"Seth Terkper makes strong argument against use of primary balance as fiscal anchor"

" Seth Terkper makes strong argument against use of primary balance as fiscal anchor \r\n\r\nFormer Finance Chief, Seth Terkper, has made a strong case against the use of primary balance instead of fiscal balance as the country\u2019s fiscal anchor.\r\n\r\nAccording to Mr Terkper, the use of primary balance as a fiscal anchor both in the IMF programme and the 2024 budget, defeats the country\u2019s objectives of reducing its debt stock and paying arrears.\r\n\r\n\u201cUsing primary balance means no emphasis on fiscal balance as well as no emphasis on reducing debt and arrears which are the main headaches of the country,\u201d he remarked speaking during the X Space discussion with NorvanReports and the Economic Governance Platform on the topic \u201cUnraveling the Facts and Numbers Behind the 2024 Budget\u201d on Thursday.\r\n\r\n\u201cLet\u2019s focus on fiscal balance and not on primary balance if we want to take the economy out of the current challenges,\u201d he added.\r\n\r\n \r\n\r\n \r\n\r\nMr Terkper further argued that, Ghana should set more ambitious fiscal targets than the IMF Program requires with these fiscal targets being; (a) Overall Fiscal Balances (commitment and cash bases) targets; (b) shift to semi-accrual accounting to account for arrears and other liabilities; and (c) a\u00a0debt repayment or amortization methods.\r\n\r\nSetting these fiscal targets, he argued, are necessary since the economy is very fiscally challenged, with huge arrears,\u00a0and has\u00a0defaulted in meeting debt commitments, adding that the primary balance shows an optimistic (positive) path to meeting its commitments under the IMF programme.\r\n\r\nThe main differences between the Primary and Fiscal Balances are interest payment, arrears (routine and exceptional), and debt repayment or amortization. Primary Balance is Total Revenue less Total Non-Interest Expenditure.\r\n\r\nSpeaking further during the X Space discussion and touching on the country's revenue mobilisation efforts, Mr Terkper noted the country's tax revenue has remained stagnant since 2013 and has not been able to go beyond its 2015 peak.\r\n\r\nThis is despite, the expansion of the Ghanaian economy and increased tax revenues.\r\n\r\nMr Terkper noted that the highest recorded levels of total revenue, domestic revenue and tax revenue in 2015 were 17.8%, 16.3% and 13.14 respectively as against the recorded 16.2%, 15.9% and 13% for total revenue, domestic revenue and tax revenue respectively for 2021 on the back of inflows due to the Covid pandemic.\r\n\r\nThis, he primarily attributed to stalled revenue reforms to be implemented by the Ghana Revenue Authority (GRA) to boost efficiency in tax revenue mobilisation efforts.\r\n\r\nAccording to him, a re-engineering of tax revenue reforms are needed to increase the country's tax revenue share to GDP.\r\n\r\nMeasures aimed at re-engineering the country's tax revenues, he noted are present in the current IMF programme."

"Seth Terkper makes strong argument against use of primary balance as fiscal anchor"

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