The Minister of Finance, Ken Ofori-Atta will today, Thursday, 6 August 2020, justify his request to suspend the Fiscal Responsibility Act (FRA) in Parliament.
In his mid-year budget presentation last month, Mr Ofori-Atta made it clear that, the rules of the FRA must be side stepped because the magnitude of the Impact of COVID-19 on the economy does not leave any room for the Act’s viability in the near future.
“From developments thus far, it is clear that the fiscal rules of a deficit not exceeding 5 percent of GDP and a positive primary balance enshrined in the Fiscal Responsibility Act, 2018 (Act 982) are neither feasible nor attainable targets in this emergency period of the COVID-19 Pandemic.
“The scale of damage and macroeconomic distortions caused by the pandemic is unprecedented in our country’s history. It may take a while to return to the pre- COVID-19 fiscal path. According to our revised fiscal framework, the economy is not likely to return to the 5 percent fiscal deficit threshold set in the Fiscal Responsibility Law sooner than 2024.
“Consequently, as required by section 3(3) of the Fiscal Responsibility Law, the government will within 30 days present before this august House the necessary documentation that supports the suspension of the fiscal rules and targets for this year 2020.”
However, that is not the only issue prompting the Minister’s presence into the House. In an interview on Wednesday, 5 August 2020, ahead of the scheduled justification for the FRA’s suspension, the Minister of Monitoring and Evaluation, Dr Anthony Akoto Osei, pointed out that, Mr Ofori-Atta will also be seeking a formal approval of the more than 11 billion cedis, extra money, he asked Parliament’s permission to spend in the budget review.
“There are two things he’s coming to do; first he’s coming to, as the law requires, provide justification for the suspension of the fiscal responsibility act and second, he’s coming to formally ask for the approval of the supplementary estimates, that’s what he’s coming to do. Then it’s only after that the supplementary budget is deemed to have been approved.”
Dr Akoto Osei added that,
“The committee has met, the committee will prepare its report and he’ll come and round up to justify it. So, it’s after tomorrow that you can say that the supplementary budget has been approved.”
Concerning the FRA, Dr Akoto Osei said:
“The law allows the Minister to suspend, under certain conditions and the law says that he must provide justification. He puts a statement in the budget that he’s going to suspend it but the way the law is, he has to bring justification. He’s brought it, the committee has reviewed it and it is proper and so they’re coming to report on it.”
When the Finance Minister indicated that he will be seeking to waive the restrictions imposed by the FRA in Parliament, the Minority made it clear he will not get their support.
“Go and read the law, the law is very specific; said the minister, under these circumstances, can do so if the economic shock or GDP is projected to below 1 per cent. It’s not what they want to do, we’re going by law and the supplementary estimate is seeking approval that, just like when you bring a budget you come and seek approval, then you’re able to do it.”
Mr Ofori-Atta, in the mid-year budget review, projected that the country’s GDP will grow at 0.9% this fiscal year.
Economist, Professor Peter Quartey and some analysts have backed government’s decision to spend more than the FRA permits to protect businesses in the country. Prof Quarter has said “that is the way to go,” he however cautions government to “spend judiciously.”
With four months to the next elections, concerns about the election year syndrome have also been expressed by Dr Theo Acheampong.
In the past years, the country has witnessed the phenomenon where most, if not all, of the economic gains chalked during the tenure of a government are eroded in the election year. This happens because an administration wants to impress the electorates and it is mostly done with not regard to its sustainability on the country’s coffers.
