Seth Terkper, the former Finance Minister of Ghana has berated the government and accused it of being dishonest for painting a misleading picture of the economy in the just ended budget review. He however, noted that the fiscal situation is worse than was presented in the mid-year budget review on the floor of Parliament by Ken Ofori-Atta.

According to the Former Minister, the macroeconomic figures presented by finance minister, Ken Ofori-Atta, are quite different from figures captured in the reports of the International Monetary Fund and other international organisations.

“Government has had presentations made to several international agencies where, in some cases, it agrees to the fact that the fiscal situation is worse than what was presented in the mid-year review. These institutions include the ratings agencies – Fitch, Moody’s, and Standard and Poor’s – and most recently, the IMF in the Article IV report that shows clearly the economy is in a worse fiscal shape than was presented in the 2021 mid-year budget.

“In some cases, such as the IMF ARTICLE IV, these reports are actually executed international agreements, which Ghana has signed onto and which obligation is fulfilled by every government.”
Seth Terkper

Furthermore, Mr Terkper observed that the conflicting figures will have dire consequences on the economy as international lenders will rely on data from the multilateral institutions and rating agencies, thereby increasing the cost of borrowing on the bond market.

“With respect to its impact, we are seeing it already. Despite the rosy fiscal picture given to Ghanaians, we are seeing auction shortfalls on the domestic market whereby government will have to raise interest rates (other than tap-ins with unconventional sweeteners) before Ghanaians or Ghanaian institutions will give it money because of the tightness in the budget.”
Seth Terkper

Meanwhile, he stated that “as for borrowing outside, I don’t have to repeat what the World Bank, the African Development Bank, the IMF as well as rating institutions warning to us about finding ways and means of lowering the deficit in a very credible way.”

Moreover, he suggested that the “effect is that we are either going to pay a significantly high amount of interest or adopt non-transparent approaches like the zero-coupon loans or we may not be able to borrow at all, as our debt is likely to range between 85-90 percent of GDP by end 2021 as is being estimated by various organisations; and we will end up becoming distressed.”

Mr Terkper therefore, called on the government to be more candid when presenting figures in budgets to avoid conflicting data with the international agencies.

On the authority of Mr. Ofori-Atta as stated in the mid-year budget review, Ghana’s public debt to GDP at the end of 2020 stood at 76.1 per cent. Meanwhile, he further stated that the fiscal deficit during the same period was 13.8 per cent, including the financial sector clean-up cost.

However, the IMF Article IV Consultation released last week shows the country’s debt to GDP in 2020 was 78.9 percent, which is 2.8 percentage points higher than in the budget. The budget deficit including financial sector and energy cost, according to the IMF, also stood at 15.2 percent within the period; thereby contradicting government’s figure of 13.8 percent mentioned in the budget.

Meanwhile, the IMF projects Ghana’s debt to hit 83.5 percent of GDP by end of 2021, effectively putting the country on the list of highly distressed economies.