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03.12.2022 Headlines

Gov’t must reduce continuous dependence on Development Partners to fund Capital Expenditure – SEND Ghana

By Eric Nana Yaw Kwafo
SEND Ghana Deputy Country Director, Dr. Emmanuel AyifahSEND Ghana Deputy Country Director, Dr. Emmanuel Ayifah
03.12.2022 LISTEN

Advocacy group, SEND Ghana has issued a statement to give its preliminary assessment of the 2023 Budget Statement and Economic Policy of the government.

The Minister of Finance, Ken Ofori-Atta was in Parliament on Thursday, November 24, to present the 2023 Budget to the house.

After analyzing the budget, SEND Ghana says the government still relies heavily on Development Partners (DPs) to fund its capital investments for some major ministries.

“Investments in the provision of Water, Hygiene and Sanitation (WASH) services in the last four years have largely been donor driven. In the 2019 budget for the Ministry of Sanitation and Water Resources, 70.26 percent of projected allocation was sourced from DPs. In 2020, it increased to 82.39 percent. This trend continued in 2021 with projected funds from DPs, for purposes of capital expenditure, constituting 75 percent, while the GoG, Internal Generated Funds (IGF), and the Annual Budget Funding Amount (ABFA) collectively make up just about 25 percent.

“In the 2023 budget, a whopping 92.22 percent of the total allocation is expected to come from DPs while GoG’s contribution reduced from 8.48 percent in 2022 to 1.8 percent in 2023,” SEND Ghana’s release issued on December 1 explained in parts.

Having identified that Donor Partners' support also accounts for a large portion of the agriculture sector budget, SEND Ghana insists that it puts at risk the government’s drive in pursuing agricultural modernisation and industrialisation.

According to SEND Ghana, the government will most likely miss its target to reduce grants by 10% to finance Goods and Services and CAPEX by 2023 as envisioned in Ghana Beyond Aid strategy document.

“The government must therefore take concrete steps to reduce the over-reliance on aid from donor partners. It has become apparent that donor funds are gradually dwindling, hence over-reliance on external support is counterproductive and could prove problematic in the near future. Again, considering the global economic turbulence, the government runs the risk of not mobilizing the required funding from DPs which will in turn affect actual releases to finance Agriculture and WASH interventions for 2023.

“Therefore, overreliance on dwindling and unpredictable donor support have serious consequences on the implementation of key interventions in the agriculture sector,” the release stressed.

Read the full SEND Ghana analysis of the 2023 Budget below:

Thursday, 1st December, 2022
SEND GHANA
Telephone: 0553538221 | Email: [email protected] | Twitter: @SEND GHANA

SEND GHANA ASSESSES 2023 NATIONAL BUDGET AND ECONOMIC POLICY

SEND Ghana has announced its preliminary assessment and analysis of the 2023 National Budget Statement and Economic Policy. This year’s assessment is a 5year trend analysis spanning 2019 to 2023 and covering 5 Ministries: Health, Education, Agriculture, Sanitation and Water Resources, as well as Gender, Children and Social Protection.

Our analysis identified some cross-sectoral and sector-specific concerns. We observe poor budget execution and overdependence on donor funding across the sectors mentioned above. We are drawing government’s attention to these weaknesses because they possess a threat to attaining the needed developmental outcome and achieving the Sustainable Development Goals (SDGs).

CROSS-SECTORAL OBSERVATIONS
Improve Budget Execution Rate
We have identified a common theme of poor budget execution pertaining to ministries including Health, Education, and Sanitation. Budget execution rates are an indication of the credibility of the budget. Consistently high variations between budgetary allocations, amount released and actual expenditures (over or under-execution) points to issues bothering on the quality of budget planning and/or challenges in budget execution. Allotting less or more to certain budget lines could potentially impact the implementation of other itemized budget lines, ultimately undermining Ghana’s development agenda. A critical look at the performance reports of the various ministries (health, education, sanitation and water resources, gender, children and social protection) for the last three (3) years (2019 – 2021) demonstrates the government’s consistent weakness in budget execution.

First, the Ministry of Sanitation and Water Resources (MSWR) has particularly and consistently experienced budget execution crisis, as far as actual disbursements are concerned. The 2019 and 2020 performance reports of the Ministry showed that only 6.32 percent and 18.9 percent of the approved budget were respectively released. This implies that Goods and Services and CAPEX suffered the most, and delivery of services to citizens was severely constrained. It is refreshing to note, however that in 2021 we saw a huge jump from the 2020 execution rate to 86.00 percent. Although the 2021 execution rate relative to the previous years’ is commendable, the general trend in poor budget execution raises deep concern about the government’s commitment to addressing the huge challenges facing the water and sanitation sector. To achieve goal six (6) of the SDGs, the Ministry of Sanitation and Water Resources must improve its’ budget execution rate in 2023 to enhance service delivery in the sanitation and water sector.

In the same vein, similar sentiments can be expressed about the Ministry of Health’s budget. Expenditure allocations to the health ministry is the first step of government’s commitment to improving the health of the people of Ghana. However, poor execution of the budget through over or underspending of funds to some budget line items prevents health managers from providing quality health services and thus deprive citizens access to quality healthcare. The total amount of the health budget released in 2020 was 64.8 percent of the revised appropriation. The budget performance for 2021 was comparatively much better at 93percent, and this is commendable. However, if we look at specific budget line items, capital expenditure budget execution leaves much to be desired. Even though for the past three years the health ministry received more than two-thirds of its budget allocations for salaries and Goods and Services, the yawning gap in the execution of the capex budget leaves much to be desired. The execution rate of the capex appropriation encountered a wider gap among the three line-items. Less than one-tenth of the appropriation was actually released in both 2020 and 2021. This means that the government could not honour its responsibility as planned and compromised on the provision of health care and infrastructure development during the peak of the covid-19 pandemic and beyond. Should such trends continue, in particular for capital expenditure, the construction of the numerous health infrastructure including the agenda 111 will be stalled.

Again, analysis of the annual budget performance report for 2021 revealed a disparity between allocation and actual disbursement to the education ministry. Out of an approved budget of GH¢15.64 billion, the ministry received GH¢13.67 billion (86.3 percent). A further breakdown by economic classification revealed that capital expenditure received less than half of its total allocation. In specific terms less than half (42.2 percent) GH¢634.69 million out of the total allocation of GH¢1.5 billion was released to the ministry. This smack of governments commitment to providing educational infrastructure and development. We encourage the government to prioritize capital expenditure for the education sector by approving and releasing in full the allocated amount if human development is of uttermost importance.

To honour its commitment of Restoring and Sustaining Macroeconomic Stability and Resilience through Inclusive Growth & Value Addition, as the theme for the 2023 budget statement and economic policy highlights, and to maintain citizens’ trust, the government through the Ministry of Finance should take the necessary steps to disburse the appropriated budget in full. Persistent low budget execution rate only points to bad fiscal practices and should not be encouraged. The implications of poor budget execution are dire and the adverse impact on the delivery of public goods and services cannot be glossed over. Poor budget execution erodes government’s commitment to SDG indicator 16.6.1, which assesses primary government expenditures as a proportion of original approved budget.

Reduce Continuous Dependence on Development Partners to Fund Capital Expenditure

Our analysis of the national budgets (2019-2023) shows that the government still relies heavily on Development Partners (DPs) to fund its capital investments for some major ministries. Investments in the provision of Water, Hygiene and Sanitation (WASH) services in the last four years have largely been donor driven. In the 2019 budget for the Ministry of Sanitation and Water Resources, 70.26 percent of projected allocation was sourced from DPs. In 2020, it increased to 82.39 percent. This trend continued in 2021 with projected funds from DPs, for purposes of capital expenditure, constituting 75 percent, while the GoG, Internal Generated Funds (IGF), and the Annual Budget Funding Amount (ABFA) collectively make up just about 25 percent. In the 2023 budget, a whopping 92.22 percent of the total allocation is expected to come from DPs while GoG’s contribution reduced from 8.48 percent in 2022 to 1.8 percent in 2023.

Donor Partners support also accounts for a large portion of the agriculture sector budget. While we commend the government for the significant increase of ABFA contribution witnessing a meteoric rise from 2.99 percent in 2022 to 51.48 percent in 2023, DPs contribution on the other hand increased to 40.50 percent in 2023 from 26.57 percent in 2022. In the Agriculture sector, DPs were expected to contribute 88.9 percent of projected allocations in 2021 to finance capital expenditure (CAPEX) of the Ministry of Food and Agriculture (MoFA). While investment in CAPEX is critical in stimulating growth, over reliance on donor support, which is characteristically unpredictable, puts at risk the government’s drive in pursuing agricultural modernization and industrialization.

With this trend, the government will most likely miss its target to reducing grants by 10% to finance Goods and Services and CAPEX by 2023 as envisioned in Ghana Beyond Aid strategy document. The government must therefore take concrete steps to reduce the over-reliance on aid from donor partners. It has become apparent that donor funds are gradually dwindling, hence over-reliance on external support is counterproductive and could prove problematic in the near future. Again, considering the global economic turbulence, the government runs the risk of not mobilizing the required funding from DPs which will in turn affect actual releases to finance Agriculture and WASH interventions for 2023. Therefore, overreliance on dwindling and unpredictable donor support has serious consequences on the implementation of key interventions in the agriculture sector.

CROSS-SECTOR OBSERVATIONS
GENDER, CHILDREN AND SOCIAL PROTECTION
Ensure the Regular and Prompt Release of Funds for Social Protection Programmes

The effectiveness of the flagship social protection programmes, such as the LEAP Programme, the Ghana School Feeding Programme (GSFP), and the National Health Insurance Scheme (NHIS), to address poverty and inequality is minimized by erratic, irregular, and frequent delays in fund disbursements. Since November 2019, LEAP payments have witnessed consistent delays multiple times for months, often resulting in disruptions of the livelihoods of the poor beneficiaries and vulnerable families. The GSFP, despite the meager grant size allocation per child, has long suffered recurring delays in releasing feeding grants and payments to caterers. Delays in paying caterers, in particular, have resulted in a series of strike actions by caterers, and the consequences thereof are dire, especially on child poverty and malnutrition as well as educational outcomes. When it comes to the NHIS, the government has literally ‘starved’ the scheme of money for several months due to its failure to transfer the full amounts realised from the NHIS levy and the SSNIT contribution to the National Health Fund. This situation has led to the indebtedness of health institutions to medical suppliers across the country, compelling some facilities to demand patients make out of payments (OOP) for medical commodities and services. The poor and vulnerable people are the worst hit by this unfortunate development. The increasing cost of living in the country, exacerbated by high inflation and worsening cedi depreciation, is projected to push more people into extreme poverty and widen the inequality gap. To reverse this trend, the government needs to implement concrete expenditure measures, including strengthening social protection systems. We urge the government to release funds timely in line with statutory commitments to accelerate efforts at attaining the Sustainable Development Goals (SDG) 1 (End Poverty), 2 (Zero Hunger), 3 (Good Health and Well-being), and 10 (Reduced Inequalities).

The recent Ghana Living Standard Survey round 7 (GLSS 7) shows that the multidimensional poverty rate in Ghana is 45.6 percent, and more worrying is the fact that 73.4 percent of children in Ghana have been identified as multidimensionally poor. To reverse this trend, pragmatic and concrete expenditure measures are paramount, and this include strengthening social protection systems and prioritizing social service spending. We urge the government to increase social spending and release funds timely and fully.

Government Should Clarify Intention to Double LEAP Grant from GH¢45.00 Per Household to GH¢90.00

The government’s promise to expand the LEAP programme to attain universal coverage by 2024 is most welcoming. It is even more pleasing to note that the grant size, which currently falls below the extreme poverty line, will, in 2023 increase by 100 percent to mitigate the rising cost of living among beneficiary households. While we highly commend the government for this impressive development, the specific amounts as captured in the budget statement create a situation of ambiguity. According to the budget document, the “Government will double the amount of the LEAP grant from GH¢45.00 per household to GH¢90.00.” We find this problematic because the amount received by a household is determined by the number of eligible members, and presently, a single-member beneficiary household receives GH¢ 64 and not GH¢45 as presented by the finance minister. In the interest of transparency and accountability, the government ought to explain the amount stated in the budget and indicate the specific amount to be paid to the category of beneficiaries in accordance with the payment eligibility criteria, as well as the when exactly this increment in the grant size will take effect.

Prioritize Social Services Spending and Ensure Equity in Budget Allocation for the Social Sector

A five-year (2019-2023) analysis of budgetary allocation for the major social sector Ministries, Departments, and Agencies (MDAs), such as Health, Education, and Gender, Children, and Social Protection (MoGCSP) show inequity in expenditure allocation. The Education Ministry continues to receive the largest budget allocation as a portion of the social sector MDA budget, followed by the Ministry of Health, with the Ministry of Gender, Children, and Social Protection. Ministries receiving the least among the three MDAs. Although investment in the social sector as a whole is critical to building the country’s human capital development, the MoGCSP’s mandate in coordinating most of our social interventions and ensuring the protection of vulnerable populations, especially women and children, is even more imperative. However, our analysis over the years point to very low allocations to the MoGCSP relative to the other social sector MDAs. For instance, in the 2023 budget, the share of the MoGCSP allocations to the total social sector budget of GH40,382,965,377 is just 3.65 percent. A huge sum of the 6.85percent is going into employee compensation (GH34,869,501) and the LEAP (GH395,070,000) and GSFP (GH969,000,000). Funding allocation to the Child/Human Trafficking and the Domestic Violence unit have remained low over the years, for example at GH 1,000,000, each, adversely affecting the implementation of child and women-friendly programs, such as sexual and gender-based violence against women, child marriages, and abuse. We urge the government to ensure equitable allocation of resources to the social sector MDAs. The MoGCSP and its agencies, in particular, need more funding to enable it to provide welfare services for the poor and marginalized groups.

HEALTH
Increase NHIA Receivable Budget from The National Health Fund

The budget statement over the past five years shows increases in revenue from the NHIL and SSNIT contribution to the NHIF. However, only a percentage is transferred into the NHF with no information on what uses the remaining funds is put to. The introduction of the electronic renewal system has increased active membership of the NHIS to more than half of the population, thus requiring more funds to purchase healthcare for members. Yet, the ministry of finance since 2020 transfers less than 50% of allocations to the NHIA according the MOH 2021 holistic report, thus affecting claims payment. Many accredited health facilities have in effect resorted to operating cash and carry along the NHIS where 42% of the poorest members are paying out of pocket for healthcare. In the current state of the economy of the country, this practice will increase the vulnerability of poor people such as the aged, LEAP beneficiaries and Persons With Disability by limiting their access to quality healthcare services. The ministry of finance must increase transfers from the NHIL into the NHF and ensure that not less than 90percent is released from the NHF to the health insurance authority during the implementation of the 2023 budget.

Lodge the Covid-19 levy into an identifiable Fund

The Covid-19 outbreak revealed weaknesses in Ghana’s health system and proffer several lessons for building a resilient system. One of such lesson early in the pandemic was the establishment of the COVID-19 levy by an act of parliament to raise funds to combat the disease and its impact. Since its establishment in 2021, revenues generated have increased by 28.4% from Ghc889,07 million to Ghc1.141 billion in 2022 representing 10.4% of the health budget for both years. The levy is projected to raise Ghc2,533 billion in 2023 representing a 121.9% increase over 2022 and 16.6% of the projected health budget. Revenue from the covid-19 as with other levies is lodged into the consolidated fund and sometimes is not entirely used for its intended purpose. Even though the levy over the last three years reflects the revenue part of the budget, it is unclear to which expenditure line it can be traced. With governments intentions to sustain gains made “under COVID-19 to detect and respond to future pandemics and emergencies”- by embracing vaccination as its main prevention strategy among other interventions such as strengthening disease surveillance and response, establishing the National Vaccine Institute and Ghana Centre for Disease Control- this is the time for the government to channel revenues from the levy into a dedicated fund for health emergency preparedness and response and outline it uses and management to ensure efficiency. This will ensure the implementation of one of the country's key policies on global health security.

Increase Domestic Funding to Sexual and Reproductive Health/Family Planning through the NHIS

DP support to the health budget will remain the least of revenues of the health budget should taxes, IGF and the oil funds be merged. With their contribution constituting 20% of the budget, government seem to be on track of going beyond aid. However, DP’s on or off budget contribution constitutes a major source of funds for certain interventions such as SRH and immunization. With projections of dwindling funding inflows from DPs in coming years and to avoid reliance on external funding, government must ensure that the NHIS becomes the main domestic source of funding for the procurement of FP commodities and SRH services by releasing all funds in the NHF to the NHIS.

EDUCATION
Provide Education Infrastructure at the Basic And Secondary Levels to Augment the Infrastructure Deficit in the Education Sector.

SEND Ghana’s assessment of the country’s education sector over the years has continually exposed the infrastructure deficit, especially at the basic and secondary levels without any significant improvement. Even though the government in the 2022 budget made mention of completing some projects (Page 149, item 766) such as classrooms, dormitories, and staff bungalows inter alia, there was no specific mention of any of such projects in the 2023 budget. Our analysis of the 2022 education sector budget revealed that some 5,403 schools were in critical condition with another 2,417 schools still under trees with GH¢3.5billion still required to fix the sector’s infrastructural gap. Our analysis of the 2023 budget revealed that 2.76 billion was allocated to capital expenditure which constitutes only 12% of the total education ministry’s budget. Government must commit to increasing the allocation of funds for infrastructural development in the education sector to overcome the persistent deficit.

SANITATION AND WATER RESOURCES
Chanel Proceeds from Sanitation and Pollution Levy to Support Investment in Sanitation.

In 2021 the government of Ghana instituted a Sanitation and Pollution Levy (SPL) of 10p per litter of petrol and diesel respectively, to support infrastructural investment in the Sanitation and water sector, with the view to ensure sustainable sanitation management, improve the quality of life and reduce the number of deaths and diseases from poor sanitation. The levies have accrued substantial sums of money but not everything is disbursed to support investments in their targeted sectors. According to 2023 budget, the Sanitation and Pollution Levy has provisionally accrued GH345,347,346 for Q1-Q3, and is projected to accrue GH 435,243,346 by the end of the year 2022. For the year 2023, the levy is projected to accrue about GH522,248,357. Notwithstanding the inflow, the country still experiences serious sanitation challenges. As indicated earlier, in the 2023 budget for the SWR Ministry, a whopping 92.22 percent of the total allocation is expected to come from Development Partners while GoG’s allocation has reduced from 8.48 percent in 2022 to 1.8 percent in 2023. This is inadequate, highly unsustainable, and bad practice considering the government of Ghana’s “Ghana beyond aid mantra” and dwindling donor support in recent years. We therefore call on government to demonstrate commitment by channeling proceeds of the SPL to finance WASH infrastructure as it will significantly reduce government’s over-reliance on donors to finance WASH infrastructure.

AGRICULTURE
The Government Should Increase Its Allocation and Ensure Priority Investment in the Agriculture Sector.

Allocation to the ministry in 2023 saw a nominal increase of 95.19 percent from GH¢1,103,171,000 in 2022 to GH¢2,153,234,369 in 2023. This translates in real terms to 80.18 percent increase in 2023 over the previous year’s allocation. Despite the steep rise in allocation, MOFA’s share of 1.13% is still far less than the 10% of government’s commitment in line with the Malabo declaration. This accounts for the inconsistent growth of the sector and the rising food insecurity among the vulnerable and low-income population in Ghana.

Eric Nana Yaw Kwafo
Eric Nana Yaw Kwafo

Journalist

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