Former Minister for Finance, Seth Tekper, has expressed worry about the change of fiscal accounting by the current government in treating ‘exceptional’ expenditure items and arrears as a footnote.

As such, he stated that key attention will be on how the government will treat the IMF US$1billion SDR inflows in its provisional outurn for 2021 or the 2022 budget.

“As we wait for the budget for 2022 and the Provisional outurn for 2021, we wait to see how government will treat the ‘exceptional’ IMF US$1billion SDR inflows or revenues as a Budget Appendix Footnote or as income”.
Seth Tekper

According to him, there have been several concerns over the change of fiscal accounting by the current government since 2017. He noted that if the government treats the SDR as a Budget Appendix Footnote, “it will be following the ‘consistency’ rule but be incorrect”.

However, “if it does not, and follows what it does with ESLA now, it will also be consistent with their current practice”. Yet, he said, doing this means that the government is exercising a discretion or option that does not warrant it comparing its fiscal performance to those of any past governments.

“In particular, it has used this approach to account for the banking and energy sector bailout costs. In fact, in the case of the energy sector costs it has even skipped the footnote treatment and brazenly added the expenses and arrears to amortization”.
Seth Tekper

Departure from previous administrations

The Former Finance Minister stated that the current practice is a departure from what past governments did. He averred that the current government has treated all exceptional revenue inflows and expenditure outflows ‘above the line’. This means that “they have added them to revenue, expenses or arrears, but showed them distinctly in the fiscal framework”.

“This means that the exceptional revenues decrease the deficit while the counterpart expenditures increase the budget deficit (also called the fiscal balance)”.
Seth Tekper

He cited divestiture and HIPC/MDRI (as revenues or receipts) and single spine, excessive subsidy, additional fuel cost for thermal plants during droughts, or gas supply disruption (as expenses) as some examples.

However, Mr. Tekper stated that when it came to the exceptional bailout costs, this government excluded the cost and boasted of better budget deficit performance.

“Note that at the same time government treated the related ESLA flows as revenues, which minimizes the deficit or fiscal balance. It is disappointing to note the defense from well-informed experts and institutions that government had the option to go against well-known GFS and IPSAS accounting rules on the matter”.
Seth Tekper

Ballooning debt stock

Mr. Tekper highlighted that the practice also defies the accrual accounting rules in the PFMA. He emphasized that “other well-informed experts simply chose to remain silent, including those who should set our national standards”.

Nevertheless, Mr. Tekper indicated that the rising debt stock has exposed the practice of the current government “as a hoax”. According to him, the IMF and ratings agencies now isolate but include exceptional expenditures in determining the budget deficits or fiscal balance. To date, however, government has not changed this practice, he said.