Bright Simons, Vice President of IMANI Africa, has raised concerns over Ghana’s fiscal management, budget execution, and the sustainability of state-owned enterprises (SOEs).
Simons provided an analytical perspective on the implications of the recent Ghanaian budget, highlighting inefficiencies that continue to plague government spending and the operations of state institutions.
“I got to summarise my thoughts on the recent Ghanaian budget and the plight of state-owned enterprises in Ghana”
Bright Simons, Vice President of IMANI Africa
Ghana’s recent budget presents a paradox. While the country is under an International Monetary Fund (IMF)-driven fiscal consolidation program, the government has adopted an expansionary budget.
Simons argues that this contradiction can only be internally reconciled by the high probability of low budget execution.
“The idea of an expansionary budget in the midst of an IMF-driven fiscal consolidation effort can only be internally reconciled by the high likelihood of low budget execution”
Bright Simons, Vice President of IMANI Africa
The challenge of low budget execution is not new, but its impact is felt disproportionately across different sectors.
Simons referenced data from the Food and Agriculture Organization (FAO), which showed that between 2016 and 2020, only 41% of the allocated budget for the agricultural sector was actually spent.
This, he explained, exemplifies how certain sectors suffer more than others when budgets are not fully executed.
Ghana’s Peers Tighten Fiscal Management
While Ghana grapples with inconsistent budget execution, some of its regional peers have significantly improved their fiscal management.
Simons pointed to Ivory Coast, which achieved an aggregate budget execution rate of nearly 94% in 2023.
“Over the years, some of Ghana’s peers have really tightened fiscal management. In 2023, the Ivory Coast, for instance, scored nearly 94% aggregate budget execution”
Bright Simons, Vice President of IMANI Africa
In contrast, Ghana’s failure to ensure high execution rates has had dire consequences for capital expenditure.
The share of gross fixed capital formation as a percentage of GDP has halved since 2010, a clear indication of the country’s declining investment in long-term productive assets.
Government’s Response to Budget Challenges
Recognizing these concerns, the government has pledged to enforce stricter spending regulations.
Simons explained that a key part of this effort is the enforcement of a rule requiring government departments to obtain commencement certificates before operationalizing new contracts.
“The new government recognises this challenge and is promising to strictly enforce the rule that government departments not operationalise new contracts unless they receive a commencement certificate”
Bright Simons, Vice President of IMANI Africa
While this move appears to be a step in the right direction, he pointed out a fundamental flaw, “the lack of granularity in sectoral medium-term expenditure frameworks (MTEFs).”
Without a well-structured MTEF, enforcing commencement certificates may not be enough to ensure fiscal discipline.
A direct consequence of poor budget discipline is the accumulation of unplanned obligations.
Ghana’s current outstanding financial commitments total over $13 billion, with nearly $7 billion of this burden stemming from the road sector alone.
The challenge of unbudgeted spending remains a major fiscal risk.
The SOE Crisis and Ineffective Oversight
Beyond budget execution, Simons turned his attention to Ghana’s state-owned enterprises, which have long struggled with efficiency and accountability.
Calls for bailouts, recapitalizations, and equity injections from the government have increased in recent years.
However, he questioned the effectiveness of such interventions, given the lack of performance incentives for SOEs.
“No SOE board has ever been fired for non-performance in Ghana since 1990,” he pointed out.
The absence of consequences for poor performance, he explained, creates a cycle where public funds are continuously pumped into failing SOEs without meaningful restructuring.
This, he argued, is an exercise in futility, simply throwing good money after bad.
“If an SOE is underperforming, all board perks and remuneration ought to be suspended and a turnaround specialist appointed to implement recovery measures, including pruning management and board”
Bright Simons, Vice President of IMANI Africa
However, he acknowledged the difficulty of implementing such reforms in a political environment where board appointments are often based on party loyalty rather than merit.
The entrenched system of political patronage makes it nearly impossible to enforce discipline in struggling SOEs.
“Where such appointments are made on the basis of political rewards, however, discipline of this kind is impractical”
Bright Simons, Vice President of IMANI Africa
Given these realities, Simons believes that some non-performing SOEs should be allowed to fail rather than continue accumulating liabilities.
In his view, propping up these enterprises without fundamental restructuring serves no long-term economic purpose.
“Some SOEs are probably better off being left to die slowly without further accrual of liabilities.”
Simons’ analysis underscores the urgent need for better fiscal discipline and a more pragmatic approach to managing state-owned enterprises.
Ghana’s budget execution challenges have long stifled growth in key sectors, while the inefficiencies within SOEs continue to drain public resources.
Without a concerted effort to enforce accountability and ensure responsible spending, the country risks further economic stagnation.
As the government moves forward with its fiscal plans, the effectiveness of its policy measures will determine whether Ghana can overcome these challenges or continue down a path of financial uncertainty.
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