2020 Budget: Finance minister struggling between economic stabilization and growth – IEA

The Institute of Economic Affairs says the provisions of the 2020 budget reveals Finance Minister, Ken Ofori Atta is having a hard time to either grow or stabilize the Ghanaian economy.

According to the Institute, Mr. Ofori Atta is grappling with the right Fiscal policies for the country’s economy.

The Finance minister presented the 2020 Budget Statement and Economic Policy on Wednesday, November 13, 2019, projecting GH¢67.1bn (16. 9% of GDP) as total revenue and grants for 2020, an amount which represents an upward projected outturn for 2019 of GH¢54.6 billion (15.8% of GDP).

He said domestic revenue is estimated at GH¢65.8 billion, representing an annual growth of 22.5 percent over the projected outturn for 2019. Grants disbursement from Development Partners is also estimated at GH¢1.2 billion (0.3% of GDP) and nominal growth of 48.8 percent over the projected outturn of GH¢833.2 million in 2019.

But the Institute of Economic Affairs (IEA) described the projections as cautious and not ambitious enough.

Director of research at the IEA, Dr. John K. Kwakye who today addressed the media, described the Finance Minister as walking between tight ropes, adding that the revenue capital expenditure and growth targets within the budget are “insufficiently ambitious”.

“A budget must have 3 key objectives; stabilization, growth, and social relief. Stabilization involves reducing spending or deficit whereas with growth you may have to inject fiscal impulse through higher spending. There’s always the tension between going for stabilization and growth. Reading the budget, we can see the Finance Minister grappling with these tensions. The 2020 budget is cautious but not sufficiently ambitious.”

Mr. Kwakye added, the approach adopted by the Finance Minister appears to be defined by political sensitivities, hence lacks the necessary means to optimize socio-economic outcomes.

“The budget involves tinkling and tweaking figures to stay within the FRA. It does not involve policies that would bring about fundamental changes that will allow Ghana to make the needed quantum development leaps over the medium term,” he noted.