Ghana Raises Budget-Deficit Target as Oil Revenue Target Cut

Ghana said this year’s budget deficit will be wider than previously projected after a fall in crude oil prices curbed revenue.

The target for the gap was revised to 7.5 percent of gross domestic product from 6.5 percent, Minister of Finance Seth Terkper told Parliament Thursday in the capital, Accra. The deficit has averaged about 10 percent in the past three years. The benchmark oil price in the budget was cut to $52.80 per barrel from $99.38, he said.

“This is the fiscally responsible and prudent thing to do,” the minister said. The revisions “address the impact of these shocks.”

Ghana is seeking to rein in inflation and stabilize a currency that has been Africa’s weakest, plunging 40 percent against the dollar over the past year. The government reached an agreement with the International Monetary Fund last month for almost $1 billion of loans. Brent crude oil traded in London has dropped 47 percent in the past year.

The target for revenue and grants was cut 8.3 percent to 29.7 billion cedis ($8.3 billion), while the target for spending was lowered 3.6 percent to 39.7 billion cedis, Terkper said. The government will take money from the Stabilization Fund to help finance the budget deficit, he said.

Terkper slashed the oil revenue estimate to 1.5 billion cedis from the previous estimate of 4.2 billion cedis. Oil output will remain around its 2014 average of 102,000 barrels a day this year, he said.

Ghana has started preparations for a Eurobond sale this year and will submit the plan to parliament soon, Terkper told reporters at a press conference later on Thursday. He said the government will seek partial guarantees for the debt from international institutions including the World Bank and African Development Bank.

Ghana will use $500 million of the revenue from the bond sale to pay debt due in 2017, Terkper said.

To contact the reporter on this story: Moses Mozart Dzawu in Accra at mdzawu@bloomberg.net

To contact the editors responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net Andres R. Martinez, Ben Holland.

Source: Bloomberg.com

By Moses Mozart Dzawu

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