Ghana’s budget deficit forecast increases to 7.5% of GDP

seth-terkper-budgetGhana’s 2015 budget deficit forecast has risen to 7.5 per cent of Gross Domestic Pproduct (GDP) from 6.5 percent when the budget was prepared in November.

The minister of Finance, Mr Seth Terpker who announced this when he updated parliament last week on the impact the fall in world oil prices is having on the economy, said based on these expected changes in total revenue and grants as well as total expenditure and arrears, the fiscal deficit for 2015 is estimated to be GH¢10.0 billion, up from the 2015 budget target of GH¢8.8 billion.

“In line with the formula specified in section 12 of the Petroleum Revenue Management Act (PRMA), it is expected that an amount of GH¢487.2 million would be drawn from the Ghana Stabilization Fund, on a quarterly basis to finance the gap,” he said.

Following the slump in crude oil prices Ghana had to review its revenue projections in the 2015 budget and based on the new revenue assumptions, total petroleum receipts for 2015 is estimated at GH¢1.5billion(1.1 percent of GDP), compared with the 2015 budget estimate of GH¢4.2billion(3.1 percent of GDP).

The difference of GH¢2.7 billion is 64.4 percent lower than the 2015 Budget target.

“Of the projected total petroleum receipts, GH¢468.9 million will be transferred to the National Oil Company in line with the PRMA. Hence, the remaining amount of GH¢1.0 billion (0.8 percent of GDP), will not be sufficient to cover the Annual Budget Funding Amount of GH¢2.5 billion in the 2015 budget,” the minister said.

He said “Among the various sources of petroleum revenues in the PRMA, the significant decline in total petroleum receipt is mainly attributed to substantial decline in corporate income tax from oil companies.”

This he said was because the production costs for some of the companies would outstrip their revenues and result in losses.

In addition to the direct impact on petroleum receipts, the minister said the decline in crude oil prices was also likely to impact negatively on the Special Petroleum Tax (SPT).

To this end, he said the revenue yield from the special petroleum tax is estimated to be lower by GH¢185.6 million.

The fall in crude oil prices as well as the current energy situation and rapid depreciation of the cedi in 2014 the minister said could also have a negative impact on overall output.

“As a result, it is considered that taxes on domestic goods and services as well as non-oil taxes on income and property could be lower than what the 2015 Budget estimated by GH¢358.7 million,” he said.

Due to these factors, the minister said total domestic revenue for 2015 was now expected to be GH¢27.8 billion, resulting in a shortfall of GH¢3.1 billion.

Mr. Terkper said one factor that was expected to minimise the impact of the decline in crude oil prices was enhancement of grant disbursements following staff-level agreement reached with the International Monetary Fund.

“Our development partners have pledged to disburse additional grants totalling GH¢381.1 million to fund programmes in the 2015 Budget. Therefore, on a more positive note, this could result in an increase in the estimate for grant disbursements from GH¢1.6 billion to GH¢1.9billion,” he said.

Mr. Terkper said the total revenue and grants for the 2015 fiscal year were now expected to be GH¢29.7 billion (22.3 percent of GDP) instead of GH¢32.4 billion (24.0 percent of GDP), resulting in a shortfall of GH¢2.7 billion (1.7 percent of GDP).

By David Adadevoh

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