{"id":597056,"date":"2019-03-07T16:23:00","date_gmt":"2019-03-07T16:23:00","guid":{"rendered":"
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Paragraph 25 of the FY2019 Budget notes that the government was on course to meet its \u201cfiscal deficit target of 4.5 percent for the year (3.7 percent in the rebased series)\u201d and that \u201cthis will be the second consecutive year this Government has achieved its fiscal deficit target\u201d. <\/span><\/p>\n

We have been disputing this claim and remain skeptical\u2014as in two previous articles where we disputed the use of \u201coffsets\u201d to neutralize part of Ghc7 billion arrears in the 2017 Budget.<\/span><\/p>\n

<\/p>\n

Exceptional treatment of arrears<\/b><\/span><\/p>\n

As shown in Table 1, MOF uses an unusual approach to project the deficit of 3.7 percent for FY2018, by adding Ghc2.2 billion \u201cbanking sector (bailout) costs\u201d to \u201cfootnotes\u201d. <\/i><\/b>Given progress with the public financial management (PFM) reforms, these should be passed through the Accounts Payable module in GIFMIS, our electronic \u201cbook of record\u201d. The footnote treatment has a similar effect<\/i><\/b> as the \u201coffset\u201d of Ghc7 billion arrears in FY2016\/2017. <\/span><\/p>\n

<\/p>\n

Table 1: FY2019 Budget Extracts (Ghc million)<\/b><\/span><\/p>\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
\n

Budget Items (Ghc million)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Budget Original<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Revised Budget (Mid-Yr)<\/span><\/span><\/b><\/span><\/p>\n

<\/p>\n<\/td>\n

\n

2018 Projected Outturn<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Program Q1-Q3<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018\u00a0\u00a0\u00a0\u00a0\u00a0 Prov\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Q1-Q3<\/span><\/span><\/b><\/span><\/p>\n

<\/p>\n<\/td>\n<\/tr>\n

\n

I. ABOVE THE LINE<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n

Total Revenue & Grants<\/span><\/span><\/span><\/p>\n

<\/p>\n<\/td>\n

\n

49,401 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

49,059 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

46,808 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

35,599 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

32,201 <\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Total Expenditure<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

59,514 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

59,172 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

56,965 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

42,714 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

41,493 <\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall Balance (Commitment)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,113)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,113)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,157)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(7,115)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(9,292)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\u00a0<\/td>\n\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n

II. BELOW THE LINE<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n

Overall Balance (Commitment)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,113)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,113)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,157)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(7,115)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(9,292)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Net change in arrears\u00a0 i\/<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

(858)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(858)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(858)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(670)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(856)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall Balance (Cash)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,971)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,971)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(11,015)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(7,784)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,148)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Discrepancy\u00a0\u00a0 ii\/<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(0)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(0)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

1,098 <\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall balance (incl. Divestiture & Discrepancy)\u00a0\u00a0 iii\/<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,971)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,971)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(11,015)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(7,784)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(9,050)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Note (i) is arrears brought forward (b\/f) plus accumulation less payments; (ii) is discrepancy while (iii) adds both.<\/span><\/p>\n

Source: Appendix 2A: SUMMARY OF CENTRAL GOVT OPERATIONS (2018)<\/span><\/span><\/b><\/span><\/p>\n

Since the discrepancy at end-Q3 of FY2018 is positive and unusual <\/i><\/b>it makes the Overall Balance (cash basis) lower than the Overall balance (commitment basis), eliminates it the end-December 2018 provisional outturn, and increases the fiscal deficit.<\/span><\/p>\n

\u00a0<\/span>Table 2: Budget 2019 Memorandum [Footnote] Items (Appendix 2A)<\/b><\/span><\/p>\n

\u00a0<\/p>\n

\u00a0<\/p>\n\n\n\n\n\n\n\n\n\n\n
\n

III] Nominal Budget Items (Ghc mill.)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Orig<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Rev<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prov<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prog<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prov<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Budget<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Budget<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Outturn<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Q1-Q3<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Q1-Q3<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall Balance (cash, discrepancy)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,971)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(10,971)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(11,015)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(7,784)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(9,050)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Balancing item: Financial sector cost\u00a0 iv\/<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(2,201)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(2,201)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(2,201)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0 <\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall Balance (cash, discrepancy, and financial sector cost<\/i><\/b>)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(13,172)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(13,217)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(9,985)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(9,050)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

GDP Nominal (GDP)<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n<\/tr>\n
\n

Overall GDP<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

298,699 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

298,699 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

298,699 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

298,699 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

298,699 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Non-oil GDP<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

285,921 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

285,921 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

285,921 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

285,921 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

285,921 <\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/p>\n

\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 Table 2 (note iv) is a significant footnote since it shows it omits tje Ghc2.2 million<\/i><\/b> from total arrears \u201cbelow-the-line\u201d in Table 1. This is exceptional since it should increase \u201cnet change\u201d in arrears to Ghc3,060 million, <\/i><\/b>overall balance (cash, discrepancy, and financial sector costs) to Ghc13,217<\/i><\/b> and the fiscal deficit of 3.7 percent to 4.4 percent of GDP<\/i><\/b>.<\/span><\/p>\n

\u00a0<\/p>\n

Table 3: Budget or fiscal deficit (percent of GDP)<\/b><\/span><\/p>\n

\u00a0<\/p>\n\n\n\n\n\n\n\n\n\n\n\n
\n

IV. BUDGET DEFICIT (% of GDP)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Original<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Rev<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prov<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prog<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prov<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

2018 Prov<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

a) Above the line (cash basis)<\/span><\/span><\/i><\/b><\/span><\/p>\n<\/td>\n

\n

Budget<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Budget<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Outturn<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Q1-Q3<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Q1-Q3<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

Non-oil<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall balance (commitment)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.4)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.4)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.4)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(2.4)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.1)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.6)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

b) Below the line (cash plus arrears)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall balance (cash)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.7)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.7)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.7)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

(2.6)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.4)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.9)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall balance (cash + discrepancy)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.7)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.7)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.7)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

(2.6)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.0)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.9)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

c) Footnote (overall plus financial cost)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/b><\/span><\/p>\n<\/td>\n

\u00a0<\/td>\n\u00a0<\/td>\n\n

\u00a0<\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Discrepancy<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0.0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(0.0)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0.0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(0.0)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0.4 <\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

0.0 <\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n

\n

Overall balance (cash + discrepancy + financial cost)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

0.0 <\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(4.4)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(4.4)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

(3.3)<\/span><\/span><\/span><\/p>\n<\/td>\n

\n

(3.0)<\/span><\/span><\/b><\/span><\/p>\n<\/td>\n

\n

(4.6)<\/span><\/span><\/span><\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

\u00a0<\/p>\n

Treatment of past exceptional arrears<\/b><\/span><\/p>\n

\u00a0<\/p>\n

The Gh2.2 billion is large bit its exceptional treatment offends the consistency rule or convention <\/i><\/b>in financial and fiscal accounting. Some past examples buttress the point:<\/span><\/p>\n

    \n
  1. \n
      \n
    1. Single-spine salary scheme (SSSS) arrears:<\/i><\/b> Between 2011 and 2014, the Mahama and Mills governments were saddled with huge SSSS arrears. After the Ho Forum, about Ghc4 billion, over 70 percent of tax revenues, were disclosed and paid over several years under the current IMF ECF Program.<\/span><\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

      Subsidy arrears:<\/span><\/i><\/b> A recurring utility, petroleum and other subsidy arrears that resulted in liberalizing prices in 2015 were huge but added routinely to commitments by successive PNDC, NDC and NPP administrations. The alternative to budgetary allocation was\u00a0<\/span><\/p>\n

        \n
      1. \n
          \n
        1. passage of the Energy Sector Levy Act (ESLA) to clear the huge VRA and energy sector debt that weighed heavily on our banks.<\/span><\/li>\n<\/ol>\n<\/li>\n<\/ol>\n
            \n
          1. \n
              \n
            1. Financial sector costs:<\/i><\/b> Similarly, past arrears of foreign exchange losses and bailouts were added to arrears or public debt. Hence, the current \u201cbailout\u201d costs are fiscal and monetary policy choices that should not dilute our fiscal rules<\/i><\/b> on arrears or public debt.<\/span>\u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/span><\/li>\n<\/ol>\n<\/li>\n<\/ol>\n

              The inclusion of \u201cbailout costs\u201d<\/i><\/b> in Appendix Tables (2019 Budget) to make material and unusual changes to our fiscal rules<\/i><\/b> is new, from fiscal records available since FY2000. The unusual approaches started in the FY2017 Budget, presumably on the blind side of domestic and foreign fiscal oversight institutions.<\/span><\/p>\n

              \u00a0<\/p>\n

              Recap of FY 2016 \u201cOffset\u201d of Ghc 7 billion Arrears<\/b><\/span><\/p>\n

              \u00a0<\/p>\n

              The other breach of fiscal rules uses \u201coffsets\u201d to neutralize part of the Ghc7 billion \u201carrears\u201d <\/i><\/b>that the 2017 Budget (par. 7\/8) stated as unpaid in FY2016. As Table 4 shows, this offset\u2014and change in end-period \u201ccut-off\u201d rules discussed later\u2014increased the deficit to 10.3 percent of GDP\u2014about 6.4 %<\/span> (without a setoff it would be 4.1%).<\/span><\/p>\n

              Table 4: Cash Accounting Portion of Fiscal Table<\/b><\/span><\/p>\n<\/div>\n