Ghana’s three-week-old government says it found a 7 billion-cedi ($1.6 billion) hole in the budget, a disclosure that sent its bonds tumbling.
“We have been very surprised by the fiscal data,” Vice-President Dr. Mahamudu Bawumia, said last Tuesday night in a speech broadcast by Citi FM.
“We find out that there’s 7 billion Ghana cedis of expenditure that have not been disclosed.”
The central bank on January 23, 2017 urged the government to narrow the budget deficit after provisional data for January through November showed a shortfall of 7 per cent of gross domestic product, exceeding a forecast of 4.7 per cent.
The West African nation will probably miss its fiscal-deficit target for 2016 by more than the government’s forecast because of weak income collection and higher-than-planned capital spending, the International Monetary Fund (IMF) said last month.
“How are you supposed to manage an economy with faulty data,” Dr. Bawumia said in his speech given in the capital, Accra.
Former Finance Minister, Seth Terkper, didn’t answer calls seeking comment. Calls to the phone of Mustapha Hamid, a spokesman for President Nana Addo Dankwa Akufo-Addo, didn’t go through.
President Akufo-Addo and his New Patriotic Party (NPP) won presidential and parliamentary elections against former President John Dramani Mahama’s National Democratic Congress (NDC).
Yields on Ghana’s benchmark dollar bond due in August 2023 increased 33 basis points to 8.70 per cent, the highest since December 19, at 11:30 a.m., in Accra. The cedi weakened for a third day against the dollar, slipping 0.4 per cent to 4.38.
Investors will be concerned about a high budget deficit and there’s still the risk of further debt accumulation, said Courage Martey, an economist at Accra-based Databank Group Ltd.
“There will be a difficulty in payment which can lead to restructuring” of the nation’s debt, he said by phone. “It only shows that our fiscal and debt situation is quite complicated and too complicated to deal with in the short-term very quickly, so the Eurobonds will continue to reflect that difficulty in the short-term.”
Finance Minister, Ken Ofori-Atta, will table the 2017 budget next month. The economy probably expanded 4.1 per cent in 2016, according to forecasts from the government.
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