Government urged to ensure efficiency in public spending

Business News of Tuesday, 1 August 2017

Source: Graphic.com.gh

2017-08-01

Dr Robert Osei says it was even more important for government to check the efficiency of expenditure

Associate Professor at the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, Prof Robert Darko Osei, has urged the government to ensure public expenditure is efficient and results oriented in order to strengthen the public financial management system in the country.

He said although it was important for the government to cap expenditure, it was even more important to check the efficiency of expenditure.

He therefore advised the government to ensure that it got the maximum output from its expenditures to improve efficiency.

“It is rather good to check efficiency of expenditure than to check corruption,” he stated.

Prof Darko said this at the 2nd Pentvars Business journal Public Lecture on the theme “Ghana’s development agenda- is the 2017 budget a formula for success?”

He said whether the budget would even achieve its broad level goals would depend on how the government tackled the leakages in public spending.

Ghana’s economy

Touching on the curretnt state of the economy, he said the country’s economy was not where it could have been as growth had been too reliant on primary commodities, with fiscal space also shrinking over the years.

“We have seen a change in the structure of the economy but one that is not transformational,” he noted.

He said although the 2017 budget had the potential to address the development challenges in the country in the medium to long term; it was not a panacea to the overall challenges facing the economy.

2017 budget

“There are good signals in the budget, however, implementation still matters. Budgets are intentions, the key is implementation,” he stated.

“There still remains the question of whether the incentives in the budget will engender private sector investments,” he added.

He said the proirity now was to determine if the realignments in the fiscals would yield the anticipated efficiency.

“Also growth (with employment creation) will have to respond to these many incentives. The challenge now is how much the private sector will respond to the incentives signaled by the budget,” he said.

Prof Darko explained that although there were many good intentions in the list of initiatives outlined in the budget, turning these initiatives into policies that would deliver on growth and jobs would not always be straightforward.

“One village one Dam’ is a great idea but government is yet to tell us how it would maintain and sustain the dams. One district one factory is also a great idea but it won’t be easy to implement,” he pointed out.

Macroeconomic stability

Prof Darko, who is also the Vice Dean of the University of Ghana’s School of Graduate Studies also noted that gross savings in the country remained low, at below 20 per cent, and that this explained the ‘borrowing’.

“The extent to which this has contributed to long term debt depends on the returns to the general use of the borrowing,” he said.

He said the macroeconomic targets set in the budget were pointing the right way, as it was bold to relook the statutory funds and use that to create a bit more fiscal space.

The Vice Dean noted that the budget talks about shifting ‘focus of economic management from taxation to production,’ but this, in a short term, could result in a decline in tax revenue.

He said it was important to note that the elasticity of revenue change in the effective tax rate depended on how long it took growth to respond, and shift incentives from ‘cheating’ to ‘compliance’.

Involvement of citizens in budget process

The Deputy Chairperson of the National Development Planning Commission, Dr Esther Ofei-Aboagye, also called for the need to involve all citizens in the entire budget process from formulation to implementation.

She said although some of the provisions in the budget had some prospects for promoting the development agenda; some of the incentives like the abolishing of Value Added Tax (VAT) on domestic flight were not initiatives that the poor would benefit from.

She also pointed out that although the creation of the new development authorities was a step in the right direction, the bill for its establishment was now going to Parliament four months after the budget was read.

“This implies that there will not be enough time for implementation,” she said.

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