Why worry about overspending when people are dying? – Ofori-Atta
Fears of government spending outside of its budget remains a constant feature in every election year in Ghana.
But the Finance Minister, Ken Ofori-Atta, has said while he remains committed to prudent spending, the current coronavirus pandemic relegates to the background, discussions on the fiscal deficit.
“You have millions of people dying in the world and those are the issues you are concerned about?” he said in a JoyNews PM Express, which was monitored by theghanareport.com.
Ghana’s economy is estimated to shrink to 0.9%. Coronavirus has wiped off about 6% economic growth estimates, the Finance Ministry has said.
Businesses look forward to a government stimulus package and Finance Minister has confirmed beyond the 600m given to SMEs, other sectors like hospitality and aviation are in line for support.
He called big businesses, the “organisational capacity” of the economy and said supporting them is “not a matter of choice.”
“It is a must…. We need to find means of ensuring they are back in business,” Ken Ofori-Atta said ahead of the mid-year budget review next Thursday.
More government spending raises questions about the Fiscal Responsibility Act, a statutory fiscal rule which requires that the budget deficit in any given year does not exceed 5 percent of GDP.
The Act, however, allows the government to suspend this restriction in the face of a public health emergency or an unanticipated severe economic shock.
To do this, the Finance Minister to suspend the rule and head to parliament within 30 days of the suspension to explain economic recovery plans.
The government had targeted a 4.4.% budget deficit for 2020 but the Finance Ministry plans to revise this target to 6.6% of GDP due to the impact of coronavirus.
Commenting on the widening gap between plummeting revenue and rising expenditure, Finance Minister quoted German Chancellor, Angela Merkel, response to a similar situation.
“Don’t talk to me about deficits”, he quoted and quoted another that the world is in “an era of known unknowns.”
Ken Ofori-Atta said at a time such as coronavirus pandemic, economic recovery models must shelve “classical” economic theories.
He, however, added that Ghanaians ought to trust government to spend judiciously.
“I think that the issue, of course, is the application of resources that we have and…. it’s been three and a half years of seeing how the government has operated and what therefore the economy has been. There has to be trust that we will use this money well, at least, from the Ministry of Finance.
“We are confident that by God’s grace, the people of Ghana will re-elect us and you will truly want to make sure that you start January 2021 on a good note. So that’s the assurance,” he said.
He indicated that the government was confident of winning the elections and therefore it would be “unnecessary” to jeopardise economic gains which it would then have to fix after the 2020 polls.
Ghana’s highest budget deficit ever was recorded in 2012, an election year which saw John Mahama elected president.
In October 2019, the International Monetary Fund (IMF), warned the government to craft and execute its 2020 budget carefully to avoid overspending.
As the country prepares to go to the polls on December 7, 2020, some Civil Society Organizations (CSOs) and finance experts have warned of same.