Towards fiscal discipline: Let’s change course of economy — Business leaders urged

An indigenous business leader in the petroleum industry in Ghana has advocated a strong force of business people to undertake an aggressive advocacy that can help to change the course of the economy to benefit the masses of the people and not just the few political elite.

According to the Chief Executive Officer of Petrosol, Michael Bozumbil, like others within the sub-region, Ghana also deserved to have the crème of business people whose voice will be heard at all times by politicians to help shape and implement policies capable of accelerating the economic transformation of the country

“As business people, we do not have to play into the hands of politicians to dictate to us what we have to do with our business. We must collectively lead the discourse in neutrality, thinking about the sustenance of our businesses even after a change in government, he proposed at the Graphic Business/Stanbic Bank Breakfast Meeting in Accra last Tuesday.

Speaking on the theme “Fiscal Discipline: Breaking the Political Business Cycle in 2024”, he said the indiscipline exhibited by politicians over the years can only be broken by a unified front of business owners whose ideas wear no political colour”.

Over the years since the inception of the 1992 constitution, governments have overrun the national budgets on the altar of political expediency.

This phenomenon has taken the country to the International Monetary Fund (IMF) 17 times, with the worst of the bailout being felt under the current government, which has forced domestic investors to take a heavy haircut on their investments in a bid to reduce the country’s over-bloated debt presently described as highly unsustainable.

Debt restructuring

For instance, to return to a path of debt sustainability, from a Debt to GDP ratio of 89 per cent, Ghana, in December 2022, commenced the implementation of a nerve-racking restructuring programme covering both domestic and external debt to achieve a 55 per cent Debt to GDP ratio and 18  per cent revenue to GDP ratio over the medium term.

Ghana completed the first phase of what has become the infamous Domestic Debt Exchange Programme (DDEP) in February 2023, where some GH¢82,994.51 million of old domestic notes and bonds were exchanged for new bonds.

These new bonds have longer maturities and an average coupon of about 9.1 per cent, achieving a participation rate of about 84.9 per cent, which is still not enough at the moment. While there are concerns and calls on the government to live within its means by cutting its expenditure, the 2024 Budget State and Government Economic Policy laid before Parliament last week points to a determination to overspend.

Total revenue and grants are projected at GH¢176.4 billion (16.8 per cent of GDP) and are underpinned by permanent revenue measures, largely tax revenue measures amounting to 0.9 per cent of GDP. By way of resource allocation for 2024, the government is projecting a total expenditure (commitment) of GH¢226.7 billion (21.6 per cent of GDP).

Much as this projection reflects a reduction of 6.1 percentage points of GDP in total expenditures (commitment basis) relative to the outturn in 2022, there are worries about the deficit when the signs on the ground are not the best.

The overall budget balance to be financed is a fiscal deficit of GH¢ 61.9 billion, equivalent to 5.9 per cent of GDP.

History of deficits

In 2004, despite the country just benefiting from the HIPC initiative which led to a total debt relief of US$3.5 billion, Ghana still recorded a budget deficit of 3.2 per cent of GDP against a target of 1.7 per cent. In 2008, which was another election year, the budget deficit went into double digits and more than double 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 a cash basis was equivalent to 8.7 per cent of GDP against an IMF programme target of 5.3 per cent of GDP. On a commitment basis, the fiscal deficit was 10.3 per cent of GDP. In 2020, COVID-19 expenses, coupled with election-year spending, led to the missing of the deficit target.

The overall budget deficit on a cash basis was 11.7 per cent of GDP against a revised target of 11.4 per cent of GDP.

Changing the narrative to surplus

Describing the deficit as unfortunate, Mr Bozumbil wondered when a government in the country will announce a surplus, saying: “We can make a surplus if we are determined to do so. It is not beyond us.

This is where we, as business people, must lead the discourse to prove to the politicians who run our economy that what makes our businesses survive and profitable can also make the economy return a surplus and not a deficit”.

He said much as business owners deserve the right to support a political party at any time, what should be done to sustain the economy for their business to thrive must not be sacrificed, because we must “be mindful of the fact that the moment we sacrifice our business to openly and recklessly support a political party, a defeat in an election will be the end of that business and there are many examples to guide us”.

Mr Bozumbil bemoaned instances where businesses sacrifice the pay rise of their workers, evade taxes, and default on workers’ pension contributions among many others to fund political parties, saying that “these are dangerous acts we must avoid”.

He warned that those engaged in such practice needed to be aware that, immediately after an election, the authorities will come after them and will not take any excuses for defaulting on their obligations to the state. “Pay your taxes as an obligation to the state. Pay your workers’ pension contributions and abide by regulatory requirements governing the sector you play in and that is enough to ward off politicians who may come at you to take your money to support their campaign and leave your business to suffer.

“The worst of it is when they lose an election,” he said.

Compliance

Mr Bozumbil said as business people, the best way to stay truly independent and contribute to economic success is through compliance. He said once the business person is tax compliant, and works in tandem with the regulatory processes, being tracked down by politicians could be an impossibility.