Report: 2011 Budget - Worrying Concerns

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.



1. *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.



1. *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.



1. *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.

Equally worrying is the fact that nearly 30% of the traditional funding
allocation to the District Assembly Common Fund has been diverted to fund
these programs, thus undermining the decentralisation agenda.

Let’s face it: we are throwing money away in this country and have no clue
how to seriously go about bringing relief to the poor through
government-designed initiatives.

And how can we, when we don’t even have a means-testing program?

A proper “mean-testing” program is a system that ensures that government
expenditure on pro-poor schemes reaches the intended beneficiaries rather
than those who can comfortably pay their own way (including cronies of
government big-shots).

A sound means-testing mechanism is based on identifying, collecting,
sieving, storing and analysing citizen income information derived from
multiple sources in easily retrievable and deployable formats.



1. *Public Sector Performance*

Reviewers of the 2011 Budget and the mid-year supplement reported seeing no
evidence of the public sector reform process being on course. In real terms
funding allocation to the Public Services Commission declined by nearly 20%
in 2011 compared to 2010.

It needs to go on record that the critical issue facing the public service
is not the level of wages, as it is so often made out to seem. This is
especially the case in the Civil Service.

Civil servants receive on average approximately GHC 400 per month in
salaries. This is more than 2 times the corresponding average in the private
sector. Recall that this is a country where per capita income (not
necessarily analogous to average adult income but indicative of it) hovers
below GHC150 per month.

Indeed by 2013, more than 46% - nearly half - of all domestic revenue
(taxes, rates, duties etc.) will be used to pay public service employees.

Therefore we cannot continue to attribute underperformance in the public
service to low motivation DUE PREDOMINANTLY to poor wages.

Much of the unsatisfactory performance is due to over-centralisation and
ineffective management practices.



1. *Institutions*

Independent observers are worried that there has been no explicit commitment
by the Government, either in the main budget or in the supplement, to fully
fund the critical post-enumeration survey which should give full meaning to
the 2010 census.

This survey is what shall provide the details many observers are waiting for
from the Ghana Statistical Service, such as datasets containing demographic,
income, and housing statistics.

Some people are even interested in rigorous figures concerning ethnic,
religious, employment, urban-rural migration, literacy, and various human
development developments in Ghana. All that data analysis is outstanding and
need to be funded to be ready on time.

As the milestones draw near for the Statistical Service to begin releasing
such detailed breakdowns, IMANI is equally concerned that once again
Government of Ghana appears to be setting up the Statistical Service for the
fall by failing to commit to release funds expeditiously.

Equally worrying are the projected FUNDING SHORTFALLS of GHC 84 million and
GHC189 million respectively for 2011 and 2012 in the case of the Electoral
Commission.

In the case of Parliament, it is a BIG BLOT on the record of the
parliamentary leadership that, in contravention of the constitution, the
Ministry of Finance & Economic Planning was permitted to reduce the
legislature’s funding request by 25% without further recourse to senior
Clerks and the leadership. In real terms, there has actually been a decline
of about 7% in total financial resources available to parliament in 2011
compared to 2010.

On the other hand, even though resources for investment available to the
National Media Commission have been reduced in 2011, Government should still
be commended for having increased the budget of this vital institution by
more than 4 times, primarily to help recruit more personnel. Hopefully
disbursements shall also proceed smoothly.



1. *Key Sectors & Social Services*


- “Single Spine” appears to be intensifying its constraining impact on
key areas like education. While spending on salaries has increased
(projected/annualised) by 18%, there has been a concomitant fall of 50% in
spending on investment in the educational sector. This is the kind of logic
that results in the famous scenarios of teachers showing up in school only
to find that there is no chalk available to teach with. There is no
provision in the supplementary budget to address this shortfall.
- There was no analysis, beyond a blanket attribution to “seasonal
factors”, in the supplementary budget statement to clarify whether the
real-term decline of funding allocation to the agriculture sector by nearly
14% is causatively linked or correlated to the frightening fall by 35% in
the growth rate recorded by the sector in the preceding quarter. It may be
recalled that in the first half of 2010, agriculture grew by 4.8%.
- The Government intends to transfer more than GHC327 million of our
money to GNPC but did not see it fit to offer even one line of explanation
regarding which projects and programs being pursued at GNPC shall benefit
from this largesse.

The opaqueness that has come to characterise the GNPC’s operations in this
country goes against the grain of transparency and accountability as we have
had cause to lament over many times in the past. One can only hope that
persistent complaints shall in the not too distant future soften the hearts
of powers that be.

While the supplementary budget statement suggested that approximately 25% of
all petroleum proceeds shall go the GNPC the Deputy Minister of Finance
clearly mentioned 40% during an interview with Accra-based Joy FM.

WHICH IS WHICH, HONOURABLE?



*This report is by courtesy of IMANI Ghana and is syndicated through:
www.africanliberty.org*