Ghana: Budget – Worrying Concerns

18 July 2011

analysis

This report does not aim to provide an in-depth sector-by-sector analysis of the 2011 supplementary budget, or of the master budget volume, to which it is a supplement.

Rather the intention is to use the opportunity presented by the release of the supplementary budget to review some of the issues associated with the 2011 budget outlook generally, and further to use sectoral analysis to cast light on broader matters of financial accountability in this country.

Simply put, IMANI’s goal is to ensure that the taxes of citizens in this country are being put to good use.

Water, Sanitation, Housing, Community Services

In the government’s own outlook for the water, sanitation, housing and sea defence sectors in 2011, the expectation was that as much as 95% of funding would come from donors.

As the supplementary budget has shown, grants from donors fell short of government target by as much as 28%. Clearly, there is a danger in the heavy dependence on the grace of donors to meet basic government responsibilities in this country.

Even though Government undertook to be responsible for as much as 34% of expenditure in the specific area of capacity-building within ministries and agencies overseeing these sectors – of which the two primary ones are Water Resources, Works & Housing and Local Government & Rural Development – the truth is that so much of the money goes into personnel salary payments that in practice training tends to be sub-standard.

For example, only 1% of total funding allocation to the Ministry of Local Government & Rural Development goes into administration. 2% of funding allocation to the same ministry is spent on investment.

It is impossible to imagine any credible human resource development and skill improvement programs being implemented with such a low level of allocation.

This is to say that the less than GHC1.9 million that goes into the combined management and investment function at that ministry cannot guarantee even the minimal level of staff performance expected. With a staff-strength of more than 18,000 and an administrative expenditure of approximately GHC660000, the Ministry, even if it were to dedicate 10% of its administration budget to training, shall still be spending less than GHC4 per employee per annum on training.

This is not enough to even cater for basic manuals. In practice, less than 2% of funding usually finds its way into training.

One wonders therefore what kind of “capacity building” the government of Ghana claims to be conducting for this ministry. Once again, one sees at work the haphazard logic controlling the apportioning of resources in this country which persistently counsels that pennies be saved to the detriment of pounds.

In the area of investment, civil society activists in the water and sanitation sector have in recent weeks decried the discrepancy in the budget, whereby government in paragraph 378 sought approval to commit funding to the drilling of 20,000 boreholes in 2011, only to claim a few paragraphs later, in 948, that it shall in fact be spreading this drilling effort over five years.

So which is it: 4000 boreholes on average in 2011 or 20,000 in total in 2011? This is worrying primarily because borehole costs in recent years have tended to be inflated, with projects costing on average more than GHC11,000.

The comparable costs in Britain and South Africa, respectively, far higher labour costs there and due consideration given to geological factors notwithstanding, are GHC10,000 and GHC7,500.

This is not acceptable, seeing as program-based budgeting (the new approach to developing budgets in this country) cost taxpayers as much as GHC1.25 million for each full budget written for the financial year (in total, the budget division at the Ministry receives nearly GHC8 million per year), we have a right to expect from the Ministry sound budgets that add up.

Budget Accountability & Probity Issues Arising

When a country spends nearly GHC7 million on reforms every year to improve the budget process, citizens have a right to expect that proper accounting and calculations shall be done.

On the theme of ensuring budget transparency and accountability, questions have been raised about a curious allocation of GHC 42 million to an amorphous entity of recent creation called the External Economic Relations Division (EERD) housed in the Ministry of Finance whose exalted task is to help Ghana “improve [its] fiscal resource mobilisation”.

WE CALL ON THE MINISTRY OF FINANCE TO IMMEDIATELY CLARIFY WHAT THIS NEW ENTITY SHALL BE DOING WITH GHC42 MILLION OF OUR MONEY.

In ordinary English, this entity is ostensibly tasked with improving on how Ghana attracts money from external sources. And they need GHC42 million to do that? How much have they brought in so far beyond the historical norm? Is this how the Ministry is financing the wild goose chases such as the fundraising effort for STX, the Goldman Sachs $500 million saga etc. etc.? Ghanaians DESERVE TO KNOW NOW.

Historically, “external economic relations” is an aspect of economic governance that was addressed within the purview of the government’s external debt portfolio and its management.

The External Resources Mobilisation Division (ERMD) used to house the Aid & Debt Management Unit, until the latter was deemed important enough to become a division on its own, and to assume additional responsibilities such as coordinating with the Bank of Ghana to implement government capital-raising generally.

Quite clearly, the ERMD, now stripped of its vital unit, is the rump that has metamorphosed into the curious form of the EERD. What exactly is it supposed to be doing though that the Debt Management folks aren’t already doing with far fewer funds ($251,000)?

Another curious issue is the dramatic shortfall in the inward flow of donor grants by about 30% so far. We see no evidence that the Government has begun thinking through what it would mean to its finances if donor funding was severely curtailed in coming years perhaps partly because of our newly-found, rebased, lower middle-income situation.

Social Protection & Interventions

Given the level and intensity of the rhetoric on social interventions and protection for the vulnerable under this administration, it is surprising that even in absolute terms, not to talk of real terms, the government is shifting the responsibility for supporting women and children development to donors like the African Development Bank, and that it has actually reduced its commitment to the sector ministry by more than 20%.

Government of Ghana has to make up its mind. If it is not interested in supporting gender-responsive policymaking in this country, it would do better to just scrap the Ministry. The constant hide-and-seek played by successive governments around funding is no longer funny.

Meanwhile, a comprehensive World Bank study recently revealed some startling conclusions regarding social protection policies in this country. Nearly half of all the money allocated to the vaunted LEAP program does not reach the poor people such funding is supposed to assist. And, mind you, this is the best-managed of the “social protection” schemes underway in Ghana presently.

Only half of the free school uniforms being distributed across the country represent good value for the cash spent on the program in terms of social results.

Just about a fifth (that is 20 Ghana pesewas in every 1 Ghana cedi) of the value of money spent on the school feeding program reach the poor children whose malnourished existence it is supposed to be improving.

Only 15 Ghana pesewas out of every 1 Ghana cedi spent on fertiliser subsidies actually benefit the poor farmers of our hinterlands who are breaking their backs to feed us.

Only 12 pesewas in every 1 Ghana Cedi spent on the much talked about National Youth Employment Program (NYEP) actually results in sustainable benefits to the beneficiaries.

As for the subsidies on petroleum products, only 2 Ghana pesewas in every 1 Ghana cedi spent ends up doing any real good for the country’s poor.

The analysis that turned up these results was based on data going back 8 years that is fully available to the Administration, and yet Ministers continue to trumpet these underperforming, money-sapping, so-called “social intervention” programs as if they are the holy grail of development.

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