AN economic think-tank, of the Institute for Fiscal Studies (IFS), has described the 2016 budget as uninspiring, saying it does not outline transformation policies to deal with the economic challenges facing the country.
It said the 2016 budget in its current form could not address all the critical economic challenges and risks currently confronting the country.
Addressing a post-budget forum for the media in Accra yesterday, Professor Newman Kwadwo Kusi, Executive Director of IFS said the 2016 budget lacked concrete economic policies and strategies to transform the ailing economy, establish macroeconomic stability and fiscal consolidation.
However, he commended the government’s decision to implement an interest rate hedging to allow for enhanced predictability of debt services, stressing the decision was long overdue.
The forum was meant to educate the media on the budget and state the IFS’s position on it.
Prof Kusi said the budget had not addressed many of the issues and concerns raised by the IFS at its 2016 budget forum.
“As we all know, it is through the budget that a government exercises the three key functions of economic policy, viz. allocation function, stabilisation function and the distributive function. As such, the national budget should be able to identify the key challenges and risks confronting the economy, accurately diagnose their causes, undertake the three function of economic policy to provide corrective measures to address the challenges and thus influence the economy to make progress,” he said.
According to the Professor, “many have observed the 2016 budget looked like a mere fulfillment of a constitutional mandate than an instrument of economic policy and strategy to deal with the country’s economic growth and development challenges”.
For instance, the Executive Director said the projected decline in the fiscal deficit would not be achieved due to uncertainties surrounding the revenue assumptions and difficulties in containing budget expenditure.
“Even if the deficit target is achieved, it may happen at the cost of a substantial build-up of arrears and a sharp decline in capital spending. Government will continue to borrow to increase the public debt stock and worsen its sustainability implications,” he said.
He said although the economy was experiencing a serious slowdown and instability at the macro level, caused by the twin deficits and weak monetary policy, the recent economic policies by the government were short of transformational ambitions.
“Conspicuously missing from the 2016 budget are also plans to mitigate the impact of possible swings in oil prices. One of the main causes of the revenue shortfall experienced this year is the falling oil prices,” he said.
He said “with oil prices experiencing volatilities and some analyst predicting that oil prices may drop to around $20 dollars per barrel, one would have expected the government to come out with clearly spelt out plans to mitigate the effects of the oil price fall in 2016, but unfortunately there was nothing”.
Prof. Kusi said there was no indication in the 2016 budget of a major reform of the Petroleum Revenue Management Act going forward even though and as some analyst have observed the act had proved ineffective in controlling government because as petroleum revenue rises it encouraged government spending to go up through the benchmark revenue calculation.
“The act has also been effective in managing oil revenue volatility because of the limited effectiveness of the Ghana Stabilisation Fund. This arises mainly from the decision of the government to cap the GSF in response to the country’s increasing debt-finance and contingency purposes,” he said.
By Times Reporter