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General News of Thursday, 14 November 2019


Expect more pressure in 2020 – Economist warns government

A professor of Economics, Prof. William Baah Boateng has urged the government to brace itself for more pressure ahead of the 2020 elections.

Although he expects the government to manage the economy through prudent spending, Prof. Baah Boateng said huge demands from various quarters during such periods are likely to have adverse effects on the revenue and expenditure scheduled for the year.

The government has already given strong indications that it will ensure that it stays within its budget next year and that the usual excessive spending that characterized past elections will not happen in 2020.

But speaking on the Point of View on Citi TV, Prof. Boateng who is also the Head of the Economics Department at the University of Ghana noted that the government will be vulnerable in absorbing the pressure from labour unions, politicians and other groups.

“I expect the Finance Minister to be committed and prudent. But from where I sit, I don’t think the Finance Minister will be able to absorb the pressure that will come. Not only pressure from workers but also from his own people, colleague Ministers, and MPs. It’s an election year and everybody will want to get [something]. It is something I don’t envy him at all. In every election year, the government is vulnerable. So the pressure will come even from the Cabinet because they want to win.”

Recent election years have been marked by overspending as the country exceeded its budget deficit targets.

For the last election year, in 2016, Ghana’s budget deficit target was 5.3 percent but the deficit eventually widened to 7.8 percent.

The government has already cautioned against lack of discipline in an election year as the hunger of the electorate for infrastructure is expected to increase.

We won’t overrun 2020 budget

Presenting the 2020 budget and financial policy in Parliament on Wednesday, Finance Minister, Ken Ofori Atta said the government will maintain fiscal discipline despite the elections.

“In spite of the year being an election year, let me repeat that President Akufo-Addo and his government will ensure that the perennial excessive spending during such periods will not happen in 2020. We shall work within the 2020 Appropriated Resource envelope and adhere to the Fiscal Responsibility Act to maintain fiscal discipline”, he said.

EIU’s prediction

But the Economist Intelligence Unit (EIU) has already predicted that the government will struggle to lower its expenditure in the run-up to the 2020 general elections.

Despite government passing the Fiscal Responsibility Act last year aiming to limit future budget deficits to a maximum of 5% of GDP, the London-based business advisory firm expects the government to record a 5.5 percent budget deficit in 2020.

In its July 2019 Country Report, the EIU stated that following the completion of the IMF programme in April 2019, and a period of fiscal consolidation, it expects to see some spending laxity.