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PARALLEL GOG AND IMF [ARTICLE IV & COVID-19] FISCAL DATABUDGET DEFICIT AND PUBLIC DEBTIntroductionIn December 2019, even while the NPP administration was presenting the 2020 budget to Parliament for approval, in there was a “parallel” act, it had given a different set of “parallel data” to the IMF, which its Board used to approve the Article IV Consultations Report.Again, in March 2020, the Minister for Finance presented his COVID-19 Statement to Parliament and quoted impressive fiscal performance data to Parliament.Yet, in another “parallel act”, the NPP had given another “parallel” data to the IMF to show a worsening fiscal situation, to justify a loan of US$1 billion under the Fund’s Rapid Credit Facility (RCF)—equal to 100 percent of Ghana’s IMF quota or borrowing room with the IMF.The revised IMF data from 2017 shows that the “fiscal gap” existed before COVID-19, as its Article IV Report released in December 2019 clearly shows.Yet, the NPP appears to use the tragic COVID-19 pandemic to escape accountability to Ghanaians but we wish to inform Ghanaians that the IMF “parallel data” version also back-dates the country’s to 2017 and it shows a dire fiscal and economic situation than the NPP has been presenting to Ghanaians. Parallel [revised] IMF and GOG fiscal dataTable 1 below summarizes and compares the revised IMF fiscal or budget deficit against what GOG has been telling Ghanaians since 2017.The main reasons for the difference, which the NDC has been pointing out since 2017 include the following—excluding the bank bailout costs and energy arrears from the NPP’s “impressive fiscal consolidation” that shows these costs as footnotes in Footnotes and Appendices to its Budgets or MTEF [or nil, as in FY2017 and 2020 estimates]using “offsets” [positive and negative data to cancel actual fiscal impact] and “off-budget” items [that the IMF warns against] to run-down the NDC.Table 1: Budget Deficit showing effect of excluding exceptional costsFigures 1 and 2 show the data presented in Table 1 in Graphical form for easy comparison.Figure 1: Budget Deficit showing effect of excluding exceptional costsFigure 2: Budget Deficit showing effect of excluding exceptional costsWorsening budget data affects Public DebtThe NPP may find it easy to use the “offset”, “off-budget” and “footnote” techniques to virtually falsify the record it puts out on its budget deficit performance.However, its “financing” or “borrowing” to pay for the deficit,leads to higher debt accumulation and service burdens; (i.e., interest and loan repayment);high levels of Public Debt which are more difficult to suppress and led to non-residents exiting the domestic debt market and, as BOG notes, difficulty in financing the deficit.Table 2: Public Debt Data [including IMF revision]Figure 3 presents the data in Table 2 in graphical form for easy understandingFigure 3: Total Public Debt and Debt Accumulation (% of GDP)Rate of accumulation of Public DebtFigure 4, which is based on Table 2 and other data, shows that the rate of decline of Public Debt that started with the “smart-borrowing” strategy in 2013 stalled and reversed under the NPPThe IMF version (based on its Article IV and COVID-19 Reports) show that the deterioration will continue into FY2020, not decline as the NPP versions portrays. Figure 4: Public Debt—rate of growth or accumulationConclusionThe Mid-Year Review requirement in Section 28 of the Public Financial Management Act is clear the NPP must account for its performance as follows—Fiscal developments over the last 6 months [during which period the IMF released its COVID-19 report to confirm the Article IV view of deteriorating pre-COVID fiscal situation.As we note in another set of data, the period covers the borrowing (IMF etc) and grants, including Ghanaians, that exceed the COVID-19 costs presented to Parliament—confirming that the fiscal gap and continuing heavy borrowing covers no-COVID pandemic costs.In our view, the borrowing in excess of COVID needs is likely to include the Ghc10.5 billion BOG financing of the budget since the Central Bank’s MPC Statement clearly states that the consideration for the borrowing is market-based:difficulty in borrowing from the domestic markets; andhigh interest costs to government.Fiscal developments into the medium-term: we expect government to present a future trajectory that includes the IMF and Rating Agency projections since they issue these reports in concurrence with Governments. The government should explain to Ghanaians why it made hasty U-turn on its IMF-exit drumming (that has died down), early in the wake of the declaration of the COVID-19 as a pandemic for a hefty loan—when countries with less than its “stellar” performance had not even contemplated the move.Finally, it makes fiscal to provide COVID-19 assistance but (a) the borrowing costs and grants should not be treated and hidden as a footnote; and (b) not consist of borrowing mainly but include expenditure rationalization (which is missing in a substantive way in the Government’s presentations to Parliament. ................
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