Prof Kusi Newman, Executive Director, IFS
The Institute for Fiscal Studies (IFS) says it has taken note of a large discrepancy of GH¢1.7 billion in government’s fiscal data between January and May, this year which has increased government expenditure and budget deficit.
“In the light of government’s financial management reforms, particularly the deployment of the Ghana Integrated Financial Management Information System (GIFMIS) within the public sector, a discrepancy figure of such magnitude is puzzling.
“We would also like to point out that arrears payments have become a major driver of government expenditure in recent years, and despite successive budgets allocating substantial sums for arrears clearance, huge payments continue to recur,” it mentioned in a recent assessment of government’s supplementary budget.
It said this year, GH¢2.3 billion has been budgeted for arrears payments after payments of GH¢4.1 billion in 2014 and GH¢2.4 billion in 2015.
“Given that information on the stock of arrears is not provided in the budget, it is difficult to make sense of these numbers. Thus to make this aspect of the budget more transparent, and also help monitor compliance by the government with its commitment to zero arrears creation in the IMF programme, details of the stock of arrears, its evolution and the liquidation payments need to be disclosed.”
The IFS stated that it was curious that an amount of GH¢1.4 billion had apparently been indicated as financing from the Bank of Ghana (BoG) as against the IMF’s continuous condition of zero central bank financing in 2016.
“While the abolishing of central bank lending to the government is ill-advised, we are not aware of any change to the zero financing condition under the IMF programme. And if the Central Bank is to provide financing to the government, where does this leave the IMF programme?”
Based on the budget’s accounting convention, it said the supplementary budget request of GH¢1,888.2 million for amortization will be deficit-neutral.
“Nevertheless, it will lead to an increase in the gross budget financing requirements and thus require more borrowing on a gross basis, by the government. In the present context of high domestic and external borrowing costs facing the government, the risk in borrowing for amortization or to refinance maturing debt is that the new debt could be procured at a higher interest rate than the one being replaced, leading to a net increase in interest payments on the debt stock.”
It disclosed that “another issue with the planned amortization involving the buying back of the 2007 Eurobond is that whereas until now, the government has said it is using proceeds from issues of Eurobonds to retire more expensive domestic debt, it is now going to resort to higher domestic borrowing as a consequence of buying back the 2007 Eurobond.
The question to ask is whether the implications of this action for domestic interest rates, inflation and real GDP growth have been properly considered.”
“Just as in the 2016 supplementary budget, the 2015 supplementary budget request was also based entirely on amortization which was increased at the time by GH¢1.8 billion.
“However, the 2015 fiscal outturn shows that not a single cedi of the additional money approved was spent on amortization. In fact, the amount actually spent on amortization was GH¢65 million less than even the original budget estimate.
“Given the loose control over expenditure in Ghana, we worry that the requested supplementary budget for amortization could well end up being spent on other unapproved areas.”
By Samuel Boadi