Budget Fails Social Democracy Test

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Created on Wednesday, 18 March 2009 00:00

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Budget Fails Social Democracy Test

By Frederick Asiamah

The Centre for Budget Advocacy (CBA) of the Integrated Social Development Centre (ISODEC) has stated that the 2009 Budget statement cannot pass as a social democracy budget.

The comment is informed by the National Democratic Congress Government?s attempt to hold inflation at levels below 16 percent. Finance Minister Dr. Kwabena Duffuor announced "average inflation target of 15.3 per cent" and "end period inflation of 12.5 per cent" in the Budget which he presented to Parliament on March 4.

The CBA fears that this could compel government, which is the biggest spender, to cut back on spending especially in the social and infrastructural sectors.

Mr. Bishop Akolgo, Executive Director of ISODEC spoke on behalf of the CBA on Thursday, when he delivered the CBA's "initial comments" on the first fiscal policy statement of the Prof. Mills administration to the press in Accra.

"Too much emphasis on low inflation, he emphasized, "is not a social democratic agenda." He said: "Quality of spending is also important and this can be achieved by reallocating expenditure to more productive sectors of the economy and the social sectors through a public investment-led growth even if this raises inflation modestly as there is no evidence that a 20% or slightly higher inflation will necessarily hurt the economy. Ironically, the Ghana Statistical Service announced a day after that February 2009 inflation stood at 20.3%, being the highest recorded since 2004. Government also targets real GDP growth of 5.9 per cent and an overall budget deficit equivalent to 9.4 per cent of GDP.

The CBA argues that the key purpose of government ?is the welfare of its citizens, especially the poor, marginalized and vulnerable. Fiscal targets such as budget deficits and government spending should not be set at too low a level to undermine this mandate but should be flexible enough for sustainable investment and debt servicing."

The Centre posited that Budget should target employment explicitly. Besides, constrained deficit level should be examined because pro-poor expenditure such as health, education and housing cannot be contained in such environment. The government has said it will be guided by four main pillars namely: transparent and accountable governance; strong economy for real jobs; investing in people; and expanding infrastructure for growth.

Against the backdrop of investing in people, Mr. Akolgo said the concept contrasts with certain indicators in the Budget, including targeting low inflation. The CBA could not agree with the level of language used in the fiscal document. "Generally the budget should be presented in a non-technical language and in a format that is reader-friendly and conveys all information to allow citizens to understand and use it as a guide to life decisions." Overtime, the Centre said it has observed that, "There is limited analysis (budget document mainly descriptive and not analytical enough), contending that "it should show links, assumptions and risks."

Further, "The language is very technical and therefore needs to be a citizen's budget, targeting Ghanaians." It suggested that, "Budget should start with what quality and quantity of jobs will be created and how many and what quality infrastructure will be created for which the president is seeking mandate to raise and spend public resources."

All the same, "The 2009 budget has elements of a pro-poor budget," the CBA concluded. Social interventions covered by the budget include free school uniforms for 1,665,644 in basic schools in deprived areas at the cost of GHc 11.7million; free exercise books for 5,000,000 pupils in basic schools at the cost of GHc15.0 million and an increase in the capitation grant from GHc 3.00 to GHc 4.5, representing 50%. Similarly, Insecticide Treated Mosquito Nets (ITN) are to be made available for pregnant women and new mothers at the cost of GHc 300,000.

Away from the macroeconomics, The CBA commended the government for seeking to run a transparent, lean, efficient and effective government. "We observe that the number of ministries has been reduced. We however, see that the number of ministers is growing."

The Centre was also pleased that the President has promised to allow the Freedom of Information Bill to see the day of light and further promised that contracts and agreements on natural resources like solid minerals, petroleum, forests and marine will be transparently disclosed.

But the Centre has a request. "We recommend that all these natural resources management be brought under the discipline of the extractives industry transparency initiative (EITI). Immediate steps should be taken to review and adjust the fiscal regime for the extraction of these resources to ensure that government take, in times of high prices, especially solid minerals sector increases as prices increase."

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This Editorial of 16 March 2009 does not necessarily express the views or opinions of JuscticeGhana