Election Year Spending: Fitch Solutions expects Ghana's fiscal deficit to widen next year

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00:00 Hi, good afternoon. Welcome to the Marketplace. Coming up, IMF Board revised its review date

00:04 for Ghana's programme once again over concerns about China's position on debt restructuring.

00:14 Also coming up, Fish Solutions cautions Ghana's fiscal deficit will widen next year due to

00:19 election year spending. Across the region, we'll continue to run

00:24 wide budget deficits in 2024, and that's despite concerted efforts at fiscal consolidation.

00:31 Meanwhile, economist Dr Patrick Kisumi warns government's failure to address challenges

00:36 confronting its public expenditure framework could affect attempts to curb election year

00:41 spending. The immediate thing we can do is try and

00:44 then strengthen our expenditure control measures to ensure that people are not spending outside

00:51 of their budget. That is usually the main source of the overspending that comes.

00:56 My name is Darrell Carr. Thanks for joining us. Details coming up.

01:01 Thanks for staying with us everyone. First up, the International Monetary Fund

01:22 has once again revised the date for the board meeting on the review of Ghana's programme

01:27 and the disbursement of the second tranche of bailout package through the first week

01:31 of December. This is what Joy Business has picked up from

01:34 persons with knowledge of Ghana's programme with the fund.

01:37 Here's George Afueth-More. The move is more of a precautionary measure

01:42 to deal with fresh consents coming from China over the December 22 cut-off date for restructuring

01:49 its debt. China rather wants March 2020 as the date

01:54 that all funds that it has given to Ghana to be restructured.

01:57 The IMF board's new date is to ensure that by that time all these consents have been

02:03 addressed. Sources say the action has nothing to do with

02:07 Ghana not meeting the targets set under the programme for fresh disbursement.

02:11 The fund had initially set November 29 as the new date for the board to meet on Ghana

02:18 from the Wednesday date of November 22, 2023. However, this new date is what Joy Business

02:26 has picked up from persons working on the programme.

02:29 Sources say the fund is not looking at a full agreement to be reached between Ghana and

02:34 the official creditor committee co-chaired by France and China, but rather just a letter

02:40 of comfort that they have agreed on the terms to begin discussions to restructure Ghana's

02:45 debts. Government on the other hand is optimistic that this letter of comfort may come way before

02:51 the date that the board has set to review Ghana's programme for fresh disbursement.

02:58 Now Fit Solutions expects Ghana's fiscal deficit to widen next year due to election

03:03 spending despite the International Managing Fund programme. According to the UK-based

03:07 firm, the fiscal deficit will be more than 7% in relation to the size of the economy,

03:12 suggesting the economic challenges are far from over. Government in the 2024 budget projected

03:17 a deficit of 5.9% of gross domestic product, about 61.9 billion CED. Fit Solutions says

03:25 most of the deficit will be financed by increased domestic borrowing, thus crowding out lending

03:30 to the private sector and posing risks to macroeconomic and banking sector stability.

03:36 Here's Orson Gard, country risk analyst, South Sudan Africa at Fit Solutions.

03:40 We expect that governments across the region will continue to run wide budget deficits

03:44 in 2024, and that's despite concerted efforts at fiscal consolidation. In most markets,

03:50 the primary cause of this will be increased spending on debt servicing, which is expected

03:55 to remain elevated as a proportion of revenue due to higher global and domestic interest

03:59 rates. So indeed, while interest payments as a proportion of government revenue averaged

04:04 22% in sub-Saharan Africa between 2013 and 2022, we project that this will increase to

04:10 41.3% this year and will remain elevated at 38.7% in 2024. So, in some markets, idiosyncratic

04:18 factors will also play a role in keeping budget deficits wide. So, in Ghana, for example,

04:23 we actually expect the fiscal deficit to widen next year. And this will be a result of election-related

04:28 spending, with history showing that the government tends to overrun spending targets during election

04:32 years, and that's even when under an IMF program.

04:36 Now, finance and economics lecturer at the University of Ghana, Dr. Patrick Esumin, says

04:40 a failure by a government to address challenges confronting its public expenditure framework

04:45 will continue to affect the fiscals of the economy. He says these loopholes will always

04:50 throw government out of its budget going into the 2024 elections. Interacting with Joy Businesses

04:56 James Ishen at the Graphic Business Dambig Bank breakfast meeting, Dr. Esumin stressed

05:01 on the need for more expenditure cuts.

05:04 There are long-term things we can do and there are short-term things we can do. I think over

05:09 the long term, really, the political business cycle is a result of the governance system

05:15 that we run. A governance system that gives always an incentive to the ruling government

05:21 to try and overspend. So, that's one part. But the other thing is that we have a fiscal

05:29 or a public expenditure framework has a lot of loopholes that allow political actors to

05:36 spend outside of their budget. So, I think that is the immediate thing we can do is try

05:42 and then strengthen our expenditure control measures to ensure that people are not spending

05:49 outside of their budget. That is usually the main source of the overspending that comes.

05:54 People making expenditures outside of the ones that are approved by the budget.

05:59 Talking about expenditure and looking at the budget, what we've seen so far, what was being

06:03 read in the budget, do you think we are making headway somewhere?

06:06 Well, that's for next year. I mean, for this year, I have been pleasantly surprised that

06:14 we've kept expenditure under wraps, especially when the revenue has underperformed. We've

06:19 seen that because the revenue is underperforming, the government has money to rein in expenditure.

06:25 Although my preference would have been the expenditure cuts would have come from the

06:32 wages and salaries and compensation. As it is, most of the cuts have been coming from

06:37 capital expenditure, which has implications for a long-term growth. But at least we've

06:42 seen that the government is trying to keep the fiscal deficits under wraps. So, hopefully

06:47 that will continue.

06:48 Now, Doc, let me bring you to that of the city. We've had the association of our group

06:53 saying going into the festive season, there's a likelihood the city would depreciate. The

06:58 city is now hovering around 12 cents. What is your expectation going into the festive

07:03 season, basically?

07:04 Well, I think we're beginning to see wobbles, as you are saying. So, we go to the festive

07:14 season, we go to the reporting season. So, the pressure is likely to come to bear on

07:18 the currency, except if we're able to finalise the CoCo syndicated loan, which will bring

07:24 us some relief, help us with the reserves. And also, if the second tranche of the IMF

07:32 comes on board, then it might help. But we know that those ones are short-term fixes.

07:36 In the long term, everybody knows what we have to do. We have to broaden our export

07:41 base and we have to do more import substitution. We have to reduce our dependence on foreign

07:46 financing. When foreigners are bringing the money, we are happy and we are singing. When

07:51 it's time for them to take their money out, we see that the currency is wobbling. So,

07:55 I think over the long term, we have to diversify our export base, we have to do more domestic

08:00 production and cut our imports, and then reduce our dependence on foreign money.

08:05 About this perpetuation of profit, how do we ensure that these campaigns or multinational

08:09 campaigns sort of keep some of these profits? And what are some of the ways forward?

08:12 It starts with the laws. I mean, if you look at our investment laws, we are too generous.

08:18 But that in itself is because we have an orientation that without foreign money, the economy cannot

08:24 grow. That is a problem. We have to change our mindset and begin to say that no, we have

08:28 to look inward. And looking inward, of course, means that we have to ensure that we are collecting

08:34 the taxes. That doesn't necessarily mean imposing more indirect taxes, but ensuring that we

08:39 monetize the economy and that we use the digitization efforts to expand the tax base, make sure

08:45 that more of the informal sector is paying the taxes. If we do that, and we change our

08:50 orientation to say, okay, we have to look within Ghana and start implementing some of

08:57 the ideas in Ghana beyond aid, then that will ensure that, you know, if you are always in

09:03 need of foreign financing, then you always find a way to give them the incentive to bring

09:08 them in. And one of the incentives we give is that, hey, when you make profits, we allow

09:12 you to freely repatriate them. So that is where we have to tackle. We have to start

09:17 by focusing more on domestic resource mobilization.

09:21 All right. Information Minister Kujo Ponkoma says the 2024 budget will stabilize the economy

09:32 and spur growth. According to the minister who kick-started the debate on the budget

09:36 in parliament, he said significant measures have been announced to bring down the cost

09:41 of living and reduce inflation to 15% by the end of 2024. Parliamentary affairs correspondent

09:48 Kwaku Asante joins us from there. Good afternoon to you, Kwaku. Talk to us a bit more about

09:53 what the information minister has been saying, and for that matter, those on the majority

09:58 side.

09:59 Well, it's been a really fiery debate, which is still ongoing on the floor, as I speak.

10:05 The information minister, like you rightly said, Kujo Ponkoma kick-started the debate

10:08 in parliament, and on behalf of the majority, he says that the 2024 budget is going to focus

10:14 on growth. It is going to focus on reducing the cost of living, and then ultimately, it

10:19 is going to put Ghanians back on the path of prosperity and growth, and that is what

10:24 this budget is going to do. He has also been taking on the minority's claim that this budget

10:28 is empty and useless. In fact, the minority in the Adolfo Caccellato Fosin, in an interview

10:33 with Evans Mensah on PM Express, had claimed that the budget was literally useless and

10:37 empty. But Kujo Ponkoma took that on and said they should debate the specifics in the budget,

10:44 that the degree is empty, and take that on. And so he has been doing that. We also heard

10:49 from Isaac Adongo, who is almost always doing these budget debates, but introducing a certain

10:55 football element. Last year, he spoke about Harry Maguire of Manchester United and compared

11:00 him to the vice president, Dr Mahmoud Bamiya, and claimed that the vice president was just

11:05 like Harry Maguire. He was actually scoring on goals. Today, he says he has an apology

11:09 for Harry Maguire because he believes Harry Maguire is a better defender than Dr Mahmoud

11:14 Bamiya is a better manager of the economy. And so he has been taking on that. I've been

11:18 also asked by the Deputy Finance Minister, I've also been talking about the NDC's pension,

11:23 as he puts it, to actually run down the bad diseases. The NDC is acting irresponsibly,

11:29 and that they must come together, together with the majority, to be able to support the

11:33 government, to be able to deliver on the promises they've made to government. And just gone

11:37 by, we've heard from George Ndapo, the ranking member of the Mines and Energy Committee,

11:41 also a member of the Finance Committee, who has also been pivoting and talking about Dr

11:45 Mahmoud Bamiya. It appears the NDC's strategy to debate this budget is to focus on Dr Mahmoud

11:51 Bamiya as chair of the Economic Management, especially because we are doing this in the

11:55 2024 election. And Dr Mahmoud Bamiya is now the flag bearer of the new patriotic party.

12:01 So the NDC's point on the economy has been that the government has mishandled it, it

12:05 has run it down, and the NDP must be given a way out in 2024. And Dr Stephen Amwah, the

12:11 Deputy Minister of the Children's Industry, is currently on the floor debating, and the

12:15 ideal is that this budget has what it takes to turn the tide. And the Finance Minister

12:20 claims that the economy has turned the corner. Is it the truth?

12:23 Well, Abin, you mentioned the 2024 elections. Of critical concern is how the government

12:28 intends to keep within the budget in an election year. Have those concerns come up?

12:33 It has come up quite strongly. We heard from the minority leader on the day the budget

12:38 was presented, which made the point that governments should be careful not to overspend. And in

12:42 fact, George Ndapo just gone by, has been talking about the budget deficit we are likely

12:46 to see in 2024. He talks about how much government is expecting to lose, and how much government

12:53 is expected to be. In fact, if you do the math, that is about 50 billion in terms of

12:57 deficit that government has to finance through loans and other borrowing mechanisms. He says

13:03 that is not something that the government should be doing, and that he was expecting

13:07 that government will cut its cost according to its size. If you are only able to raise

13:11 170 billion, why are you planning on spending 220? Why don't you spend exactly what you

13:16 are going to be able to raise? And that is the point the minorities have been making.

13:19 The part of government side has also been that budget deficit has always been with the

13:23 economy, and in all, even the advanced economy, the budget deficit is always going to feature.

13:28 What is important is the way government is seeking to finance those deficits. Although

13:34 government is going to follow to fill in those gaps, they say the terms are way better than

13:38 the debt that we have approved under the NDC between 2009 and 2017 when John Mahama left

13:44 office. So it's been quite a spirited debate on both sides. A few times it's paralleled

13:49 into politics, but both sides have stuck to their guns, making the point as to which of

13:54 them is better managers of the economy within the space of time that we all manage the economy.

13:59 All right, keep following that for us. Thank you so much. Gokwa Asante is a parliamentary

14:03 correspondent following the debate on the 2024 budget there. Well, let's move on to

14:08 other stories. Flag bearer of the NDC, John Mahama, has assured the Customs Amendment

14:13 Act 2020 will be reviewed to enable the importation of salvage vehicles. Though the implementation

14:19 of the act is suspended, the former president believes it will negatively impact artisans

14:24 and the transport business. Nanai Aljima was at the Tichiman market where Mr Mahama engaged

14:29 with economic groupings in the area. The building Ghana Tor is characterized by town hall meetings

14:41 focused on documenting challenges of various groups. Artisans at the Tichiman magazine

14:50 expressed disaffection with the Customs Amendment Act. The act, among other things, provides

14:58 incentives for automobile manufacturers and assembling firms registered under the Ghana

15:04 Automotive Manufacturers Program. It prohibits importation of salvaged motor vehicles and

15:12 cars over 10 years of age into Ghana. But John Mahama believes the ban on salvaged cars

15:18 could be limited to government agencies. Since governments purchase cars more than any individual,

15:34 and also have the purchasing power, they should buy from the assembling plants so that they

15:40 can also make profits. For those who can't buy new cars, they will have to import the

15:56 salvaged ones. When we return to power, we will make sure that we make changes in the

16:12 act. To modernize the vehicle mechanic trade, the former president admitted the need to

16:17 train artisans in modern technology for the business. He explains plans of the NDC government

16:24 when it regains power. When I was vice president, we partnered with SMIDO at Sun Magazine to

16:37 construct a training center and equip it with all modern machinery to aid training of apprentices.

16:52 Meanwhile, Mr Mahama has insisted on the legalization of tricycle business.

17:11 Now out of the 47 countries that have ratified their instruments under the African Continental

17:16 Free Trade Area, only seven countries have so far begun trading amongst themselves under

17:21 the pact. Ghana, Cameroon, Kenya, Egypt and three others have all received certificates

17:26 of origin to trade freely without trade barriers. Ceramics, tea and AC components are but some

17:33 of the few items that are being traded. And after speaking to Joy Business at the joint

17:38 Equus North Africa Multi-Stakeholder Forum and after, Special Advisor to the Secretary

17:43 General Peter Joy, Sir Onu, said the Secretariat is hopeful of increasing the numbers to about

17:48 30 by next year. Here's more.

17:52 The Regional Multi-Stakeholders Forum, which is being organized by Third World Network

17:57 Africa, seeks to strengthen alliances, share information and perspectives on Africa, as

18:03 well as fashion out agenda for future engagements among stakeholders and civil organizations

18:09 in Equus North Africa. Speaking to Joy Business, Special Advisor to the Secretary General of

18:14 AFTA, Peter Joy, Sir Onu said, "Despite the challenges being faced, enough progress has

18:20 been made to realize the optimization of the trade pact." He added that, "So far, only

18:26 seven out of the 47 countries that have ratified are trading among themselves."

18:32 So where we are currently, we have 47 countries that are state parties to the agreement establishing

18:39 the AFCA. Another thing we are also doing is also getting the countries to trade. So

18:46 what we've introduced or what His Excellency, the Secretary General of the AFCA, the Secretariat

18:51 has introduced is something we call the AFCA Guided Trade Initiative. So that is just getting

18:58 the countries to actually start trading. So what we've done is to start with seven countries.

19:04 So seven of our countries, they have certificates of origin, they have customs procedures in

19:10 place and they've actually started trading. Economist Dr. Patrick Esumene called on government

19:16 to be deliberate with its trade laws to ensure local businesses leverage on the potential

19:21 of the AFTA. The question is, what programs have you put in place to ensure that Ghanaian

19:27 businesses are strategically positioned to make sure that when implementation is in full

19:33 force we are ready? I think that is where the big ten is. So we have to think about

19:38 competitiveness. The competitiveness of Ghanaian businesses and that comes from policy. So

19:45 there's what has to happen among the continental bodies in terms of easing the bureaucracy

19:56 and the restrictions on doing business across bodies. The forum, which is a three-day event,

20:00 will bring together civil society organizations, key private sector players, women organizations,

20:07 trade unions, among others, for joint business. Piles, Kujubaka. And thanks for staying with

20:13 us here on the Marketplace. Now government says it will demystify the business environment

20:17 through its regulatory framework set to be presented to Parliament for approval. According

20:22 to Trade and Industry Minister KT Hammond, his outfit is committed to supporting private

20:26 sector businesses through technology to thrive and contribute to the country's economic

20:31 growth. He was speaking at the UK Ghana Chamber of Commerce end-of-year gala dinner and awards

20:36 for businesses. The Trade and Industry Minister KT Hammond said his outfit is committed to

20:43 supporting private sector businesses through technology to thrive and contribute to the

20:48 country's economic growth. He reiterated government's commitment to cushioning low-carb businesses

20:54 to take advantage of the African continental free trade agreement. This economic transformation

21:02 is private sector led. This is because Ghana, like many other countries, recognizes the

21:12 pivotal role that a stronger partnership between the government and the private sector plays

21:20 in fostering economic growth, innovation, and sustainable development. This transformation

21:29 is about creating an environment where businesses can thrive, where innovation is encouraged,

21:37 but where opportunities are abandoned. It's a vision of self-reliance and economic independence.

21:47 Where Ghana takes its rightful place on the global stage as a beacon of growth and prosperity.

21:58 Executive Director at the UK Ghana Chamber of Commerce, Adjoba Chiyama, said her outfit

22:03 will deepen trade relations with the United Kingdom. So it's been an amazing night of

22:10 celebration, of celebrating our member companies, celebrating our chamber, and also celebrating

22:18 UK Ghana trading relations, which dates back over several decades. And all of the winners

22:28 are deserving award winners, our funding businesses in our membership, who are contributing so

22:34 much to the economy of Ghana and have strengthened the trading relations between Ghana and the

22:41 UK. I am also especially pleased about the entries that we received, even from amongst

22:49 the wholly owned Ghanaian businesses, who do not necessarily have trading relations

22:53 with Ghana, but are proud to be members of our chamber. The UK GCC, established in 2016

23:00 in Ghana, has promoted trade between the UK and Ghana. Now, government has been intruded

23:08 to incentivize businesses to invest in education and research. This, according to the founder

23:13 of the Acquire Business Group, Bishop Gideon Titi Ofer, will help bridge the gap between

23:17 academia and industry. He suggested that this can be done through effective policies to

23:22 help solve the unemployment menace in the country. Bishop Titi Ofer was speaking at

23:26 the 15th graduate congregation of Acquire Business School. Supportive policies from

23:33 our government are crucial. We urge the government to formulate policies that promote the integration

23:40 of academic learning with industry needs. Such policies can provide incentives for businesses

23:46 to invest in educational partnerships, research, and development initiatives, creating a fertile

23:53 ground for innovation and economic growth. By aligning our educational practices with

24:01 industry needs and fostering government support, Acquire Business School is not just educating

24:07 the next generation of leaders, we are actively contributing to solving Ghana's economic

24:13 woes. Let us continue this journey together for a stronger and more prosperous Ghana.

24:20 Alright, and before we go, let's just bring you up to speed on what's trending on our

24:30 website myjoyonline.com/business. We've got the day's latest stories there for you to

24:37 check out as we conclude this bulletin. Okay, we don't, alright, that's it, myjoyonline.com/business.

24:44 Check out the day's latest stories there. If we could scroll and get the headline story

24:48 on that website. Okay. That is taking a bit of time, but CD to record single digit depreciation

25:02 against dollar in 2024, that's according to the EIU, Ghana's fiscal deficit to widen

25:08 in 2024 for solutions. We brought you that story this afternoon. So you can read more

25:13 on those stories and others myjoyonline.com/business. My name is Daryl Kyle. Thanks for watching.

25:22 We'll be back same time tomorrow.

25:25 [Music]

25:44 [Music]

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