The government, after it was strapped naked on plot to use to cot the sympathy of the International Monetary Fund (IMF) to give room for a reengagement on the three-years extended credit facility (ECF) terms and conditions, has decided to fully complete the IMF programme.
The government immediately after assumption of office and faced with the reality of the economic data of the country, the still-in-progress IMF programme and juxtaposing them with the urge to fulfill its juicy campaign promises; now sort to use ways and means to level grounds for a bid of reengagement with the IMF to ask for fiscal space to borrow to meet some proposed budget lines.
Among the ways and means were the pronouncement by the Vice President, Dr. Mahmud Bawumia that, the previous government had hidden an expenditure to the tune of GHC 7 billion from the public knowledge.
This seemed to suggest that, the reported budget deficit of 7% left behind by previous government was not accurate and therefore should be in the range of 9% to 10%.
In this sense, any plead to IMF to allow the current government to borrow more than the limit set in the ECF terms and conditions must be adhered to.
But, this plot to discredit the credibility of the country’s economic data by the Vice President have been challenged by several economists and financial experts.
One of the economists who challenged the Vice President’s on his bait was Mr Isaac Adongo. He accused the New Patriotic Party (NPP) government of trying to cot sympathy from the IMF, using the GH¢7 billion expenditure loophole’ as a bait.
Mr Adongo said the government was now looking for excuses to bypass that limit of borrowing both externally and internally by the government, one of which was the allegation that the previous administration hid GH¢7 billion from the fund after the government realized that the three-year ECF with the IMF limits the amount the government can borrow at a time which is a major headache to the government as it tries to fulfill its promises to cut taxes, give financial supports to businesses, improved irrigation systems, creating a number of funds and its local industrialization policy.
“How can a government hide expenditure to the tune of GH¢7 billion,” he quizzed.
“These are people who are going to face the IMF and because of that they go out and make it seem like they have inherited lots of arrears and debts so that they will be given the opportunity to borrow more and expand the deficit,” he said.
The Member of Parliament (MP) for Bolga Central explained that, the government, after it realised that there was no fiscal space for it to raise funds to be able to deliver on its numerous promises, was now intentionally creating that impression to be able to court sympathy from the public.
Also, among the bait, was the plan to use renowned economists in the country to propagate the need for the government to reengage with IMF on some of the terms and conditions since the current government was not part of the negotiation team.
One of the economists used by the NPP government for its bait on IMF was, Economist Dr Eric Osei Assibey, a senior lecturer of the University of Ghana.
He is on record to have said on several media platforms that: “I do not see why we should stick to the set targets which have been woefully missed; to be fair to the new government it is only proper that the new targets are based on its own programme.”
He had told an Accra base media again that, “New targets have to be set, new measures have to be taken, and new forecasts have to be generated”.
The ruling NPP has not hidden its intention to provide some fiscal stimulus in terms of tax cuts and other reliefs to get the private sector thriving again.
The Finance Minister, Mr Ken Ofori-Atta, after the failed attempt to use its baits to cot the sympathy of IMF and the learned public has publicly accepted to go by the original terms and conditions of the ECF which will end in the middle of 2018.
Contrary to his new position, the Finance Minister, Mr Ken Ofori Atta had earlier hinted that government’s economic team will push for changes in the IMF’s conditions to meet government’s fiscal policies.
According to him, it is imperative for such adjustments since it will guarantee economic development under the new administration.
“We will need to sit down with the IMF to discuss how well the programme fits within our stated goals and objectives and discuss and agree on any tweaking that we may do going forward,” the Minister said in a press briefing.
It will be recalled that Senior Minister Yaw Osafo Maafo had at his vetting indicated that the IMF itself would request a review of the programme since most of the targets had been missed.
But, expatiating on his new position, the finance minister explained that the government’s commitment to the IMF programme followed a series of cross-sectional discussions held with key stakeholders.
“Our partnership with the IMF so far has been well and there have been several discussions and some commitments and we have promised to successfully complete the programme in the stipulated period,” Mr Ofori-Atta said at the launch of Goldenlink Savings and Loans in Accra.
The minister said under the guidance of the Vice-President, Dr Mahamudu Bawumia, and the Senior Minister, Mr Yaw Osafo-Maafo, the government would ensure that Ghanaians benefited from the programme.
He added that the government would restore fiscal policy credibility and transparency, as well as policy clarity, in the formulation of the 2017 budget and economic policy.
“We have already had several discussions with the various heads of ministries, departments and agencies (MDAs) to review their policies and ensure consistency with the government’s medium-term policy strategy, but there were several challenges in their books. So one thing we can assure Ghanaians is that there will be a period of fiscal credibility, clarity and transparency in the protection of the public purse,” he said.
Mr Ofori-Atta said the government was committed to ensuring fiscal discipline and good economic governance, focusing on transparent and accountable use of public resources, in accordance with the Public Financial Management Law.
Again, as part of the bait, the government recently revealed that the country will miss its growth, fiscal deficit and primary balance targets.
Ghana’s primary balance, according to the Finance Minister is in the negative from a projected target of 1.3 percent set by the John Mahama administration.
But, economic research institutions such as umb Stockbrokers have projected a GPD for the first quarter of this year to hinge between 4.8 and 5.2 percent.
The World Bank and the IMF had also remain positive about Ghana’s outlook, projecting 6% and 4% growth respectively for the economy in 2017 on the back of expected boost in oil revenue inflows from the development new fields.
Moody’s said Ghana’s economic growth will accelerate to 6.5% in 2017 and 7.5% next year, from 3.8% in 2016.
The forecast for GDP by the previous government for 2016 was 4.1 percent while the IMF had a forecast of 3.3 percent. Analysts are not certain whether or not the GDP targets have been missed as data remains unavailable.
The totality of government’s tax and expenditure policies (including those related to electoral pledges) must lead to a lowering of the deficit from the 2016 level, the economists maintain.
This paper’s interaction with analysts reveal fears of other targets such as zero new arrears accumulation and the wage bill ceiling also being missed if what we’re hearing about unreported data is to be believed.
The inflation target was missed too at 15.4 per cent against -8±2 per cent.
A positive primary balance (that is, a primary surplus) is seen by economists as contributing to improve debt sustainability, while a negative primary balance (a primary deficit) is seen as worsening debt sustainability.
Further explaining to the reasons behind the GH¢7 billion expenditure, Mr Adongo said, the amount was arrears and commitments that were necessary in the governance of any financial regime.
“Development projects that are executed will span a number of years. For instance, if you are constructing the Eastern Corridor road, you will have to commit the state to an expenditure that will span a certain number of years and so at the time that you will be leaving office, you would have executed the project to a certain stage; you would have made payments on the project to some stage; and you will have some certificates or some bills that have been raised that you have been unable to pay.”
“So the government needs to know that yes, there is an obligation of certain payments that you need to make but beyond that, the project still has a certain amount of expenditure that will accrue as to when the project is being executed and it may span a year or two and that must be catered for in the budget,” he added.
He noted that the GH¢7 billion arrears was because the previous government, having assessed the need to eliminate infrastructure deficit, engaged in certain projects for which reason certain arrears had accrued.
The Bolga Central MP, again explained that most of the funds that constituted the GH¢7 billion arrears had already been secured, adding that it was not now that the government was going to look for funds.
“With the Eastern Corridor project for instance, we already have a loan from the Brazilian government. The same applies to the Bolga Regional Hospital, the Wa Regional Hospital and the Kasoa Interchange. The funding for all these projects have already been secured,” he noted.
On the arrears that arose from statutory funds, Mr Adongo said, “it is because by our treasury system, you have to collect the revenues into the consolidated fund then within that quarter, you access the total monies available and based on the formula, you distribute and share.
“So, they are always in arrears by, at least, one quarter or two, but the monies should be sitting in the consolidated fund by now,” he added.
He said it was only the government of Ghana components that the government needed to look for money to cater for.
The sad aspect of this plot of the government is that, it has great and dire consequences on the country’s economy. It has impact on the country’s bonds yield, exchange rate, investor confidence and rating agencies perception of the country’s economic data which could lead to downgrading.
While insisting that the claim was erroneous and should, therefore, be ignored, Mr Adongo said, the government needed to know that such allegations were disingenuous to the economy, citing the impact of the claim on the country’s bonds.
“Such statements had the tendency to jeopardise the country’s credit ratings since they sent a message out there that the country’s financial statistics could not be trusted.
“We are no more in an electioneering season. If you have facts, meet your donors and IMF and put those figures to them, they will know how to interrogate them. It is not good to make public such information to court sympathy and in the end, jeopardise the whole nation,” the MP said.
By: Adnan Adams Mohammed