Financial sector stakeholders call for Fiscal Council
Stakeholders in the financial sector have pushed for the establishment of a Fiscal Council to put the government on its toes in observing prudence in public expenditure.
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According to the Public Financial Management Act, 2016 (Act 921), the prime fiscal policy objective of the government is to ensure macroeconomic stability within the macroeconomic and fiscal framework.
At a forum dubbed: “Policy forum on making Ghana’s Fiscal Council work” held in Accra yesterday, participants held the view that fiscal policy remained anchored on the government‘s medium-term fiscal consolidation objective, for which reason a fiscal council could help spur that objective.
The forum was organised by the Institute of Economic Affairs (IEA), and among its participants were members of the Diplomatic Corps, officials of the Ministry of Finance, the Ghana Investment Promotion Council, the Ministry of Information and the International Monetary Fund (IMF).
Ensuring financial prudence
A Senior Economist at the University of Ghana, Dr Eric Osei-Assibey, who made a presentation on the topic, said fiscal policy aimed to progressively reduce the overall fiscal deficit to about three per cent of gross domestic product (GDP) by 2019.
He said the achievement of that target required enhanced revenue collection, continued strict expenditure control and sustainable levels of public debt.
He expressed concern over the fact that fiscal indiscipline, resulting from the lack of adherence to fiscal rules, had, for a long time, been the biggest cause of persistent macroeconomic instability and mounting public debt stock in the country.
Dr Osei-Assibey noted that the attainment of a low fiscal deficit-to-GDP ratio had been a long-term target in the country but that target had proved to be largely elusive in recent times.
He spoke about insufficient monitoring and enforcement tools to safeguard fiscal discipline and expressed regret that there were no instruments in place to address the macroeconomic imbalances within the economy.
Fiscal Council
Dr Osei-Assibey, who is also an Adjunct Research Fellow at the IEA, said in keeping with its mandate of broadening the debate on public policy, the IEA, a few years ago, commissioned a study that looked at the role of fiscal policy rule in improving fiscal management in Ghana and it recommended the need for a fiscal council for the country to stem the persistent large fiscal slippages.
The NPP government, in its 2017 budget statement, made a strong commitment to fiscal discipline by indicating its intention to initiate the process towards the establishment of a fiscal council to ensure compliance with fiscal rules.
According to the university lecturer, budgetary discipline required governments to maintain fiscal positions that fostered macroeconomic stability and sustainable growth.
“The political economic system has created a deficit bias related to the short-sightedness and selfishness of policymakers who initiated tax-cutting programmes for purposes of re-election,” he said.
Benefits
Dr Osei-Assibey enumerated some benefits of the fiscal council as better informing voters on the actual state of fiscal policy, raising the political cost of fiscal indiscipline and fostering transparency over the political cycle to allow people to make inputs into the budget cycle.
He added that through independent analysis, assessment and forecasts, such a body could raise public awareness of the consequences of certain policy paths, contribute to a stability culture that directly addressed fiscal illusion and make direct inputs to the budget process.
Touching on what some countries had achieved so far with respect to their institutional set-ups, he mentioned Britain, Ireland, Sweden, Portugal, Romania and Cyprus as nations with stand-alone bodies and France, Germany, Italy, Lithuania and The Netherlands as those with functional autonomy bodies.
South Africa, Uganda and Kenya, he added, were the three countries in Africa with fiscal councils but added that fiscal councils must be politically independent to be able to effectively function.
For a fiscal council in Ghana to succeed, Dr Osei-Assibey underscored the need for all the political parties to buy into the idea for the council to get the necessarily support to continue to function when governments changed.
A Deputy Minister of Information, Mr Kojo Oppong-Nkrumah, said the government recognised the need for a fiscal council to help tighten the fiscal regime in the country.
He encouraged stakeholders and other interest groups to engage the government on such issues to achieve the desired fiscal tightening framework.
The Chairman of the Finance Committee of Parliament, Dr Mark Assibey-Yeboah, chaired the function.
