Rating agency, Fitch, has forecasted that the 2017 budget deficit would narrow to 7.5% of GDP on a cash basis, and further to 5.5% in 2018.

This deficit forecast by the US-based agency is higher than government’s 2017 forecast of 6.5% which the Finance Ministry is hoping to achieve with an increase in tax revenues and a cut in capital expenditures.

According to Fitch, government’s expected increase in tax revenues will be difficult to realise because the 2017 budget contains significant tax cuts aimed at boosting the business climate.

Fitch notes that Ghana has historically underperformed its budget revenue projections.

On the expenditure side, the report said interest costs will continue to exert upward pressure.

Ghana’s interest costs are 32% of its revenues, a level well above the ‘B’ median of 9%.

Also, a lack of transparency and accountability within the line ministries has persistently led to substantial off-budget spending and accumulation or arrears.

Successful implementation of the measures outlined in the Public Financial Management Act, 2016 would help control expenditure and keep spending focused in the policy priorities outlined in the budget.

Gross government debt has stabilised, experiencing a slight increase to 73% of GDP at the end of 2016 from 72% at the end of 2015.

Fitch expects, however, that Ghana’s debt/GDP ratio to decline to around 71% by end of 2017 due to strengthening of the exchange rate (62% of debt is foreign currency denominated), lower budget deficit and robust nominal GDP growth.