The International Monetary Fund and the World Bank have been challenged to come clear and tell Ghanaians the true state of the fiscal economy-that is the Budget Deficit to Gross Domestic Product and also the Debt-to-GDP ratio.
Responding to reports that the country will be assessed by the middle of next year over its ability to repay its debt on time, former Finance Minister, Seth Tekper said the Bretton Wood institutions should stop being diplomatic with the country’s macroeconomic indicators.
“We’re going to pay part of compensation and interest and then the debt servicing itself but there’s no money left. What other signals do you need to show that you’re a country at risk of debt distress”, the former Finance Minister said.
Mr. Tekper said it’s unhealthy for government to continue to borrow to pay compensation and emoluments.
He further said “because your capital budget is borrowing, remember its compensation and interest so running government offices, goods and services you know is borrowing…borrowing for these two items is unhealthy.
“Capital is borrowing and ordinarily you should be able to finance compensation, interest and running government offices-these three items- from your own recurrent incomes. You borrow from capital and so you should be able to finance the capital. So this is the structure I’m saying’.
Mr. Tekper added that I’m saying that some of the interviews which I hear from the local offices of these institutions should not make us complacent. We’re a country that has to pull on a brake on a number of occasions”.
Fitch, IMF, World Bank all forecast over 10% fiscal deficit-to-GDP
International ratings agency, Fitch earlier forecast a fiscal deficit to Gross Domestic Product of 10.5% for Ghana in 2020.
This it said will be more than twice the 2019 commitment basis deficit of 4.7%.The government had brought the commitment basis deficit to below 5.0% in 2017-2019, following the 2016 election-year blowout.
The ratings agency said cash deficits remained high as the government paid down domestic arrears and realised the cost of contingent liabilities in the banking and energy sectors.
The World Bank also projected a fiscal deficit of a little over 12.0% to GDP this year, according to its Africa Pulse Report.
It emphasized that the average increase in the fiscal deficit in Sub Saharan Africa in 2020 is considerably smaller, relative to that of advanced economies.
The IMF however predicted a fiscal deficit of 16.4% of GDP this year.
In its Regional Economic Outlook (October 2020) report, the Fund projected that the Ghanaian economy will grow by 0.9% in 2020.
The Bank of Ghana also said provisional data for the first three quarters of 2020, showed an overall budget deficit of 9.0% of GDP against the target of 8.9% of GDP.
The primary balance also recorded a deficit of 4.1% of GDP, marginally above the target of 4.0% of GDP.