Terkper disputes deficit figures

BY: Suleiman Mustapha
Finance Minister, Mr Seth Terkper
Finance Minister, Mr Seth Terkper

A former Finance Minister, Mr Seth Terkper, has cast doubts on claims by the government that the country’s rebased fiscal deficit has been trimmed to 3.7 per cent as stated in the 2019 budget.

He said the 3.7 or 3.9 per cent deficit figures in his 2019 Budget Statement were not accurate because they ignored the banks’ bailout costs.

Mr Terkper stated in an article to be published in the Daily Graphic tomorrow that the government deliberately left out the bailout cost of GH¢2.2 billion or 4.4 per cent deficit disclosed as a memorandum item in appendix 2A of the 2019 budget.

Debt report

Mr Terkper’s current claim that the deficit for 2018 is even higher at 7.2 per cent is based on disclosures made in the 2019 Annual Debt Report and in the Report on the IMF’s 7th and 8th Review of the just-ended Extended Credit Facility (ECF) Programme.

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“The deficit of GH¢ 21,474 million or 7.2 per cent in the Debt Report (and IMF Report’s 7.0 per cent) is higher than the firm assertions of 3.7 or 3.9 per cent in the 2019 budget; House Statement; and “Forward” to the Annual Debt Report.

“The irony is that the 7.2 per cent deficit is much higher than the inflated 6.3 per cent that the government now discloses in the Debt Report, which the government berates as excessive in the 2017 budget,” he added.

Mr Terkper, therefore, called on the government to come clean and a make full disclosure of the total deficit and debt stock (which has also increased above end-2016 levels, their impact on the economy, and the exact cost of the bank bailout costs—where there is little mention of the ESLA proceeds accruing to government.

The Debt Report also projects the debt-to-GDP ratio to be higher at 56.8 per cent, compared to 57.8 per cent between 2016 and 2018.

Board meeting

That, he said, was critical due to the creeping increases in the deficit from 4.4 per cent of GDP to 7.2 per cent within three months of the 2019 budget, Statement to Parliament, IMF board meeting and Debt Report.

He cited subsidies, single spine and other exceptional items in past budgets and noted that the deficit and debt stock must be stated and disclosure made for various components, as was the fiscal accounting convention.

Using graphs and tables and quoting extensively from the 2019 budget and Debt Report to illustrate his point, Mr Terkper said the Finance

Minister, in quoting the IMF, did not mention that the fund report gave the “Overall Balance” as 7.0 per cent—and the Overall Balance (excl. financial sector bailout costs) of 3.7 per cent as a secondary item.

The analysis

In fact, the IMF states that, “The analysis is complicated by the fact that the GDP rebasing affected past years differently; in addition, not all financial sector costs are reflected in the above the line fiscal accounts (as some represent equity injections below the line), though they are all included in public debt.”

The former Finance Minister also drew attention to several breaches of the Public Financial Management Act (PFMA), which he said had resulted in many anomalies in the public accounting process.