By Julian Owusu-Abedi
The former Finance Minister Hon. Seth E Terkper stands vindicated in all his positions, projections and the warning sign posts he mounted in the course of the 2020 fiscal year under review. These are mainly in terms of his long standing critique on government’s reporting of “parallel” figures to the IMF as against what they present to Parliament and Ghanaians.
He had also been cautioning the government on likely breach of Ghana’s sustainable debt levels and deficit financing by the Bank of Ghana (BoG).
It appears the Central government and the Bank of Ghana are steadily ‘coming around’ to the former Finance Minister’s (FM) long standing position on all the above issues he pointed out. They are beginning to wrap their heads around the stack reality as was tacitly admitted by the Governor of BoG Dr. Ernest Addison at a lecture he gave in December last year at the Annual Legon Alumini Association meeting in Accra.
The IMF, World Bank and Ratings Agencies, notably, Moody’s have cautioned government on its economic and fiscal performance.
In an exclusive interview with the former FM to elicit his views or observations in the light of what the Governor said at the Alumini meeting, he stated that “it simply goes to confirm my long standing issues with the “parallel” figures or “footnote items”, debt levels and deficit cum COVID financing”.
He said, “I’ve already spoken about the need for government to move away from the narrow basis for calculating deficit and debts where items like exceptional expenditures amongst others are taken out and pushed to appendices and foot notes, which tends to hide the actual picture or true state of fiscal performance. So I think it’s refreshing to hear the Governor mention that Government should revert to the broad base calculation”
“Remember I’ve also mentioned that it was very unusual for the BoG to finance the government’s deficit to the level it did. It’s the first time it has happened at that high level in nearly forty years. During our (NDC) tenure we had zero deficit financing even at a time when we avoided going into recession but the ruling NPP government has already received US$1.7 billion (i.e., over ghc10 billion) so far from BoG (more than the US$1.0 billion COVID loan from IMF). So if the governor says the Central Bank cannot continue to finance government going forward, it shows the unusual nature of that BoG venture,” he recounted.
Mr. Terkper had also pointed out that financing the deficit has got very little to do with COVID -19 spending as is being boxed together sometimes because COVID financing was fully covered by the IMF, World Bank, and other donor loans and grants.
The former FM stated that the Governor in his lecture also warned about what he described as “breaching unsustainable debt levels which brings the country back to the whole issue of HIPC, with the debt to GDP estimated to hit some 77% by close of last year 2020.
“This is going to take a whole lot for us, as a country, to dig ourselves out again because we can’t access or benefit from HIPC again. Therefore the impact is going to be very heavy on debt servicing as we continue to pay so much on interest and compensation alone”, he noted.
Concluding on the outlook of the 2020 fiscal year and the way forward, Mr. Terkper advised that it will be prudent for Ghana to start preparing the public mind towards austerity, not the upbeat mode we heard recently. It will have to try its own “home grown” policies or it will be forced to go to IMF. If Moodys and others are talking the way they are doing about the economy of Ghana it means your preference of going to the stock market is going to be tough and then your development partners will start pushing you towards an IMF program before they give you the necessary budget support”