Ghana cuts 2012 budget deficit forecast to 4.4% On revenue

Ghana’s budget deficit is expected to narrow to 4.4 percent of gross domestic product this year as government revenue increases and spending is reined in even during an election year, said Finance Minister Kwabena Duffuor.

The revenue and spending forecast in West Africa’s second- biggest economy was revised from a 4.8 percent projection made in Duffuor’s 2012 budget that was released in November.

“We have resolved to stick to the expenditure targets for the year, notwithstanding that this year is an election year,” Duffuor told reporters on the sidelines of a workshop for budget officers today. “We are expecting revenue to exceed target on the back of improved tax administration measures.”

Ghana’s tax revenue was forecast to increase to 12 billion cedis ($7 billion) from a 9.6 billion cedis in 2011, while expenditures in 2012 are seen at 18.9 billion cedis, according to the budget. The fiscal gap for 2011 was expected to narrow to 4.8 percent, below a target of 5.1 percent, Duffuor said in November. He didn’t provide new revenue or spending figures today.

Ghana will hold presidential and parliamentary elections in December, with President John Atta Mills vying for a second term in office after winning in 2008 by less than 1 percentage point. That year, the fiscal gap jumped to 14.5 percent on election- related spending and as global food and fuel prices rose, boosting the inflation rate to the highest in five years at 20.7 percent in June 2009.

Cedi Weakens

Price growth has since eased, reaching 8.7 percent in January. The rate is expected to remain at less than 10 percent this year, Duffuor said today. The central bank, which targets inflation in setting monetary policy, forecast 2012 inflation of 8.7 percent.

The Bank of Ghana’s Feb. 15 decision to raise its key interest rate will help to slow the depreciation of the domestic currency and curb its effects on inflation, Duffuor said. The cedi has weakened 3.6 percent this year, making it the worst performer in Africa against the dollar, according to data compiled by Bloomberg.

Governor Kwesi Amissah-Arthur boosted the policy rate by 100 basis points to 13.5 percent, citing possible price pressures from the cedi’s decline and government spending.

“That was an appropriate decision to keep up confidence in the currency markets,” Duffuor said.