Growth, deficit estimates revised

The economy is now expected to grow at 14.4% this year following higher-than-expected revenue inflows and projected higher spending, says Finance Minister, Dr. Kwabena Duffuor.

The increased spending forecast will result in a fiscal deficit equivalent to 5.1% of GDP, up by a percentage point from the 4.1% projected last November.

The new real growth forecast beats the earlier 12.3%, and surpasses the International Monetary Fund’s estimate of 13.7%. In the first quarter of this year, the economy expanded by 23% year-on-year, boosted by oil, gold and cocoa production.

Announcing revisions to the government’s macroeconomic targets for this year, Dr. Duffuor said developments since the last quarter of 2010 call for changes in the assumptions underlying the 2011 fiscal budget.

Notable among these developments, he said, were the passage of the petroleum revenue-management legislation, “major inflows” from the World Bank, proceeds from the sale of shares in mining giant Anglogold, and a boost to tax collections.

Thanks to triple-digit oil prices and higher production from the Jubilee field, additional petroleum revenues of GH¢339.4 million is expected. The total oil-revenue estimate now expected is GH¢923.4 million, plus extra GH¢327.3 million that will be transferred to the Ghana National Petroleum Corporation (GNPC) -- consistent with its interest in the Jubilee partnership.

Additional fiscal revenue and external grants of GH¢1.366 billion is expected, bringing the total to GH¢11.967 billion. More spending of GH¢1.459 billion is projected, raising the total amount to GH¢14.344 billion.

The government’s benchmark oil-price assumption has been reviewed to US$100 per barrel from US$70 per barrel initially, with average Jubilee daily output forecast raised to 84,737 barrels.

In line with the revisions, Duffuor asked Parliament yesterday to vote GH¢1.463 billion in additional spending for the rest of the year. Various job-creation and infrastructure- improvement initiatives will benefit from the new funding, he said.

“The aim of this supplementary estimate is to seek parliamentary approval to commit additional resources to fund additional expenditures resulting from the revisions made to the 2011 budget.”

The additional resources will be used to finance, among others, road construction and rehabilitation (GH¢40m); education infrastructure (GH¢40m); sanitation projects (GH¢15m); purchase of fire-fighting equipment (GH¢11.36m); the national youth employment programme (GH¢10m); and rural electrification (GH¢15m).

A new public-private initiative to improve skills and create jobs, the Local Enterprises and Skills Development Programme (LESDEP), will receive GH¢12m. It will involve training in information technology skills, and jobs in agro-processing and construction.

The Minister said a detailed strategy, involving cash payments and securitisation, has been worked out to settle fiscal arrears that continue to encumber effective expenditure planning.

By end-2010, total arrears were GH¢3.8 billion including state-owned enterprises’ indebtedness of GH¢1.77 billion. Nearly GH¢2 billion of this amount has so far being liquidated, leaving an outstanding balance of GH¢1.7 billion, he said.

He was upbeat about the outlook for inflation, and said the government expected end-year inflation to finish at 9%, with an average annual inflation forecast of 8.7%.

Source: B&FT