Professor Peter Quartey, who serves as the Director of the Institute of Statistical Social and Economic Research (ISSER), has urged the Ghanaian Parliament to take swift action to reinstate the Fiscal Responsibility Act.
He emphasized the importance of this step in controlling discretionary spending, highlighting the potential exacerbation of Ghana’s debt situation, particularly as the country approaches the 2024 election year.
This concern persists despite the ongoing implementation of the International Monetary Fund’s (IMF) US$3 billion loan-support program.
Professor Quartey made these remarks during a media interview following a forum held on Monday, September 18, in Accra. The forum’s theme was “Ghana’s public debt management: facts, impact, and the way forward.”
The Fiscal Responsibility Act, 2018 (Act 982), mandates the government to ensure that the overall fiscal balance, on a cash basis, for a given year does not exceed a deficit of five percent of the Gross Domestic Product (GDP) for that year. However, this Act was temporarily suspended in 2020 due to the outbreak of the COVID-19 pandemic.
The government’s rationale for this move was the anticipation that it would not be able to meet the five percent deficit threshold until 2024.
While the primary objective of the Act is to uphold macroeconomic stability and debt sustainability by capping the fiscal deficit at five percent, the country had a fiscal deficit of 11.4 percent of GDP at the time of its suspension.
This situation, according to Prof. Quartey, significantly contributed to Ghana’s mounting debt problem, eventually leading to the 17th loan-support program with the IMF.
He urged Parliament to reinstate the suspended Act. Furthermore, Prof. Quartey emphasized that Parliament possesses the authority to oversee both the Central Bank and the Finance Ministry but fell short in exercising its oversight responsibilities.
“So, when they were faced with the challenge, the easier way was for the Central Bank to support the government,“ Prof Quartey said, adding that there should be rules on discretionary spending.
“Discretionary behaviour if not checked, can lead to crisis… We have the right to bring the Finance Minister and the Governor Bank of Ghana to Parliament to seek approval so why do we avoid this situation going forward,” he said.
He recommended that in times of financial difficulties, Parliament should ensure that its suspension of the Fiscal Responsibility was made temporal, and “give timeline, so that for example, in one year they can come back for another approval.”