Ghana’s Finance Minister Seth Terkper pledged to narrow the budget deficit to 9 percent of gross domestic product as the world’s second-largest cocoa producer faces a possible credit-rating downgrade.
“We have fashioned and will continue to fashion pragmatic policies to correct imbalances that threaten our economic aspirations,” Terkper told lawmakers in Accra today in his first budget speech since becoming minister in January.
Spending ahead of December’s election and a salary increase for public sector workers widened the fiscal gap to 12.1 percent of GDP last year, almost double the government’s target of 6.7 percent, the central bank said on Feb. 13. Fitch Ratings cut its outlook on Ghana’s B+ rating to negative from stable two days later.
The government plans to raise 22.5 billion cedis ($12 billion) in revenue, up 35 percent from 16.7 billion cedis last year, mainly by reviewing Ghana’s tax laws, Terkper said. Spending will rise 21 percent to 30.5 billion cedis, he said.
The economy is forecast to expand 8 percent this year and 8.7 percent in 2014, Terkper said. Excluding oil, growth will rise to 6.5 percent in 2013 and 8.9 percent next year, he said.
Ghana’s cedi, Africa’s third-worst performer against the dollar in 2012, weakened 0.3 percent to 1.9225 per dollar by 3:25 p.m. in Accra, the lowest in six months on a closing basis, according to data compiled by Bloomberg. The yield on the country’s $750 million of Eurobonds, due October 2017, eased a fourth day, dropping 23 basis points, or 0.23 percentage point, to 4.69 percent.
“We don’t know how he is going to bring the budget deficit down,” Anthony Akoto Osei, a member of parliament and minority spokesman on finance, said in an interview. “We’re talking about almost 5 billion cedis worth of savings that must come out,” he said. “I did not hear any specifics.”
Crude output is forecast to reach 120,000 barrels a day, according to Terkper. Ghana, which began exporting oil in 2010, increased gasoline costs by 20 percent last month after cutting fuel subsidies to help narrow the deficit.
The fiscal situation may improve this year and next “assuming that global commodity prices remain stable and there are no unexpected production disruptions” to oil output, New York-based Moody’s Investors Service said on Feb. 19.