The Economic Governance Platform in partnership with the IMF and Oxfam organized a roundtable workshop on July 11, 2019 on the theme; Tackling Ghana’s Political Budget Cycle: Lessons for Ghana Beyond at the World Bank office, Accra. The workshop brought together over 83 participants from Civil Society, Academia, Ministry of Finance, Bank of Ghana, IMF, World Bank and the Media.
Dr. Albert Touna Mama, Resident Representative, IMF presented on averting another need for a bailout in future: Key takeaways from the IMF’s joint final reviews on Ghana’s 16th bailout programme. Mr. Pierre Laporte, World Bank Country Director was represented by the Bank’s Economist Kwabena Gyan Kwakye. Dr. Alhassan Iddrisu, Director of Economic Strategy and Research Division, Ministry of Finance represented the Minister of Finance.
The CSO panel that delved into the key issues included; Prof. Godfred A. Bokpin, Economist and Professor of Finance, University of Ghana, Dr. Priscilla Twumasi-Baffour, Economist and Lecturer, University of Ghana, Mr. Benjamin Boakye Executive Director, Africa Centre for Energy Policy and Mr. Vitus Adaboo Azeem, Chairman, Tax Justice Coalition-Ghana and Mr. Franklin Cudjoe, President, Imani Africa. Below is the communiqué issued at the end of the workshop:
Having participated fully in the Roundtable Workshop on the theme: “Tackling Ghana’s Political Budget Cycle: Lessons for Ghana Beyond the IMF”, hereby adopt and approve the following Communiqué to ensure that fiscal discipline is internalized in Ghana.
- The costs of elections-induced profligacy have been inimical to Ghana’s development.
- The near-term fiscal risks particularly from the energy sector are too high to be ignored.
- The need to forge stronger ties, cooperation and relationship between Citizens, Government and Development Partners towards quality assurances for efficient and effective quality decisions on behalf of the people of the Ghana.
Hereby agree to
- Intensify advocacy for the Government of Ghana to put the interest of the country first (rather than partisan interest) and remain fiscally disciplined throughout its tenure as this is the path to debt sustainability.
- Work with all stakeholders to ensure that the Government of Ghana resolves the short-term fiscal risks of the economy which are macro-critical ahead of the elections next year.
The ensuing underlying themes to be considered and adopted by the Government to deepen fiscal responsibility in Ghana:
A. The Costly Political Budget Cycle
- Ghana has a chequered history of relatively stable macroeconomic environment informed by prudent fiscal policy and sound monetary policy in between elections, and fiscal indiscipline combined with loose monetary policy during election periods.
- This political budget cycle has been very costly economically and socially; fiscal consolidation measures have come with painful adjustment burdens that are–all too often–unevenly shared among the population.
- Having sought IMF bailouts 16 times in its history, Ghana had reached a point where it should reinforce the necessary institutional and policy regime that would help internalize fiscal discipline rather than delegate the role to the IMF.
B. Interventions to Strengthen Fiscal Discipline
- The Government has taken commendable steps towards instituting internal mechanisms for entrenching fiscal responsibility and fiscal discipline in Ghana.
- The passage of key legislations: the Public Financial Management Act, 2016 (Act 921), the Amended Bank of Ghana Act, 2016 (Act 918) the roll-out of the Ghana Integrated Financial Management System (GIFMIS), the Fiscal Responsibility Act, 2018 (Act 982) which, among others, stipulates a fiscal rule in the form of a deficit ceiling of 5% of GDP, followed by the establishment of a Presidential Fiscal Responsibility Advisory Council (FRAC) and Financial Stability Council.
- Participants however remain skeptical as laws in Ghana are often observed in breach than in compliance given the broken commitments by successive governments to be fiscally responsible in the run-up to elections.
- In the interim, participants urged Parliament to exact compliance with the deficit ceiling of 5% of GDP.
- Participants appealed to the President to transform the Presidential Fiscal Responsibility Advisory Council (FRAC) to an Independent Fiscal Council ((IFS) in line with international best practice to provide the much-needed oversight over fiscal policy.
- Participants urged government to publish monthly budget performance report with a lag of 4weeks to enable the Ministry of Finance and the public keep track of government’s outturns.
- Participants urged government to publish and swiftly act on the findings of the Public Expenditure and Financial Accountability Assessment (PEFA) for year end 2018 to strengthen the country’s public financial management.
C. Key Challenges that Confront Ghana in the Short Term
- Very high-level fiscal risks in the energy sector.
- Weak domestic revenue mobilization (DRM). Ghana’s tax to GDP ratio of 12.6 percent compared with the country’s peers’ 18-20 percent. About 97 percent of revenue is absorbed by wages and interest payments alone.
- Successive debt sustainability analysis by the IMF & World Bank have classified Ghana as high risk of debt distress in view of the country’s high debt service to revenue ratio.
- Ensuring value for money in all government’s outlays (dealing with corruption in all forms) given the country’s large financing needs.
- Off-budget transactions such as Sinohydro, securitization of gold royalties, etc. make it challenging to have comprehensive fiscal picture (debt and deficit); policy stance becomes more expansionary, exerts pressure on Cedi and foreign exchange reserves.
D. Resolve the Short-Term Risks in the Energy Sector
- Government should address the cashflow problems and inefficiencies within the electricity sector State Owned Enterprises (SOEs) and the gas sector. Given that key energy sector-SOEs (the electricity distributor ECG), the transmission company, Gridco and the power supplier, VRA) have generated a negative average return on equity since 2014.
- The government should persevere with its collaboration with World Bank on the comprehensive Energy Sector Recovery Program (ESRP) to ensure the sector’s financial viability and plan to reduce the large stock of intra-SOE and government payables in the energy sector, following the completion of the ongoing external audit of the payables.
- Given that a supplier to the ECG can expect to wait over a year, on average, to get paid. Simultaneously, the time it takes ECG to collect from its customers has increased to over 200 days.
- The establishment of a regulated electricity tariff consistent with sector viability is critical to safeguard the energy sector whiles putting in measures to minimize generation and transmission losses, in addition to review of the power purchase agreements.
E. Strategies to Address Challenges with Domestic Revenue Mobilization
- Taxpayers want to know and be assured that their tax money is being well spent (this could improve tax compliance and willingness to accept new taxes or increases in rates). This could only be achieved through increased government transparency and accountability to the people.
- Participants called for an independent audit of the activities of Ghana Revenue Authority (GRA) to ascertain the reasons underlying the Authority’s inability to effectively collect revenues in spite of the numerous technical support from development partners over the years.
- Participants called for depoliticization of appointments at the top echelons of GRA. Efficient and effective personnel should be put at the helm of affairs with their job security tied to meeting set revenue collection targets (increasing the number of tax payers from say 1.5 million to 2million by end of 2020 in addition to the actual amounts collected).
- GRA should exercise its mandate to audit firms who may be involved in under invoicing and transfer-pricing in the mineral resource sector.
- Participants bemoaned the increasing loss of revenue through the granting of tax exemptions by government. Participants called for a stock-taking exercise of the tax expenditures in place-granted by the authorities including the Executive, Parliament, the Ministry of Finance (and other MDAs), and the Ghana Investment Promotion Centre (GIPC). The outcome should be published (or be available for public scrutiny) to inform the authorities and the general public as to which tax expenditures should be revised or enhanced as well as which beneficiary should continue to enjoy the incentives.
- Participants urged Parliament to pass the Tax Exemptions bill to help streamline the tax exemption regime in Ghana.
F. Other Recommendations
- Participants noted that as a country we need to stop the sloganeering and appreciate the fact that if we continue to live beyond our means to the point that the country borrows at unsustainable levels, then austerity becomes inevitable.
- The country’s current debt to GDP ratio and high servicing costs limit borrowing space and in fact, constrain further debt build up. Hence, the Government should ensure that the limited borrowing space is judiciously utilized by channeling new debt to projects which are viable and able to generate cash flow to retire the debt. Capital budgeting decisions should precede financing decisions.
- In a private sector led market-based economy, macroeconomic stability is necessary though not a sufficient requirement. Markets do not like uncertainties or do not function well in uncertain environments.
- Participants urged government to put the country’s interest first and resist the temptations of unplanned public spending, which in turn exerts pressures on the economy as well as to shift expenditure off-budget in the run-up to the elections next year.
- The inability to permanently raise revenue could undermine the implementation of development programmes, undermine fiscal discipline, pose risks in the financial sector, and maintain unsustainable debt build-up.
- The continued weaknesses in the state-owned enterprises (SOEs) especially in the energy sector if not addressed, could result in direct or contingent liabilities of the government and pose financial sector risks.
- Participants noted that the country cannot continue to do things the way it has done all these years and expect different results. There is urgent need to change the structure of the economy from the export of primary products to finished products. Government should focus on the basics to restructure the economy by supporting the employment generating sectors (agriculture and manufacturing). Participants wondered why Ghana continues to import tomato paste (even those with local names) in the midst of abundant tomato production for in stance?
- Participants noted that efficient government spending (including through the elimination of corruption) is essential for balancing fiscal discipline and economic growth. It is, therefore, necessary for the government to prioritize and tighten control over spending and strengthen procurement procedures. This would help achieve “more with less” – in other words, much-needed value for money as the elections beacons next year.
ADOPTED THIS 11TH DAY OF JULY 2019, WORLD BANK, ACCRA
|1||Samuel Oracca-Tetteh||Network For Health & Relief Foundation (NFHRF)|
|2||Joy Abbey Reichmann||Centre for Policy Analysis|
|3||Margaret Aloryito||Bright Minds|
|4||Joyce Edem Kofigah||GACC|
|7||Kwaku Mawuena||Sisters Next Door|
|8||Dennis Osei Kyere||University of Ghana Business School|
|9||Eunice Panin Offei||University of Ghana Business School|
|10||Kyeremeh Eric Obeng||Women Livelihood Program-Wenchi|
|11||Sammy Obeng||Parliamentary Network Africa|
|13||Ben Boakye||Africa Centre for Energy Policy|
|15||Godfred A. Bokpin||University of Ghana Business School|
|16||Emmanuel S. Mekpor||University of Ghana Business School|
|17||Sylvana Zuanah||University of Ghana Business School|
|18||M.E. Duncan||Field Support Services Project|
|19||Vitus A. Azeem||BSF CONSULT|
|20||Elizabeth Abena Nkrumah||FAT-AFRICA|
|24||Victor K. Nimo||DKN|
|26||Richard Annor Amponsem||GBC Radio|
|28||Kwabena Gyan Kwakye||WBG|
|29||Richard Kasu||Social Accountability Platform|
|30||Jerry J. Afolaho||Social Accountability Platform|
|31||Dorcas Awortwe||Tax Justice Coalition|
|32||Gifty Dotse||Bank of Ghana|
|34||Elorm Asabea Akpedonu||GBC Radio|
|36||Eric Nii Sackey||Ghana News Online|
|38||Linda Lorwia||Save-Ghana (SAP)|
|39||Leonard Shary-Quartey||Tax Justice Coalition|
|40||Allen Osei Akoto||Gacc|
|42||Emmanuel Amoah-Darkwah||HIS MARKIT|
|45||Richard Ananga||World Vision/SAP|
|46||Kwadwo Amponsah||BANK OF GHANA|
|51||Gregory Ocansey||Tax Justice Coalition|
|52||Emmanuel Ayifah||SEND Ghana|
|53||Abdulkarim Mohammed||IBP Ghana|
|54||Bismark Osei||University of Ghana, Dept of Economics|
|55||Mark Bruce||DALS Consult|
|57||Priscilla Twumasi Baffour||University of Ghana, Dept of Economics|
|58||Delali Ndo||Volta Trade & Investment|
|59||Dr. Alhassan Iddrisu||Ministry of Finance|
|63||Anthony Darko||Diaspora Affairs Office|
|64||Jesse Clottey||Fiscal Focus|
|65||Petrine Addae||Abibiman Foundation|
|66||Charity E. Dzradosi||ILGS|
|67||Philip Kesse||Daily Graphic|
|68||Ebenezer Sabutey||Joy News|
|69||Isaac Awo||Joy News|
|70||Bernard Dadzie||Daily Searchlight|
|71||Esther Adjei||Daily Graphic|
|72||Fred Dzakpata||Starr Fm|
|73||Aikins Agyei||Pink Fm|
|76||Kwaku Ankoma-Abrokwa||Accra Fm/Ctv|
|77||Isaac K. Amo||Joy News Tv|
|78||Emmanuel Sackey||Top Radio/Fm|
|79||Jerry Akornor||Class Fm|
|80||Matise Otoo||Ghana Daily News Online|
|81||Benjamin Akufffo||The Insight|
|82||William Sarpong||Daily Democrat|
|83||Ishmael Barfi||The New Independent|