Economic Policy Failure Is Responsible For The Missing Targets In The 2013 Budget

Economic forecast and projection underline most of the fiscal policy measures of government. The policy helps to regulate the macro environment in order to promote stability and growth while the forecast and projection aid the policy in absorbing the changing trends in the domestic and international markets. This is where creative decisions are taken to keep the economy stable. The inputs of key stakeholders like Economic Think-Tanks, Civil Society Organisation, Opposition political parties, Workers' Unions and many others must be tapped to move the economy around. This teamwork strengthens the economic policy decisions of the government.

The 2014 Budget statement presented to Parliament in November, 2013 set some targets which were critical for the stability and growth of the economy. It is hoped that the achievement of these targets will enhance the stability and growth of the economy in order to deliver the maximum social welfare and conditions of Ghanaians. To achieve the target, the policy statement always outlines capacity building for the officials who will drive the result. This will help improve the communication skill of the officials who will regularly give early warning signals about the future prospects of the economy and indicate whether the target can be achieved under the prevailing market conditions.  In this regard, the economic policy will thus be measured in the field to enhance revenue collection and ensure the achievement of the targets.

The 2014 Mid-year review budget statement presented to Parliament clearly shows that a lot of targets were missed. Note that target setting is a function of forecast and projection. When the forecast and the projection are realistic, the target will be achieved.  In this way, therefore, the various elements or variables that go into the forecast must be manageable and controllable. The forecast can be accurate when the macro environment is properly scanned to make sure that the economic fundamentals can respond positively to the policy directions. When this is not properly assessed, the target will be missed and this will interfere negatively with the provision of social services.

When a government decides to raise revenue, it must put in place structures or measures to drive the achievement of the revenue target. Key Performance Indicators (KPI) must be put in place to drive the monitoring and evaluation of the operational activities of the officials to ensure that the targets are achieved. This will help detect any lapses that might affect the target delivery. Managers of the economy should not go to sleep and expect the revenue to come. Additional revenues can be raised through creative policy initiatives. Additional revenue is needed to deliver the multiple needs of the people. A fall in revenue hampers the ability of government to deliver on development projects. In order to overcome this negative trend, revenue projection must be aligned with the economic development agenda of the country. Project costs should be kept conveniently within the national budget. Note that project cost overrun put enormous stress on the national purse.

The economic policy choices with regard to revenue and expenditure must be grounded on the needs of the people. Prudent control of expenditure to enhance strict fiscal discipline must an integral part of the policy initiatives so that the budget is not thrown out of gear. Recurrent expenditure must be kept under control so that the capital expenditure items can be financed. When recurrent expenditure takes the greater proportion of the revenue, financing capital items becomes difficult and provision of social services suffers. In this regard, it is important for government to ensure a functional equilibrium between the recurrent and capital expenditures. Any economic policy that does not address this balancing situation cannot be said to be sound. It clearly lacks focus and direction. When the national budget falls short of providing the social needs of the people, it creates social discontent.

The mid-year review budget reflects the poor work that went into the preparation of the 2014 budget statement presented to Parliament in November, 2013. It demonstrates the short sightedness of the managers of the economy. Budget statement does not deliver results by itself. It is the creative decisions of the managers of the economy that ensure that the result is delivered. In the mid-year review budget, the Minister of Finance, Mr. Seth Terkper, made it clear that the economic prospects looked good because additional revenues from oil and gas were coming. From this, we can see that the government lacks the creative capacity to come out with new sources of revenue to deliver the development projects of the country. He failed to announce any new sources of revenue. They only depend on the traditional sources of revenue to run the affairs of the country. This is very sad.

The Minister of Finance announced that government had so far spent GH¢28.9 billion within six months as against the annual expenditure projection of GH¢30.5 billion. Assuming this expenditure pattern was maintained, the close of the year would record GH¢57.8 billion. Revenue collected within the period amounted to GH¢19.8 billion as against the target of GH¢22.5 billion.  When this trend of revenue mobilisation was maintained, the year would close with GH¢45.0 billion. By simple calculation based on these assumptions, the country would register a fiscal deficit of GH¢12.8 billion by the close of the year (i.e. assumed expenditure of GH¢57.8 bn minus GH¢45.0 bn assumed revenue).

The Finance Minister cannot be realistic in demanding GH¢3.2 billion as the supplementary budget. Ghanaians should brace up for more fiscal deficit. Based on these assumptions, it is clear that the government is already in arrears of GH¢9.1 billion (i.e. given actual expenditure as GH¢28.9 minus GH¢19.8 as the actual revenue under the mid-year review). Assuming that the government would operate within GH¢3.2 billion supplementary budget, then deficit would be GH¢12.3 billion by the end of the year (i.e. GH¢9.1 bn plus GH¢3.2 billion).Therefore, my humble projection is that by the close of the year the deficit would range between GH¢12.3 billion to GH¢12.8 billion.

Expenditure control during this period is critical to strengthen the economy. Expenditures tainted with corruption must not be countenanced. Public expenditures must be thoroughly scrutinised and due diligence and value-for-money analysis must be the highpoint of all national transactions and contract award processes. Should this be neglected, the economy will shut down in August.

By Leo-Nelson Adzidogah