The fall in the price of crude oil on the world market is taking a heavy toll on the budget of many developing countries, including Ghana.
A typical example is the revision of Government’s 2015 Budget, which was presented on Thursday by Seth Terkper, Finance Minister in Parliament.
Ghana’s total petroleum receipts for 2015 is cuurently estimated at GH¢1.5 billion (1.1 percent of GDP), compared with the 2015 Budget estimate of GH¢4.2 billion (3.1 percent of GDP). This is based on the IMF’s revised Brent crude oil price projection for 2015 to an average of US$52.8 per barrel.
Government had initially based its projections of a barrel of oil at US$99.38 per barrel and a volume of 102,033 barrels per day arriving at GH¢4.2 billion pursuant to the Petroleum Revenue Management Act (PRMA), 2011 (Act 815).
‘The difference of GH¢2.7 billion is 64.4 percent lower than the 2015 Budget target. Of the projected total petroleum receipts, GH¢468.9 million will be transferred to the National Oil Company in line with the PRMA.’
However, Mr Terkper mentioned that the remaining amount of GH¢1.0 billion (0.8 percent of GDP) would not be sufficient to cover the Annual Budget Funding amount of GH¢2.5 billion in the 2015 Budget.
He attributed the significant decline in total petroleum receipt mainly to the substantial decline in corporate income tax from oil companies, adding that production costs for some of the companies would outstrip their revenues and result in losses.
‘In addition to the direct impact on petroleum receipts, the decline in crude oil prices is also likely to impact negatively on the Special Petroleum Tax (SPT). Thus, the revenue yield from the special petroleum tax is estimated to be lower by GH¢185.6 million.
‘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¢358.7 million.’
As a result of the afore-mentioned factors, he said total domestic revenue for 2015 is now expected to be GH¢27.8 billion, resulting in a shortfall of GH¢3.1 billion.
He added that Ghana’s development partners have pledged to disburse additional grants totalling GH¢381.1 million to fund programmes in the 2015 Budget and this could result in an increase in the estimate for grant disbursements from GH¢1.6 billion to GH¢1.9 billion.
In summary, total revenue and grants for the 2015 fiscal year are expected to be GH¢29.7 billion (22.3 percent of GDP) instead of GH¢32.4 billion (24.0 percent of GDP), resulting in a shortfall of GH¢2.7 billion (1.7 percent of GDP).
Although crude oil prices have started showing signs of recovery in recent weeks from a low of US$47 per barrel in January, many market analysts believe that near-term crude oil prices could hover around an average of US$50 per barrel in 2015.
BY Samuel Boadi
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