PANIC OVER 2012 BUDGET

Dr. Kwabena Duffuor is the Finance and Economic Planning Minister of Ghana
http://www.businessguideghana.com/?p=4915
By William Yaw Owusu

Tuesday November 15, 2011.
There is anxiety over the 2012 Budget statement to be read on Thursday as many organizations continue to hold strong views that the government is going to overspend the budget estimation.

The concerns are borne out of the fact that 2012 is an election year and any extra budgetary spending are most likely to erode the economic gains made so far.

Business Guide has sought to find out from stakeholders about their expectations of the budget and they have all expressed fears that the government is going to overspend the budget in order to maintain its electoral advantage into the elections.

Some were however quick to point out that over-expenditure does not necessarily benefit the party in government as it was proven in the general elections of 2000 and 2008 when incumbents overspent but still lost the contests.

Policy analysis group IMANI-Ghana, Center for Policy Analysis (CEPA), Ghana Association of Bankers (GAB), Ghana Chamber of Commerce (GCC) as well as the National Farmers and Fishermen Award Winners Association shared their views on what they expect to go into the 2012 budget.

The close of fiscal and financial year is about six weeks away but analysts say most of the targets set by the government for 2011 main and supplementary budgets cannot be attained.

Analysts have predicted a pile up of the country’s already over-burdened fiscal deficit which they pointed out, would automatically affect trajectories and estimations of the 2012 Budget.

According to Trading Economic, the Gross Domestic Product (GDP) in Ghana stagnated in the second quarter of 2011 over the previous quarter.

Historically, from 2006 until 2011, Ghana's average quarterly GDP Growth was 1.58 percent reaching an historical high of 5.30 percent in March of 2008 and a record low of -5.10 percent in March of 2011.Ghana has one of the highest GDP per capita in West Africa.

In the Supplementary Budget of July, the government said it needed GH¢1,463,123,559 to tackle specific national issues and programmes including National Flood Control Programme, Sakumono Sea Defence Works, Completion of Nima drains, and the
Construction of Ferry on Black Volta, the School Feeding Programme, Sanitation, removal of Schools under Trees, Education Infrastructure but most of the projects are either uncompleted or yet to commence.

Officials of the Ministry of Finance and Economic Planning are tightlipped on what would go into the budget but Business Guide sources has revealed that about 70 per cent of the 2012 budget would finance infrastructural development.

Furthermore, Finance Minister Dr. Kwabena Duffuor has already reiterated the government’s commitment towards ensuring fiscal consolidation in the 2012 budget.

He has promised that the government would focus on strategic infrastructural projects captured under the China Development Bank (CDB) loan as well as offer support for the private sector and deepen the commitment towards other social intervention programmes.

Kofi Bentil of IMANI-Ghana said “for me, it is not about what is in the budget but the post-budget monitoring that is a source of worry. What we will all have to do is to look at whether they are going to spend according to the budget or they are just going to spend for the purposes of the elections.”

“We expect that there would be spending but what we do not know is whether it would be budgetary or extra-budgetary,” he said adding “we are going to increase the wage bill and we would like to know how that would affect the economy.”

He said he expects the government to use the 2012 Budget to improve roads infrastructure, absorb the single spine, strengthen the National health Insurance Scheme and strategically determine how education spending would be applied.

“The government should also use this budget to “separate oil revenue from the rest of our revenue in order to raise money to cater for other sectors so that we do not over-emphasize oil revenue.”

Asare Akuffo, President of Ghana Association of Bankers (GAB) said the tendency to overspend by governments always destroys the basis of the economy.

“Election years have always been a challenge to our economy where government overspends, inflation rises, interest rates follow then after the election the government tightens its expenditure just to try and reclaim or re-establish stability. It has been a very expensive exercise for this country and it will be a tragedy if we are not able to curb it and we find ourselves going through that cycle again.”

Mr. Akuffo who is also the Managing Director of HFC Bank advised: “What we have achieved to date by this government we should hold on to it jealously and not do anything to disturb it. What we want the 2012 budget to do is to ensure the maintenance of the trend of economic stability. That inflation would be kept low and it would enable interest rates also to continue to show downward trends.

Dr. Joe Abbey, Executive Director of Center for Policy Analysis (CEPA) wants the 2012 budget to tackle infrastructure deficit, promote effective economic development and reduction in rampant labour unrests.

He said “CEPA would like the government to present a budget that sustains growth because the eight percent growth rate is sustainable. The budget should make room for employment creation, and should prioritize the SMEs sector and also address the high lending rate in the financial sector.”

Nana Osei Bonsu, Director-General of Private Enterprises Foundation (PEF) said the foundation has already made inputs into the preparation of the budget and has proposed that the government should facilitate projects that are more viable.

Philip Abayori, President of National Farmers and Fishermen Award Winners Association of Ghana says the rank and file of farmers want the government to establish Agricultural Authority to modernize and facilitate the development of the sector.

He said the budget must support the private sector, build the capacity of farmer-based organisations and then help them to acquire appropriate technology so that they can reduce production cost, compete in both the local and international markets and ensure food security.