Ghana cut its 2014 economic growth target and forecast a wider budget deficit and higher inflation due to falling revenues, the slide of the cedi and declining gold prices, the finance minister said on Wednesday.
The country’s budget gap will rise to 8.8 percent of gross domestic product, compared with an initially targeted 8.5 percent, Seth Terkper said as he presented a supplementary budget to parliament.
He said the government now expected economic growth of 7.1 percent this year, down from an initial 8 percent, and a year-end inflation rate of 13 percent plus or minus 2 percent, compared with an earlier 9.5 percent forecast.
Ghana’s gross international reserves at the end of the year are expected to be enough to cover not less than 3 months of imports, up from 2.5 months in June, he said.
Terkper said the government was seeking parliament’s approval for 3.1 billion cedis ($935 million) in additional spending for the year to complement the 34.9 billion cedi 2014 budget.
“The economy has experienced a number of pressures, which continue to pose challenges to the attainment of our 2014 economic targets,” he said, citing higher interest costs and a shortfall in external inflows as factors leading to the imbalance.
Ghana, which exports gold, cocoa and oil, is seen as one of Africa’s brightest prospects because of its stable democracy and strong growth in the past.
But the government is under pressure to stabilise public finances, especially a stubborn budget deficit and increasing public debt, while the cedi has slumped around 30 percent against the U.S. dollar since January.
The country’s public debt amounted to 54.8 percent of GDP at the end of May. Terkper said that despite the challenges, Ghana’s short-to-medium term economic prospects remained positive.
“We are presenting the supplementary estimates to ensure that we maintain the pursuit of our growth and macro-economic stability agenda,” Terkper said.
“It has therefore become necessary to make adjustments to accommodate higher interest costs due to rising interest rates and exchange rate depreciation,” he added.
Ghana is set to issue a third Eurobond of up to $1.5 billion later this month for government finances.