Understanding Ghana’s Budget Cycle: A layman’s perspective

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Finance Minister Ofori-Atta
File photo: Finance Minister Ken Ofori-Atta going to present a budget in parliament

Ghana’s budget process has always followed the related cycle without any major hitches quite apart from preparing the budget and economic policy statement within stringent timelines to meet the Constitutional requirement. 2021 has been an interesting year since for the second time in many years, the budget was rejected by Parliament and has gone through several processes to be approved and the appropriation bill passed.

For many, this is a yearly activity and so they haven’t followed through the process and for the few who have been engaged it is also interesting how article 102 and 104 have become important in this process though it is not directly linked to the budget process, the current structure of parliament makes it critical for approval of government business. I am sure it’s safe to say that article(s) 102 and 104 are the most popular, important and sort after articles in 2021. Article 102 provides that “a quorum of Parliament, apart from the person presiding, shall be one-third of all the members of Parliament” whiles Article 104 (1) reads: “Except as otherwise provided in this Constitution, matters in Parliament shall be determined by the votes of the majority of members present and voting, with at least half of all the members of Parliament present”.

I have had a few people reach out to me to ask questions about the budget process and so in this article I will try to demystify the budget cycle in a layman’s perspective.

Budget Cycle

The budget contains reviews of the state of the national economy, expenditure and revenue projections, strategies for revenue generation and policies relevant for the ensuing year. The President of the Republic of Ghana is mandated by Article(s) 179 and 180 of the 1992 Constitution to submit a budget to Parliament each year for approval. Per Article 179 “the President shall cause to be prepared and laid before Parliament, at least one month before the end of the financial year, estimates of the revenues and expenditure of Government of Ghana for the following financial year”. Guided by the Medium-Term Expenditure Framework (MTEF), the Ministry of Finance (MOF) prepares the budget on behalf of the President.

The budget cycle is a continuous process and has four (4) main stages i.e. budget formulation, approval, implementation, M&E and Reporting.

Budget Formulation: Consists of planning and preparation of the budget which is the longest stage of the process. The Ministry of Finance (MoF) in April/May requests for inputs from citizens, Civil Society Organizations (CSOs), think tanks etc for consideration into the Budget by advertising in the print media. A revision of the macro-economic framework is done incorporating policy measures and initiatives aimed at attaining economic growth targets. The MoF then facilitates cross-sectorial meetings of MDAs and MMDAs to discuss activities and programmes.

Based on the revised macro- economic framework, changes in national policy direction and the relative priorities of sectors as well as sectoral ceilings are estimated by April. MoF then issues the Budget Guidelines which provides MDAs and MMDAs with clear steps and budget ceilings for the preparation of their Budgets. The Guidelines is supposed to be issued in May but usually happens in July/August.

Budget Approval: The approval of the National budget is the responsibility of Parliament which is provided for in the 1992 constitution. After the presentation of the Budget by the Minister of Finance to Parliament, Parliament debates, approves the related budget and subsequently enacts the Appropriation Bill. The budget approval stage provides the basis for the total amount of the budget to be disbursed. This usually happens in December before Parliament goes on recess for the Christmas break.

It is worth noting that Parliament has the mandate to reduce expenditures but cannot increase it. In the event a need arises for certain expenditures for which the budget has not been approved and appropriated, the Constitution provides that a supplementary budget estimate be presented to Parliament for its approval. It is important to note that approval at the Metropolitan, Municipal and District Assemblies (MMDAs) and the Ministries, Departments and Agencies (MDAs) are done by different stakeholders.

At the MMDA level, Budget Hearings are done at the Regional Coordination Council (RCC) level (usually around either September/October).  MMDAs submit their budgets to the District Assemblies in October for approval. The budgets are then approved by the General Assembly whiles at the MDAs level, draft estimates of the budgets are sent to Parliament. The parliamentary select committees review and scrutinize the budget for consideration. The Ministers present at the Committee hearing have the opportunity to defend the policies and spending of their MDAs. Approval of the MDA budget is done by Parliament. The main purpose of the budget hearing is to ensure that the budget estimates are consistent with the Medium-Term Development Plan (MTDP), Medium-Term Expenditure Framework (MTEF), Annual Action Plan (AAP), and government policies.

Budget Implementation: MoF issues a Budget Implementation Guideline that provides clear directions on funds request and expenditure(s). At this stage, the Minister authorizes the release of funds for implementation. The macroeconomic targets are periodically reviewed and updated to reflect the current developments and projected performance of the economy for the fiscal year. This requires a review of the budget.  In line with provisions under section 28 (1) (2d) of the PFM Act 2016 (Act 921), MMDAs and MDAs during the budget implementation period are mandated to conduct a Mid-Year review of their approved budgets and they are also required to prepare a supplementary budget in line with Section 35 (1) of the PFM Act, if the amount approved by the General Assembly for MMDAs and Parliament for MDAs are insufficient or there is a need for expenditures for a purpose for which no amount was approved for in the budget year. Approval of the supplementary budget is done by Parliament. This occurs in July.

Budget Monitoring, Evaluation and Reporting: The Budget monitoring process happens all year round and reporting is done quarterly. MoF supervises the spending of the MDAs and MMDAs using quarterly expenditure ceilings. In addition, the Auditor General has the responsibility of auditing public accounts and providing recommendations. In recent years, the Auditor General’s mandate to surcharge and disallow expenditures have thus been ignited based on a Supreme Court ruling secured by Occupy Ghana. Further, the Public Accounts Committee (PAC) also has a mandate for ensuring that all expenditures were incurred with the appropriate legislative authority as informed by the Auditor General’s report submitted to Parliament. Respective recommendations as captured within the Auditor General’s report as well as reports by the PAC falls within the mandate of related Audit Committee(s) of covered entities to ensure timely, effective and efficient implementation of such recommendations whiles emphasizing on internal controls aimed at ensuring identified infractions are either reduced drastically or prevented from being repeated.

The interesting case of 2022 Budget

The 2022 budget debate ended with a rejection at the first attempt by the Minority in Parliament. Consequently, the Majority in return rejected the decision by the Minority by referring to article(s) 102 and 104 and approved the budget. Parliament finally passed the Appropriation Bill (2021) after weeks of prolonged debates. The appropriation provides for the withdrawal of the approved budget amount to meet government’s expenditure for the 2022 fiscal year. Budgets of the various MDAs have also been approved by the house. However, there was no final decision taken on the e-levy bill before Parliament went on recess to resume on the 18th of January, 2022. Revenues from e-levy is estimated to contribute to 6.9% of the total expected revenues for 2022. What then is the related implication granted that the e-levy is not endorsed/approved by Parliament? Does it mean Government can’t spend? In addition, what strategy does government have in place to make-up for revenues lost as result of the suspension of road tolls since this decision/directive was affirmed on the wheels of the recent budget and economic policy statement?

The 2021 appropriation process brought to bear some concerns and highlights of the process and understanding of same. As stated by the MP for Ajumako-Enyan-Essiam, Dr Cassiel Ato Forson, “the appropriation is only the summation of all the expenditure estimates. This does not mean that revenue items have been approved. Which means the approval of the appropriation does not mean that the Electronic Transaction Levy (E- Levy) has been approved. It is only the approval of government’s expenditure to the tune of GH₵145.5 billion”. What if the Electronic Transaction Levy (E- Levy) is not approved in January? Will Government have to cut down on expenditure, cut down on waste or look for other sources of revenue to bridge the revenue deficit.

Per the focus of the Appropriation (No. 2) ACT, 2017 ACT 951, it furnishes stakeholders with ‘An Act to provide for the withdrawal of sums of money necessary to meet government expenditure for the financial year from the consolidated fund and from other funds and to provide for related matters’

NB: For more information on the Budget Cycle and Processes, you can refer to the Budget Operations Manual which is a comprehensive document that describes the main components of Ghana’s budget processes and budget cycle. ( Budget-Operations-Manual.pdf (mofep.gov.gh) and the Budget Calendar which gives an overview of the budget preparation process )

The writer is a Development Practitioner/Public Financial Management Specialist

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