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Effects of current event on the international commodity market have necessitated the Finance Minister Seth Terkper in parliament last week to present a reviewed budget for the year 2015.

The President of Ghana, John D. Mahama and Seth Terkper that, had earlier announced that estimated revenue from crude oil exports from the Jubilee Field is likely to dip  US$700 million in government's revenue from the slump in crude oil prices on the international market.

Government in the reviewed confirmed that it will withdraw GHc 19.488 million from the Ghana stabilization fund following the drastic fall in Ghana’s projected oil revenue due to the consistent decline in price of crude oil on the world market.

”An amount of GHc 4.872 million will be drawn from the Ghana Stablization Fund on a quarterly basis to finance the potential gap”, Minister of Finance Seth Terkper confirmed to Parliament last week when he presented a reviewed 2015 budget.

The Fund has accumulated in excess of US$ 590 million both in capital and interest incomes from 2011 when it was established.

Government in July last year used US$ 176 million from the fund as announced in the supplementary budget presented by the Finance minister.

The minister in the supplementary budget announced a cap on the Fund at US$ 250 million, in consonance with section 23(3) of the Petroleum Revenue Management Act 2011.

But this was challenged by the Public Interest and Accountability Committee, who in a statement said the capping is supposed to be done prospectively and not retrospectively as the finance minister had done.

PIAC early this year however called on government to use the monies that had accrued in the fund due to the fall in crude oil prices on the world market and its impact on governments projected revenue.

However the Civil Society Platform on Oil and Gas described the call as unnecessary despite the fall in oil prices.

Government in the 2015 budget pegged the benchmark price of crude at US$ 99.38 per barrel but the consistent fall in the price of crude currently selling at US$ 57.0 per barrel is disrupting government plans.

According to government it will go with the International Monetary Fund forecast for oil prices for the year at US$ 52.8 per barrel leading to a downward revision of government’s projected revenue by about 64%.

Government has revised total revenue estimates from oil from GHc 4.2 billion to GHc 1.5 billion, also from 3.1 percent of GDP to 1.1 percent of GDP.

“The drawdown of the Ghana Stablization Fund is significant in one major respect. It bears testimony to our efforts at building fiscal buffers in our public fiscal management. It is in times like these that we are able to reap the benefits of making a conscious effort at building the Ghana Stablization Fund”, Seth Terkper stressed.

Also, in the reviewed budget, government announced that, three government agencies Driver and Vehicle Licensing Authority (DVLA), Environmental Protection Agency (EPA) and the Energy Commission will this year be weaned off government’s financial assistance.

The three are the first batch of agencies affected by a new government policy introduced in 2014 to wean some of its agencies from government funding. The development is part of moves to trim down the wage bill.

Government is expecting to save between GH¢20 million and GH¢25 million this year following the move.

Compensation of employees which comprises wages and salaries, allowances, pensions, gratuities and social security contributions by government on behalf of its employees is estimated at 12.3 billion cedis which is 9.1 percent of GDP for 2015.

Of this amount GHc 10.3 billion (7.1 percent of GDP) is estimated for the payment of wages, salaries and allowances.

While GHc 750.9 million, GHc 216.0 million and GHc 1.1 billion is estimated for pensions, gratuities and social security respectively.

Finance minister Seth Tekper during his presentation of the 2014 Budget stated that 12 government agencies would be weaned-off government subvention within a period of three years.

At parliament last week, the finance minter said the other nine will be done in subsequent years.

‘The weaning off of some subvented agencies from government payroll has begun three agencies namely Driver and Vehicle Licensing Authority (DVLA), Environmental Protection Agency (EPA) and the Energy commission which have the capacity to be financially independent based on their internal generated funds have been identified for weaning off this year. Nine other agencies are being reviewed for consideration for subsequent years’.

Seth Tekper, however, has cautioned the ministries, departments and agencies as well as metropolitan, municipal and district assemblies to reduce their expenditure on goods and services since the slash in budgeted revenue has direct and immediate impact on them.

“Following my appearance before this House in November 2014 and the subsequent approval of the 2015 Budget, the sharp decline in crude oil prices on the world market has posed and continues to pose a challenge to the achievement of the 2015 economic programme. After careful consideration of these developments and the likely impact on revenues, Government has started to intensify the implementation of approved measures to ensure that MDAs and MMDAs remain within the lower than expected projected revenues,” Mr. Terkper told Parliament.

“The practical implication is that the periodic ceilings given to ministries, departments and agencies (MDAs) and metropolitan, municipal and district assemblies (MMDAs) are being revised downwards on account of the likely shortfall in petroleum revenue,” he said.

He also stated that the measures being taken by Government are also informed by the fact that recent volatilities in cocoa and gold prices affected the country’s reserves and fiscal revenues negatively.

“It is, therefore, economically prudent to assess the impact of such commodity price volatilities on the economy on a timely basis—and as soon as they arise—and to take the required adjustment measures in order not to jeopardize the achievement of our macroeconomic objectives.”

Mr Terkper, allayed fears to sound optimistic, saying that in spite of the challenge, the medium-term prospects of the economy were bright.

He said the bright prospects were underpinned by expected additional oil and gas production, enhanced services sector performance and improvement in agriculture.

Mr Terkper affirmed the government’s resolve to continue to work towards ensuring that macroeconomic stability and socio-economic objectives were not derailed by external and domestic shocks.

He said the government was convinced that the measures put in place to address the impact of the shocks would yield the intended benefits and contribute to the achievement of the short-to-medium-term fiscal consolidation objectives.

His earlier attempt to present the statement had been blocked by the Minority, which insisted that his statement should have come to the House as a motion, not as a statement.

Sitting was then suspended for about three hours to allow the leadership of the House to thrash out some issues related to the presentation, after which members were called back to the House for the presentation.

After submissions by the Majority Leader, Mr Alban Bagbin, and the Minority Leader, Mr Osei Kyei-Mensah-Bonsu, the Speaker of Parliament, Mr Doe Adjaho, relied on precedent to conclude that the Finance Minister be made to present the statement.

Mr Terkper told the House that following his appearance before Parliament in November 2014 and the subsequent approval of the 2015 budget, the sharp decline in crude oil prices had posed and continued to pose a challenge to the achievement of the 2015 economic programme.

He said the petroleum benchmark revenue (PBR) price in the 2015 Budget, based on the formula stipulated in the Petroleum Revenue Management Act (PRMA) 2011 (Act 815), was estimated at $99.38 per barrel and a volume of 102,033 barrels per day.

He said based on those assumptions, the estimated total petroleum receipts in the 2015 budget amounted to GH¢4.2 billion and indicated that of that amount, GH¢2.5 billion was allocated as annual budget funding amount (ABFA) to finance specific projects and programmes in the budget.

He said GH¢1.1 billion was estimated to be transferred into the Ghana Petroleum Funds and GH¢697.7 million to the National Oil Company.

The Finance Minister said following global developments and market sentiments which had led several international institutions to revise their oil price projections, it was not likely that the benchmark price estimated for 2015 would be realised, hence the government’s decision to examine the estimates of petroleum revenues in the 2015 budget and assess the likely impact of such an examination on the budget.

Consequently, he said, the government’s assessment was based on a price of US$52.8 per barrel, which was consistent with the International Monetary Fund (IMF) forecast.

However, he said following discussions with the oil production companies, oil output was expected to remain unchanged at the 102,033 barrels per day used in the 2015 budget.

Mr Terkper said based on the new revenue assumptions, total petroleum receipts for 2015 were estimated at GH¢1.5 billion (1.1 per cent of Gross Domestic Product (GDP), compared with the 2015 budget estimate of GH¢4.2 billion (3.1 per cent of GDP).

He said the difference of GH¢2.7 billion was 64.4 per cent lower than the 2015 budget target and indicated that of the projected total petroleum receipts, GH¢468.9 million would be transferred to the National Oil Company, in line with the PRMA.

“Hence, the remaining amount of GH¢1.0 billion (0.8 per cent of GDP) will not be sufficient to cover the ABFA of GH¢2.5 billion in the 2015 budget,” he said.

The minister said the revenue yield from the special petroleum tax was estimated to reduce by GH¢185.6 million.

Mr Terkper said the fall in crude oil prices, as well as the current energy situation and the rapid depreciation of the cedi in 2014, could also have a negative impact on overall output.

As a result, he said, 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¢358.7 million.

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

The minister said a factor that was expected to minimise the impact of the decline in crude oil prices was the enhancement of grant disbursements following staff-level agreement reached with the IMF for a $940-million facility.

He said the country’s development partners had pledged to disburse additional grants totalling GH¢381.1 million 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¢1.6 billion to GH¢1.9 billion,” he said.

Mr Terkper said total revenue and grants for the 2015 fiscal year were now expected to be GH¢29.7 billion (22.3 per cent of GDP), instead of GH¢32.4 billion (24 per cent of GDP), resulting in a shortfall of GH¢2.7 billion (1.7 per cent of GDP).

The minister said the key precautionary measures included an across-the-board reduction in expenditure ceiling on goods and services and capital by GH¢344 million and GH¢868.4 million, respectively, as well as a draw down from the Ghana Stabilisation Fund.

Similarly, he said, transfers to the Ghana National Petroleum Company (GNPC) from government are carried and participating interests in oil would be reduced to GHc468.9 million.

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