Avoid budget overruns for political expediency — Professor Quartey warns
An economics professor has cautioned the government against indulging in expenditures that will lead to budget overruns and derail the targets and conditions agreed with the International Monetary Fund (IMF).
Advertisement
With particular reference to the impending general election, the Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey, said every expenditure must be carefully guided and planned and not done for political expediency only to worsen the present economic conditions in the country.
Prof. Peter Quartey, in an interview with Graphic Business, referenced 2016 and many other election years in which incumbent governments spent money outside the budget and plunged the country into serious economic challenges after the elections.
He was emphatic when he said that “much as it will be tempting to retain power by all means, we need to be extremely cautious because of the impact of such an action and we must also be guided by the past to avoid repeating those mistakes that worsen the economic conditions, create difficult times for businesses and individuals”.
The renowned professor was responding to questions about how the country can avoid any slippages going into the 2024 elections, particularly at a time when the government has secured an agreement with the IMF for balance of payment support.
Political expenditures
Even before the general election in 18 months, the government has exhibited its desperation to capture seats in by-elections in two constituencies, one in which it has already won and the other in which it is desperately on the grounds undertaking projects outside its budget.
With its intention to “Break the eight”, many are worried about what the government will do across the country when the campaign time heats up.
The developments so far have sparked concerns among many economic watchers who fear the impact of the government’s actions on the generality of the IMF programme and the consequences for the succeeding government to be formed by the same ruling party or the opposition, depending on the final outcome.
To them, such expenditures, most of which they described as reckless, might be necessary but must be within budget to avoid the situation where the government would embark on a spending spree to worsen the already bad economic situation which had necessitated the country to seek IMF support.
Political temptations
“The temptation is there although we are many months away from the elections but we need to stay focused on the agreement we have with the International Monetary Fund so that we do not distort the programme, which is meant to restore the economy to the path of growth and reduce our debts to sustainable levels,” Prof. Quartey warned.
He said the country has a lot of credibility issues and noted that the time had come for the government to demonstrate its capacity to manage affairs in a manner that restore investor confidence and not to use elections to worsen the present conditions prevailing in the economy. Consequently, the economics professor said Parliament had a crucial role to play.
“It has to seriously carry out its oversight responsibility to ensure that the government is kept on its tracks,” he said.
He reiterated the heavy prize that will await the economy after elections should the government refuse to heed the advice and do what was politically expedient and not economically prudent to bring back the ailing economy on track.
IMF deal
The IMF Executive Board approved, on May 17, about a US$3 billion 36-month Extended Credit Facility (ECF) arrangement for Ghana.
This decision enabled an immediate disbursement of about US$600 million.
The rest is expected to be disbursed in tranches every six months, following programme reviews approved by the IMF Executive Board.
Ghana’s economic programme has three key objectives: restoring macroeconomic stability, ensuring debt sustainability, and laying the foundations for higher and more inclusive growth.
To reach Ghana’s economic programme objectives, some policy priorities have been laid out by the government:
First, large and frontloaded measures to bring public finances back on a sustainable path.
This will be done by mobilising more domestic revenue and improving the efficiency of public spending. Importantly, the programme does – and will continue to – include efforts to protect the vulnerable. The 2023 budget has, for example, doubled the benefits of the existing targeted cash transfer programme, the Living Empowerment Against Poverty (LEAP) and boosted the allocations towards the school feeding programme.
Advertisement
Second, to support fiscal adjustment and enhance resilience to shocks, ambitious structural reforms will be implemented in the areas of tax policy, revenue administration, and public financial management, as well as to address weaknesses in the energy and cocoa sectors.
Third, steps are being taken to bring inflation under control – for example, the Bank of Ghana (BoG) raising interest rates and eliminating monetary financing of the budget. A flexible exchange rate policy will help rebuild international reserves.
The key aspect of the deal is the fourth priority area where measures to be put in place to preserve financial stability are very central to the programme and finally, reforms are envisaged to encourage private investment, growth and job creation.
Prof. Quartey said the road to revival would not be an easy one and again stressed the need for caution to avoid a situation where the country would be worse off.
Advertisement