Ghana risks IMF sanction over ‘GHS7bn loophole’

Business News of Wednesday, 8 February 2017



Osei AssibeyDr Mark Assibey-Yeboah

Ghana risks being sanctioned by the International Monetary Fund (IMF) for failing to disclose full financial data to the fund at the time it signed onto the three-year Extended Credit Facility (ECF), the Majority in Parliament has said, pointing to the GHS7 billion that it claimed had not been accounted for.

The sanction will be similar to a US$39 million fine that the fund imposed on the country in 2000 after accusing Ghana of providing misleading financial information.

While insisting that the previous administration intentionally hid some GHS7 billion expenditure from the fund and Ghanaians, the Majority NPP Members of Parliament (MPs) said they feared that what happened in that year could befall the country again if the fund finds out about the alleged loophole.

“We will know by the end of this week (if the expenditure loophole is true and liable to sanctions) when the Mission Chief is expected to brief donors on his findings,” the Majority Spokesperson on Finance and Chairman of Parliament’s Finance Committee, Dr Mark Assibey-Yeboah, said at a news conference in Accra on February 2.

The press conference was to shed more light on earlier allegations by the Vice President, Dr Muhammudu Bawumia, that the John Mahama administration had failed to account for some expenditure arrears, totaling GH¢7 billion.

While supporting the Vice President’s claim, Dr Assibey-Yeboah said what was worrying was the fact that the arrears covered 2014-2016, the period of negotiations of the ECF programme begun.

“On the face of the reality that the arrears dated back to 2014, then it would suggest that when the previous administration entered into negotiations with the IMF, full disclosure of data was not made available to the fund,” he stated.

He said, given that, the implementation of the ECF was still underway, the IMF stood a better position to make some of these issues clear, as to whether it represented a breach of the ECF programme conditionalities.

“We may also recall that under the program, the government is not allowed to accumulate arrears and this may yet represent another serious breach of the program and punitive actions could be meted out against Ghana,” he pointed out.

As a result, he said the non-disclosure, in full, of arrears for 2015 and 2016 also raised further questions on the integrity of data that the previous administration churned out over the past eight years.

Implications on budget deficit

Dr Assibey-Yeboah, also pointed out that these uncovered arrears could put the overall budget deficit at 10-11 per cent of GDP, up from the 8.5-9.5 percent being projected for 2016.

“Let us put this in perspective- for an economy with a size of US$ 41.5 billion, the current deficit numbers show that in 2016 alone, our expenditures far exceeded revenues by as much as US$ 4 billion,” he said.

“Who financed these expenditures? Is it the Bank of Ghana through the banks? Is it from the US$ 250 million that was provided UBA bank?” he asked.

“Didn’t President Mahama keep reminding us that his government was not going to overblow the deficit? How did this humongous deficit arise in spite of declarations to the contrary? Where was staff at the Finance Ministry doing all this while?”

Minority’s reaction

The Minority in Parliament had earlier on responded to the Vice President Dr Mahamudu Bawumia’s revelation that the NDC government failed to disclose a GHS7billion expenditure.

The Minority Spokesperson on Finance and Ranking Member of the Finance Committee, Mr Cassiel Ato-Forson said the GhS7 billion referred to by the Vice President came about as a result of a major initiative or reform on government contracts and expenditure, which was part of the GIFMIS project [Ghana Integrated Financial Management Information System] that the new administration was expected to continue implementing.

He said the framework was covered in the new Public Financial Management (PFM) Act, under the Budget Responsibility provisions.

Mr Ato-Forson therefore accused the Vice President of rushing to make his allegations without understanding the structural measures, reforms and the rationale for the reforms and initiatives.

Dr Assibey-Yeboah, however, described this reaction as pathetic, stating that, “clearly there is an admission by the minority that the GHS7 billion expenditure which had been kept out of the purview of the books of government, constitutes real expenditures that have been undertaken,” he stated.

He said the explanation by the Minority depicted a team that was grossly unaware of the extent to which the nation’s books may have been cooked to provide a false sense of good economic management and to deceive investors.

“More worrying is the fact that the Former Deputy Minister attributed the arrears accumulation to reforms underway and the way in which data is captured. What he describes as creative accounting management is unethical and dangerous,” he said.