Finance Minister Seth Terkper has played down fears that the government’s expenditure in 2016, which is an election year, will dislodge its economic stability programme with the International Monetary Fund (IMF).
Although government’s fiscal deficit raced from 4 percent in 2011 to 11.8 percent in 2012, when President John Mahama was chasing his first mandate, Mr. Terkper insists the huge overruns were largely necessitated by oil revenue shortfall and a huge compensation bill and not reckless spending.
Apart from the 2012 massive overrun, two other election years –2000 and 2008 – witnessed budget overruns and such concerns have come up again as government announced that it has reached a three-year deal with the IMF which will span the 2016 election year.
But addressing the press last Thursday, Mr. Terkper said it was unfortunate government found itself in a large fiscal hole which it did not create.
“I don’t think everything that happened in 2012 can be attributed to the fact that we were in an election year. The three years preceding 2012, we never overspent our capital expenditure which is where normally we overshoot the budget regarding an election year.
“Inasmuch as some expenditure may have been prompted by an election year, I don’t think the notion should be repeated that for some reasons every overrun that occurs within an election year could be attributed to the elections,” Mr. Terkper said.
“We have a programme coming up in 2015, which span through to 2017 and an election year 2016. President Mahama has in the past stated that it is not his wish to monetize an election only to win and come back to do some corrections,” he added.
Government in the 2015 budget demonstrated its strong commitment to maintaining a strong fiscal discipline when it announced that it has eliminated distortive and inefficient energy subsidies, introduced a new tax on petroleum products, and stronger containment of the wage bill.
The announced measures, the Finance Minister said, should contribute to a significant reduction in the fiscal deficit over the medium term, from 9.5 percent of GDP in 2014 to 7.5 percent in 2015 and about 3.5 percent in 2017, including the repayments of all arrears outstanding at end-2014.
Three-year IMF programme
Government, after engaging the IMF since last August, announced last week it had landed a three-year programme which could allow it access around US$940 million or 180 percent of Ghana’s IMF quota.
Experts hope the deal, which is expected to be approved by the Fund’s Executive Board early next month, will strengthen the corrective measures of the government to improve macro stability, which eventually should benefit growth.
The three-year programme is also expected to shore up international confidence in Ghana’s economic management and should nudge the country’s donors, who were consulted during the negotiations, to release previously held-back funds. That support, analysts say, will be critical for the budget in these trying times of falling commodity prices and slowing growth.
One analyst said the last Fund programme (2009-2012) failed in many of its reform targets, such as the reform of government financial operations and SOEs, even though the macro objectives were achieved.
This latest programme must focus more on reforms to increase fiscal discipline and financial accountability within government.