Former Minister for Finance Seth Emmanuel Terkper, has reacted to an explanation given by Governor of the Central Bank, Dr Ernest Addison, to government’s constant exclusion of exceptional costs in its fiscal deficit calculation.
Mr. Trkper stated that government has adopted what he describes as an “unconventional” computation of data especially on fiscal deficit resulting in government’s parallel reports on the macro-economy whereby one set of data is shown to Ghanaians and a different set presented to the International Monetary Fund (IMF).
The former Finance Minister’s reaction is coming at the heels of the 97th Monetary Policy Committee (MPC) press conference held last week where the Governor of Bank of Ghana Mr. Addison was quizzed as why government has since 2017 excluded exceptional costs in its fiscal deficit computation despite red flags consistently raised about the computation method.
Mr. Addison in his response stated that “In 2018, when we were under an IMF programme, in order to be able to monitor the budget performance, it was important that we computed the deficit to exclude the energy and financial sectors, as those were legacy problems that we had inherited.”
“Now that we have finished the programme, given the developments in 2020 in the wake of the pandemic, this is the time to relook at that area—the broader fiscal deficit which includes the energy and the financial sector issues.”
“Over the medium term, we need to redefine the broader fiscal deficit, which gives you a better sense of the burden on the budget.”
However, Mr. Terkper has refuted the Governor’s explanation and accused government of excluding the exceptional costs simply to show “impressive” fiscal deficit figures.
The former Finance Minister posits that, the Governor’s excuse is flawed given the fact that the IMF programme which begun in 2014 under the NDC and inherited by the NPP, mandated that exceptional costs be computed as part of the country’s fiscal deficit.
According to Mr Terkper, Ghana’s fiscal framework adopted since 1980s, makes room for the computation of both exceptional costs and exceptional revenue to the point where even the HIPC programme Ghana underwent in the 2000s was captured in government’s total revenue and included in the budget.
The current NPP government however includes exceptional revenue, such as the legacy ESLA receipts, to its total revenue and puts it in the budget, but excludes exceptional ESLA-BASED costs.
“Exceptional revenue like HIPC and others were part of the budget, it has always been part of the budget. Under former President Rawlings, divestiture receipts coming in was recorded as part of revenue, so the fiscal framework takes care of exceptional costs and exceptional revenue,” he noted.
“But this government includes exceptional revenues from ESLA to its total revenue and puts it in the budget, but treats exceptional costs PAID FROM ESLA differently,” he added.
Again, the former Finance Minister averred that the much talked about exceptional costs from the financial and energy sectors were determined by the NDC Government in 2016 through an audit assessment conducted by the BoG.
“ESLA was not an obligation under the IMF programme, it was an initiative by Mr Mahama and the IMF was informed about it, and ESLA was simply to cater for the financial and energy sector costs because crude oil prices then had plunged, so ESLA was a way to clear the debts in the two sectors,” Mr Terkper intimated.
“We did the first restructuring of the sectors and the IMF was aware of it, we restructured VRA’s portion of the banking costs and used part of revenues from ESLA to pay for it, we put aside Ghs 250 million for banks as cash injection and also did restructuring worth Ghs 2.2 billion with 11-13 banks and the IMF was aware of all of these things,” he emphasised.
According to Mr Terkper, what he now finds surprising is not the fact that the incumbent government treated exceptional costs as footnotes, but the false claims by government that the IMF accepted that exceptional costs be excluded from the fiscal framework.