As market watchers had expected, government says it will draw GH¢487.2 million from the Ghana Stabilisation Fund to support the 2015 budget after a fall in crude oil pricesGH¢487.2 million forced it to slash oil revenue forecasts by 64 percent – about GH¢2.7 billion.
This will be the first time government will be relying on the Fund to shore up its budget, which pegged benchmark petroleum price at some US$99.00 per barrel.
Prices of the commodity have since plummeted, thereby dislodging the government’s fiscal plans for the year.
The Fund was established in 2011 with the passage of the Petroleum Revenue Management Act (PRMA,) to serve as a buffer for the budget in times of decline in oil prices and has so far accumulated about US$150.5 million (appr. GH¢525 million).
Finance Minister, Seth Terkper, told Parliament the withdrawal will be on a quarterly basis as contained in the Act, when he briefed the house on the impact of the falling crude oil prices on the 2015 budget and steps being taken to mitigate its impact on the economy.
Mr. Terkper said: “The drawdown of the GSF is significant in one major respect; it bears testimony to our efforts at building fiscal buffers in our public financial management.
It is in times like these that we are able to reap the benefits of making a conscious effort at building the GSF. This underscores the need to build the GSF as was announced in the 2015 Budget.”
Government previously planned to spend GH¢41.2 billion this year on the assumption that crude oil would trade at least US$99 per barrel, and the rapid fall in the price of the commodity meant that the deficit target of 6.5 percent had to be revised to 7.5 percent.
Budget deficit will now drift away from the initial target of GH¢8.8billion to GH¢10billion in the face of an expected shortfall in government’s revenue of GH¢3.1billion.
As a result, spending on capital projects and goods and services will all be reduced in an attempt to bring the budget deficit within the new target.
According to Mr. Terkper, total grants and revenue are now estimated at GH¢29.7billion as the global business environment and domestic conditions remain at variance to government’s expectations.
Besides the drawdown from the Stabilisation Fund, Mr. Terkper said, the fiscal deficit will be financed from domestic and foreign sources with domestic financing of the Budget estimated at GH¢6.4 billion, lower than the 2015 budget estimate.
“It is expected that this will free up more resources for the private sector and reduce government’s domestic interest costs burden. Foreign financing of the deficit is estimated at GH¢3.0 billion. Of this amount GH¢1.7 billion will be sourced through the issue of a Eurobond (in addition to an estimated US$500 million that is expected to be used to refinance the 2007 Eurobond),” he added.
Source: B&FT Online