We must entrench fiscal discipline — Kwaku Kwarteng
THE Chairman of the Finance Committee and Member of Parliament (MP) for Obuasi West, Kwaku Kwarteng, has called for entrenched fiscal discipline to help the country avoid the cyclical return to the International Monetary Fund (IMF) for bailouts.
The New Patriotic Party (NPP) MP also urged the country’s development partners (DPs) to be less diplomatic by exposing economic wrongs to help put fiscal discipline on a sustainable path.
The former Deputy Minister of Finance told the Daily Graphic in Washington DC, United States of America (USA), on Tuesday, April 11 that the time had come for governments to muster the courage to cut expenditures when revenues underperform, for the country to balance its budgets, noting that the repeated fiscal imbalances through large deficits and high debts undermined economic development and citizen’s progress.
He added that the problem applied to countries in the subregion and the earlier a holistic decision was taken, the better for the economies and the citizens.
The MP for Obuasi West said on the sidelines of the ongoing IMF/World Bank Spring Meetings that the new paradigm in managing the economy prudently required partnership between the Executive and the Legislature in the interest of the citizens.
He spoke to the paper after addressing the Global Parliamentary Forum at the Spring Meetings.
The close door session discussed how the Legislature can help address the current high debt pressures, surging inflation and general fiscal imbalances facing sub-Saharan Africa and the world at large.
After joining the IMF in September 1957, Ghana is now at the verge of clinching its 17th IMF bailout programme to address similar challenges –surging inflation and a weak cedi caused by large deficits and high debts.
Unlike the previous bailout requests, the approval of the July 2022 request is contingent on a debt restructuring exercise that has seen about GH¢83 billion of local debts that were comparatively short-dated but costly exchanged for long-dated and low cost instruments.
The restructuring of the external component and the subsequent securing of financial assurances from bilateral creditors has dragged, resulting in a delay in closing the deal.
While being optimistic that the country would secure a deal soon, the Chairman of Parliament’s Finance Committee said the real solution was for the country to be fiscally prudent and wean itself off the fund’s assistance.
To make this possible, he said MPs must build their capacities in economic issues. By often approving loans and fiscal policies of the Executive, with less regard to their impact on the economy, Mr Kwarteng said Parliament was also complicit in the cyclical fiscal imbalances that the economy had been through since Independence.
Once the legislators are well equipped, the former Deputy Minister said: “We can then use our approval powers to pull the brakes when we think the government is making a mistake.”
Although Mr Kwarteng admitted that the polarised nature of Parliament made it difficult for MPs from the governing party to insist on fiscal discipline, he said the country was at a stage where it had less options.
“I do recognise that realistically, because of the way our political architecture is, it becomes a bit difficult for you to just say to your own government when you are in Parliament.”
“But what it tells us is that to the extent that we must indeed correct the wrongs, we do not have to wait for it to even get to the floor of the House.
Those of us on the side of government must be able to engage government out of the pubic view not to take a certain route,” he said.
That, he said, would ensure that MPs played their role of ensuring prudence without embarrassing their own government.
Role of DPs
On why Parliament allowed the government to hinge a chuck of the fiscal corrections on revenues to the detriment of expenditure cuts, Mr Kwarteng expressed optimism that things would be corrected soon.
“As we proceed, the water will find its level. If the revenue does not come and you are in an IMF programme, you are going to have to do the necessary adjustments in order to live within your means,” he said.
To him, it was also important for the country’s DPs to toughen up and demand fiscal prudence.“I hope that they will be less diplomatic about exposing the things we are doing wrong.
For instance, if we were to enter a programme and they see that the revenues are not coming, they should be able to say that we are not disbursing further because the revenues are not coming and you are not cutting expenditures.
“If we begin to get that support from our DPs, then we as Parliamentarians will need to rise above the partisan concerns that we raised and begin to do the things that we need to do,” he added.