The 2015 Budget Statement; Some brief thoughts
The budget, after the dismal performance of the last 18 months, was very different from the business-like approach to righting the Ghanaian economy I was expecting.
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In my view, the statement missed several opportunities to identify and address a number of risk areas with cutting-edge policies and innovative solutions. Ultimately, this budget leaves the transformative outcomes we seek for Ghana in the hands of good fortune because it:
Lacks focus on cost reduction and overconcentrates on revenue generation
While the budget had concrete strategies for marshalling revenue, it was less specific and lacked any strategic focus with regards to stemming the inexorable rise in the costs of running the government that arise from a mix of Constitutional provisions, administrative decisions, systemic corruption and waste in the public sector.
I have shared some thoughts on the role Parliament can play to address this. However, the speed with which approval was given to the Bill suggests a yawning gap between the possible and reality.
For example, I expected to hear about strategies to reduce the cost of borrowing for the government underpinned by a legal framework designed to increase hard currency remittances into the local banking sector by Ghanaians in the diaspora with ironclad guarantees of uninhibited access to their funds, which could unplug a flood of relatively lower cost funds for projects directly related to boosting manufacturing and agriculture – which can sustainably transform and grow the economy.
And I wanted to hear strategies for moving people out of the public sector into private sector industries. These could have been major boosts for reducing in the cost of running the government.
This budget missed an opportunity to signal a commitment at the highest levels to exorcise waste and corruption, and slash costs across all segments of government operations. The signal rather is that government will continue to dominate overall economic activity without concerted efforts to become efficient.
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Kept silent on the scale of any impact on the real economy, growth and employment generation
The budget missed an opportunity to give quantitative evidence that businesses can expect to become more profitable and grow in scale and scope. The negative impact on consumer spending and the cost of doing business through 2015 and beyond for private sector firms arising from the slew of new taxes and charges, revenue generating initiatives and policies are also not costed.
The result of this is uncertainty for business owners, and local and foreign investors. We can expect that the private sector will continue to execute business and investment plans on the basis of the worst-case scenario as the safest option to assure continuity of their businesses. It is implicit then that the highest possible prices will be charged consumers; that growth will become a secondary priority after profit maximisation, and that profit extraction will trump re-investment.
A clear strategy to reduce business risk and interest rates would have been a first for the private sector and evidence of transformation.
Instead, an important opportunity to advertise as soon-to-come, well-paid private sector jobs to attract and absorb talent/labour from the public sector seed in the impending discussions on reducing the number of the public sector workers, any willingness by labour to take less entrenched positions to safeguard their current jobs was missed.
Was sketchy and lacked innovation in reviewing debt management methods
Soberingly, debt management was more addressed in how to maximise it than in minimising it. Unsustainably high public debt is not good reason or just explanation for development. Clearly, the inefficiencies and lack of productivity in the public sector are exposed but went largely unaddressed.
A bold strategy would have presented opportunities for Ghanaian private sector entities to take over the building of development infrastructure and limited any foreign participation to strategic management and/or partners with minority equity stakes.
This way, inflation-neutral, sustainable development could have happened in a fairly condensed period of time. In the absence of government policy to prioritise public private partnerships (PPPs) with local and foreign investors, debt management can at best only remain a colourful art in this and any other budget.
The budget missed another opportunity to innovate in terms of how the government would raise development dollars from 2015 without adding to the public debt stock, in such a manner that shores up the value of the Cedi, and raises overall productivity in the economy.
d) Clearly not market and investor-focused, largely IMF stabilisation-focused
What Ghana needs is massive, sustained levels of growth, a stable economy, and stable currency. The deafeningly silent address of the risk of inflation well beyond what was projected, and a much weaker Cedi than anticipated is worrying.
The policies planned to govern the economy from 2015-2017 are not perfect and the budget could have been used to initiate a transparent analysis of the year-by-year trade-offs between growth and stability; balancing IMF conditionalities and private sector confidence. Again, an opportunity missed.
e) Lacked imagination and ambition
For example, what the transformation would mean in terms of growth and success for individual businesses; or opportunities for households to have access to more disposable income.
And details for transformation in the efficiency of the government was muted. Set against all the prior discussions on the scale of the recurrent budget for governing Ghana.
And so finally, we missed another opportunity to increase the share of private consumption in our Gross Domestic Product (GDP), and raise the impact of the economic multipliers from the private sector and households.
The transformation theme, in my view, will not be fully or best implemented until our economy changes from one dominated by the public sector to one where the most important levers for expanding the scope and scale of our GDP, and GDP growth, are the private sector and households.
It will only be transformed when;
- the cost of running government is low,
- the private sector and private consumption are the most important drivers of growth
- we shift from debt-finance growth to investment funded development and growth
- private local and foreign investors have the right tools and incentives to operate, and
- the budget signals and fuels ambition in all economic actors to succeed.
That said, it is still possible for the government to implement the 2015 budget to highlight and focus on these themes. All may not be lost.