Fiscal offsets or consolidation?
Portion 1: Postponing THE FISCAL Discomfort
Ghana is praised for obtaining rapidly decreases in budget deficit considering that FY2016 when the previous governing administration was alleged to have bequeathed GH¢7 billion arrears. As we argued in past articles or blog posts, the decreases are from fiscal ‘offsets’, not true payments, of arrears. The reduction of end-2016 deficit of 10.3 for every cent of GDP with an ‘offset’ of GH¢5 billion (3.3 for every cent) in the exact 2017 budget is now exhibiting in several inconsistencies.
We have said that the compilation of the GH¢7 billion (or GH¢5 billion arrears) falls outdoors the usual definition of arrears and is a daring attempt by the President Mahama administration to go Ghana to a semi-accrual accounting regime.
Logically, the accelerated deficit reduction should guide to fewer borrowing, not increase, in the rate of progress of the debt stock (debt-to-GDP ratio). Alternatively, as Figure 1 demonstrates, the decline in the price at which Ghana is borrowing has turned optimistic yet again, as it activities a climbing credit card debt load. It has acknowledged the profits shortfalls, substantial expenditures, and not long ago revealed large amounts of arrears.
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