The Institute for Liberty and Policy Innovation (ILAPI) has proposed the formulation of a new fiscal covenant in Ghana as a solution to address government expenditure waste.The suggested fiscal covenant aims to define clear guidelines for government spending, specifying what, how, and when to spend within allocated budgets to avoid non-prioritized and extravagant expenses, as explained by Mr.

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Peter Bismark Kwofie, the Executive Director of ILAPI.Mr. Kwofie emphasized that effective public finance management is crucial for any democratic state, and the fiscal covenant plays a pivotal role in determining the legal responsibilities of the government towards its citizens based on tax contributions.

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The recommendation came after ILAPI conducted a representative perception poll, highlighting the necessity for legislators to establish fiscal responsibility laws and rules to ensure the efficient and prudent utilization of state resources.Over the years, Ghana, as a democratic state, has faced challenges in rational decision-making without a fiscal covenant.

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“A fiscal covenant leads to the development of consensus on norms, standards, and principles that must guide public policy delivery; the state must be guided, and there should be consistency in that behaviour in terms of how it collects resources and how they can be used,” he added.To realize such expectations, political agreement among social actors regarding tax collection, usage, and accountability is essential.

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The fiscal covenant would also entail fiscal discipline, legislating on debt limits, and reducing executive discretions on revenue legislation with specific sunset clauses.Transparency in public expenditure would be promoted by establishing regular engagement with all stakeholders involved in the development value chain.

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Furthermore, the fiscal covenant would include developing efficient criteria for managing national resources, indexing revenue and expenditure, and adhering to the principles of budgetary unity and universality, among other tenets.

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