Economists share opinion on mid-year budget review

Three economists have advised the government to use the mid-year budget review to send the right signals to the International Monetary Fund (IMF) and the investor community that it is willing to do whatever it takes to put the economy back on track.

They were of the view that the right signals should involve steps to rationalise expenditure, while at the same time introducing measures to plug the loopholes in the tax system in order to rake in additional revenue.

The three economists, Doctoral Researcher at the University of Cape Town, South Africa, Eugene B.G Bawelle, the Dean of School of Business at the University of Cape Coast, Professor John Gatsi, and Economics Lecturer at the University of Ghana, Dr Adu Owusu Sarkodie.

The Minister of Finance, Ken Ofori Atta, is expected to appear before Parliament on Monday, July 25, 2022, to address the country on how the economy had performed in the first half of the year and the projections for the rest of the year.

The minister will do so when he presents the Mid-Year Review of the Budget Statement and Economic Policy of the Government and Supplementary Estimate for the 2022 financial year, in pursuant of the Public Financial Management Act (PFMA), 2016 (Act 921).

Sending right signals

In an interview with the Graphic Business ahead of the presentation, Eugene Bawelle said “because we are currently trying to negotiate a programme with the IMF, one of the first things I am expecting is a budget that will take into consideration those negotiations and the possible outcomes.

He said while it was not possible for the country to get a programme with the IMF this year, it was still necessary to use the mid-year budget review to send the right signals that it was willing to undertake any programme that would help put the economy back on a steady growth.

He said he was, therefore, expecting policies that would seek to rationalise government expenditure.

“In the last six years, almost GH¢530 billion have been raised in terms of revenue and if you look at the fact that the government’s flagship programmes, put together, we have spent only about GH¢42.8 billion; one will ask that beyond the interest payments and the loans themselves what are we using a chunk of the money for?

“So one of the things I would want to see is government expenditure rationalisation that dovetails into our readiness to undergo an IMF programme,” he stated.

Feedback on the economy

In a separate interview, Prof. John Gatsi said the mid-year budget was based on the guidelines of the PFMA which was to give feedback to the revenue projection, expenditure projection, debt management situation, growth prospects of the economy, and to provide some feedback on major activities and projects that were being financed from the budget.

With the government commencing negotiations with the IMF for a possible programme, he said it was expected that the government would use the mid-year budget to provide information on its data assessment meetings with the IMF recently.

“As it stands now, the Government of Ghana has not yet briefed the country on the data assessment that was done with the IMF in terms of the debt portfolio of the country, whether or not some other debts from quasi-government institutions, and energy sector debts would be added,” he pointed out.

He also emphasised calls for the government to use the mid-year budget to introduce measures to rationalise expenditure.

“There are things that are in our common interest but there is no efficiency in terms of financing those activities so measures should be put in place to ensure efficiency in expenditure in those critical areas.

“The government should be interested in cutting down the size of government and should look at reducing the number of deputy ministers and deputy chief executive officers,” he advised.

Homegrown solutions

For his part, Dr Owusu Sarkodie said the mid-year budget review presented the government with an opportunity to develop its homegrown solutions that would be presented to the IMF.

“This will be an opportunity for the government to put together what it plans to do in the short to medium term. This is an opportunity to put together the programmes and policies they intend to run with the fund,” he stated.

He also urged the government to take advantage of the stability that an IMF programme came with to strengthen the base of the economy, which is agriculture and manufacturing.

“The IMF is only going to give you stability and what we do with the stability will be up to us so the government should take advantage of the presence of the IMF to strengthen the base of the economy which is agriculture and manufacturing.

“Let’s ensure food security. Farmers are crying about the shortage of fertiliser – let us channel some of the funds into fertiliser manufacturing, get wheat available, get the buffer stock ready, and get the storage facilities ready.

“My immediate concern has to do with food security because if you take the top 15 items with the highest inflation in the country, nine of them are food items,” he explained.

Way forward

Various speakers and experts have shared their views way before the budget, an indication that this very mid-year budget review is highly expectant and must show the way. Particularly, at a time when the country is opting for an IMF programme after it consistently avoided that move, the country and the world will be watching to see what the government has planned and what it is likely to negotiate with the Bretton Wood institution on behalf of the people.