The Current Account Deficit And Government Spending

The recent deficit current account report requires urgent changes in Ghana’s international trade posture as well as spending especially, domestic spending abroad, a composite contributor to the balance of trade deficit. Unlike trade policy that may require some time to negotiate, the government can take immediate steps to reduce domestic spending abroad by closing at least the eight embassies and High Commissions within the ECOWAS region.

The deficit current account outcome for Ghana, can be expressed simply as excess expenditure over income. The ideal expectation for a balanced economy is zero. In economic terms, however, deficit current account outcome as shown in the graph below between January-November 2015 means, Ghana is a net global borrower.

It is imprudent to commit to wasteful domestic spending abroad on eight or so embassies and consulates within ECOWAS if we have to borrow money to do so. Embassies or consulates are vital, part of every countries’ international relations toolbox. However, there appears to be little economic and political use for the eight embassies within ECOWAS or the twenty-four in Africa given the African Union.

Within the ECOWAS region, much of the tasks traditional embassies or consulates perform are provided for in the ECOWAS Treaty. Article 3 of the ECOWAS Treaty—makes express provision for the free movement of people, protection as well as the economic integration of Member States. It is one thing if ECOWAS is not delivering, but certainly it is wasteful to commit scarce resources to duplicate the same effort in eight Member States.

For instance, what is the consulate in Lagos, Nigeria doing to enhance economic integration beyond the capability of the ECOWAS Secretariat or the Ministry of Trade and Industry. Or what citizen services is the Ghana embassy in Lomé, Togo providing Ghanaians distinct from the ECOWAS Secretariat, given the provisions of Article 3 or the capacity of the Ghana Immigration Service at the Aflao Border.

Advances in information technology, communication, and proximity of Member States makes expenditure on full-time missions in the region wasteful. For instance, Togo, Burkina Faso, and Cote D’Ivoire are readily accessible through the immigration officers at the respective border posts. The truth, the Ghana Immigration Service can absorb the responsibility for emergency aid if necessary and at present cost of administering the Service. The other the five—Nigeria, Liberia, Benin, Senegal and Sierra Leon are not too distant as to justify the cost of a mission post.

Having recognized the wasteful expenditure on mission posts within the region, Ghana should rely on Article 3 of the ECOWAS Treaty, to pass a bill authorizing the Ministry of Foreign Affairs and Regional Integration to close the eight ECOWAS region missions. Besides the mandate for closure, the bill should either authorize the ministry or the executive to introduce or pass an ECOWAS bill designed to expand the capacity and strengthen the ECOWAS Secretariat to deliver on Article 3.

An express political will exist among ECOWAS Heads of States to pass and enforce the type of bill described above. In an affirmation contained in its Vision 2020 document, ECOWAS Authority of Heads of State and Governments, commit to improving integration and enhancing the effectiveness of ECOWAS. There cannot be a perfect opportunity to deliver on this vision item than giving the ECOWAS Secretariat, full jurisdiction over citizen services within the region.

Besides the commitment expressed in the ECOWAS vision 2020 document, section (iii) of Article 3, obligate Member States to seek— “the removal, between the Member States, of obstacles to the free movement of persons, goods, services and capital, and to the right of residence and establishment.” Therefore, introducing a bill designed to make good on this provision is within Ghana's responsibility to ECOWAS and, in doing so, assets Ghana’s influence in the region.

The economic benefit of achieving a truly functional ECOWAS Secretariat or embassy closures within the ECOWAS region is demonstrable. Assume the current annual cost of administering one of eight mission posts is $35,000 including salaries and compensations. Though a gross underestimation, closing all eight functionally redundant embassies will save enough money to eliminate more than a quarter of the projected 5.3 percent budget deficit for 2016.

Now, imagine closing sixteen additional embassies or High Commissions in Africa. The savings are significant in proportion to the 2015 current account deficit. Like the ECOWAS Parliament, Ghana can sponsor in the Pan- African Parliament, a bill designed to strengthen continental integration. Such a bill could accomplish one of two things: authorize the creation of an African People Secretariat (APS); or empower an existing AU Organ to assume responsibility for citizens’ protection services.

There should not exist significant opposition to a piece of legislation seeking to engender the common dream of regional economic integration and unity. However, short of a unanimous endorsement or passage of a regional and continental unity bill, the managers of the Ghanaian economy bear the responsibility to find creative ways to cut wasteful domestic expenditure abroad. If it means the unilateral closure of functionally redundant embassy posts, nothing could be more fiscally responsible.

2015-12-23 092249