The International Monetary Fund (IMF) appears to be awakening to what could be described as a “postponement of Ghana’s fiscal pain” exhibited in the unusual treatment of exceptional amounts “below-the-line” in Ghana's fiscal framework.

The Fund after heaping praise on government several times for a spectacular economic performance has for the second time warned that Ghana’s risk of debt distress classification still remains high. An increasing debt is basically borrowing to finance expenditures in excess of revenues and, therefore, a slower pace of reducing the deficit.

The second warning after Ghana's Ayicle IV Review was after the Bretton Wood’s institution carried out the latest Debt Sustainability on the country after March 2019 stating, “The medium-term debt path is now higher than in the March DSA”.


Though the Fund – the chief steward of the world monetary system-- with many others touted government’s fiscal performance, the immediate past Finance Minister, Seth Terkper consistently pointed out a case of false impression of rapid growth being created about Ghana’s economy which if not addressed could distort fiscal reporting, borrowwithor financing and debt stock.


Since 2017, Mr. Terkper in his write-ups disclosed the use of ‘offsets’ instead of explicit payments of annual arrears to reduce the budget deficit or fiscal balance “on paper". This simply means government intentionally leaves out some amount of arrears it owes from its books without actual payment hence reducing the deficit only “nominally".

Hence, as the Fund now notes, these expenditures are dealt “off-Budget”, as the Minority in Parliament follows the ex-Minister in saying. This practice he said was used to offset some GHC5bn against the GHC7.3 bn arrears, which the Mahama administration is alleged, to have left without proper accounting at the end of 2016.

The ‘’offsets" which continued but more subtly he said contributed to the sharp decline of the 2016 budget deficit from 9.3% to 3.9% - a much trumpeted impression of accelerated fiscal consolidation.

Additionally, he argued that it’s inaccurate to show “exceptional items” such as the banking sector bailout costs as footnotes since it lowers financing and treats part of debt as footnote (not ledger entries) in the Public Accounts. In the same vein, Mr Terkper argues that it is wrong to add the recent energy sector liabilities to amortisation (actual debt repayment) without adding it to arrears (which increases, not reduce, the deficit) and before the borrowing takes place.

In noting that the IMF has made the necessary adjustments, Mr Terkper continues the treatment of “exceptional” expenditures has become needlessly contentious even though the pre-2017 data shows that Ghana had always treated “exceptional” expenditures “above the line”.

A case in point is the exceptional expense treatment of the GHC16bn banking sector clean up cost “below-the-line” but revenue from ESLA “above-the-line”: a practice Mr. Terkper deems contradictory. The IMF now adds the ESLA Bonds to Domestic Debt in its latest fiscal tables.

The IMF’s recent adjustments confirm Mr. Terkper’s long held view that the substantive 2018 and 2019 fiscal deficits are approximately 7 percent - not the “headline” 3.7 and 4.7 percent respectively.

According to the Fund’s recent report ‘’Ghana’s high risk of debt distress’’ status is a reflection of “lower GDP growth in 2019 and a higher government deficit (largely due to energy sector costs) and debt service over the medium term”. Curiously, the current administration touted excessive borrowing by the Mahama administration when the GDPgrowth rate fell to 3.6% in 2016, on account of the energy crisis and fall 8n commodity prices.

The IMF’s eventual warning on “risk of debt distress” has roots in factors such as the expansionary fiscal policy; stagnant revenues; and “offsets” of arrears that equate budget deficits to “headline” fiscal balances [on cash and commitment basis], Mr Terkper observed..
The achievement of impressive “headline” fiscal consolidation on paper has led to off-budget transactions, and fiscal balances that understate the real amount of “financing”. The exclusion of “exceptional” bailout costs from expenses leads down a slippery road of separating them from public debt.