GH¢11.6bn allocated to settle contractors’ arrears
The government has allocated GH¢11.6 billion in the 2024 budget statement to settle arrears owed contractors to enable them to return to site to complete ongoing projects across the country.
Many projects in the country have stalled due to non-payment to contractors, forcing them to abandon their project sites, and leaving roads in particular in deplorable state.
The announcement is in line with the government’s intention to avoid starting new projects and forms part of measures to ensure fiscal discipline as the country heads into an election year.
Speaking at a breakfast meeting at the instance of Deloitte Ghana in Accra on the theme: “Building together: Accelerating the recovery process through fiscal discipline and economic competitiveness”, a Deputy Minister of Finance, Abena Osei-Asare, said the government had also decided not to secure any commercial loans next year to fund new projects in the country.
It is not immediately clear whether the decision by the government is part of austerity measures occasioned primarily by the closure of the international capital market to the country over its current unsustainable debt levels.
History has shown severe budget overruns in election years, a phenomenon which subsequently worsens the country’s already bad economic conditions post-elections.
But amid calls from experts and civil society organisations on the government to ensure fiscal discipline, Ms Osei-Asare said: “We will not make any new project promises because of next year’s elections.
We will stay disciplined, and that we can assure you.
All we need from you is cooperation.
We also do not want to be pressured unduly by people from all walks of life wanting one project or another to be undertaken in their constituency or area at this time”.
The Deputy Minister, however, stressed that in the event that the government was highly pressed to secure such loans for an essential project, it would go through the full process to seek the necessary approvals before any such loans were secured.
Meanwhile, she said, state-owned enterprises (SOEs) had also been directed to desist from accessing commercial loans for any new projects.
Elections budget cycle
Governments across the Forth Republic have gained a reputation for overrunning their budgets in election years, with the award of new projects ostensibly to win electoral votes to cling on to power.
For instance, in the election year of 2004, despite the country just benefiting from the HIPC initiative which led to a total debt cancellation of $3.5 billion, Ghana still recorded a budget deficit of 3.2 per cent of gross domestic product (GDP) against a target of 1.7 per cent.
Again, in 2008, the budget deficit went into double digits and more than double of what was budgeted for, recording 11.5 per cent of GDP against a projection of four per cent.
The story was no different in 2012 as the country recorded a budget deficit of 12 per cent against a target of 6.7 per cent.
In 2016, despite being under an IMF programme, the government still missed its budget deficit target.
The overall budget deficit on cash basis was the equivalent to 8.7 per cent of GDP against an IMF programme target of 5.3 per cent of GDP. On commitment basis, the fiscal deficit was 10.3 per cent of GDP.
In 2020, COVID-19 expenses, coupled with election-year spending, caused the country to miss the deficit target.
The overall budget deficit on cash basis was 11.7 per cent of GDP against a revised target of 11.4 per cent of GDP.
Next year, total revenue and grants are projected at GH¢176.4 billion, which is 16.8 per cent of GDP, but by way of resource allocation for 2024, the government is projecting a total expenditure on commitment basis of GH¢226.7 billion, which is 21.6 per cent of GDP.
The projection reflects a reduction of 6.1 percentage points of GDP in total expenditures (commitment basis) relative to the outturn in 2022.
The government is expecting an overall budget deficit of GH¢61.9 billion, equivalent to 5.9 per cent of GDP.
Meanwhile, an economist and professor of finance, Professor Godfred Bokpin, said he was not convinced by the pledge of government to remain within its budget for next year, saying: “Since 1992, we have not seen any government which has ensured fiscal discipline in an election year”.
He wondered what could change this time around when the stakes were high for a ruling government which was determined to “break the eight” to set a new election record.