Government’s End-2024 0.5% Primary Balance Target Inferior – Seth Terkper
Former Finance Minister Seth Terkper has described as inferior Ghana’s targeted primary balance of 0.5% of GDP at end-2024.
This is because, per the assertion by the former Finance Minister, Ghana’s true primary balance at end-2024 is rather -0.1% of GDP.
Finance Minister, Dr. Mohammed Amin Adam, during the presentation of the 2024 Mid-Year Budget Review announced that the country is on course to achieve a primary surplus of 0.5 percent of GDP by the end of the year, consistent with its program with the International Monetary Fund (IMF).
“We have reined in expenditures to ensure we are within the 2024 Budget Appropriation and exceeded the mid-year revenue target by 0.2 percent by end-June, 2024. In effect, Mr. Speaker, we are living within our means. Indeed, consistent with our programme with the IMF, we are on course to achieving a primary surplus of 0.5 percent of GDP by end of the year,” remarked Dr. Amin Adam.
However, according to the former Finance Minister, the country’s actual primary balance is -0.1% of GDP if you account for interest payments, arrears, and debt amortization.
Mr Terkper has long argued against the use and reliance on primary balance as a fiscal anchor by the Government, particularly under the IMF programme.
According to him, the Government cannot continuously use the primary balance as the basis or benchmark for its “good performance” under the IMF programme as the primary balance does not fully reflect the country’s actual deficit as the metric excludes interest payments, arrears, and debt amortization.
“Ghana is on a slippery path over the fact that we continue to use the primary balance as the basis for saying we are doing well, as the means for determining our performance under the Fund programme.
In his view, the use of the primary balance does not allow the government to properly manage its actual deficit, as a country only uses the primary balance as its fiscal anchor if it has made provisions for its interest payments, arrears, and amortization.
Otherwise, it uses the fiscal balance which accounts for arrears, interest payments, and amortization thereby giving a true reflection of the country’s overall deficit and the need to reduce the deficit.
