Mid-year budget review-- Resist temptation to spend more - Economist

An Economist and Sustainable Banking Consultant, Mr Eugene B.G. Bawelle, has advised the government to resist any temptation to request a supplementary budget in the name of COVID-19 expenditures.

With the Minister of Finance set to present the mid-year budget review on Thursday, Mr Bawelle advised the minister to move away from what he described as the “COVID-19 excuses”.

He said the country’s debt was reaching unsustainable levels and the government could, therefore, not continue to use COVID-19 as a reason to overspend.

In an interview with the GRAPHIC BUSINESS, he said, “Our public debt is becoming unsustainable and both the International Monetary Fund and the World Bank have pointed out that our debt level is reaching distress levels, so what we want to see in the mid-year budget are elaborate plans to control expenditure.

“The government has used COVID-19 as an excuse for a lot of the expenditure that we have seen in the last one year, but it is time to move beyond the COVID-19 excuses and begin to make decisions that will help control public debt,” he stated.

Presenting the 2021 budget, the Minister of Finance, Mr Ken Ofori Atta, said total revenues and grants for 2020 was revised downwards by GHȼ13.40 million to reflect the impact of the COVID-19 pandemic on revenues, while total expenditures were also revised upwards by GHȼ11.78 million to accommodate COVID-19 related expenditures.

The Bank of Ghana recently disclosed that GHȼ21 billion was spent on COVID-19 in 2020.

Read; Mid-year budget review must focus on micro side of economy — Dr Sam Ankrah

Rationalising expenditure

Mr Bawelle, who is a Lecturer at the Academic City University College, also advised the government to rationalise its expenditure.

“The government’s COVID-19 expenditure has been a concern to a lot of Ghanaians and if you read the latest country report by the IMF, they are expectant of the COVID-19 expenditure audit.

“We, therefore, expect the government to rationalise its expenditure,” he said.

Reaping benefits of digitisation

The economist also called for the need to start reaping the benefits of the government’s digitisation drive over the years.

He said while the government needed to be commended for its digitisation drive, the country was yet to reap any benefits from that agenda in terms of boosting domestic revenue.

“As we speak, we have about 14 million people who have linked their Tax Identification Numbers (TIN) to their national IDs, which means that the number of people eligible to pay taxes has increased, but only six million have filed their taxes for last year.

“It is good to have people register for tax payment purposes, but we must move beyond the digitisation to make sure that it reflects in revenue generation and collection, and that is what I am expecting for the next half of the year,” he explained.

He said revenue growth per GDP in the last four years had virtually hovered around 12.7 per cent, which was not good enough when compared to previous years.

“So inasmuch as the digitisation is gaining grounds, we are not seeing a commensurate increase in government revenue and we need to transition beyond that and reap the benefits,” he stated.

Review of the Fund Capping Act

Mr Bawelle also urged the Ministry of Finance to use the mid-year budget to have a second look at the Earmarked Funds Capping and Re-alignment Act, 2017 (Act 947).

He said that act, which capped the allocations of some government agencies and institutions, was starving those institutions of the needed funds to operate, hence the need to have a second look at it.

“The institutions and agencies who had their funds capped have been starved of the required resources to undertake their activities. If you take GETFUND  for instance, in 2020, it spent about 56 per cent of its total inflows on debt servicing and only nine per cent went into providing facilities for second-cycle institutions. And we are looking at the fact that there is a flagship policy like the Free SHS that ought to attract the attention of GETFUND but that is not happening.

“Also, as a result of the Free SHS policy, we are going to see a lot of students enter the universities in the next few years but last year, only 18 per cent of GETFUND resources went into tertiary education facilities and that is not good.

“So I am hoping that the government will rethink this capping policy that is affecting a lot of agencies and institutions in the public sector,” he explained.

Payment of arrears

The economist also urged the government to come up with an elaborate plan to pay all of its arrears to contractors and suppliers.

He said the government’s continuous debt to contractors and suppliers was creating a liquidity crunch in the system.

“At the end of 2020, about GHȼ8.2 billion was owed by the government to contractors and suppliers and the government must pay these people.  In an economy like ours where the biggest expenditure comes from the government, what it means is that when it does not pay, then there is no liquidity in the system.

“I am, therefore, expecting to see an elaborate plan of how the GHȼ8.2 billion in terms of arrears owed to individuals and companies will be cleared,” he stated.