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Ghana's Budget IFS worried about depletion of the stabilisation fund

The IFS made this known in its assessment of the 2016 supplementary in which the government requested for GHC1.88 billion.

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Professor Newman Kusi play

Professor Newman Kusi

The Institute of Fiscal Studies (IFS) has expressed grave concern about the continuous reduction in the country’s stabilisation fund.

The fund was established to provide budgetary support in times of revenue shortfall under the Petroleum Revenue Management Act (Act 815).

However, it is warned that the reduction of the amount from $250 million to $150 and a further reduction to $100 may defeat the purpose for which the fund was established.

The IFS made this known in its assessment of the 2016 supplementary in which the government requested for GHC1.88 billion.

The continued depletion of the Stabilization Fund, whose closing book value at the end of 2015 was just US$177.4 million, weakens its capacity to help sustain critical public expenditure when oil prices decline. It also has the propensity to cause more borrowing by the government to plug revenue shortfalls,” the IFS noted.

The Institute of Fiscal Studies also observed a large discrepancy of GH¢1.7 billion in the January to May 2016 fiscal data provided by the government.


“In the light of the government’s financial management reforms, particularly the deployment of the Ghana Integrated Financial Management Information System (GIFMIS) within the public sector, a discrepancy figure of such large magnitude is puzzling,” the IFS said.

The statement also took aimed at the reduction in capital expenditure in the supplementary budget, compared to the original one in 2015.

“This will be offset by increased transfers to other government units, in particular to the Road Fund. At least two issues emanate from these proposed adjustments. The first concerns the feasibility of reducing compensation of employees’ expenditure through cutting social security payments without incurring arrears, as the government has committed itself to under the IMF programme.

“Social security payments are a given fraction of wages and salaries expenditure, so a cut to this expenditure in the face of unchanged wages and salaries expenditure implies creation of new arrears.”

The second concerns the rationale for the reduction in capital expenditure, which underpins long-term economic growth.

“In actual fact, the revised budget proposal will see capital expenditure slashed by GH₵740.5 million (10.4 percent) from 2015 which will take it down to 3.8 percent of GDP from 5.1 percent last year.”

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