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Euromoney Country Risk

ECR: Ghana to post double digit growth in 2011, driven by offshore oil production

Ghana will experience its first full year of oil production in 2011. Up to 120 thousand barrels of oil a day will be produced according to new research from Renaissance Capital. Oil production from the offshore Jubilee Field is being managed by a consortium lead by UK resources company Tullow Oil. This should propel real GDP growth to 10.5% in 2011, according to new research from Renaissance Capital. The government estimates that 250,000 barrels will be produced by 2013. Tax revenues generated from oil production are expected to contribute 1 percent of GDP this year, (approximately 300 million Euros). Oil exports are forecast to contribute 8-10 percent of GDP in 2011.

New legislation to govern the collection and management of state oil revenues is expected to be drafted later this year. Euromoney Country Risk understands that this part of this legislation will take the form of an oil revenue sharing formula, whereby a minimum level of funds will contribute to a heritage fund that will be used to finance future infrastructure projects. Excess funds beyond this point will be invested in state foreign currency reserves, in the form of US Treasuries. It is not yet clear which government agency will manage the funds.

Oil revenues will contribute 6-7 percent of fiscal revenues in 2011. “When we met with the World Bank last year, they was some concern about the delay in the legislation. However, they have since been reassured that the proposed measures will be in place later this year,” said Yvonne Mhango, SSA Macro and Fixed Income Research analyst at Renaissance Capital.

Since oil revenues still contribute a relatively small proportion of fiscal revenue, donors have pledged to continue to provide support Ghana, despite the country attaining middle income country, in November this year. The World Bank approved a $215 million Poverty Reduction Support Credit on 22nd January. Grants from the donor community totalled 3 percent of GDP in 2010.

The government has yet to agree on any measures to control the repatriation of profits from oil production. “There is some concern among politicians about any upward pressure oil exports may have on the Cedi,” said Mhango. “This is not presently an issue, but it is something that we will be watching in the medium term.”

Ghana was ranked the fifth best Sub-Saharan country to do business in the World Bank’s doing business survey. 

View Ghana's current country risk score on Euromoney country risk

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