Ghana Uncovers $1.6 Billion Hole in 2017 Budget

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  • Amount uncovered in preparing for 2017 budget, Bawumia says
  • IMF warned nation will probably miss fiscal-target deficit

Ghana’s fiscal shortfall could be close to double the forecast for last year, Finance Minister Ken Ofori-Atta said a day after the government said it discovered a 7 billion-cedi ($1.6 billion) hole in the budget.

The budget deficit as a percentage of gross domestic product could be close to “double digits” for 2016, he said Wednesday in an interview in Accra, the capital. “We’re still in the process of gathering information,” said Ofori-Atta, who will table the 2017 budget next month. The expenditures date back three to four years, he said.

The central bank on Jan. 23 urged the state to narrow the budget deficit after provisional data for January through November showed a shortfall of 7 percent of GDP, exceeding a government forecast of 5.3 percent. The West African nation will probably miss its target for 2016 because of weak income collection and higher-than-planned capital spending, the International Monetary Fund said last month.

The economy probably expanded 4.1 percent in 2016, according to forecasts from the government.

Data ‘Surprise’

“We have been very surprised by the fiscal data,” Vice President Mahamudu Bawumia said Tuesday night in a speech broadcast by Citi FM. “We find out that there’s 7 billion Ghana cedis of expenditure that have not been disclosed.”

“How are you supposed to manage an economy with faulty data,” Bawumia said in his speech given in Accra.

The 7 billion cedis Bawumia referred to relates to a government contract which was part of a project for an integrated financial management system and doesn’t constitute arrears, Former Finance Minister Seth Terkper said by e-mail.

“The vice president is known for rushing with information to the public and the media particularly with structural measures and reforms without taking time to understand the rational for the reform or the initiatives,” Terkper said.

Calls to the phone of Mustapha Hamid, a spokesman for President Nana Akufo-Addo, didn’t go through.

Akufo-Addo and his New Patriotic Party won presidential and parliamentary elections against former President John Dramani Mahama’s National Democratic Congress in December.

Yields Increase

Yields on Ghana’s benchmark dollar bond due in August 2023 increased 28 basis points to 8.66 percent, the highest since Dec. 19, at 1:37 p.m. in Accra. The cedi weakened for a third day against the dollar, slipping as much as 0.4 percent and trading little changed at 4.365.

Investors will be concerned about a wide budget deficit and there’s still the risk of further debt accumulation, said Courage Martey, an economist at Accra-based Databank Group Ltd.,

“There will be a difficulty in payment which can lead to restructuring” of the nation’s debt, he said by phone. “It only shows that our fiscal and debt situation is quite complicated and too complicated to deal with in the short term very quickly, so the Eurobonds will continue to reflect that difficulty in the short term.”

 

Bloomberg

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