Annual budget is not political tool - Prof Dordonoo

Economic and public policy analyst Professor Cletus Dordonoo has charged government to use annual budget statements for development management, and not as a party political tool.

“Avoid the overwhelming political (party) capital inclination and re-direct development to the benefit of the citizenry,” he said.

As the guest speaker at a seminar on the review of 2016’s national budget statement organised by the Pentecost University College Graduate School, Professor Dordonoo urged government to practice strict public accounts governance and eschew excessive budgetary overruns, because deficits over and above 3 percent of GDP are “simply not sustainable”.

He added that there is a need to change the fundamental model of taxation and financial management. “Depend on balancing the budget instead of excessive borrowing and interest servicing burdens,” he added.

Speaking on the theme ‘Tax Components of the 2016 National Budget Statement’, Professor Dordonoo stated that the effects of current fiscal architecture have resulted in high interest rates and the crowding out of the private sector -- especially de-industrialisation leading to crippling of the manufacturing sub-sector.

The effects also include the “dumsorisation” effect -- collapse and/or injury of the private sector, which has led to job and income losses, leading to a shrinking tax base; inflation; and agitation by workers for higher nominal wages to counter loss of real income.

He further stated that the budget statement and fiscal structure, in its current state, puts the economy of Ghana in a bleak state for the near-future. “For a country to spend more on interest payment, 7.1 percent of GDP including oil, rather than on capital expenditure, 5.2 percent, then we are not going anywhere,” he said.

The 2016 budget has an overall real GDP (including oil) growth rate of 5.4 percent; overall non-oil real GDP growth rate of 5.2 percent; end of year inflation target of 10.1 percent; overall budget deficit equivalent to 5.3 percent of GDP; and gross international reserves of not less than three months import cover.

The Dean of the institute’s graduate school, Professor Kwame Boasiako Omane-Antwi, also stated that the budget deficit target of 5.3 percent of GDP in an election year is very tricky. “Can we resist election year expenditure deficit? Is it not a herculean task?” he asked.

Professor Omane-Antwi added that, already, the three causes of country’s expenditure overruns - labour demand, subsidies on utilities and a fall in commodity prices - have resurfaced, with labour calling for increased compensation to cope with utility price increases and the energy levy.

He asked that, though the 2016 budget statement aims to continuously prescribe measures which improve revenue mobilisation, tighten tax enforcement and ultimately help promote fiscal discipline, is the Ghana Revenue Authority sufficiently resourced and empowered to play this role effectively?

To him, it is high time government and the citizenry refocus on agriculture as the support base for youth employment and to halt rural-urban migration. “We must refocus by enhancing the agricultural projects listed in the budget to ensure sustained growth in agriculture.”