Budgeting for Hard Times: Ghana's 2009 Budget Reflects the Current Economic Gloom Hanging over the World, Although the New Administration Led by President John Atta Mills Has Stuck to Its Campaign Pledge to Clean Up Government Business and Provide a Million Free School Uniforms. Stephen Gyasi Jnr Reports from Accra

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Presenting the budget to Parliament in March, Finance and Economic Planning Minister, Dr Kwabena Duffour admitted that the domestic and external state of affairs will make the year 2009 very challenging for the new National Democratic Congress administration. But, he promised, the government was nevertheless committed to its pledge of providing enhanced social services to improve the living conditions and dignity of the average Ghanaian.


"Expected shortfalls in remittances, a slowdown in donor support and private capital inflows as a result of the global recession are likely to have a negative impact on the Ghanaian economy in general and on public finances in particular.

"This trend calls for vigilance and careful monitoring of the global situation. Weak demand for exports and weak commodity prices imply less export revenue."

The policy thrust of the 2009 budget is to reduce the current budget deficit to sustainable levels, improve the exchange rate regime and work towards the attainment of a single-digit inflation. The main strategies to be used, according to the minister, will include enforcement of fiscal discipline, significant reduction in unproductive recurrent expenditure and improvement in revenue generation (including dividends from state-owned enterprises). Infrastructural development in the roads, energy and water sectors is to be accelerated and expanded whilst providing security and justice for all. These measures, he said, will be pursued within a process of monitoring and evaluation of all government ministries, departments and agencies to ensure the effective implementation of government policies and the achievement of objectives and set targets. The savings that would be achieved from this exercise would be channelled into projects that would benefit the ordinary Ghanaian.

The budget focuses on rationalising some key government expenditure. This includes a critical look at the wage bill administration, the management of statutory funds and the profitability, financial situation and relevance of state-owned enterprises and subvented organisations. In this regard, Ghanaians have been promised a significant change in the management of the economy since the leaders of government institutions, especially state-owned companies, are expected to commit themselves to very high levels of accountability while in office.

The private sector is also expected to work hand-in-hand with government to provide the necessary enabling policy environment and incentives for both enterprise growth and the efficient and effective delivery of public services.


Missed targets

Some 2008 budgetary targets under the government of John Kufuor were missed and Dr Duffour says the government would learn from the mistakes of the erstwhile government in their bid to meet their budgetary projections. A targeted real GDP growth of 7% produced 6.2% at the end of the 2008 year, while a projected end-period inflation rate of between 6%-8% produced a rate of 18.1%, with the year ending with an average inflation rate of 16.5% as against the targeted 7%. The sectoral components were as follows: the agriculture sector, the largest of the three sectors in the national accounts, grew by 4.9% against a target of 5.0% and the industrial sector grew at 8.3% against a target of 9.8%.

With the exception of construction, which exceeded its growth target of 13%, all the industrial subsector components registered lower than projected outturns. In order to stabilise the economy quickly, Dr Duffour says his ministry intends to deepen collaboration with the Bank of Ghana to ensure better formulation and implementation of fiscal and monetary policies.

"Our policy in 2009 will be reinforced to ensure macroeconomic stability in the context of a deteriorating international environment so as to provide a temporary cushion to the domestic economy. …