The International Monetary Fund (IMF), has clarified a statement by its Deputy Director of Fiscal Affairs Department, Dr. Sanjeev Gupta, which contradicted figures from the Bank of Ghana (BOG) about the country’s real debt to Gross Domestic Product (GDP) ratio.
According to him, “the latest actual figure available to IMF staff for end-2013, is equivalent to 56 percent of GDP, consistent with the figures released by the Bank of Ghana.”
Dr. Sanjeev Gupta’s explanation, collapses claims that Dr. Mahamudu Bawumia and his New Patriotic Party (NPP), had been vindicated on their insistence that the John Mahama led-government was not telling Ghanaians the truth on the actual state of the economy.
On October 8, at a press briefing on the Fiscal Monitor, IMF’s Deputy Director of Fiscal Affairs Department, Dr. Sanjeev Gupta said, Ghana’s debt to GDP was actually 71 per cent contrary to the 55 per cent put out by the government.
His statement, created apprehension among some Ghanaians and an NPP Member of Parliament (MP) on the Finance Committee, Kwaku Kwarteng said, it confirmed his suspicion that government had been lying to the IMF about the true state of Ghana’s economy and the country’s macro-economic figures.
Kwaku Kwarteng said, government has been exposed by the IMF’s recent announcement that Ghana’s true debt to GDP ratio is 71% and not 55%, adding “If you lie about your economy and you get the support that you do not deserve, in the end, the problems will still be there and it will only lead to more problems.”
He alleged that government intentionally pegged the debt to GDP ratio at 55 per cent, in order to reduce the harsh conditions attached to the bailout from the IMF.
The 71 per cent means that the nation’s debt level is way above the international benchmark for sustainable debt level.
Kwarteng remarked that the consequences for such an act is dire because, “if you lie about your economy and you get the support that you do not deserve, in the end, the problems will still be there and it will only lead to more problems.”
According to him, there is a seeming “systematic attempt” by the Mahama administration to “misreport, to give a false impression of the economy in order that the political consequences for them will be lessened.”
He cautioned government that the path it is threading on “will not get this administration anywhere…It doesn’t matter what figures you put out, people will know that things are really deteriorating.”
Mr. Kwarteng, however, counseled the government to admit to Ghanaians that “things have really gotten bad.”
But in a short e-mail from the Communications Department of IMF copied to citifmonline.com and signed by Ismaila Dieng, the IMF clarified that Dr. Sanjeev Gupta’s statement was rather their projected figure for 2015.
The statement further said: “The number (71%) corresponds to the level projected at end-2015 under our baseline scenario published in the World Economic Outlook, which assumes the continuation of current economic policies (very gradual fiscal adjustment in 2015, a more depreciated exchange rate, and lower growth related to remaining high vulnerabilities).”
Industry players, had warned government to present the true state of the economy to the IMF, after a former Deputy Governor of the central bank, challenged the inflation and exchange rate figures put out by the Central Bank and the Ghana Statistical Service (GSS).
Dr. Mahamudu Bawumia alleged that the level of hardship, and the cost of living for Ghanaians, did not correspond with the picture government painted about the economy.
However, prior to the commencement of the bailout talks, Dr. Bawumia, accused the Central Bank and the GSS of releasing inaccurate figures on the recent data on inflation and exchange rate.
He said, he was convinced that the government was seeking to create a false impression that the exchange rate data has remained fixed over the last three months.
Both the GSS and the BOG, vehemently denied the allegations and questioned the analysis made by the former Deputy Governor. Some industry players, subsequently cautioned government to refrain from presenting inaccurate figures to the IMF for a bailout.
The Herald, has meanwhile discovered that Sanjeev Gupta’s statement was taken from a question asked during a press briefing in Washington, DC in America on October 8, 2014, where issues on Fiscal Monitor report was discussed.
Present were Vitor Gaspar; Director of Fiscal Affairs Department, Martine Guerguil; Deputy Director of Fiscal Affairs Department, Sanjeev Gupta; Deputy Director of Fiscal Affairs and Wafa Amr Senior Communication Officer in the IMF Communications Department.
Below is the question with respect to Ghana.
QUESTIONER: For most of the sub-Saharan countries there is a sudden increased appetite for going on to the capital market, doing more Eurobonds. Ghana recently did this as well. For you, do you think it is a good thing or bad thing for the increasing appetite for Ghana and other West African countries that are going onto the bond market, because in the case of Ghana, debt-to-GDP ratio is inching toward the 50 percent mark. Do you think it is good or we should take a second look at that?
Second, there are concerns about some of the prescriptions that the Bretton Woods Institutions are putting across on how to go about the fiscal consolidation. They think for instance that Ghana has argued that we need more time to work on it, while the World Bank and the IMF are pushing for a faster push. Do you think that we need to take our time with this prescription, because the one size fits all appears not to be working?
Mr. Gupta: First of all, the debt-to-GDP ratio in Ghana is 71 percent, not 60 percent so it is much higher than you mentioned. I think you raise the question whether countries should be borrowing abroad or not. I think it is a very good idea to be able to borrow the money and use it effectively for development and building infrastructure. What we have noticed, not necessarily in the case of Ghana but in many other countries, is that increases in that borrowing has not necessarily been accompanied by higher spending on infrastructure on the capital side, but has been accompanied by increase in spending on the current side. So, that has an impact on the ability to repay this debt. So, that is one of the aspects of borrowing from abroad. Essentially one of the points which the Fiscal Monitor makes is that there is a need to improve the fiscal governance related to external borrowing in a number of countries, which means there should be allocation of resources, there should be efficient use of resources that are borrowed, so that the countries are able to grow, which is the purpose of that borrowing and repay those funds.
So that is one of the aspects.
The second issue you raised was, should there be fast consolidation in the case of Ghana or not. Given the debt levels, and given that there is pressure that is coming up within the system itself, it would be a good idea to consolidate sooner than later and this would entail trying to restrain pressures on wages, containing the outlays on subsidies. Of course, while establishing appropriate targeted social safety nets. And also, improving the quality of spending that is taking place so that overall in the end there is an improvement in outcomes. I think that is how I would answer that question.