Vice President Dr. Mahamudu Bawumia has declared his intentions of modifying the fiscal rule upon assumption of office to control government spending.
Due to the COVID-19 pandemic, the fiscal rule which mandates an administration not to spend beyond 5% of the country’s Gross Domestic Product (GDP) was suspended. The move was to help the government address the crisis effectively.
The New Patriotic Party’s (NPP) flag bearer, has, however, argued that the current form of the fiscal deficit requirement does not help in effective regulation of government spending.
He has therefore proposed an amendment to the existing provision at a meeting with the Trades Union Congress (TUC) Wednesday, May 29, 2024.
The proposed amendment, according to the NPP flag bearer, would require the budget deficit not to exceed 105% of the previous year’s revenue.
“The fiscal discipline, the fiscal rule that we have before was to make sure that fiscal deficit was not above 5% of GDP. Of course, when COVID came it had to be suspended so that government could respond.
“I believe that the fiscal rule needs to come in an amended form, not just to look at the deficit, say 5% in a year. But let us make sure that government expenditure does not exceed 105% of the previous year’s tax revenue.”
“This gives you more discipline because if you forecast a tax revenue for this year which is overly optimistic and you go and spend thinking you are going to do 5% of GDP you will end up with more than 5% of GDP if those revenues don’t materialize,” he stated.
The Vice President also expressed his intentions to establish the fiscal governance council as an independent entity to enable it scrutinise the actions of the Finance Ministry.
“It should be given independence so that they have an independent oversight over the MoF. Because if you don’t have that independence in terms of oversight then who watches the MoF.
“We don’t have that independence and so we need an independent fiscal responsibility council. The current council as constituted in the Act is not independent and we need to have that independence of the fiscal responsibility council,” he stated.
