International ratings agency, Fitch says Ghana’s 2014 budget will not effectively address the deterioration in government finances over the past two years that has substantially eroded Ghana's creditworthiness.

It maintains that the pace of fiscal consolidation over the next two years will be slower than government’s projection, forecasting a deficit slightly above 9 percent for 2014.

The 2014 budget targets a deficit of 8.5 percent of GDP, following an upward revision of the 2013 deficit to 10.2 percent against a target of 9 percent. The budget also pushes back a year until 2016 the target 6 percent deficit of GDP.

“Slower fiscal consolidation than the authorities had anticipated in the first nine months of 2013, and the consequent risk of fiscal slippage, was a key driver of our downgrade of Ghana's sovereign rating to 'B' from 'B+' in October”, Fitch stated in its latest report on the 2014 Ghanaian budget.

Containing current expenditure and dealing effectively with arrears will continue to be a challenge for the authorities in 2014, given trends seen in 2013, it added.

Though total expenditure is 6.6 percent lower than forecast for the year to September, wages and interest - two areas where overruns have been persistent - were respectively 5.5 percent and 39.5 percent higher than budgeted. Arrears for the first nine months of the year are 19.2 percent above target.

Continuing, the international ratings agency said successive years of large budget deficits have put pressure on public debt, which has risen to 52 percent of GDP in September 2013, from 38.3 percent in 2011 and 31 percent of GDP at the time of the 2008 elections.

Policy credibility has been significantly weakened following two years of larger-than-expected budget deficits, it added.

Concluding, it said risks remain to the medium-term fiscal outlook, including persistently high bond yields, and continued arrears build-up, as well as utility subsidies.