Government said it would increase the size of a Eurobond this year to $1.5 billion - some $500 million higher than originally planned - as it cut its economic growth forecast and widened its budget deficit estimate due to weak commodities prices.
Presenting a revised 2015 budget, Finance Minister Seth Terkper said Ghana had raised its deficit target to 7.3% of gross domestic product (GDP) from 6.5%, due largely to lower-than-expected revenues from the oil sector.
Estimated oil revenues this year were more than halved to ¢1.8 billion ($562.5 million) from ¢4.2 billion.
Economic growth in the gold-, cocoa- and oil-producing nation is now expected at 3.5%, down from a previous forecast of 3.9%. Output has been hit by a disappointing cocoa harvest and weak gold prices.
Hit by a stubbornly high fiscal deficit, rising inflation and a debt-to-GDP level close to 70%, Ghana agreed a $918 million three-year programme with the International Monetary Fund in April.
That marked an abrupt reversal of fortunes for a country whose robust economic growth in previous years had marked it out as a darling of frontier market investors.
Terkper said that steps taken by the government to stabilise the economy were beginning to yield dividends. The cedi currency has rallied significantly in July after slumping 25% in the first six months of the year.
"The bold measures we have taken since 2013 have restored confidence in the economy, resulting in the gradual and envisaged improvements in revenue performance and foreign exchange inflows," Terkper said.
He said the government was seeking to cut 2015 total expenditure to ¢40.3 billion from an earlier forecast of ¢41.2 billion.
Despite domestic benchmark interest rates set at 22% by the Bank of Ghana, the government raised its end-year consumer inflation estimate to 13.7% from 11.5%.
The government also said it would now seek to issue a $1.5 billion Eurobond in September rather than a $1 billion bond by end-June, as originally planned.
The increase issuance has been approved by the International Monetary Fund, a senior government official told Reuters, requesting not to be named.
The government has said that $400 million of the Eurobond would be covered by a World Bank guarantee.
Razia Khan, head of research for Africa at Standard Chartered in London, said the revised growth figure was more realistic given both weaker commodity prices and the demands of the IMF programme.
She said that if the proceeds of the Eurobond were used to retire more expensive domestic debt, it would be seen as good news - and vital to putting Ghana on the path towards some sort of debt sustainability.
"This is especially the case if the World Bank is providing a partial guarantee of the Eurobond, which will otherwise blunt the higher borrowing from Ghana," Khan said.
"Without retiring very expensive domestic debt, it is not clear how debt sustainability will be achieved," she added.
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