Vice President Mahamudu Bawumia
Government has revealed that it has discovered a yawning GH¢7 billion ($1.6 billion) expenditure gap in a budget prepared by the previous Mahama administration.
Vice President Mahamudu Bawumia, who dropped the hint on Tuesday, disclosed: “How are you supposed to manage an economy with faulty data? We have been very surprised by the fiscal data. We find out that there is GH¢7 billion of expenditure that has not been disclosed.”
Calls to former Finance Minister Seth Terkper by the media for clarification on the matter went unanswered.
The Bank of Ghana (BoG) on January 23, this year, asked the new administration to contract the budget deficit after provisional data for January through November showed a shortfall of 7 percent of Gross Domestic Product, exceeding a forecast of 4.7 percent.
The International Monetary Fund (IMF) last month said it expected Ghana to miss its fiscal-deficit target for 2016 by more than the government’s forecast because of weak income collection and higher-than-planned capital spending.
According to Bloomberg, yields on Ghana’s benchmark dollar bond due in August 2023 increased 33 basis points to 8.70 percent, the highest since December 19, at 11:30 a.m in Accra.
The cedi weakened for a third day against the dollar, slipping 0.4 percent to 4.38.
Investors will be concerned about a high budget deficit and there was still the risk of further debt accumulation, said Courage Martey, an economist at Accra-based Databank Group Ltd.,
“There will be a difficulty in payment which can lead to restructuring of the nation’s debt, he said by phone.
“It only shows that our fiscal and debt situation is quite complicated and too complicated to deal with in the short-term very quickly, so the Eurobonds will continue to reflect that difficulty in the short term.”
Finance Minister Ken Ofori-Atta will present the 2017 budget next month but forecasts from government indicate the economy most likely expanded by 4.1 percent in last year.
Meanwhile, the Minority in Parliament on Wednesday, expressed dissatisfaction with the announcement by Dr Bawumia.
“We are displeased by the tendency of the Vice President to rush with information to the public and the media, particularly the structural measures and reforms without taking time to understand the rational for the reforms and initiatives.”
It explained that the GH¢7 billion that the Vice President Dr. Bawumia referred to was as a result of a major initiative or reform on government contracts and expenditure, which was part of the GIFMIS project that the new administration was expected to continue implementing. The framework was also covered in the new Public Financial Management (PFM) Act under the Budget Responsibility provisions.”
It stated that “the fund was used for part of the contract database and outstanding commitment, and does not constitute conventional definition of arrears.”
By Samuel Boadi