The Finance Minister, Seth Tekper has announced that government’s spending for this year will be cut by GH¢1.5billion due to the expected decline in oil and tax revenue.

Government had earlier planned to spend GH¢41million but has been forced to cut down the expenditure to GH¢39.7billion following the dramatic drop in crude oil prices and challenges in the domestic business environment.

As a result, spending on capital projects and goods and services will all be reduced in an attempt to bring the budget deficit within a new target of 7.5 percent, up from the initial target of 6.5 percent of GDP.

Subsequently, the budget deficit will now drift away from the initial target of GH¢8.8billion to GH¢10billion in the face of an expected shortfall in government’s revenue of GH¢3.1billion.

According to Mr. Tekper, total grants and revenue are now estimated at GH¢29.7billion as the global business environment and domestic conditions are not favourable to government’s expectations.

“The fall in crude oil prices -- as well as the current energy situation and rapid depreciation of the cedi in 2014 -- could also have a negative impact on overall output. As a result, it is considered that taxes on domestic goods and services as well as non-oil taxes on income and property could be lower than what the 2015 Budget estimated by GH¢358.7million.

“Due to these factors, total domestic revenue for 2015 is now expected to be GH¢27.8billion, resulting in a shortfall of GH¢3.1billion

“Based on these expected changes in total revenue and grants as well as total expenditure and arrears, the fiscal deficit for 2015 is estimated to be GH¢10billion (7.5 percent of GDP), up from the 2015 Budget target of GH¢8.8billion (6.5 percent of GDP),” he said.

Mr. Tekper, who sounded worried on the floor of Parliament when presenting a statement on implications of the fall in crude oil prices on the 2015 budget -- amidst heckling and jeering from the opposition NPP due to lapses in procedures for the presentation -- is optimistic the impact of falling crude oil prices will be weakened by expected inflows of grants from development partners following the agreement with the International Monetary Fund (IMF) for a fund programme.

He said despite the expected drop in oil revenue from GH¢4.2billion to GH¢1.5billion, the effect of IMF oversight on government’s spending will result in an increase in grants, which hitherto was not expected.

“A factor that is expected to minimise the impact of the decline in crude oil prices is enhancement of grant disbursements following the staff-level agreement reached with the IMF. Our development partners have pledged to disburse additional grants totalling GH¢381.1million to fund programmes in the 2015 Budget. Therefore, on a more positive note this could result in an increase in the estimate for grant disbursements from GH¢1.6billion to GH¢1.9billion,” he added.

Mr. Tekper said government has further taken steps to continue strengthening the Public Financial Management system and deepening structural reforms in the public sector as part of the overall objective of ensuring transparent and accountable economic governance.

He told the House that, as noted in the 2015 Budget, the weaning-off of some subvented agencies from government payroll has begun, saying: “Three agencies -- namely the Energy Commission, the Environmental Protection Agency (EPA), and the Driver and Vehicle Licencing Authority (DVLA), which have the capacity to be financially independent based on their Internally Generated Funds (IGFs) -- have been identified for weaning-off this year.

“Nine other agencies are being reviewed for implementation in subsequent years.”