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Former Minister of Finance, Mr Seth Terkper, has added his voice to the controversy surrounding the total public debt as of December 2016, stating that no minister has the power to change the public accounting methodology or fiscal methodology used in computing the national debt stock without recourse to due process.

He said the decision to use March 2017 exchange rate to calculate the country’s debt for December 2016 was alien and an attempt to change the public accounting methodology and fiscal outcomes.

Background

The country’s total debt as of December 2016 sparked controversy at the Public Accounts Committee (PAC) sitting in the week ending August 17, when the Chairman of the committee, Mr James Avedzi, accused Finance Minister Ken Ofori-Atta, of deceiving Parliament on the country’s public debt.

The 2017 budget statement, which was presented to Parliament, indicated that the country’s debt as at December 2016 stood at GHS122.3 billion, but the Controller and Accountant General Department (CAGD) in its 2016 report on the consolidated fund reported that the debt stood at GHS120.3 billion, a figure which was also verified and confirmed by the Auditor General Department (AGD).

Armed with this, Mr Avedzi sought to understand how the Finance Minister came by a figure on the debt stock that is alien to the one provided by AGD and the CAGD.

“Our domestic debt was GHS52.179 billion and external was GHS68.149 billion. The two put together will give you GHS120.3 billion. The accounts of the CAGD confirmed GHS120 billion and the auditor also verified and confirmed that figure,” he said when the Deputy Minister of Finance, Ms Abena Asare, took her turn at the PAC meeting.

“My question is; why did your minister say GHS122.3 billion when the actual debt was GHS120.3 billion,” Mr Avedzi asked.

Ms Asare, when explaining the reason for the discrepancy, said the ministry used the exchange rate as at that time to arrive at the GHS122 billion.

“Yes, our minister confirmed GHS122 billion, but you know that a lot of these debts are foreign based or denominated and so these exchange rates differ. My minister reported this in March 2017 based on the current exchange rate at that time,” she stated.

Ms Abena Asare, explaining the reason for the discrepancy, said the ministry used the exchange rate as that time to arrive at the GHS122 billion.

“Yes, our minister confirmed GHS122 bilion, but you know that a lot of these debts are foreign based or denominated and so these exchange rates differ. My minister reported this in March 2017 based on the current exchange rate at that time,” she stated.

CAG and AG right

Mr Terkper, however, noted that both the Controller and Accountant General and the Auditor General were right in using the end-December 2016 exchange rate and not the end-March 2017 exchange rate, as the Minister is purported to have done in the 2017 Budget.

“We can go back from 2000 to 2015 and show that, in computing the Public Debt figure or Debt/GDP ratio, it has always been the end-period exchange rate that was used to convert the domestic debt balance into US dollars.

“This is because, in both accounting and fiscal terms, we are dealing with a stock or balance item, as compared to flows,” explained.

“Curiously, we now have the situation where H.E. Vice President (and earlier as flagbearer) was back-dating exchange rates and holding it fixed at end-2008 while the Finance Minister is doing the opposite and using a forward exchange rate,” he added.

The former minister also pointed out the issue of consistency in presenting fiscal and financial accounting stock items in the adjusted 2017 annual budget in the mid-year reviews for 2018. The ministry was not consistent when it used the end-December 2017 exchange rates: instead of the end-May or June 2018 rate.

“We also have a situation, in relation to the end-2016 figures, in which in calculating the debt/GDP ratio, the end-march 2017 exchange rate is used for "debt" (or numerator) whilst the end December 2016 stock figure is used for GDP (denominator)", he explained.

Mr Terkper drew attention to some other earlier fiscal changes that were outside the norm.

“As the Minority argued after the presentation of the 2017 Budget, it was wrong for Ministry of Finance and the Bank of Ghana to reverse the "debt service" amounts paid in 2017 and show them as a charge against the end-2016 Debt stock,” he said.

He also recalled that he recently took issue with the methodology for calculating "arrears" for end-2016 and the obvious "offsets" that were used to make the much-touted GHS7 billion neutral.