Business and Economics

Economic Governance Platform says independent Fiscal Council very critical

Accra, Feb 19, GNA- Dr Joseph K. Kwakye, A Consultant for the Economic Governance Platform (EGP), Ghana, commending Government’s efforts at ensuring fiscal discipline through a Fiscal Council (FC), however, said appointment of members should be through a competitive recruitment process.

This, he said, would guarantee its independence and survival over successive governments and end the perennial resort to International Monetary Fund bailouts, which has happened 16 times.

Dr Kwakye made the suggestion in a survey report titled, “The Sustainable Model of Fiscal Council for Ghana: Learning from Best Practices”.

The survey organised by the EGP in collaboration with Oxfam and the World Bank.

The President inaugurated a seven-member Fiscal Responsibility Advisory Council, on Friday, February 15, tasked to develop and recommend to the President Fiscal Responsibility policies for the maintenance of prudent and sustainable levels of public debt.

Dr Kwakye, however, said the natures of the appointment would make it difficult for it to exercise its watchdog role due to possible interference from the appointing authority.

Consequently, the appointment of members should be done through Parliament-cum-the Public Services Commission.

 That process would also enable the country to get the best qualified and independent professionals for a permanent Council to advice Presidents on fiscal discipline, budgetary outcomes and potential risks.

The country, he said, had a record of fiscal indiscipline characterised by recurrent high budget deficit.

“Fiscal indiscipline tends to escalate in election years when politically-fueled spending and fiscal deficit overruns tends to occur,” he said.

“The recurrence of high deficits is the result of failed discretionary policy, ungoverned by rules and lack of independent policy analysis and oversight”.

With the frequent IMF bailouts, it was important to create the necessary institutional and policy regime that would help internalise fiscal discipline, he said.

Parliament should strictly enforce its Appropriations Acts, which approve spending limits for Government to help avoid breaches of the Fiscal Rule.

The Public Financial Management Act of 2016 prescribes the adoption of fiscal rules to guide fiscal policy, while the Fiscal Responsibility Act of 2018, formalises the fiscal rule by capping the overall cash budget deficit at five per cent of the Gross Domestic Product.

Professor Godfred A. Bokpin of University of Ghana Business School, also agreed that the country needed was an independent FC that would carry out analysis of Government’s budget to ensure the credibility of the macroeconomic frameworks.

However, his interest, he said, was not in the recruitment process but the objectivity of the Council members to discharge their duty in an effective and efficient manner without fear or favour.

Dr Joseph L.S.Abbey, the Executive Director, Centre for Policy Analysis, also called an independent FC with political neutrality to advice government on sound economic policies to ensure fiscal discipline.

He expressed concern about the recent rate of the depreciation of the cedi and urged the Government to find ways of addressing the phenomenon.

Mr Vitus Adaboo Azeem, the Chairman of the Tax Justice Network Ghana, said it was time for the Government to commit to exercising fiscal discipline without political interference.

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