Ghana’s fiscal deficit for 2010 could reach a record high of 26% as opposed to a target of 9.7% set by the Mills-Mahama NDC led administration in the 2010 budget, which quite clearly represents a major setback suffered by the economy in 2010.
This revelation was made known today at a press conference by the Minority in Parliament and addressed by Prof. Gyan Baffour, MP for Wenchi and a former Deputy Minister of Finance.
Prof Gyan Baffour stated the NDC government’s entire programme for 2010 was hinged on its ability to reduce the fiscal deficit, adding that the reported budget deficit for 2010 of 7.5% of GDP on a cash basis is not only off target but more importantly grossly underestimated.
Of major concern was the non disclosure of the status of the net arrears accumulated in the course of the fiscal year 2010, leading to an assessment of economic performance which is totally different from reality.
According to Prof. Gyan Baffour, the NDC’s projected budget deficit for 2010 relies on some unexplained increase in non tax revenue of over GH¢770 million from profits and dividends in the last quarter of 2010 when the first three quarters yielded only GH¢609 million.
He added that the projected deficit did not take into account the over GH¢300 million in payments on arrears including judgment debts that were made in 2010.
The projected deficit also depended on grants of over GH¢300 million materializing in the last quarter of 2010.
“Should the projections not materialize and account is taken of the stock of arrears then the projected deficit will be over 13% ofGDP as compared to a target of 7.5% of GDP”, Prof. Gyan Baffour stated.
What was really worrisome, according to Prof. Baffour, was the significant accumulation of new arrears in 2010.
He said government has accumulated domestic payment arrears to the tune of some GH¢3.2 billion or over 12% ofGDP, including arrears on single spine salary structure of between GH¢600 million and GH¢1.1 bilion), new commitments by MDA’s of some GH¢1 billion, arrears on GetFund, DACF, NHIS, SSNIT pensions, etc.
“When you add this new accumulation to the stock of arrears as of 2009 of GH¢ 1.4 billion then the total stock of arrears as of the end 2010 will be over GH¢4.6 billion. This is much higher than the stock of arrears of GH¢1.1 billion that was inherited in 2008. Is this a better Ghana Agenda?” he retorted.
The new arrears of some GH¢ 3.2 billion for 2010, indicates that on a commitment basis the deficit exceeds 23% ofGDP and could be as high as 26% ofGDP, a record high.
It can be recalled that in March 2009 and again in November 2009, when Dr. Kwabena Duffuor came to present the budget statements for 2009 and 2010 respectively, he told Ghanaians that he had inherited a rundown and distressed economy because the deficit was 20.1% of GDP while the stock of arrears stood at GH¢1.7 billion.
“After only two years in government the deficit is hovering above 23 % of GDP and the stock of arrears is above GH¢4.6 billion. Is this a better Ghana agenda? We wonder how the Minister will want to characterize an economy with a deficit of over 23% ofGDP and stock of arrears of GH¢4.6 billion? Is the economy now comatose after only two years?” Prof. Gyan Baffour added.