Kicking the Spending Habit: Can Ghana Resist Overspending Ahead of Elections in 2020? Unlikely

Ghana has long suffered from expanded deficits in election years as spending balloons in a bid to win votes, sometimes causing the government to miss its target by as much as double. As we look ahead to the 2020 elections, it appears that history could well repeat itself, unless a concerted effort is made, as noted by both Governor Ernest Addison of the Bank of Ghana[1] and the former World Bank country head, Henry Kerali.[2]

Situation Report

Ghana has set its budget deficit target to no more than 5% as outlined in the Fiscal Responsibility Act. In the last elections in 2016, Ghana’s budget deficit target was 5.3% yet the deficit widened to 7.8%. In 2012 the target was 6.7%, but the deficit ended up reaching 12.5%. 

Since 2016, there have been no legislative changes around political party funding to ensure that there is a cap on party funding, as is the case in South Africa, for instance.[3] Typically, in Ghana, parties are funded through donations from benefactors but there is no requirement for full disclosure of the source of funding, which is problematic because it feeds the umbilical cord of political patronage.

Ghana’s Public Procurement Act, the Public Financial Management Act and the Fiscal Responsibility Act provide stipulations regarding prudent fiscal management and procurement procedures yet enforcement by the appropriate oversight bodies has been lax. For instance, the head of the Public Procurement Authority is currently suspended over potential conflicts of interest and the Fiscal Responsibility Advisory Council has yet to make any pronouncements or interventions since its inauguration in February this year.

The government may feel the pressure of needing to overspend in the hope of winning over an electorate that is not feeling the benefit of promised social and infrastructural interventions. For instance, key policy promises included free secondary education; a factory in every district of the country and a lowering of taxes and utility tariffs yet in reality, implementation of these schemes has been delayed at best. 

Outlook

Without legislative reforms, punitive measures for non-compliance of fiscal management/procurement laws, vibrant domestic and external pressures, we are unlikely to see a difference in the spending habits of the government in the build-up to the 2020 polls. If the status quo remains unchanged in these areas, we are likely to see increased spending on infrastructural projects as has often been the case in the pre-election build-up.

While we are unlikely to see reforms to the extent needed to force behavioural change ahead of 2020, conversations at the grassroots and in corporate Ghana are tuning into this problem of overspending. At a recent Stanbic Business Breakfast we attended, delegates spoke of the need for radical legislative change such as in Australia, where laws forbid government from embarking upon any planned spending activity within the 12 or 18 months preceding an election. Greater involvement of local government in spending was also widely debated, and the upcoming referendum on whether to elect local government heads in December, could be a step in that direction. To quote one participant of the meeting “you can’t expect to change things just by telling politicians what to do”. 

To discuss further with the team, please do drop us a line: questions@songhaiadvisory.com 

[1]https://www.myjoyonline.com/business/2019/September-23rd/govts-rising-expenditure-low-revenues-major-threats-to-stabilising-economy-bog.php

[2] https://www.ghanaweb.com/GhanaHomePage/business/Risk-of-overspending-budget-in-next-year-s-elections-real-World-Bank-Country-Director-755914

[3]https://www.gov.za/documents/political-party-funding-act-6-2018-english-setswana-28-jan-2019-0000