IEA wants independent check of election spending

The Institute of Economic Affairs (IEA), an independent  policy think tank, has called for the establishment of an independent, multi-partisan Parliamentary Budget Office to check what it calls “cyclical politically-driven” expenditure during election years by governments.

This, and the enforcement of the contingency and appropriations provision by parliament, it said, would save the country the unpleasant situation where after each election the economy showed  excessive expenditure which ballooned budget deficit to alarming levels.

A senior economist with the IEA, Dr J. K. Kwakye, made the call when he briefed journalists on ‘the true state of the economy,’ in the face of politically biased discourse on the issue by the main political parties.

“The economy was dealt a fatal blow in 2012 through the fiscal window. And we are currently suffering the fallouts of this cyclical, politically driven indiscretion. As a result of excessive expenditure, the budget deficit ballooned to 12 per cent of Gross Domestic Product, along with carry-over of substantial levels of arrears,” he said.

Dr Kwakye said “the economy is cash-strapped” and attributed the problem to the nation’s inability to collect enough revenue, lagging donor disbursement, arrears to contractors and non-payment of other statutory payments.

Economy not broke ?

The IEA’s view runs contrary to that of the Minister of Finance, Mr Seth Terkper, who had stated emphatically that Ghana was not broke.

Although the minister admitted during interaction with journalists at the Peduase Lodge at Aburi early this month that the economy was facing some challenges, he contended that the country could not be described as being broke because of the challenges.

To address the challenges, he  asked that  managers of the economy think out of the box and come up with ways of taxing large income earners who had eluded the system, and take a second look at tax exceptions, while  enforcing tax compliance and reducing tax corruption.

Economic Stabilisation Tax

On the recently introduced economic stabilisation tax, he was of the view that it “is not such a good idea because it will further increase the cost of Ghanaian businesses and render them uncompetitive. This will further undermine domestic industralisation”.

Dr Kwakye said Ghana’s current export pattern, which is raw material-based, had reduced exports receipts as against high demand for exports leading to a dwindling domestic industrial base.

“In 2012, the current account deficit was nearly $5 billion (13 per cent of GDP). Meanwhile, international reserves stand at just about $5 billion, which is less than three months of import cover. Given the country’s vulnerability to commodity shocks, a cushion of four to six months of reserves is required”, he contended.

Eurobond

He said the government’s decision to float some Eurobond to generate funds to stabilise the economy, particularly to stabilise the currency, might not be a good idea because it would only be a stop gap measure and suggested that a long- term stability of the currency hinged on addressing the economy’s weak fundamentals on a durable basis.

Source: Daily Graphic