Business in Ghana

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Out of HIPC, into HIPC, Out of HIPC. Critical News, 12th October 2014

Posted by Business in Ghana on October 12, 2014

Sydney Casely-Hayford,

What a crazy week. And next week threatens to be even better. Is this good crazy or strange crazy? Can crazy get better or does it just mesmerize because we don’t understand the implications of future crazy?

A Deputy Director of Fiscal Affairs Department at the IMF, Sanjeev Gupta countered a Government statistic and declared us HIPC in one single response to a questioner and for a few brief days until the IMF chickened out and did some damage control we were back to HIPC, with a debt to GDP ratio pitched at 71%. Government had calculated its figure at 55%.

Now the program sensitive bureaucrats at the IMF have placed the figure at 56% and rephrased Gupta’s glib remark as their estimate for the end of 2015. Read the detail from here. (

This controversy has mega spine implications for the people at the IMF. Without providing numbers to show how he arrived at his 71% ratio, which I will try and justify or refute later in this article, I kind of accepted the figure, based on available statistics and the state of events in the country.

I do however think it is time to get clear reference points when we place these numbers in the public domain, especially when they can be alarming and even cataclysmic.

But as an aside, I wonder if Gupta will be sent to another division.

So, the repository for GDP, inflation, Consumer Price Indices, Producer Price indices etc. should lie with the Ghana Statistical Service (GSS). Actually they have a very good and easily navigable website and very useful if you need facts and figures.

The nominator side however, lies with the Central Bank, the Ministry of Finance (MOFEP) and the Controller and Accountant General’s (CAGD) offices.

My reference as an accountant is always to go where I can understand disclosure and descriptors, so I will use the CAGD’s published reports for 2013 and after.

However, before I get to those numbers, you should read the Finance Minister’s mid-year review of the budget statement and economic policy presented to Parliament on 16th July 2014. He based his report on figures as at May 2014.

On page 36, he calculates debt to GDP ratio as 54.8%. So that is that, and that explains the 55% figure as referred.

But, he omits a few line items from the estimation of total liabilities (amounts owed). There are other liabilities to suppliers and contractors, withholding taxes and outstanding PAYE. He also omits payments due to statutory funds. These two figures are disclosed by the CAGD and add up to ghc4,458 million.

It is important to note that the comparable figures for domestic and external debt differ between the Ministry of Finance (ghc62,861 million) and the CAGD (ghc50,837 million). The difference is primarily exchange rate, which the CAGD does not factor into its statements.

There are exchange rate gains and losses in both domestic and external debt, but when converted to cedis the MOFEP calculated debt adds up to ghc62,861 million.

To get a more accurate figure, we must add the other debt mentioned above. We must also guesstimate a figure for the State Owned Enterprises whose statements are not available but debt is guaranteed by Government, (a position Minister Seth Terkper has constantly berated the determination of national debt to exclude) and debt outstanding at District, Municipal and Metropolitan assemblies, which GIFMIS is meant to flush. But we don’t know these numbers.

With this insight, the total debt can be stated as ghc67,319 (62,861+4,458).

Lastly, there is an accounting principle that guides us how to estimate outstanding liabilities based on what we call an accruals concept rather than purely on cash only records. This figure is lost, totally unavailable with the present accounting system we have in place.

So now we need to work out the GDP figure. The last estimation of a full year GDP from the Ghana Statistical Service is available for December 2013. Using the more meaningful expenditure approach (which is still equal to the output approach) the GSS confirms GDP for 2013 at ghc93,461 million.

We can allow for some growth between 2013 to date, but it is not likely, because we have heard consistently how 2013 was bad for economic growth because of the election petition and 2014 forecasts have been revised because of a downturn in economic activity.

So best we use the IMF’s end of year forecast of 4.5% in place of MOFEP’s 7.1%.

Nonetheless, for the purpose of academics lets calculate both, having come all this numbers way.

If GDP grows 7.1% we will end the 2014 year at ghc100,097 million. This makes the debt to GDP ratio 67.3%. If we assume growth to be only 4.5%, the 2014 year will end at ghc97,667 million. Debt to GDP is now 68.9%.

And we have not considered the most recent sovereign debt and the cocoa loan, which we all know have been contracted including the recent $800 million debt approved by Parliament.

So why is the IMF running away? If they have done the similar exercise, mine is a back of the envelope, they have more detail, and they should have the courage of conviction and stand their ground.

This pandering to Government in order to maintain their program and status within continental boundaries does not help the Government and does the citizens of Ghana a bigger disservice.

Well, we went HIPC, came out of HIPC, returned to HIPC in a morning, (courtesy “Gupta IMF”) rode that status for three days and we are now out of HIPC again from sheer cowardice.

So if Sir “Order of the Volta” Gupta has been reigned in because we are at the beginning of fashioning a program to give us credibility in policy delivery, lets not accept that his number is too far out. We have been HIPC before; it was when we had an NDC Government. We can be there again and signs are we are sitting in a cesspit of HIPC, except the numbers are not credible enough for us to say for sure.

But Mr. Alan “NPP flagbearer contestant” Kyeremanten gave us so much mirth when he went and promised many delegates he would give them mobile phones and “plenty tins” if they endorse his candidacy for 2016. And while he was doing so, Johnson Asiedu Nketia and Dr. Kwabena Adjei have started fighting Kofi Portuphy and his support base for control of the NDC.

And it is far from over. Even as we crawl gradually towards 2016, we have Institutional disorder with petitions filed and ignored by the President, who seems bent on leaving a legacy of “nothing done in my term”.

Well we have not had a single-term government yet. Maybe we are coming up to one and if Nana Addo gets the kind of massive win from delegates he is gunning for, it might create a significant spurt in his bid, if it carries into 2016. Will he be a better President?

Will Papa Kwesi Ndoum run again this term? He is consumed with his newly licensed status as GN Bank and is busy growing other segments of his Group.

Will Akua Donkor run again? And Ayariga? Will there be any new candidates?

Oh the jollity of election fever. Please come and bribe me to vote. The “ecominy” is tight and my vote is my secret. I promise all contestants I will vote for them. The more I receive, the more I will vote. There are ghost names coming to the electoral register, now we have all the NDC people working at the National Identification Authority.

So on Wednesday 15th October, the OccupyGhana movement will hold a press conference to clarify some things in this country. With so much future at stake, we need to get some commitment from Government to arrest rather than caress corrupt officials, moving them from chop-chop ministries into the bosom of the President’s batakari to reward them for cash well harvested.

We have two years to go before we vote. We must correct all that is wrong before the next chopping cycle begins.

Ghana, Aha a ye de papa. Alius valde week advenio. Another great week to come!

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