Finance Minister Seth Terkper has signalled that government will yet again cut its spending to make up for revenues that will be lost to the decline in crude oil prices on the world market, making it the second time in less than six months the budget is taking a hit from the declining crude oil price.

Mr. Terkper did not state specifically how much the spending would be cut, but hinted that the development on the world market is forcing government to reconsider its petroleum benchmark pricing formula.

The ministry in March announced that it had cut its projection for oil revenue from an initial figure of US$4.2billion as stated in the budget to about US$1.5billion, on account of a lower than expected crude oil price.

While government had relied on US$99 per barrel of crude to make its budget, the price fell below the US$50 mark -- causing government to slash its spending by GH¢1.5billion in a paper presented to Parliament in March this year.

In presenting a supplementary budget to Parliament last July, Mr. Terkper said government had projected the price of crude oil to be US$57 per barrel, but recent trends on the market has seen the price slide to about US$45 per barrel.

Speaking on the state of the economy last Thursday, the Finance Minister once again sounded alarm bells over the negative consequences the declining crude oil price pose for the country’s budget.

According to him, the Finance Ministry is taking necessary steps to control spending to ensure the continuous fall in the crude oil price does not derail the achievement of government’s fiscal deficit target for the year, as well as its medium-term fiscal consolidation objectives.

“In this regard, MDAs that are funded from the Annual Budget Funding Amount (ABFA) are to control their expenditure within the Budget allotments provided by the Ministry of Finance,” the minister said.

With regard to fiscal performance within the first half of the year, the minister said government policies and reform measures implemented since 2013 are taking hold and yielding results.

“Although fiscal performance shows significant improvement, the economy experienced some challenges during the period -- mainly due to lingering energy sector problems, depreciation of the local currency and softening commodity prices.

“Inflationary pressures remained elevated, while increase in foreign exchange demand as against limited supply sources largely underpinned weakening of the cedi against the major currencies,” he added.

But for the setbacks, notably in commodity (gold, cocoa, crude oil) prices, the minister said the economic situation would have been in a much better state than it is now.

Commenting on the country’s IMF programme, Mr. Terkper said in spite of the unfavourable global developments, “Our performance under the programme has been remarkable, with the achievement of almost all the Performance Criteria and Structural Benchmarks. Government remains committed to implementation of the Programme and achievement of its objectives”.

Preliminary data for the first half of the year show that total revenue and grants was more than targetted for the period. Also, total expenditure including the clearance of arrears was lower than targetted. As a result, the cash fiscal deficit for the period was 2.3 percent of GDP against a target of 3.4 percent. This compares to a deficit of 4.3 percent of GDP for the same period in 2014.