Understanding Ghana’s Budget cycle: Layman’s perspective

Ghana’s budget process has always followed the related cycle without any major hitches, quite apart from preparing the budget and economic policy statement within stringent timelines to meet Constitutional requirement.

The year 2022, has been an interesting one so far, because for the second time in many years, the budget was rejected by Parliament.

It is also interesting how Articles 102 and 104 have become important in this process.

Though they are not directly linked to the budget process, the current structure of Parliament makes it critical for approval of government business.

Budget cycle

The budget contains reviews of the state of the national economy, expenditure and revenue projections, strategies for revenue generation and policies relevant for the ensuing year.

The President is mandated by article(s) 179 and 180 of the 1992 Constitution to submit a budget to Parliament each year for approval.

By article 179, “the President shall cause to be prepared and laid before Parliament, at least one month before the end of the financial year, estimates of the revenues and expenditure of government of Ghana for the following financial year”.

Guided by the Medium-Term Expenditure Framework (MTEF), the Ministry of Finance (MoF) prepares the budget on behalf of the President.

The budget cycle is a continuous process and has four main stages i.e., budget formulation, approval, implementation, M&E and reporting.

Budget formulation

It consists of planning and preparation of the budget, which are the longest stages of the process.

The MoF in April/May requests for inputs from citizens, Civil Society Organisations (CSOs), think tanks, etc., for consideration into the budget by advertising in the print media.

A revision of the macro-economic framework is done, incorporating policy measures and initiatives aimed at attaining economic growth targets.

The MoF then facilitates cross-sectorial meetings of Ministries, Departments and Agencies (MDAs) and Metropolitan, Municipal and District Assemblies (MMDAs) to discuss activities and programmes.

Based on the revised macro-economic framework, changes in national policy direction and the relative priorities of sectors, sectoral ceilings are estimated by April.

The MoF then issues the budget guidelines which provide MDAs and MMDAs with clear steps and budget ceilings for the preparation of their budgets.

The guidelines are supposed to be issued in May, but usually happens in July/August.

Budget approval

The approval of the national budget is the responsibility of Parliament, which is provided for in the 1992 Constitution.

After the presentation of the budget by the Minister of Finance to Parliament, the House debates, approves the related budget and, subsequently, enacts the Appropriation Bill.

The budget approval stage provides the basis for the total amount of the budget to be disbursed. This usually happens in December before Parliament goes on recess for the Christmas break.

It is worth noting that Parliament has the mandate to reduce expenditures, but cannot increase it.

In the event a need arises for certain expenditures for which the budget has not been approved and appropriated, the Constitution provides that a supplementary budget estimate be presented to Parliament for its approval.

It is important to note that approval at the MMDAs and the MDAs are done by different stakeholders.

At the MMDA level, budget hearings are done at the Regional Coordination Council (RCC) level (usually around September/October).

The MMDAs submit their budgets to the district assemblies in October for approval.

The budgets are then approved by the general assembly, while at the MDAs level, draft estimates of the budgets are sent to Parliament.

The parliamentary select committees review and scrutinises it for approval.

Ministers present at the committee hearing have the opportunity to defend the policies and spending of their MDAs. Approval of the MDA budget is done by Parliament.

The main purpose of the budget hearing is to ensure that the budget estimates are consistent with the MTDP, Medium-Term Expenditure Framework (MTEF), Annual Action Plan (AAP) and government policies.

Budget implementation

The MoF issues a Budget Implementation Guideline that provides clear directions on funds request and expenditure(s). At this stage, the minister authorises the release of funds for implementation.

The macroeconomic targets are periodically reviewed and updated to reflect the current developments and projected performance of the economy for the fiscal year. This requires a review of the budget.

In line with Section 28 (1) (2d) of the PFM Act 2016 (Act 921), MMDAs and MDAs during the budget implementation period are mandated to conduct a Mid-Year review of their approved budgets and they are also required to prepare a supplementary budget in line with Section 35 (1) of the PFM Act, if the amount approved by the general assembly for MMDAs and Parliament for MDAs are insufficient or there is a need for expenditures for a purpose for which no amount was approved for in the budget year.

Approval of the supplementary budget is done by Parliament. This occurs in July.

Budget monitoring, evaluation, reporting

The Budget monitoring process happens all year round and reporting is done quarterly.The MoF supervises the spending of the MDAs and MMDAs, using quarterly expenditure ceilings.

In addition, the Auditor General has the responsibility of auditing public accounts and providing recommendations.

In recent years, the Auditor General’s mandate to surcharge and disallow expenditures have thus been ignited based on a Supreme Court ruling secured by OccupyGhana.

Further, the Public Accounts Committee (PAC) also has a mandate for ensuring that all expenditures are incurred with the appropriate legislative authority, as informed by the Auditor General’s report submitted to Parliament.

Interesting 2022 Budget

The 2022 Budget debate ended with a rejection at the first attempt by the Minority in Parliament.

Consequently, the Majority in return rejected the decision by the Minority by referring to article(s) 102 and 104 and approved the budget.

Parliament finally passed the Appropriation Bill (2021) after weeks of prolonged debates.

The appropriation provides for the withdrawal of the approved budget amount to meet government’s expenditure for the 2022 fiscal year.

Budgets of the various MDAs have also been approved by the house. However, there was no final decision taken on the E-levy bill before Parliament went on recess to resume in this month (January).

Revenues from the E-levy is estimated to contribute to 6.9 per cent of the total expected revenues for 2022. What then is the related implication granted that the E-levy is not approved by Parliament? Does it mean the government can’t spend?

In addition, what strategy does the government have to make up for revenues lost as a result of the suspension of road tolls since this decision was affirmed on the wheels of the recent budget and economic policy statement?

The 2021 appropriation process brought to bear some concerns and highlights of the process and understanding of same.

As stated by the MP for Ajumako-Enyan-Essiam, Dr. Cassiel Ato Forson, “the appropriation is only the summation of all the expenditure estimates. This does not mean that revenue items have been approved.”

This means that the approval of the appropriation does not mean that the Electronic Transaction Levy (E-levy) has been approved.

It is only the approval of government’s expenditure to the tune of GH¢145.5 billion.

What if the E- Levy is not approved this month? Will government have to cut down on expenditure, cut down on waste or look for other sources of revenue to bridge the revenue deficit?

Per the focus of the Appropriation (No. 2) Act, 2017 (951), which provides for “the withdrawal of sums of money necessary to meet government expenditure for the financial year from the consolidated fund and from other funds and to provide for related matters’, it is consistent with the statement by Dr. Forson.

The writer is a Development Practitioner/Public Financial Management specialist.
E-mail: Rachelgyabaah@gmail.com