Ghana’s govt seeks parliament nod to raise 2011 spending

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Ghana’s Finance Minister Kwabena Duffuor requested parliament approval for 1.46 billion cedis ($967 million) of additional spending in 2011 on infrastructure and other social programmes aimed at creating jobs.

Duffuor told Parliament Ghana expects the economy to grow at 14.4 percent in 2011, up from a previous forecast of 12.3 percent, and said the new 2011 budget deficit target was 5.1 percent of GDP, compared to an earlier forecast of 4.1 percent.

He said the upwards revision of the deficit would allow a step up in the pace of payment of state arrears to contractors, cited by analysts as one factor holding back the economy, Reuters reports.

Ghana joined the club of oil exporting nations in December 2010 and Duffour said developments in the first five months of 2011 pointed to an optimistic outlook for the rest of the year.
“We expect a further reduction in inflation and increased GDP growth in 2011,” he said. He said annual inflation was expected to average 8.7 percent for the year, slightly down on the previous target of 8.8 percent. The end of year target was raised slightly to 9.0 percent from 8.5 percent previously.

Duffuor said Ghana’s total oil revenues, based on an average daily production of 84,737 barrels at an assumed price of $100 a barrel, were forecast at 1.25 billion cedis for 2011, including the share set aside for state oil company GNPC.

He said total revenue and grants had been revised upwards by 1.366 billion cedis to 11.967 billion cedis ($1 = 1.51 cedis).

In March this year, the IMF recommended that Ghana make additional efforts to tighten spending, warning of inflationary risks if it failed to do so.

However analysts welcomed the revised budget saying it was in line with expectations of fiscal consolidation.
“The 5.1 percent deficit target speaks of consolidation,” said Razia Khan of Standard Chartered Bank, adding that the main thing people had been looking for was consolidation.
“No one should be too surprised about an increase in spending ahead of the election but this is in the ballpark range of what a good outcome would have been,” she said of a presidential election scheduled for late 2012.

Sampson Akligoh of the Accra-based Databank Financial Research said the revised budget was within range and unlikely to put pressure on real interest rates.

Parliament is not expected to vote on the revised budget until next week. Ghana, the world’s number 2 cocoa grower and Africa’s second largest miner, began crude oil production from its offshore Jubilee field in December last year.