Dr. Kwabena Duffour
Former Finance Minister, Dr. Kwabena Duffour through his recently formed think-tank Institute for Fiscal Studies (IFS) has launched an assault on current Finance Minister; Seth Terkper for what they claim is causing Financial loss to the state.
In collaboration with anti-government think-tank IMANI-Ghana, Dr. Duffour?s IFS is accusing Mr. Terkper of causing financial loss of Ghc2.7 billion (equivalent to 1.7 per cent of GDP) to the state by his failure to hedge oil prices on the international market.
Mr. Terpker was deputizing Dr. Dufour and became the latter?s immediate successor he was relieved of his position in 2013.
The two personalities are reportedly not seeing eye-to-eye because since assuming the office of the Finance Ministry, Mr. Terkper has initiated radical reforms that have cut down waste that was hitherto presided over by Dr. Duffour.
Dr. Duffour was the Finance Minister when in 2012, Ghana?s macro-economic indicators took a nose-dive a situation characterized by ballooning public debt, rising inflation and an inexplicably high budget deficit, leading to several measures initiated by Mr. Terkper; such as cutting government spending, issuing a multi-million dollar Eurobond and opting for an IMF program to manage public debt and rationalize government expenditure.
Insiders tell this paper that Dr. Dufour may be unhappy with the fact that Mr. Terkper?s initiatives at the finance Ministry is increasingly making his stewardship look bad.
At a recent press conference organized by IFS and IMANI-Ghana to analyse the 2015 budget, speakers virtually attacked Mr. Terkper for refusing to hedge petroleum prices for Ghana.
However, the Finance Ministry under Mr. Terkper has insisted that it will go slowly on the hedging business because of its high risks. Crude oil hedging is a risk management strategy used in limiting or offsetting probability of loss from fluctuations in the prices, sometimes countries make huge gains from hedging and sometimes they lose ?big time? from poor hedging calls. The Finace Ministry has stated that it cannot take that gamble, giving Ghana?s particularly volatile financial situation.
Executive Director of IFS Prof Newman Kusi who questioned Mr. Terkpers reasons for not hedging stated that under Dr. Duffour, crude oil was ?successfully? hedged ??Mr Terkper was a deputy finance Minister, he should have known better than fail to do same now that he is the Minister,? he charged.
International crude oil prices have drastically fallen in the past few months as the Government earlier estimated to rake in Ghc4.2 billion from the oil sector this year, but the sharp fall in crude prices resulted in the government realizing just Ghc1.5 billion in 2015.
?The question that arises is why couldn?t the country avoid the loss of Ghc2.7 billion? Why did the Government stop using the hedging programme that was successfully implemented between 2010 and 2012 to mitigate the losses?? Prof Kusi wondered.
But Mr. Terkper has stated that his plan to offset the shortfalls in oil revenues is to adjust the national budget to absorb the decline, rather than using hedging as the sole counter-measure.
?To address the revenue shortfalls noted above and ensure the achievement of the objectives of the ongoing fiscal consolidation, and keep borrowing in line with the levels approved in the 2015 Budget, key measures being implemented include an across the board reduction in expenditure ceilings on Goods and Services and Capital by GH?344.0 million and GH?868.4 million, respectively, as well as a drawdown of an amount of GH?487.2 million from the Ghana Stabilization Fund.?
According to the Finance Ministry, the measures to address the impact of these shocks will yield the intended benefits and ?significantly contribute to the achievement of our short-to-medium term fiscal consolidation objectives?.
Source: The Republic