Staying the course during this election year
In her departing presser, the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, was optimistic that the country would stay the course with regard to maintaining fiscal discipline as the country heads to another general election.
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Graphic Business shares her opinion as we have indeed made such commentary in the past.
Even though, the stakes are high in this election year as has been the case in every 8-year cycle, the peculiar economic challenges over the past two years cannot and shouldn’t toe the line of previous election year expenditures.
We know it is not lost on government, the dire challenges facing the economy.
We are currently pursuing a debt restructuring exercise, the end of which, after almost two years, we are still not too clear on the way forward especially with regard to our external debt situation.
Even though macro-economic indicators are heading downwards as expected, the current indicators do not provide enough comfort for investors and businesses in the country.
Inflation is still in the 20 percentiles, the currency even though is depreciating at a slower rate than what we witnessed two years ago, remains wobbly. Interest rates are unbearably high and cost of living is skyrocketing.
It therefore cannot be business as usual. Some economists are even very sceptical of government’s promise that it will keep to fiscal discipline as outlined in the 2024 budget statement, which is to maintain a fiscal deficit of about 5.9 %.
We, however, take note of the assurances given by the economic managers to stay the course in this election’s year. The question though is that do they have an option?
Already, there is a shortfall in revenue projections of about GH¢1.8 million on account of the suspension of the implementation of the VAT on electricity. Teachers are demanding pay rise, government workers already have a 22 per cent increase in salary.
With our external debt negotiations still not concluded and the country’s financing gap of US$15 billion needed to bridge capital expenditure, our only option really is to head to the international market to borrow or to seek some bilateral funding from external creditors.
However, the conditions for which the country needs to build the confidence of the investor community does not exist again as we are already saddled with huge debts owned to these same external creditors.
Therefore, we caught between the hard rock and the deep blue sea.
To put it mildly, we are in dire circumstances with regard to the current economic challenges. But it is not a situation that is insoluble. We have it within us to provide solutions. It will require that the status quo has to change, that is, over spending during election year over the past years has to come to an end with this year’s election.
The country cannot afford it. Our external creditors will not forgive us and like Kristalina said, “I believe that lessons have been learnt from the past that abandoning fiscal discipline for short-term gains does not pay back,” adding that “2024 was a different year and the world was more uncertain - we are in a more shock-prone economy.”
Graphic Business is of the view that government can show the way by reviewing its own expenditure and also reviewing some of its policies.
A major challenge as reported previously has been about government procurement practices which that do not provide value for money, especially sole sourcing.
Government can also review its flagship projects that does not deliver value such as the school feeding programme and planting for food and jobs to ensure it delivers on its mandate.
These, among others, are some of the critical decisions that can change the narrative with regard to election year ballooning expenditure.