The profligate spending of government during election years have been broadly criticised by several economists, analysts and think tanks in recent times. This is because, the bruises from an almost 12% fiscal deficit recorded in 2012, even after the addition of oil revenues is still with us.
Interest rates are at record high, the domestic currency has depreciated by over 100% since 2013 year-open, prices of general goods and services have doubled or tripled and government debt as a percentage of GDP has crossed the 70% mark among others.
Thus, one may have expected government to increase capital expenditure and initiate policies that will drive private sector growth and public-private partnerships to stimulate economic growth. However, what we witnessed is a gradual reduction in government capital expenditure at the expense of bloating debt interest payments.
The recent statistics released by the Ministry of Finance indicates that total government expenditure for 2015 stood at GHC37.34 billion as against a revised budget target of GHC37.97 billion.
However, government halved its commitment to capital expenditure in 2015 but paid a littleover GHC 9 billion in interest payments. This figure was relatively higher than the total taxes on Income and Property and equivalent to about 36% of total tax revenue.
With wages and salaries taking about 44% of government total tax revenue, it is obvious that government is presently hard-pressed. One does not need to be a rocket scientist to know that, this position is not sustainable within the medium to long-term.
GN Research analysts still remain skeptical about government’s commitment to spend within its budget this year as opposed to implementation of expansionary fiscal policies to drive economic growth and create employment to win the nod of electorates.
Additionally, the absence of fiscal rules and delay in fiscal data updates by the Ministry of Finance gives government enough room to deviate from any agreed targets.
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