Ghana’s gaping budget deficit is set to be cut from a projected 8.8% of GDP this year to 6.5% next year and further to a much more sustainable 3.5% of GDP by 2017, Finance Minister Seth Terkper said on November 19 in his 2015 Budget Statement and Economic Policy presentation to Parliament. The intended fiscal consolidation over the medium term will be driven mainly by improvements in tax policy, including tax hikes, revenue administration reforms, improved management of public funds, expenditure rationalisation, and the implementation of new debt management strategies, Terkper said.

Finance ministry data shows that Ghana’s budget deficit reached GHS6.77bn ($2.1bn) as of end-September, equal to 5.9% of GDP, below a target of GHS7.36bn, or 6.4% of GDP. Total revenues and expenditures were both below target - at 15.4% of GDP (16% target) and 21.3% of GDP (22.5% target). However, compared to the first nine months of last year, both revenues and expenditures outperformed, with revenues reaching 15% of GDP at end-September 203, and expenditures standing at 23% of GDP.

Ghana’s government is currently in talks with the IMF on a financial assistance programme that should help restore macroeconomic stability and win back the confidence of private investors. The IMF has insisted on a more ambitious and front loaded fiscal consolidation and while officials hope to sign a staff-level agreement later this month, some observers doubt that a deal will be reached before the fund’s January board meeting. Without disbursements from the IMF and/or other multilateral lender funding in 2015, the fiscal pressures will remain high.