Government sees tough budget choices

By Reynt-Jan Sloet van Oldruitenborgh

ACCRA, Nov 3 (Reuters) - Ghana's government, hurt by falls in the prices of the country's main exports, faces tough budget decisions for 2000, made all the more difficult because it is an election year, Deputy Finance Minister Victor Selormey said.

Ghana has cut its economic growth forecast for 1999 to 4.4 percent from 5.5 percent, and 2000 will also prove difficult because of low cocoa and gold prices, as well as the increased cost of oil imports, Selormey told Reuters in a recent interview.

The government expects a funding gap of $183 million for 2000 and sees no easy way of filling it.

``We are between the devil and the deep blue sea,'' he said. ``Decisions will be taken before the end of the year.''

None of the revenue-raising measures seem very palatable ahead of elections, and spending has already been cut.

Hardly any non-wage expenditure is going ahead. An exception is being made for contractors in the road sector, as reducing arrears in this area was a condition for Ghana's latest International Monetary Fund loan.

The outook on the revenue side is dire.

``We have forecast government cocoa revenues at 348 billion cedis ($114 million) for this year, that is what is in the budget. It is going down to 210 billion,'' Selormey said.

The early forecast of 400 billion cedis for government cocoa revenues in 2000 would also have to be slashed, he said.

A rally in gold price in September caused big problems for the hedging activities of Ghana's biggest company, Ashanti Goldfields (AGC.GH), which is 20 percent-owned by the government.

Ashanti, Africa's third-biggest gold producer, on Monday said it had won a three-year reprieve from its gold hedging counterparties.

Under the deal with 15 banks, Ashanti has won exemption from the obligation to post collateral against margin calls on hedging contracts in exchange for issuing the counterparties with warrants which convert indirectly into Ashanti shares.

Selormey welcomed this, even if it came at a high cost, but would not comment on a takeover bid from Lonmin Plc (LMI.L) for Ashanti.

Selormey denied that revenue from government divestments was behind schedule this year.

``We have budgeted 80 billion cedis and as of now we have received 51 billion. There are things in the pipeline, which will bring in the rest,'' he said.

On the other hand, donor support had been lower than anticipated. ``We received only 30 percent of what was budgeted,'' he said.

Selormey suggested some donors were waiting to see if Ghana becomes eligible for debt reduction under the IMF/World Bank Heavily Indebted Poor Countries initiative (HIPC). If so, donor efforts might be diverted to that end.

``If we join HIPC, we have to consider that we are going to lose Japan and Britain. That will be a big chunk of the help that we get at the moment,'' Selormey said.

A World Bank-sponsored Consultative Group meeting between Ghana and its donors is scheduled for November 23-24.

``Our attitude to the donors will be frank and open. The money that we can raise has been drastically reduced. Our revenues are in jeopardy and will continue to be in jeopardy over the next 12 months. The donor community has to be more accommodating,'' he said.

Asked what the donors will expect from Ghana, he said: ``The theme of the conference is mainly poverty alleviation and they want us to show evidence as to what has been done.''

($ - 3,050 cedis)