The budgets of election years are not supposed to make economic sense. They are supposed to raise money from the most irrational sources( mostly loans), preferably now Eurobonds, to finance campaign projects that are made to look like national social projects.
The national budget of a country must show the direction in which spending for the next year or two will go. But it is also an evidence of how the government intends to maneuver its way out of the difficulties of the previous year while setting a tone for the immediate future.
Put simply, the budget of a serious country is very relevant, authoritative and sensitive. But Ghana's 2016 budget will not achieve any of these and mind you, none of the country's budgets in modern times have.
I am sorry to disappoint the many who hope that , for once in a long time, the budget will properly chart a path that gives confidence of a road to economic recovery and stability, especially due to the peculiar challenges Ghana faced in 2015.
Let me jog your memory in case you have forgotten:
The worsening protracted load shedding excersice led to massive erosion of revenue from companies who were already burdened with the tax hikes of 2014, a situation that was further worsened by a close to total removal of subsidies on fuel that these companies resort to to power their generators.
Weak Local Currency
2015 was a year where the Ghana Cedi continued its free fall of 2014 as though the year never ended and the 2015 budget was never put together. What were government's plans to forestall the slide of the Cedi then, whatever they were, they did not work.
The Cedi in 2015 saw close to 40 percent deppreciation. This would have been worse, had the bank of Ghana not taken a bold decision to deplete their dollar reserves drastically by increasing their weekly ingestion of dollars onto the local market form $14 million to $20 million a day. How do we replace those reserves? That's definitely something worth watching out for in the 2016 budget.
Woeful International Commodities Prices
Again, there was the almighty issue of massive revenue shortfalls due to drastic reductions in crude oil prices on the international market. The price dropped from the 140 dollars projected by the finance minister projected as the cost of a barrel to 49 dollars a barrel.
This meant that the total amount of money he projected as total revenue that will accrue to the country from the oil revenues was reduced by 60 percent....the rest is now for the history books. But in a nutshell all the country's foreign earners did not do well in 2015
And finally, there was the small issue of the the country's debt crises
All I will say on this is that government doubled the country's total debt burden in 8 months in 2015, moving it from a little over 40 billion Ghana Cedis to over 95 billion today. To be fair, this was primarily due to the worsening exchange rates, and an attempt to replace maturing debts with much cheaper ones. Whichever way, that money and its accruing interest payments are waiting to be paid.
Coming to the present, anyone will think that the 2016 budget will spell out adequate steps that will solve these problems and even find a way for the country to shield itself from these shocks in future right? Wrong. This is Ghana, in the eve of an election year, it will not happen!
The 2016 Budget and financial statement will not make any difference, and here's why.
1. 2016 Electioneering year
This point is not new to any grown-up who has followed the economies of African countries long enough. The budgets of election years are not supposed to make economic sense. They are supposed to raise money from the most irrational sources( mostly loans), preferably now Eurobonds, to finance campaign projects that are made to look like national social projects.
This means only one thing, that the national debt of GHC95 billion may double by the end of 2016. There will be no proper plan to pay back the debt because most of the money will be spent on social projects, like the distribution of laptops, school uniforms, footware, and free Senor High School education. Theses which will form the integral parts of the NDC government's campaign.
2. No control over Commodity prices
Even though most of the world's commodities are produced by Africa, the continent and its countries have very little control over how much they are sold for. By extension, Ghana will not have much to do or say about the prices of oil, gold, and cocoa come 2016, hence cannot control it. All we can do is to manage the way the fluctuations affect us. Will the 2016 budget do this successfully? Emphatic NO.
We have shown little creativity over decades in solving the commodity prices challenge. Governments have not shown enough commitments to diversify the economy, which is one sure way of shielding yourself from international volatilities, neither have they shown enough resolve to add value to the commodities. Again there have been little commitments shown to a hedging program that works.
What has happened to the Petroleum Sinking Fund, that is supposed to be a hedge fund for petroleum revenue.
3. No other alternative for Revenue generation
Government needs more money, if we are to reduce our borrowing, bridge the 2 billion dollar annual infrastructure gap and comfortably spend on social projects as as citizens' welfare and welbeing, but the 2016 budget will do little in solving this problem.
Again, this is down to a lack of creativity, hence little room for optimisim. Over the years, especially since donor funds startin drying up, government has explored only two sources of revenue generation- Taxes and loan. All government's attempts to solve the revenue shortage has been by borrowing on the local and domestic markets, or increases taxes.
But this time, that will not also work because there is less and much less room for tax hikes and borrowing. So again, not much will change on that front.
4. IMF Restrictions
Times are hard in Ghana. Businesses are reeling under the pressure, and the IMF and their bailout conditions have had a role to play in it. One main condition of the bailout is for government to cut expenditure. This means, government being the biggest spender has not been spending as much to grease the operation of businesses.
Will this change in the 2016 budget, No. The IMF is keeping an a keen eye on government expenditure. The IMF has been the biggest advocate for a cut in subsidies and social spending, and they are not changing their minds
5. Lack of control and will to implement
Again a recurrent problem. Over the years, governments have shown little will to implement drastic measures spelt out in the budget as solutions to economic challenges. One of which is the frivolous expenditures of ministries, departments and agencies, with the presidency being one of the biggest culprits. Will the president have the willpower to, not only police his ministers, but cut his own apparently insatiable appetite to spend? A yes will be overly optimistic.
These are the reasons why I think the budget is a mere fulfilment of a constitutional requirement, which is ceremonial, and day dream of what a serious nation would have loved to do.