Mid-year budget silent on long-term reforms — PwC
The 2024 mid-year budget failed to give a detailed update on the long-term measures being implemented to address the structural challenges of the economy, tax and auditing firm PwC Ghana has indicated.
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The firm is of the view that while the short-term outlook for the economy looked bright as all the indicators were pointing in the right direction, little or nothing was said on the progress being made to address the structural challenges.
Context
Presenting the mid-year budget, the Minister of Finance, Dr Mohammed Amin Adam, said the country’s economy was rebounding stronger than anticipated. Growth continues to exceed expectations, as the 4.7 per cent growth rate recorded in the first quarter of the year exceeds the revised target of 3.1 per cent.
Inflation has also been on a decline after peaking at 54.1 per cent in December 2022, with a June 2024 inflation rate of 22.8 per cent. Gross international reserves reached 3.1 months of import as at end June 2024 as against 2.5 months of imports in the same period last year.
Short-term performance
The PwC said while it agreed with the minister that it was a good recovery, focus on short-term performance was not sufficient. In an interview with the Daily Graphic, the Country Senior Partner of PwC Ghana, Vish Ashiagbor, said: “From our perspective, the short-term picture looks okay but if you consider a business person or business organisation, what they are interested in is the long-term picture.”
“We did not see so much of some of the medium to long-term things that we need to work on as a country”.
“I’m talking about things like the revenue mobilisation agenda, public financial management agenda, and debt management agenda,” Mr Ashiagbor said. He said it would have been good to know the progress on what the government was doing in the long term to ensure that the economy did not run into the same troubles again in the near future.
“The mid-year budget was silent on that, so we are not sure of how much progress has been made. While the short-term picture looks okay, we are not very well informed about the progress in the medium to long-term initiatives,” he added.
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Staying the course
Mr Ashiagbor said while it was necessary for the government to stay the course of short-term measures, it must be done alongside the medium to long-term initiatives. He said the government should not lose sight of long-term measures to ensure fiscal consolidation and public financial management reforms.
“We need to look at how to raise revenue in a more equitable manner, widening the tax net and making sure everybody is paying his or her fair share,” he said. The Country Senior Partner also urged the government to focus on long-term measures to ensure expenditure control.
“There are also some key sectors such as energy and agriculture that always end up creating problems for the economy through their contingent liabilities, so we need an update on the reforms in those sectors,” Mr Ashiagbor stated.
“And also, on debt management, how do we make sure that we don’t borrow beyond our means, we need to keep a cap on the amount of debt that we can take on,” he said.
Commenting on some potential risks to the economy in the second half of the year, Mr Ashiagbor said aside from external shocks that nobody could control, the major risk facing the economy is the elections, considering that every election in the country has been characterised by huge budget deficits.
With the ongoing IMF programme, he said it was the hope of every Ghanaian that risk would be minimised. In the 2016 election year, despite being under an IMF programme, the country still overspent and missed its budget deficit target.
“At the end of the day, the IMF is not the one controlling the purse, it’s the government, so that risk is still there but it’s mitigated because of the presence of the IMF. Mr Ashiagbor said the presence of the IMF gave some layer of oversight that reduced the chances to overspend.
“Moreover, being under the programme means we have certain commitments and targets to meet before we can achieve further support,” he said. He said aside from the overspending, the election also posed a risk to pursuing long-term policies needed for the future.
Mr Ashiagbor noted that there was the risk that the government might take its eyes off the ball for the next six months and focus on the political environment.