Mahama Cries Over Donor Snub


Photo Reporting: President John Dramani MahamaMahama Cries Over Donor Snub

21 July 2014

Ghana’s donor partners are reluctant to release funds for the country’s budgetary support, according to President John Dramani Mahama.



Speaking to chiefs at the National House of Chiefs in Kumasi on Wednesday shortly after Finance Minister Seth Terkper had presented a supplementary budget to the Ghanaian Parliament to approve an additional GH¢3.2 billion to fund the remaining budget, President Mahama conceded that the reluctance of donors to pump funds into the Ghanaian budget would force the government to depend on its ingenuity to run the economy.

“We, however, must learn to pull ourselves up by our own bootstraps; it is in challenging things that one needs their best friends; unfortunately our development partners have not been as responsive to our home-grown fiscal stabilisation policy as I would have hoped,” he lamented.

Since last year, donors’ budgetary support of about $1billion has not been forthcoming following what President Mahama has described as ‘donor unresponsiveness.’

“…I have had to approve strong but unpleasant measures to increase revenue and reduce expenditure…this year is a turn-around year, we will begin to feel the effects of an economic recovery by the end of this year,” the President stated.

It is unclear why donors are pulling back from funding Ghana’s budget, but critics have attributed the donor apathy to the Mahama administration’s unbridled spending on curious projects, especially the high deficit recorded in the 2012 election year.

GH¢8.7bn Overspending

President Mahama had assured Ghanaians and Ghana’s development partners that there won’t be any budget overrun as had always been the case in election years.

However, by the time the election was over there was over GH¢8.7 billion ($5 billion) budget overrun, angering the country’s donors who refused to give budgetary support in 2013 till date, demanding an answer for the huge overspending.

Corroborating views of critics, the International Monetary Fund (IMF) recently stated, “Countries with large fiscal deficits or increasing debt levels, for example, Ghana and Zambia, should intensify their efforts to bring their public finances back to a sustainable footing, including containing expenditure.”

Indeed, the former Deputy Minister of Finance, Kweku Richetts Hagan, who is now a Deputy Minister of Trade and Industry, late last year explained that donor partners had asked the Ghanaian government to do a breakdown of how it acquired a budget deficit of a whopping $5billion in 2012.

He said the huge overspending led to the reluctance of donors to support Ghana’s budget, triggering the fast depreciation of the cedi.

Checks by DAILY GUIDE indicated that the government had not been able to present a convincing breakdown to the donors, hence the apparent freeze on budgetary support. Ghana’s budget deficit is currently around 8.8 per cent of GDP.

The 2012 deficit was more than 12 per cent of GDP – the highest in recent past.

Mr. Terkper on Wednesday, while presenting the mid-year budget review, stated that the budget deficit would gross GH¢10.128 billion, against the earlier estimate of GH¢8.970 billion, equivalent to 8.5 per cent.

According to the minister, the budget deficit would be financed from domestic and foreign sources as well as the excess amount from the stabilisation fund.

The budget deficit has mostly gotten out of hand following a sudden jump from GH¢2.065 billion (3.9% of GDP) in 2011 to an unexplained GH¢8.7 billion (12.1% of GDP) by the close of 2012 (an election year).

Broken Promise

That year (September 2012), President Mahama pledged to address the situation by the close of the year. “My task … Consolidating our achievements in holding down inflation and maintaining macroeconomic stability; Maintaining discipline in government expenditure so as to avoid unbudgeted expenditure that can distort the economy,” he stated when he outlined a broad policy framework in September 2012.

“Strict instructions have already gone out to all sectors against any unbudgeted expenditures. No new projects are allowed to be undertaken without strict adherence to the discipline of the national budget.

“Then the President began his re-election campaign and started doling out freebies, including cars, to chiefs, students, pastors, Imams and other opinion leaders to influence the election,” he emphasised.

Almost two years after this statement, the budget deficit has remained relatively unchanged on its widening path.

Bail Out

Some financial analysts and economists have called on the government to go for a bailout from the IMF.

According to the IMF, Ghana and Zambia have the worst fiscal deficits in Africa, and the most at risk if there’s a sudden reversal of foreign inflows.

In Ghana and Zambia, spending has been growing at “unsustainable levels,” the IMF said in its Regional Economic Outlook recently.

Credit-rating companies have downgraded the debt of both nations in the past four months as they struggle to curb fiscal and current-account deficits. Ghana’s cedi and Zambia’s kwacha are the worst-performing currencies against the dollar in Africa in the past six months with Ghana now taking the first spot.

By: Raphael Ofori-Adeniran

Source: Daily Guide/Ghana



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