The Ghanaian Economy in 2012 – How Accurate was the Reported Fiscal Deficit? [Occasional Paper 08]

Occasional Paper 8. The Ghanaian Economy in 2012 – How Accurate was the Reported Fiscal Deficit?

This paper reviews the performance of the Ghanaian economy in 2012, with a view to establishing the accuracy and the causes of the reported huge fiscal deficit, amounting to 11.6% of GDP, posted during the period. The study finds that the strong performance of the economy achieved in 2011 continued in 2012, driven by the services and industry sectors, with the latter overtaking agriculture as the second largest contributor to the country’s GDP. Improved macroeconomic policies, supported by a tight monetary policy, also helped to curb inflation and stabilize the domestic currency. On the fiscal front, total revenue and grants registered a shortfall of just 1.5% for the year, despite a significant drop in the disbursement of grants by development partners and the over-estimation of revenues from oil companies. On the expenditure side, however, there are some questions about some of the figures reported. Total expenditure was reported to be 17.5% more than the budget for the year, implying that the huge fiscal deficit posted in 2012 was due almost entirely to expenditure overruns, notwithstanding strong directives issued to all MDAs to maintain discipline in spending, recognizing that 2012 was an election year. The veracity of some of the huge spending overruns which contributed significantly to the overall deficit for the year cannot be established, leading to the conclusion that the reported fiscal deficit in 2012 is spurious. In our view, the actual fiscal deficit for 2012 should have been 8.3% of GDP and not the reported 11.6% of GDP

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