Parliamentarians, check govt’s budget spending - IEA

The time has come to establish an office within Ghana’s legislature to enforce the Executive’s adherence to budget estimates, Dr John Kwakye, a Fellow of the Institute of Economic Affairs (IEA), has suggested.

“We need a Parliamentary Budget Office (PBO) just like the US Congressional Budget Office (CBO), an independent body comprising representatives of all political parties, to monitor budget implementation,” Dr Kwakye proposed. 

He was sure that “That is how the perennial spending excesses can be stopped.”

At the same time, the nation must explore the option of capping excess spending and borrowing by government in order to keep the economy in balance, especially during election years, Dr Kwakye, who is a macroeconomist, also recommended.

“May be, as a country, we need to legislate some measure of fiscal discipline to prevent the election-year fiscal profligacy, in particular,” he advised when he addressed a press conference on Tuesday in Accra. This press conference was called by the IEA to present its review of the 2013 Budget Statement and Economic Policy which was presented to Parliament on March 5 by Mr Seth Terkper, Minister for Finance.

Before delivering the Institute’s verdict on the 2013 budget, Dr Kwakye took issue with the outturn of the 2012 budget, describing it as “disappointing.” That disappointment was premised largely on the high deficit of 12% of Gross Domestic Product (GDP) levels recorded in 2012 which he noted was almost double of the originally estimated figure of 6.7% of GDP.

The deficit “seems to repeat the election-year cycle of fiscal excesses,” he posited, expressing disapproval for the sharp increases in expenditure which usually drive the deficits rather than decline in revenues.

Turning attention to the 2013 estimates but sticking to the deficit topic, the IEA Fellow on the one hand praised government for proposing to reduce the deficit to 9% of GDP, and on the other, dampened the moderate levels of reduction.

He was of the view that government was right for proposing the reduction. However, “There was no choice but to reduce the deficit in 2013 as the 2012 level was unsustainable. But I am not sure if the proposed reduction from 12 to 9% of GDP is even ambitious enough,” he opined. Nonetheless, he gave credit to the government, noting that a much larger reduction carries the risk of larger losses in output and employment.

What worries him, however, is that the reduction would be leaning more on revenue than expenditure whereas the deficit resulted largely from escalation in expenditure. “I note that the burden of fiscal adjustment falls more on revenues than on expenditures. Revenues increase from 22.3 to 25.4% of GDP (an increase of 3.1 percentage points) while expenditures decrease from 35.2 to 34.4% (a decline of only 0.8 ppts)… On the expenditure side, I believe a larger reduction was needed.”

Much before Mr Tekper delivered the budget, discussions were rife about the huge budget deficit, with the largest opposition party, New Patriotic Party (NPP), claiming to have exclusive figures hovering above 12% of GDP and making enormous political capital out of it.

Delivering the budget, Mr Tekper informed the legislature that government could not keep to its deficit target of below 7% of GDP, ending up with 12% of GDP. He stated that preliminary data on implementation of the budget for the 2012 fiscal year indicated that total revenue and grants were below the budget target. “At the same time, expenditures for the period were higher than the budget estimate. This resulted in an overall fiscal deficit equivalent to 12.0 percent of GDP, against a target deficit equivalent to 6.7 percent of GDP.”
This appeared in the Public Agenda on Friday March 15, 2013.