Renowned Ghanaian Economist, Dr. Jerry Monfant has hinted that Finance Minister Ken Ofori-Atta’s insincerity exhibited in the content of the 2022 national budget presented to the Ghanaian parliament recently has dented the image of Ghana on the international capital market.
“The legislature should redirect their efforts towards the budget statement credibility which is becoming a serious dent on our sovereign credibility and imminent financial crisis rather than reducing their argument on momo tax!! If the entire document is not credible, why waste your time on taxes captured in it!” Dr. Monfant wrote in a write-up.
Dr. Monfant is a Strategic Consultant, who currently serves on the European Financial Reporting Advisory Group of the EU.
According to him, the Finance Minister’s presentation was so full of misinformation that immediately triggered the capital markets to respond negatively.
“I was shocked!! The report received contained negative reaction from the market. This is as a result of a credibility gap in the budget.
The Finance Minister presented different financial projections in the budget which contradicts financial information relay to the investors by the IMF. This caused uneasy calm as bond yield fall up to 6 points at the short end and 3-4 points at the long end, on the 17th November when the budget was tabled in Parliament,” he wrote.
According to him, a case in point was the overall fiscal deficit which Ofori-Atta alone, saw as narrowing from 9.4% of GDP in 2021 to 6.4% of GDP in 2022. “This was seen as a strong and front-loaded reduction which relies on unrealistic revenue projections from the government,” Dr. Monfant wrote.
“Another shocking scenario is where the 2022 budget project the overall deficit (which includes financial and energy sector restructuring costs) to narrow from -12.1% of GDP to -7.4% of GDP in 2022. This was absurdity!! It takes magic to be able to significantly reduce such a deficit to -4.7 percentage points within a year! Any good economists can detect inaccuracies and untruthful in such projections.”
The government’s deficit projections for 2022, he pointed out, was different from what the IMF made available to the capital markets. Overall, the government’s position was unrealistically optimistic than those presented by IMF, and that this raises very serious credibility issues.
He points out that, in 2022, the government projected overall fiscal balance including restructuring energy sector debt cost to -7.4 % of GDP, while IMF recorded -10.5 % for the same year.
In 2023, the government projected a fiscal deficit of -5.5 % of GDP while IMF projects -9.5% of GDP. In 2024 government projected fiscal deficit of -4.5 % of GDP, and IMF recorded -9.3% of GDP.
“Such a budget has failed to convince investors that envisaged fiscal path is achievable,” Monfant noted.
In spite of all the voodoo economics by the Akufo-Addo government, however, Dr. Jerry Monfant points out that questions about debt sustainability refuse to go away, with the country’s debt to GDP ratio set to hit 81%, a fact that puts bond yield under pressure, threatening markets access and ultimately increasing the chances of financial crisis.