The Director of the Institute of Social, Statistical and Economic Research (ISSER) at the University of Ghana, Professor Peter Quartey, has said that he expects government to bow to election pressure and miss its fiscal deficit target spelt out in the budget.
The fiscal deficit for the 2020 budget has been pegged at 4.7% on the back of heavy spending by government as has been the norm every year the country goes to the polls. To this effect, total expenditure (including clearance of arrears) is projected at GH¢85.9 billion, 21.6 percent of GDP, which represents a growth of 21.2 percent above the projected outturn for 2019.
Capital expenditure – the money to be spent on infrastructural and social projects which would convince electorates that government has honoured its campaign promises, is projected at GH¢9.3 billion, 2.3 percent of GDP, representing 53.5 percent increase over the 2019 projected outturn. It is on the back of this critical expenditure that Prof. Quartey says would result in a marginal slip of the budget deficit but not above 5 percent.
“It is quite a tricky one in the sense that in 2016, the IMF was with us, and yet, we overspent. What is different this time? This time round we have the Fiscal Responsibility Act in place, and there is a condition in it that sanctions the Finance Minister if spending exceed the limit; there is also a Fiscal Council so I expect we would respect our own laws and enforce them.
But I don’t foresee us meeting the 4.7 percent; maybe we will deviate marginally to 4.9 percent because there is a lot of pressure on government from the citizens as well…So overall, I foresee some deviation but not above 5 percent of GDP,” he told B&FT in an interview.
But Mr. Ofori-Atta maintains, despite their quest to retain power, there is no room for overspending this time, given the Fiscal Responsibility Act in place.
“In spite of the year being an election year, let me repeat that President Akufo-Addo and his government will ensure that the perennial excessive spending during such periods, will not happen in 2020. We shall work within the 2020 appropriated resource envelop and adhere to the Fiscal Responsibility Act to maintain fiscal discipline,” he said
Another area of concern that has contributed to doubts about whether government can live within its means in the election year is the poor revenue performance. The budget statement showed that total revenue for the first nine months of 2019 fell short of its target by 7.4 percent, hitting GH¢54.6 billion against a target of GH¢58.9 billion.
This, the professor said, if the Ghana Revenue Authority (GRA) is helped to be efficient in revenue collection, as the Finance Minister stated during his budget presentation, then the target, ambitious it is though, can be achieved.
“I think the revenue target is ambitious and not overambitious. What we have not done is what it takes to realise the revenue target. We are told that there is going to be a radical overhaul at the GRA so that it becomes more efficient. If that is done, then I don’t think it is overambitious,” he said.