The Institute for Fiscal Studies (IFS) says it feels vindicated because agricultural modernization, industrialization and infrastructure development have been included in the strategic pillars of the 2019 Budget.
At a post 2019 budget analysis press conference yesterday, Leslie Dwight Mensah, an economist at IFS, who addressed the media, said, “The non-oil sectors, particularly agriculture and manufacturing, which have higher capacities to generate jobs, however had virtually stagnated in the past few years, and this had compounded the unemployment problem in the country.
“The Institute, therefore, welcomes the attention being given these sectors in the budget. The agricultural sector should be aided by scaling up irrigation facilities, extensions services, storage and preservation facilities, and marketing facilities.”
1D1F
Touching on industrialization, Mr. Mensah said the 1D1F policy could be the fulcrum to achieve major transformation of the economy so as to reduce our dependence on imports and increase employment.
“The 1D1F policy, however, needs careful planning in terms of the type of products, factory sizes, locations, ownership, management, and the supply-chain (or raw material base). These decisions should be informed by Ghana’s previous industrialisation experience and international best practices.”
He revealed that to ease the burden of financing the 1D1F policy on the public purse, private and PPP-funding options should be considered.
“In terms of direct creation of jobs, NABCO and the YEA programmes may be important interventions to help alleviate youth unemployment, in particular. However, the capacity of the state to create large numbers of jobs on a sustainable basis is always tempered by issues of efficiency, productivity and budgetary costs.
Prior to the presentation of the 2019 budget, IFS suggested that strong broad-based economic growth, driven by agricultural growth and transformation, industrialization and the closing of the country’s infrastructure gap, were critically needed.
Job creation
“Ideally, the private sector should be spearheading growth and job creation. The Ghanaian private sector, however, remains weak, bogged down by a myriad of bottlenecks, including overly regulatory burden, poor infrastructure, high taxes, high cost of credit, high cost of public services and the general adverse effects of macroeconomic instability. It’s important for government to continue to enable the private sector to drive growth and durable job creation by addressing the numerous bottlenecks mentioned above that continue to inhibit the sector.”
Fiscal policy stance
In 2019, he said government spending was projected to increase by a whopping GH₵15.62 billion, up from the increases of GH₵5.78 billion in 2017 and GH₵5.88 billion in 2018.
He said if that is realized, the increase in government spending in 2019 would be the highest in absolute terms under the Fourth Republic.
“In percentage terms, the projected increase in government expenditure of 27.0% in 2019 is the highest since 2012. While this policy reversal was not exactly anticipated by IFS, it did not come as a surprise to the Institute because the consolidation process had seriously constrained fiscal policy and affected economic growth.
Revenue over projection
“We note that just as it happened in 2017 and 2018, total revenue and grants has once again been over-projected, high above what can possibly be collected, resulting in a small but artificial difference between total revenue and grants and total government expenditure.
“In 2019, the government has projected to increase total revenue and grants by as much as GH¢12.1 billion, compared with increases of GH¢7.5 billion in 2017 and GH¢7.1 billion in 2018. Thus, while government was able to increase total revenue and grants by a total of GH¢14.6 billion in both 2017 and 2018, it has projected to increase total revenue and grants by GH¢12.1 billion in 2019 alone. Again, in 2018, nominal GDP growth was 16.3% and revenue growth was 17.9%. However, in 2019, despite the projected fall in nominal GDP growth to 15.3%, revenue growth has been projected at 25.8%.”
He added that given this obviously over-optimistic projection, it’s hard to see the revenue increase in 2019 being realized.”
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