Some economic players have cautioned government to ensure fiscal discipline against spending excessively in the 2019 fiscal year in order to strengthen the economy.
This follows the release of the 2019 Budget Statement and Economic Policies presented to parliament last Thursday by Finance Minister, Ken Ofori-Atta, indicating that the economy is expected to grow by 7.6 percent next year.
Records from the Ghana Statistical Service (GSS) on the GDP rebasing exercise in September, 2018, indicate that Ghana’s economy is 24.5 larger, whiles the 2019 fiscal year targets single-digit inflation of 8.0 percent.
This article examines some reactions from IMANI Africa, Association of Ghana Industries (AGI), Dr. Lord Mensah and Prof. Bokpin.
Imani Africa’s initial response and comments on the 2019 budget have largely centred on the power sector, oil and gas industry and renewable energy, giving indications it would tackle the remaining sectors.
In a statement from the president of Imani Africa, Mr. Franklin Cudjoe, it stated that the 2019 budget did not give a clear figure of the amount of debt stock in the energy sector has been reduced, adding, the announcement in the 2018 budget noted that energy sector debt has been reduced to GHS5 billion indicated that the energy sector debt was being tackled to further reduced it.
“The 2019 budget failed to give a clear figure of the amount by which the energy debt stock has been reduced for the 2018 fiscal year, and its proposal that the extraction of governments share of gas resources be postponed to allow the government devise ways of getting VRA to pay its debt to Ghana Gas indicates the possible manifestation of poorly managed debt accumulation of the power utilities”.
“The fact that factors that caused debt accumulation for the power utilities have not been appropriately dealt with may be jeopardizing or eroding gains from debt restructuring”, the statement noted.
Regarding renewable energy, Imani Africa commended efforts being laid to convert almost all public buildings to solar power to increase adoption of renewable energy. It stated there remains lots work left to be done to ensure all public buildings are ready for the conversion.
“This basically involves improving the efficiency of energy or power utilization at all government and public institutions. Without this, the cost of adopting solar may be unnecessarily large therefore undermining the objective of cost savings through reducing expenditure on energy utilities”, Imani Africa statement said.
The 2019 budget reports that a contract has been awarded through the Solar Rooftop Programme, for the installation of 65kW solar rooftop system at the Ministry of Energy. The programme is expected to be extended to “most” public institutions.
Association of Ghana Industries
The Association of Ghana Industries (AGI) has questioned government’s plans in the next fiscal year or industries. The association noted that although government promised some funding to improve industrialization, it insisted that not much emphasis was placed on the One-District-One-Factory (1D1F) policy in terms of financing.
The Chief Executive Officer of AGI Mr. Seth Twum Akwaboah lamented that the concerns and expectations of the association was not captured in the 2019 budget.
According to the association’s president, the resources to make the initiatives under the 1D1F programme needed to be looked at as the resources to drive this sector was not pointed out.
“There was a review in the vat system with the introduction of the 5 percent flat vat. We had issues with it as far as manufacturers are concerned. We have raised these issues with the ministry of finance, we expect that in the 2019 budget, the concerns we raised will be addressed because the current state is not good enough”, he stressed.
Meanwhile, an economist and financial analyst Dr. Lord Mensah has cautioned government against unduly spending in the next financial year in order to strengthen its fiscal position.
Real GDP growth in the next fiscal year has been targeted at 5.4 percent, from 8.5 percent in 2017, whiles the total estimated revenue is GHS73 billion.
To ensure a collective share of the estimated revenue at all sectors of the economy for onward growth and development, Dr. Mensah stated that unwarranted government expenditure and large fiscal deficits are the key loopholes that could make the country vulnerable and lead to a return in the IMF programme.
It is estimated that the total revenue, grants and expenditure for the 2019 financial year are expected to hit an overall budget deficit of GHS14.5 billion. The amount translates to 4.2 percent of GDP.
Dr. Mensah is however, advising government to be weary of creating huge deficit, as pursuing that would mean borrowing more in the capital market.
“We should be wise going forward in borrowing so that we will not go back to the IMF programme. Borrow in-house obviously cripples the local economy. The economy is quite down. The few funds that are available in the space, government may to scramble with the private sector”. He said.
Professor of Economics at the Institute of Statistical, Social and Economic Research (ISSER)– University of Ghana, Peter Quartey, in an interaction with the Goldstreet Business stated the expectations of ISSER in the 2019 budget were largely met.
This was a result of the attainment of macro stability, modest growth rate in GDP and non-oil GDP as well as growth in the sectors.
He, however, said despite that the budget deficit was encouraging, the deficit target of 4.5 was too ambitious, and this would result in government cutting in on some spending.
With a budget allocation of Gh¢1.6 billion into the Free SHS policy, Prof. Quartey said although the proportion was huge, but was inadequate, calling for some reforms to taken in the sector.
Some of the reforms he noted were funding of less endowed schools, government taking the cost of tuition whiles parents paying for boarding fees and the measure of allowing people who have the means to pay do so.
By Dundas Whigham