Finance Minister, Ken Ofori-Atta, has reiterated assurances that government will keep spending in check in 2020, despite it being an election year, in order not to erode the gains made in keeping the country’s fiscal balance in shape.
It has become an unwritten tradition for governments to embark on massive infrastructural and social projects during election years just to appease electorates in order to win the elections. This practice always leaves the economy vulnerable, as excessive spending, coming from borrowing and not revenues, widens the country’s fiscal deficit.
In the last election held in 2016, which saw then candidate Nana Addo Dankwa Akufo-Addo win against the incumbent, President John Mahama, the budget deficit slipped to 6.5 percent from its original target of 3.9 percent — all due to the same old tradition of overspending.
Presenting the 2020 Budget to the 275-member Parliament yesterday, the Finance Minister said things will not be business as usual come 2020.
“Economic management under the Fourth Republic, with the exception of 2004, has tended to follow a pattern of political business cycle where election years have been characterised by fiscal indiscipline. We have witnessed various governments spending excessively to finance off-budget expenditures that led to major fiscal slippages, as in the case of 2016, when the then Government recorded a fiscal deficit of 6.5 percent against its own target of 3.9 percent.
Therefore, the decision of the President to impose on himself, a binding legislative constraint, with accompanying sanctions for me as the Finance Minister, I believe this is a clear manifestation of our commitment to fiscal discipline. We pledge to Ghanaians that we will not derail this economy that we have worked so hard to fix,” he said.
Mr. Ofori-Atta’s firm assurances were reminiscent of similar comments made by Finance Ministers preceding him. For example, in 2015, when presenting the budget, the Finance Minister at the time, Seth Terkper also promised that government “will resist the temptation of election-year overspending”. Unfortunately, the temptation became too strong for him and his government to fight and consequently slipped.
Nonetheless, Mr. Ofori-Atta is confident that with the Fiscal Responsibility Act – which requires budget deficit not to exceed 5 percent – in place, he will be compelled to do the right thing, hence, pegging next year’s fiscal deficit at 4.7 percent.
“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.
He further stated that government will rather restructure the tax system and administration to rake in more domestic revenue to finance its projects.