WASHINGTON (Reuters) - The International Monetary Fund said on Friday there was little room for maneuver in Ghana's 2010 budget as the government tries to rein in its fiscal deficit in the West African country.

In a statement at the end of talks with the government, IMF mission chief to Ghana, Peter Allum, said "good progress" was made to completing reviews of the country's $1.1 billion IMF program approved last year.

Ghana, a major cocoa and gold producer, was hard hit by the global economic downturn as world trade collapsed. It is about to become Africa's newest oil producer in 2011.

Allum said the IMF welcomed the authorities' revised deficit target for 2010 of 8 percent of gross domestic product (GDP) and its plans to further cut the deficit to 3-5 percent of GDP in 2011-12 as oil starts to flow.

Allum said under these projections, government debt would rise to 62 percent of GDP by the end of 2010 before falling in 2011-12 as the fiscal gap is reduced.

"There is little room for maneuver within these budget plans," Allum said. "Expenditure ceilings are tight, and the majority of Ghana's accumulated domestic expenditure arrears equivalent to 7 percent of GDP will be repaid only in 2011-2012," he added.

He said an early decision on the recommended electricity tariff adjustment before the Public Utilities Regulatory Commission was needed.

As Ghana moves toward becoming Africa's newest oil producer next year, Allum said the country's biggest challenge was managing expectations that oil profits would mean more fiscal space for new programs and projects.

"Given the need to repay expenditure arrears while also reducing the fiscal deficit, the initial scope for spending from oil revenues could be relatively modest," he said.

The IMF said further discussions to complete the first and second performance reviews of the IMF program were needed to obtain IMF board approval by the end of May.

The IMF maintained its outlook for 2010 growth in Ghana at 4 to 5 percent due to oil-sector investments. It said inflation would likely decline to single digits by end of this year from 14 percent in February.