* Subsidy cut aims at narrowing budget deficit
* Price of petrol at the pump jumps 20 pct
* Fitch revised Ghana to negative on deficit worries
By Kwasi Kpodo
ACCRA, Feb 17 Ghana cut fuel subsidies on Sunday
as its new government took measures to curb spending after the
West African exporter of cocoa, gold and oil overshot its budget
deficit target by almost 100 percent last year.
The National Petroleum Authority (NPA) said in a statement
that fuel price hikes were necessary to cover the cost of an
increase in crude oil prices and the depreciation of the local
cedi currency by about 14 percent last year.
The new prices, which took effect on Sunday, saw premium
petrol and diesel prices jump 20 percent per litre in cedi
terms, while Liquefied Petroleum Gas (LPG) rose 50 percent.
Prices of kerosene, marine diesel and residual fuel oil also
increased 15 percent per litre.
The decision to cut subsidies came days after Fitch rating
agency revised the nation's outlook to negative from stable,
citing the severe deterioration of its fiscal deficit.
"The government has funded the budget deficit mainly through
borrowing at high interest rates on the domestic market, at 22.8
percent for 91-day T-bills," the agency said on Friday.
"While current expenditure has surged, the share of capital
expenditure has fallen, which could harm longer-term growth
prospects and worsen debt dynamics," Fitch said.
Decisions by governments in the region to cut fuel subsidies
have previously led to social unrest. Nigeria's government was
forced last year to reinstate some subsidies it had cut after
several days of strikes and protests, while Ghana's last attempt
to cut subsidies more than two years ago resulted in
opposition-led street protests.
Ghana's 2012 deficit reached 12.1 percent of gross domestic
product (GDP), almost double its target of 6.7 percent, due to
excess public sector wages, shortfall in projected tax revenue
and widening fuel subsidies, the central bank said last week.
Like several other countries in West and Central Africa,
Ghana had planned to cut the swelling fuel subsidies last year
following pressure from the International Monetary Fund and the
World Bank, who see them as wasteful and inefficient.
But Ghana's government delayed taking the measures ahead of
national elections in December which confirmed President John
Dramani Mahama in office after he took over following the
surprise death in July of his predecessor John Atta Mills.
NPA's chief executive Alex Mould said fuel subsidies for
last year totalled one billion cedis ($526 million) and were
expected to rise to 2.4 billion cedis this year.
Mould said that despite the new price hikes, the government
was still maintaining a total fuel subsidy outlay of about $23
million, based on a crude oil price of $116 per barrel. The
subsidy would target particular social programmes.
Finance Minister Seth Terkper, who is expected to present
the new government's first budget to parliament on March 5, said
it would aim to narrow the budget deficit through subsidy cuts
and boosting tax revenue.