Tomorrow, Finance Minister Ken Ofori Atta will present the President Nana Akufo-Addo administration’s 2020 national budget and economic policy proposals to Parliament.
In several respects the incumbent government will be treading uncharted territory. Firstly, it is the first time it will be presenting election year budget proposals. Secondly it is the first time the proposals will be subject to a five percent cap on the fiscal deficit. Thirdly, it is the first time in nearly half a decade that the proposals are not subject to the overall supervision of the International Monetary Fund.
Combined, all these considerations will require government to perform a veritable fiscal juggling act, even as the political opposition seeks to make it fail for the sake of its own political fortunes at the impending 2020 polls. Somehow, government will have to juggle fiscal constraints, economic realities and political exigencies, all at the same time.
Unveiling a national budget with projections that fulfill all those objectives is the easy part; the real challenge will be in actually fulfilling the budgetary projections and targets.
The primary fiscal constraint is the self-imposed five percent of Gross Domestic Product ceiling on the fiscal deficit. Hitherto, successive governments have been able to simply borrow unreservedly and attempt to use fiscal consolidation to restore the resultant inevitable macroeconomic instability in the succeeding years following the elections. This time around, government will not have that luxury available for its use.
Related to this are the economic realities. While the much trumpeted gains, with regards to the restoration of macro-economic stability are largely true, they are still extremely fragile; a little mistake here or there could all to easily return Ghana’s economy to a downward spiral into renewed instability. This means there is still no space for inordinate risk in economic management policy.
Then there are the political exigencies, which tend to be the predominant consideration in an election year. Simply put, the generous promises made during the 2016 election campaign are now up for review to assess the degree of implementation. Here, development projects are behind the promises because capital expenditure has repeatedly been slashed in response to shortfalls in revenue collection below the overly ambitious targets.
Over the next one year government will be desperate to play catch up in this regard so as to satisfy the electorate ahead of the impending polls. Here the opportunity cost of financing major social interventions – most notably free Senior High School – will now be counted, having crowded out a significant portion of development projects over the past few years.
Political exigencies also dictate that government will be reluctant to introduce new taxes in 2020. Rather emphasis will be on more efficient imposition of already existing taxes although even in this regard government will be cautious about antagonizing voters who hitherto have been evading taxes but are now being forced to start paying just ahead of a general election.
Government has the option of raising non tax revenues through the sale of state assets; for instance government has already declared its intention to sell the thermal assets of Volta River Authority to private interests. But the recent Power Distribution Services concession fiasco has cast a shadow over such transactions and government would be prudent to tread carefully so as to avoid further allegations of malfeasance from a political opposition desperate to discredit it.
All this makes for a most difficult task for government in designing and implementing the 2020 budget. We wish it the best of luck – it will sorely need it.