Ghana’s budget performed better than expected in the first half of the year, with the cash fiscal deficit reaching 2.3% of GDP, compared to a target of 3.4% and a shortfall of 4.3% of GDP in H1 2014, Finance Minister Seth Terkper told a news conference in Accra on September 3. However, he warned that the recent steep drop in global oil prices could have negative implications for the full-year budget outcome, his statement, published by Joy News, shows.

In July, the government revised down its oil benchmark to $57 per barrel, but the recent plunge in crude prices will translate in lower than projected revenue. In addition to oil, Ghana is a major producer of gold and cocoa, which have also suffered price declines. This, coupled with lingering energy sector problems and depreciation of the local cedi currency have contributed to elevated inflationary pressures and a significant slowdown in economic growth.

The minister announced that total revenue and grants reached 11.2% of GDP in H1, according to preliminary data, above a target of 10.6%. In nominal terms, the outturn was 5.4% higher than target and 32.9% higher y/y, mainly due to a strong growth in domestic revenue. Tax revenue rose 32.1% y/y to GHS11.4bn ($3.1bn) in H1, exceeding target by 8.4%.

Total expenditure, including payments for the clearance of arrears, increased 14.1% y/y to GHS18.07bn, equal to 13.5% of GDP. It was by 3.9% below the target, which was equal to 14% of GDP.

“The Ministry of Finance is taking necessary steps to control spending to ensure that the continuous fall in the crude oil prices does not derail the achievement of our fiscal deficit target for the year as well as our medium term fiscal consolidation objectives,” Terkper said.

Ghana aims to cut its budget gap to 7.3% of GDP this year from 10.2% in 2014

Earlier this week, the IMF urged Ghana’s government to firmly continue with its fiscal consolidation efforts to fully restore macroeconomic stability and mitigate financing risk, pointing at continued strict control of the wage bill and adherence to the domestic arrears clearance plan, as well as avoidance of fiscal overruns in connection with next year’s election simultaneously with implementing structural reforms to strengthen expenditure control. Further enhancing revenue performance will also be key for continued fiscal consolidation, the fund said.