Government expenditure for the first half of 2019 has crossed its targetted threshold by GH¢11.7billion, sparking concerns that the Fiscal Responsibility Law will be breached as election 2020 fast approaches.
Finance Minister Ken Ofori-Atta has disclosed that the budget balance registered a deficit of 3.9 percent of GDP, against a target of 3.7 percent for the first half of the year.
Also, government’s fiscal operations resulted in a cash deficit of 3.3 percent of GDP, compared with the programmed target of 2.9 percent of GDP for the half-year. What this essentially means is that government spending between January and June exceeded the amount it programmed for in budget.
Meanwhile, the Fiscal Responsibility Law, which was passed in December 2018, limits budget deficit to a maximum 5 percent of GDP. But, with 2020 election fast-approaching and the new development in the fiscal space, it only adds to the prediction by some economic and financial analysts that government would sidestep the law to deliver on its manifesto promises.
“Following completion of the IMF programme in April 2019, and a period of fiscal consolidation, we expect to see some spending laxity. Moreover, the authorities will remain reluctant to lower public spending ahead of elections. The publicsector wage bill – together with high interest payments and capital expenditure to help to deliver ambitious industrialisation and infrastructure development promises – will drive expenditure increases.
“In December 2018, government passed a fiscal responsibility law aimed at limiting future budget deficits to a maximum 5 percent of GDP. However, overall, we expect the fiscal deficit to widen from 3.4 percent of GDP in 2018 to 5.5 percent of GDP by 2020 as a result of rising expenditure,” the Economist Intelligence Unit Country Report stated.
The NPP government made a lot of ambitious promises in the run-up to the December 2016 election. These include the Free SHS; One District, One Factory; One Village, One Dam; US$1million for each constituency, and many infrastructural projects— all of them must be delivered to boost the party’s chances of retaining power before the country goes to the polls in December 2020.
But Ofori-Atta maintains that while delivering these promises is key on government’s agenda, measures have been put in place to contain fiscal deficit within the threshold defined by the law.
“The revised Overall Budget deficit is therefore programmed at 4.5 percent of GDP. This deficit target is consistent with our debt sustainability analysis for 2019 and the medium-term. The revised 2019 fiscal framework has carefully considered some measures in the second half of the year to safeguard the revised deficit target of 4.5 percent of GDP.
“We are therefore confident that implementing these fiscal measures will enable government to contain the fiscal deficit within the Fiscal Responsibility Act threshold of 5 percent of GDP.
“The fiscal measures are specifically geared toward improving domestic revenue mobilisation, reining-in expenditures, as well as addressing some critical protracted structural issues in the energy sector,” he said when presenting the Mid-Year Budget in parliament.