Government says it has inherited a budget deficit of around 10 percent of economic output, Finance Minister Ken Ofori-Atta told Reuters on Wednesday, double the 2016 target set by the previous government.
A deficit higher than the target would reduce the amount President Nana Akufo-Addo’s government can spend on programmes to create jobs and reduce poverty.
The issue is politically sensitive because Ghana is more than half way through a three-year, $918 million International Monetary Fund programme aimed at stabilising the economy after the deficit ballooned during the previous election year, 2012.
The IMF and the government of former President John Mahama said repeatedly during 2016 that budgetary targets would be respected, although before the December election ministers said the deficit might reach 7 percent of gross domestic product.
“I suspect that it (the budget deficit) is certainly closer to a double-digit deficit. This is what we are confronting,” Ofori-Atta said. The overrun was due to “unchecked overspending” and decreased revenue, he said.
Ghana’s economy boomed for years on its exports of oil, gold and cocoa. But it has been hit by falling commodity prices, and last year a technical fault halted production at its flagship Jubilee oil field, operated by British company Tullow.
At the same time, the government opened a series of big-ticket infrastructure projects as part of its election campaign.
The new government also inherited debt from state-owned enterprises and government ministries of at least 7 billion cedis ($1.6 billion), Ofori-Atta said.
Ghana will aim for double-digit economic growth, he said, but not this year.
Indications that the deficit and debt are higher than expected appeared to have ruffled markets, pushing sovereign dollar bonds down as much as two cents in price on Wednesday.
The major commodity exporter’s 2023 issue fell 1.3 cent, the 2026 bond 1.6 cent and the 2030 bond 2.1 cents, Thomson Reuters data showed.
The government is expected to present its first budget in March and Ofori-Atta said it would outline measures to cut waste, widen revenue sources and reduce levies.
Ghana will open talks with IMF officials in Accra on Thursday following proposals by the new government to renegotiate the country’s aid programme, to gain room to spend on its agenda.
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