After the Senchi Forum — Which way for the 2015 national budget?

It was (and still is) the hope of many Ghanaians that the recently held National Economic Forum at Senchi would generate informed debates and consensus around the current macro-economic challenges facing the nation, and find common grounds to decide the way forward for the national economy.

While the whole nation waits for the detailed report of the Senchi Forum, it is important to raise the relevant questions so that the outcome of the Forum would be in synch with the current situation, meet the expectations of the generality of our population, and lay the framework for the forthcoming 2015 Budget.

Difficulties in public finances

The current difficulties in Ghana’s public finances have arisen because of a major increase in government expenditures relative to revenues between 2012 and 2013. While government tax revenue stayed constant at some 17.7 per cent of GDP between 2011 and 2013, government expenditures increased by 6.6 per cent of GDP from 20.1 per cent of GDP in 2011 to 26.7 per cent of GDP at the end of 2013. Over the first quarter of 2014, the cedi depreciated by over 13 per cent, and inflationary pressures have reared their heads again. 

These fiscal developments indicate a deterioration in the state of public finances, and have reflected in government having difficulties meeting statutory payments such as the GETFUND, District Assemblies Common Fund (DACF) etc ,a situation which has generally undermined the government’s ability to fulfil many of its basic obligations for infrastructure and service provision outlined in the 2014 Budget. 

In essence, the current macro-economic challenges mean that advocacy and pressure on government to increase expenditure or to outline new areas of expenditure for social and infrastructure services and for other public services are almost pointless. 

Public debate

There are several schools of thought reflected in the ongoing public debate about what needs to be done to reverse the current trend in public finance. The three main options being proposed for government include: Drastically cutting down on public expenditures; widening or expanding the tax net (and generally increasing domestic revenue generation); or achieving more efficient and better targeting of spending.   

The case for drastically cutting down public expenditure may be the best option, but will it be politically expedient and realistic? So the compromise may be to remove the word “drastically” and simply say “cutting down on non-essential expenditures” (whatever that may mean). Indeed, given the current state of public finances, would it not even be more prudent and worthwhile to engage government in determining how to generate more domestic and external revenues to meet its obligations? 

Questions arising

The question, however, arises as to whether any significant expansion can be done within the short-term frame that is required for addressing the fiscal gaps. Again, due to the significant leakages and poor accountability in many public sector transactions, increased revenue on its own may not necessarily address the current challenges facing the nation.

Over the last few months and weeks, public discourse over the issues and the Bank of Ghana measures implemented during the period have, unfortunately, not led to any significant change in the status quo, nor have they yielded any far-reaching proposals towards addressing the other major medium-term challenges.  

Some of the proposals made by the government and the alternatives being put out by the opposition and some civil society organisations have been so clouded in political rhetoric that there is very little space for constructive dialoguing and consensus building, except for the Senchi Forum, which was unfortunately boycotted by the largest opposition party in the country. 

2015 Budget

The 2015 Budget process is currently underway and everything is pointing to the realisation that the next Budget cannot be business as usual, and that some hard questions will have to be asked and some robust responses found, if the fiscal situation has to change course for the better. If the course is not changed through the 2015 Budget, the consequences for Ghana going into another election year in 2016 may be disastrous (to say the least). 

The recent announcement that a government delegation was at the IMF HQ, apparently seeking possible bail-out, plus the recent apparent moves by the government to access and utilise some of the Heritage Funds, have received mixed reactions from the public. Questions are being asked whether it was necessary for the government to go for IMF bail-out in the first place, and whether any new loans would not result in negative impacts on Ghana’s debt portfolio.

Of more importance to other stakeholders is the issue of statutory funds which some say keep on “fiddling while Rome burns”. While there is a general hue and cry over inadequate fiscal space, it is a well-known fact that statutory funds continue to enjoy relatively huge resource allocation, and this is in spite of the fact that the expenditures of these Funds do not always come under public scrutiny.  

The Joint Review of Public Expenditure and Financial Management (2011) reported that “about 40 per cent of DACF  were allocated for school construction (Item 4), mainly meant for urgently needed classrooms and sanitary facilities, identified in district assembly budget requests, and yet only 11 per cent of the funds received were expended towards these ends. 

The Joint Review recommended that these large anomalies in both allocations and executed expenditures called for an in-depth examination of the efficiency of DACF procedures and their implementation. So, have we not reached the point where the legal framework for some of these Funds must be reviewed to make them more responsive and accountable like all other state funds?

Identifying critical policy measures

In view of the current challenges, it is important to identify critical policy measures which will bring reality home for all of us in terms of fundamental changes in the way we run our finances. The debate and choice of policy options which will be discussed after the Forum report must, therefore, be devoid of partisan positions, and must be objective.  

Moving forward, what are the priority social and economic investment areas slated for the 2015 Budget in these times of tight fiscal space and financial austerity? There are a number of programmes and initiatives which have in recent times received significant attention and support for a variety of reasons, but primarily because they address or target issues of poverty, vulnerability and inequalities. 

They include: The Capitation Grant, the School Feeding Programme, Quality education – removal of schools under trees; teacher rationalisation; enhanced supervision; and effective monitoring, programmes for the disabled, aged and orphaned and the Livelihood Empowerment Against Poverty (LEAP) programme.

Others are the National Health Insurance Scheme (NHIS), the Community Health and Planning Services (CHPS), Newborn and child health care services, including National Immunisation Day, Maternal healthcare services, Free maternal care, Prevention of Mother-to-Child Transmission (PMTCT) of HIV and AIDS, Water including the remainder of the 20,000 boreholes project promised in the 2011 Budget, Sanitation – achieving Open-Defecation-Free (ODF) status for all communities in Ghana and women’s economic activities/livelihoods: small-scale food production/farming; agro-processing.

Unless there are other new and better options for protecting the most vulnerable in our society, there is ample evidence to suggest that in times of increasing inequalities and mounting macro-economic challenges, the above social intervention programmes should not suffer, but rather be implemented on a full scale.