Developments in both the domestic and global economic environment have forced Ghana’s government to slash key macroeconomic framework and targets in its 2015 budget.
The Minister of Finance, Seth Terkper who announced in Parliament yesterday, revised the country’s overall real GDP growth from 3.9 percent to 3.5 percent; non-oil real GDP growth from 2.7 percent to 2.3 percent; and end-year inflation from 11.5 percent to 13.7 percent.
While overall budget deficit target was revised from 6.5 percent of GDP to 7.3 percent; and
Gross International Reserves was projected to remain at not less than three months of import cover of goods and services in the country.
Mr Terkper stated: “Mr. Speaker, as a result of the revisions made to the macroeconomic framework and the fiscal performance for the first five months of the year, the 2015 revenue and expenditure estimates have been revised”.
As indicated in a statement he presented to the House in March 2015, the Petroleum Benchmark Revenue (PBR) price in the 2015 Budget, based on the formula stipulated in the Petroleum Revenue Management Act (PRMA), 2011 (Act 815), was estimated at US$99.38 per barrel.
It will be recalled that a volume of 102,033 barrels per day was also estimated in pursuant to the Act.
Based on these assumptions, the estimated total petroleum receipts for the 2015 Budget amounted to GH¢4.2 billion. Of this amount, GH¢2.5 billion was allocated as Annual Budget Funding Amount (ABFA) to finance specific programmes in the Budget; GH¢1.1 billion was estimated to be transferred into the Ghana Petroleum Funds; and GH¢697.7 million to the National Oil Company, Mr Terkper noted.
He observed that since March 2015, crude oil prices had been rising gradually above the price assumption of US$52.8 per barrel used in assessing the implications of the fall in crude oil prices on the 2015 budget.
The price rose above US$65.0 per barrel but have since fallen below US$60.0 per barrel. Consequently, following these recent volatilities and consistent with the recently amended PRMA, Act 815, the oil price assumption for the revised macroeconomic framework in this review is projected at US$57.0 per barrel.
Based on the revised oil price assumption, the revised total petroleum receipts for 2015 is estimated at GH¢1.8 billion (1.3 percent of GDP), compared with the 2015 Budget estimate of GH¢4.2 billion (3.1 percent of GDP). The difference of GH¢2.2 billion is 58.0 percent lower than the 2015 Budget target, he told the Members of Parliament (MPs) in Accra when he appeared before them to approve the government’s 2015 Mid-Year Review and Supplementary Estimates.
In addition to the direct impact on petroleum receipts, the minister noted that the decline in crude oil prices was expected to impact negatively on the Special Petroleum Tax (SPT). Thus, the revenue yield from the special petroleum tax was estimated to be lower by GH¢124.4 million.
” In spite of the receipt of additional dividends of about GH¢600 million during the first quarter of the year, non-tax revenue receipts for 2015 are estimated to be lower than projected due to the lower oil price.
Mr. Speaker, as a result of the earlier depreciation in the exchange rate, the assumption for the Budget has been revised and all Budget inflows denominated in foreign currency have also been revised upwards”.
Mr Terkper summed the total revenue and grants for the 2015 fiscal year which had been revised downwards by GH¢1.9 billion, from GH¢32.4 billion (24.0 percent of GDP) to GH¢30.5 billion (22.8 percent of GDP).
Explaining that the downward revision was mainly on account of the lower oil revenue projections. The revised total revenue and grants for the year represents an increase of 23.4 percent over the outturn for 2014.
Touching on expenditure, he stressed that the estimate for total expenditure and arrears clearance had been revised downwards from GH¢41.2 billion to GH¢40.3 billion (30.0 percent of GDP). This, Mr Terkper indicated was mainly on account of lower spending from oil revenues and lower domestic interest payments.
In spite of the estimated lower spending from oil revenue and domestic interest payments, some other expenditure items such as external interest payment and foreign financed capital expenditures are estimated to be higher mainly as a result of the exchange rate depreciation.
As a result of lower oil revenue inflow due to the decline in crude oil prices, goods and services expenditures have been revised downwards by GH¢113.6 million, from GH¢1.97 billion to GH¢1.9 billion.
In anticipation of the proposed Eurobond issue of US$1.5 billion in 2015, domestic financing is estimated to be lower than projected in the 2015 Budget. In this regard, domestic interest payment has been revised from GH¢8.0 billion to GH¢7.7 billion, the minister pointed out.
“On the other hand, external interest is estimated at GH¢1.6 billion, higher than the 2015 Budget estimate by GH¢72.6 million. On the whole, total interest payments for 2015 have been revised downward by GH¢227.4 million, from GH¢9.6 billion to GH¢9.3 billion.
Due to the lower estimated revenue from oil, and in accordance with the Petroleum Revenue Management Act (Act 815), transfers to Ghana National Petroleum Corporation (GNPC) from the oil revenue have been revised downwards from GH¢697.7 million to GH¢497.9 million”.
As a result of a short fall in oil prices, domestically financed capital has been revised downwards by GH¢722.8 million, down from GH¢2.6 billion to GH¢1.8 billion.
On the other hand, foreign-financed capital expenditure has been revised upwards from GH¢4.4 billion to GH¢4.5 billion on account of the exchange rate depreciation.
Following the completion of the audit of claims of Bulk Oil Distribution Companies (BDCs) on government, it has become necessary to clear more arrears than was envisaged in the 2015 Budget.
As a result, arrears clearance for 2015 have been revised upwards from GH¢1.6 billion to GH¢1.9 billion.
In view of the exchange rate depreciation and the plan to buy back part of the 2017 Eurobond, foreign debt repayment has been revised upwards by GH¢1.8 billion, from GH¢2.8 billion to GH¢4.6 billion.
On the basis of the revised revenue and expenditure estimates, the 2015 revised budget will result in an overall budget deficit of GH¢9.7 billion, equivalent to 7.3 percent of GDP, against the earlier estimate of GH¢8.8 billion, equivalent to 6.5 percent of GDP.
The revised budget deficit will be financed from foreign and domestic sources. Foreign financing of the deficit is estimated at GH¢4.7 billion. Of this amount, GH¢5.1 billion will be sourced from the International Capital Market, part of which will be used to buy back Ghana’s Eurobond which matures in 2017.
Domestic financing of the Budget is estimated at GH¢4.97 billion, indicating a downward revision by GH¢2.6 billion from the estimate in the 2015 Budget.
Mr. Speaker, as we stated in March 2015, the notice to revise the Budget administratively was fiscally prudent. By moving expeditiously to curtail expenditures, we have now been spared the overestimation of petroleum revenues that occurred in 2012, with major adverse effect for the economy.
We now entreat the House to approve this prudent move by the Government. This will be consistent with the approval by this August House to grant appropriate discretion to the Minister of finance (with the approval of the House) to revise our petroleum revenue target when the need arises.
African Eye News.com
