Ghana on a slippery path over continuous use of primary balance as fiscal anchor – Seth Terkper
Former Finance Chief, Seth Terkper, has re-iterated warnings against the use and reliance on primary balance as fiscal anchor by government, particularly under the IMF programme.
The former Finance Chief, argues that 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.
“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.
“The primary balance is a lower measure of deficit than the fiscal balance as it does not take account of interest payments and arrears unlike the fiscal balance which does. And so we should rather use the fiscal balance,” he quipped speaking at a Media Dialogue on Ghana’s IMF Programme organized by PFM Tax Africa Network.
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 and arrears.
Otherwise, it uses the fiscal balance which accounts for arrears and interest payments thereby giving a true reflection of the country’s overall deficit and the need to reduce the deficit.
Per the graph above and as presented by Mr Terkper, Ghana under the IMF programme begins to record a positive primary balance of 0.6% of GDP and beyond starting this year – 2024 – indicating that Ghana has ‘dealt’ with its deficit.
However, using the fiscal balance, the graph reveals that the country’s deficit still remains a challenge as it continues to persist even into the medium term.
Mr Terkper notes that the use of primary balance as a fiscal anchor both in the IMF programme and the 2024 budget, defeats the country’s objectives of reducing its debt stock and paying arrears.
