Ghana pledges to curb budget deficit to avoid downgrade

Ghana’s Finance Minister Seth Terkper pledged to narrow the budget deficit to 9 percent of gross domestic product as the world’s second-largest cocoa producer faces a possible credit-rating downgrade.

“We have fashioned and will continue to fashion pragmatic policies to correct imbalances that threaten our economic aspirations,” Terkper told lawmakers in Accra on Thursday in his first budget speech since becoming minister in January.

Spending ahead of December’s election boosted the fiscal shortfall to 12.1 percent of GDP last year, almost double the government’s target of 6.7 percent, the central bank said on Feb. 13. Fitch Ratings cut its outlook on Ghana’s B+ rating to negative from stable two days later.

The economy is forecast to expand 8 percent this year and 8.7 percent in 2014, Terkper said. Excluding oil, GDP is set to rise 6.5 percent in 2013 and 8.9 percent next year, he said.

Ghana, which began exporting oil in 2010, increased gasoline costs by 20 percent last month after cutting fuel subsidies to help narrow the deficit.

The fiscal situation may improve this year and next “assuming that global commodity prices remain stable and there are no unexpected production disruptions” to oil output, New York-based Moody’s Investor Service said on Feb. 19.