* Analysts say 9 percent deficit target disappointing
* Ghana keeps 9 percent inflation target, sees 8.5 pct GDP
* Government says medium-term plan to cut deficit to 6 pct
* Sees $582 mln in oil revenues in 2013 as production rises
By Kwasi Kpodo
ACCRA, March 5 Ghana unveiled plans to modestly
trim its fiscal deficit this year by raising tax revenues from
key industries such as oil while avoiding tough spending cuts,
despite investor concern over high expenditure and rising debts.
The West African state's 2013 budget presented to parliament
on Tuesday laid out plans to pare the deficit to 9 percent of
gross domestic product (GDP) from 12.1 percent in 2012, when
spending overran during an election year and revenues were hit
by lower-than-expected oil production.
That deficit target disappointed many economists, who were
expecting Ghana to reaffirm its commitment to reach a level
around 6 to 7 percent of GDP - in line with its target for 2012.
"We are resolved to solve the high budget deficit, the
sources of which are known," Finance Minister Seth Terkper told
parliament. "We will pursue reforms to make the tax system more
Analysts said the three percentage point deficit cut was a
step in the right direction but was likely not robust enough to
bolster offshore investor confidence in West Africa's second
"It's a huge deficit for any country to be running," Razia
Khan, Africa researcher for Standard Chartered Bank said. "The
pressure will be on Ghana to change course, and introduce
greater spending restraint, or risk a deterioration in
perceptions of creditworthiness."
Newly-elected President John Mahama is keen to raise social
and infrastructure spending to shore up Ghana's middle income
nation status and fulfill campaign promises of translating oil
and gold output into benefits for ordinary citizens.
But he is facing pressure from international investors to
prove he can keep the debt in check.
Among his first big moves to trim spending, Ghana cut fuel
subsidies in February, resulting in a 20 percent jump in petrol
prices at the pumps. But Fitch Ratings, a day later, revised its
outlook on Ghana's credit rating to negative from stable, citing
continued worries over accumulating debt.
Ghana's 2013 budget puts total expenditures for the year at
about 30.5 billion cedis ($16 billion), up some 20 percent from
last year, according to Terkper, propelled by economic growth of
8 percent as oil output rises.
He said Ghana is targeting a year-end inflation rate of 9
The government's aim is to halve the 2012 deficit to 6
percent of GDP over the medium-term of three years, the budget
"The aim is to adopt a gradual approach to the deficit cut in
order to avoid austerity and also generate growth as we go
along," said one senior official involved in drafting the
budget, who asked not to be identified.
He said the government, mindful of the effects of austerity
seen in some European nations, would fast-track the completion
of major infrastructure projects such as roads so these could
begin to yield economic dividends before deeper austerity
measures are imposed.
The government is projecting that the local cedi currency
, which tumbled nearly 20 percent against the dollar early
last year, would stabilise in 2013.
"The Bank of Ghana is expected to maintain a strong monetary
policy stance to ensure the stability of the cedi and the single
digit inflation target policy," Terkper told parliament.
The government expects a boost in oil revenues and the
release of a significant chunk of a $3 billion Chinese loan this
year. It forecast a 15 percent increase in average daily oil
production to 83,341 barrels per day in 2013.
Oil production in 2012 averaged about 72,000 bpd, well-below
target due to technical problems with the offshore Jubilee oil
field, operated by U.K. energy firm Tullow.
At an average price of $94.36 per barrel, oil revenues would
rise to $581.72 million, the budget said.