Seth Terkper writes: ‘Postponing the fiscal pain’ – Pt 1

Former Finance Minister, Seth Terkper

Fiscal offsets or consolidation?



Ghana is praised for achieving fast decreases in budget deficit since FY2016 when the past government was alleged to have bequeathed GH¢7 billion arrears. As we argued in previous articles, the decreases are from fiscal ‘offsets’, not actual payments, of arrears. The reduction of end-2016 deficit of 10.3 per cent of GDP with an ‘offset’ of GH¢5 billion (3.3 per cent) in the same 2017 budget is now showing in several inconsistencies.

We have stated that the compilation of the GH¢7 billion (or GH¢5 billion arrears) falls outside the normal definition of arrears and is a bold attempt by the President Mahama administration to move Ghana to a semi-accrual accounting regime.

Logically, the accelerated deficit reduction should lead to less borrowing, not increase, in the rate of growth of the debt stock (debt-to-GDP ratio). Instead, as Figure 1 shows, the decline in the rate at which Ghana is borrowing has turned positive again, as it experiences a rising debt burden. It has acknowledged the revenue shortfalls, high expenditures, and recently revealed high levels of arrears.

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Source: The Writer is Seth Terkper, former finance minister