Strong revenue lower first quarter deficit

A leap in revenue performance lowered the first-quarter fiscal deficit to GH¢369 million (0.7% of GDP) from GH¢956 million (2.2% of GDP) in the same period of 2010, according to figures provided by the office in charge of budgetary statistics at the Finance Ministry.

Tax and non-tax revenue collections went up by 66% year-on-year to GH¢2.375 billion, not counting revenues from oil, which are yet to be credited to the fiscal accounts.

VAT receipts were up by 61 % over the previous year and import duties grew by 66%.

Airport taxes, which were hiked in a bid to boost collections, increased by 16% to GH¢6.87 million. The fiscal deficit target for the year is GH¢2.3 billion, equivalent to 4.4% of GDP.

Though spending was down by 9% in the year to the first quarter, the wage bill shot up by more than half, coming in at GH¢1 billion, about 27% of the total estimated for the year.

Thanks to sky-high prices and a hedging programme for crude exports, oil-revenue windfalls are expected to accrue to the government, a large portion of which will be saved in accordance with a formula under the petroleum revenue management law.

In line with global trends, the government has reviewed the oil price assumption underpinning the 2011 budget. It revised the figure from US$70 per barrel to US$100 per barrel.

It also announced two weeks ago that it was hedging its share of crude sales at a price of US$107 per barrel, above the budget’s assumed price.

Finance Minister, Kwabena Duffuor, said the move is to ensure a minimum guaranteed price for oil exports and to stabilise budget revenues.

A similar contract for crude purchases has been in place since October last year.

The initial arrangement was for six months, but has since been extended to December 2011.

The transaction had generated a net surplus by the end of May this year, according to Kwame Adu Okyere-Mensuo, a technical adviser at the ministry of finance. He explained that gains have been made because total settlements to the government have so far exceeded the combined amount paid in premiums.

He said the number of counterparties has expanded as Barclays Capital, Deutsche Bank, Standard Bank and Morgan Stanley have also been admitted to the deal.

“This should even give us competitive premiums, because we would want to deal with those who offer the lowest premiums.”

Some of the surplus generated has been paid to the National Petroleum Authority (NPA) to be used to partially offset under-recoveries of pump prices, but he noted notwithstanding the work being done by the ministry’s risk-management committee, any decision on pump prices rests with the NPA.

“Whatever savings we can make for Ghana is what we are interested in,” he said.