- Finance minister targets fiscal shortfall of 5.3% of GDP
- Economic growth to rebound in 2016, inflation to ease
Ghana’s Finance Minister Seth Terkper pledged to avoid the “temptation” to overspend during the 2016 election year, setting a target to narrow the budget deficit in line with curbs set by the International Monetary Fund.
The government will target a fiscal shortfall of 5.3 percent of gross domestic product next year compared with 7.3 percent in 2015, he told lawmakers on Friday in Accra, the capital. The government will borrow on domestic and international markets to finance the deficit of about 8.4 billion cedis ($2.2 billion), he said. The fiscal gap was 5.1 percent in the first nine months of the year, below the target of 5.7 percent.
“We’ll sustain fiscal discipline while investing in infrastructure and social services,” he said. “We’ll resist the temptation of election year overspending.”
Ghana was forced to turn to the IMF last year for emergency loans of almost $1 billion to help bolster the economy amid a plunging currency and soaring debt. As part of the agreement, authorities pledged to rein in spending, including on government wages, and boost revenue.
The cedi erased its losses after the budget was announced. The currency gained 0.3 percent to 3.805 per dollar at 1:25 p.m. in Accra.
The government will spend 46.4 billion cedis, 15 percent more than the 40.3 billion cedis in the 2015 budget, according to a Ministry of Finance document. Revenue will increase 25 percent to 38 billion cedis from 30.5 billion cedis. The benchmark oil price was set at $53.05 per barrel in 2016. The government will borrow 5.4 billion cedis domestically and 3.4 billion cedis abroad next year.
Terkper said economic growth will rebound next year to 5.4 percent as oil production starts at new offshore fields and a power shortages eases. The economy is estimated to expand 4.1 percent this year, he said.
The cedi remains vulnerable because of the dollar’s strength and the U.S. economic recovery, putting pressure on inflation, Terkper said. Inflation will probably ease to 10.1 percent by the end of next year, compared with 17.4 percent in October.