Claim: North Tongu MP, Okudzeto Ablakwa, says that Ghana recorded the biggest budget deficit in the world, due to COVID-19 expenditure
The 15.2% of GDP quoted by Mr. Ablakwa as Ghana’s budget deficit for 2020 is lower, compared to some countries, including Oman and Kuwait. The two countries recorded a budget deficit of 19.3% of GDP and 15.4% of GDP respectively in 2020.
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Member of Parliament for North Tongu, Samuel Okudzeto Ablakwa, has claimed that Ghana recorded the biggest budget deficit in the world in the heat of the Covid19 pandemic.
He says that this was a result of the government’s COVID-19 expenditure.
Mr. Ablakwa made the claim during an engagement on Newsfile, a socio-political news analysis show that airs on JoyNews.
“Why is it that the Ghanaian Parliament alone cannot have a special committee to look into COVID-19 expenditure which runs into billions? Because of COVID-19 expenditure, we recorded the biggest budget deficit in the world – 15.2%,” the lawmaker said.
The MP made the claim to back calls for a bi-partisan parliamentary probe into the government’s COVID-19 expenditure.
The Saturday, February 2022 edition of Newsfile was live streamed on Facebook and the claim can be found between minutes 1:42:20 to 1:48:50
Verification
A budget deficit occurs when the government expends more than it receives within a fiscal year.
Countries measure their budget deficits as a percentage of their Gross Domestic Product (GDP).
In effect, the MP is claiming that the gap between expenditure and income for the Government of Ghana is the widest when it is compared to that of other countries across the world during the pandemic.
Several authorities, including the Ministry of Finance, World Bank, and the IMF provide an overview of Ghana’s fiscal actions.
Therefore, to authenticate the claim by the lawmaker, DUBAWA will check the data from these institutions and compare them to that of other countries.
Last year, the IMF released its Fiscal Monitor Report which is a detailed overview of countries’ fiscal actions in response to COVID-19.
In the report, Ghana was classified as a Low-Income Developing Country, alongside the likes of Nigeria, Côte d’Ivoire, and Togo.
According to the report, the average deficits as a share of GDP in 2020 reached 11.7 percent for advanced economies, 9.8 percent for emerging market economies, and 5.5 percent for low-income developing countries.
The report noted that the rise in deficits in low-income developing countries, such as Ghana, “stemmed primarily from the collapse in revenues caused by the economic downturn.”
What was Ghana’s General Government Overall Balance for 2020?
Although the IMF did not use the term “budget deficit” in its data presentation, it explains in a publication on its website that overall balance “measures the difference between revenues and grants, and expenditure and net lending.”
The IMF April 2021 Report indicated that Ghana’s General Government Overall Balance was 16.0% of its GDP in 2020.
However, after the IMF concluded its 2021 Article IV Consultation with Ghana, the country’s budget deficit was quoted as 15.2% of GDP.
“The fiscal deficit including energy and financial sector costs worsened to 15.2 percent of GDP, with a further 2.1 percent of GDP in additional spending financed through the accumulation of domestic arrears.”
The World Bank’s October 2021 update on Ghana’s Economic Outlook also mentioned that the country’s fiscal deficit was 15.2% of GDP for 2020.
However, figures from the Ministry of Finance are different from what the two authorities quote.
In the 2021 Budget Statement, the Ministry indicated that the budget deficit was 11.7% of the GDP.
“The overall budget deficit on a cash basis was 11.7 percent of GDP against a revised target of 11.4 percent of GDP,” the 2021 budget indicated.
Clearly, there is some disagreement amongst the data sources on what Ghana’s budget deficit is for 2020.
Since Mr. Ablakwa quoted Ghana’s 2020 budget deficit to be 15.2%, it is very likely that he was using World Bank/IMF figures for Ghana.
What’s the budget deficit situation like for other countries?
Ghana is not the only country with different authorities publishing different figures regarding their budget deficit.
A December 2021 publication in the UK House of Commons Library indicated that the country’s budget deficit was equal to 15.1% of GDP.
“In 2020/21 government revenue – from taxes and other receipts – was £792 billion while government spending was £1,115 billion (£1.1 trillion). The deficit was therefore £323 billion, equivalent to 15.1% of GDP, which is a peacetime record. As we discuss below, the budget deficit ballooned because of the coronavirus pandemic,” parts of the publication read.
However, the IMF April 2021 Report indicated that the UK’s General Government Overall Balance was 13.4% of its GDP.
German database organization, Statista, also quotes the UK’s budget balance, also known as budget deficit, for 2020 as 12.53% of GDP.
These contradictions were the same in the case of the United States of America. Whilst the IMF Report indicated that the US budget deficit was 15.8% of its GDP, statista mentioned 14.85%.
The Congressional Budget Office of the US also says that “the federal deficit in 2020 was $3.1 trillion, equal to 14.9% of GDP.
How does Ghana’s 2020 budget deficit stand against others?
If the figure from the Finance Ministry (11.7% of GDP) is used against others, it will be false to claim that Ghana recorded the biggest budget deficit in the world in 2020 due to COVID-19, as the likes of the US and UK recorded higher figures, according to figures from their local authorities.
Again, if the 15.2% of GDP figure quoted by the World Bank/IMF is used, it will also be lower if compared to countries such as Oman.
The IMF says that the Asian country’s budget deficit widened to 19.3% of GDP in 2020.
Kuwait, a country in the Middle East, also recorded a relatively higher budget deficit – 15.4% of GDP (including investment income)
Conclusion
Whilst there are not many countries that recorded higher budget deficits as Ghana did, it is not true that Ghana’s 15.2% of GDP budget deficit is the highest in the world in 2020. At least, Oman and Kuwait recorded higher budget deficits – 19.3% of GDP and 15.4% of GDP respectively.
