By Tom Burgis and William Wallis in Accra The government of Ghana, an evolving democracy beloved of western donors, has pledged tough new checks on spending as it wrestles with a record budget deficit inherited from the former administration. The West African nation of 23m people is poised to pump its first oil and was chosen by Barack Obama, US president, for his inaugural visit to Africa in July. It has largely weathered the worldwide recession, benefiting from high prices for its main exports, cocoa and gold, and a decline in the fuel import bill. But the government that took office in January after closely contested elections is wrestling with accumulated domestic debt arrears and the consequences of a pre-election splurge by the former government of John Kufuor. Mr Kufuor’s government launched the country’s first eurobond last year and was lauded by western donors for its pro-business stance, despite suspicions among Ghanaians that state corruption was on the rise. Kwabena Duffuor, Finance Minister in the new administration, criticised the previous government for poor management of the national finances in his budget presentation on Wednesday. “Never in the history of our country have we faced such a huge fiscal deficit in proportion to [gross domestic product],” Mr Duffour said. “Having regard to the significant increases in government resources between 2005 and 2008”, the huge deficit showed a serious failure of expenditure control. “We were living beyond our means in a manner that we could not sustain,” he said. Ghana is regarded by donors as a shining example of the benefits of aid, because of its dramatic recovery under a development model fostered by the World Bank and IMF after a history of coups and near bankruptcy in the 1970s. Some analysts suggest it may suit the centre-left government of John Atta Mills to play up the profligacy the previous administration at a time that the new government is struggling to shape policies while keeping the economy afloat. “The problem was that no one knew this had been happening,” Wayne Mitchell, the International Monetary Fund’s resident representative, told the FT last week. “Some donors are very concerned. They want to know what will happen to prevent this from happening again.” A senior government official countered this, saying that donors had invested so much in Ghana that they had developed “ostrich-like” tendencies, preferring to turn a blind eye to abuses than question a rare model of success. The deficit will be brought down to 10.2 per cent of gross domestic product by the end of the year from 15 per cent last year, Mr Duffuor said. He added that arrears owed by the previous government amounted to 22 per cent of GDP. “A large proportion of these arrears arose from contracts that were in clear breach of the procurement law,” he said. He said the government was preparing tougher oversight of spending to address “weakness in the financial management system that [has] bedevilled the public sector”. The government will also have to rein in spending in what remains a very poor country. It faces tricky negotiations with trade unions over public sector pay and will cut back on some projects. It is planning to impose new levies on the resource sector, although details are unclear. Commentators warn that public expectations of a bonanza from oil far exceed what revenues from the industry, forecast at about $1bn annually, are likely to deliver once crude starts flowing late next year. Mr Duffuor said the government was “working frantically” to ensure that oil revenues were well managed. His prediction of 5.9 per cent growth this year is higher than some economists foresee but is in line with the central bank’s estimate. Source: The Financial Times