Centre for Local GOVERNANCE ADVOCACY

  • (+233) (0) 303 937 222
    (+233) (0) 54 406 0160

CLGA COMMENTARY ON THE 2015 BUDGET STATEMENT AND ECONOMIC POLICY OF GHANA

Introduction
Ghana’s Decentralization policy aims at transferring functions, powers, responsibilities and resources to Metropolitan, Municipal and District Assemblies (MMDAs) in Ghana.  Under Article 240(2) (a), of the 1992 Constitution, MMDAs are created and established by a specific Legislative Instrument (L.I) as the highest political and administrative authority in a given area of jurisdiction.

As has been the practice, the Minister for Finance presented the 2015 Economic Policy and Budget Statement of Ghana to Parliament in November 2014.

The Centre for Local Governance Advocacy (CLGA) congratulates the government and people of Ghana for the 2015  Budget . The Budget is on the theme ‘Transformational Agenda: Securing the Bright Medium Term Prospects of the Economy with some practical provisions to propel development’.

Despite the above good provisions, the CLGA has reviewed the 2015 Budget in the context of decentralization implementation in Ghana and has produced the following commentary below. The commentary looks at the strengths of the budget and provides opinions and advises on ways to facilitate decentralization implementation in Ghana during the 2015 fiscal year.

Decentralization Strengths of the 2015 Budget
In the view of the CLGA, the strengths of the 2015 Budget in the context of decentralization and local governance are as follows;
  1. The Budget makes provision for the integration of the districts composite budgets into the national budget. The introduction of composite budget has injected fiscal discipline in the management of MMDAs in Ghana through the introduction  of the ‘Warrant System’;
  2. The Budget in promoting budget transparency and accountability indicated under Appendices (B and D, a medium term projected IGF of all MMDAs to be mobilized in 2015 together with the accompanying expenditure to be financed out of the   Internally Generated Fund (IGF);
  3. The Budget makes provision for the government to continue to support the implementation of the Street-naming and House Numbering Projects within the MMDAs;
  4. The Budget also makes provision for the resuscitation of the draft  Local Government Finance Bill to support harmonization of MMDAs fund mobilization process ( including borrowing and issuance of municipal bonds);
  5. The Budget sets a projected overall GDP (incl. oil) growth rate of 3.9 percent in 2015. This is a realistic growth rate which in the opinion of the CLGA is achievable;
  6. The swift manner in which decentralized structures  were created and  resources made available for their management and national response to  the Ebola epidemic in Ghana  is  highly commendable;
  7. The Budget also mentioned the finalization of the national medium term development plan, Ghana Shared Growth and Development Agenda (GSGDAII), with the vision of Government which is ‘A stable, united, inclusive and prosperous country with opportunities for all’. This is a welcoming news;
  8. The Budget also makes provision for the organization of the local and unit level elections ;
  9. The Budget also provides for a citizens budget which is an abridged version of the national budget. This promotes budget transparency and effective accountability since the abridged one is in six (6) languages- English, Twi, Dagbani, Nzema, Ewe and Ga;
  10. For the first time the 2015 Budget made a categorical statement on the national adoption of the International Public Sector Accounting Standard (IPSAS) and the fact that the Auditor- General has issued a qualification on the public accounts of Ghana necessitating the urgent need to adopt IPSAS in order to comply with international best practices for public sector reporting;
  11. The streamlining of Ghana Integrated Financial Management Information Systems (GIFMIS) to ensure an automation of Ghana’s public sector  financial management system as well as the extension of same to  all MMDAs are important key milestones in improving Public Financial Management ( PFM);
  12. The holistic adoption of the Programme Based Budgeting (PBB) System for all MMDAs as well as streamlining their budgeting systems is worthy of commendation;
  13. The application of the ‘automatic adjusted formula’ to price petroleum products is also worth commending;
  14. The adoption of improved resource mobilization systems for MMDAS and rationalization of public expenditure are two ways of ensuring fiscal sanity in the public sector of Ghana.
Improving the 2015 Budget Implementation for Effective Decentralization

Aside the benefits above , the CLGA wish to provide the following professional commentary on the budget to improve implementation for enhanced decentralized governance in Ghana as follows;

Development of Abridged Budget

On development of Abridge Budget, it is not enough to develop an abridged version of the budget in six(6) different local languages. Government is advised to take further steps to ensure that these documents are properly disseminated  in collaboration with the National Commission for Civic Education( NCCE) and the respective MMDAS to enable citizens better understand the budget , improve budget transparency and effective social accountability.

On the Adoption of IPSAS

Under Paragraphs 819-821, the budget provides for the adoption of IPSAS by Ghana. The CLGA is of the view that the national level must run in parallel with the MMDAs in the adoption of IPSAS to enhance total credibility in financial reporting.

On IGF Mobilization

Under Paragraph 804-905, the budget provides for IGF Mobilization and the Local Government Finance Bill. The CLGA is of the view that, this is a good move but the MMDAs financial reporting systems must be reconfigured and improved to facilitate adequate integration of their assets for improved liquidity to support borrowing. Compliance with IPSAS is the solution. The draft Local Government Finance Bill comes with various innovations:
  • applies to MMDAs  and entities  to be set-up by them to provide specific services;
  • provides  revenue sources which are a departure from the  itemized sources contained under schedule 4,5 and 6 of the Local Government Act 1993, Act 462.
All the above will come to nothing if we do not synchronize all intergovernmental transfers with the annual budget guidelines / ceilings and budget calendar.

On Financing the Management of Waste

Under Paragraph 880 of the budget, provision has been made for financing the management of waste. It is the view of the CLGA that there is nothing in the budget for the sustenance of the newly introduced National Sanitation Day. Again, what has become of the establishment of ‘Plastic Waste Recycling Fund’ required to be established under the Customs and Excise (Duties and Other Taxes) (Amendment) Act, 2013, Act 863. Under the above Act provision was made for the plastic recycling fund to be funded from 50% of the 10% ex-factory price as excise duty on Plastic and Plastic Products listed under Chapters 39 and 63 of the Harmonized System and Customs Tariff Schedules of 2012. CLGA calls for the establishment of the proposed Plastic Waste Recycling Fund if not already established.

On Re-registration of Vehicles

Under Paragraph 837, the budget provides for the re-registration of government vehicles, which is one of the best things to happen to Ghana. The CLGA is of the view that, this must be extended to the MMDAs to help properly monitor and manage their assets. Presently, the assets registers of most of our MMDAs do not provide the required information to support effective asset management including vehicles.

On Alignment of Statutory Funds Expenditure to National Policies and Priorities

Under Paragraph 852, the budget provides for aligning Statutory Fund Expenditure to National Policies and Priorities. However, CLGA is of the view that, this is what the composite budget and planning guidelines are expected to be doing. This harmonization is important for proper plan coordination and budget implementation discipline. By the above, the supplementary budget of MMDAs for the DACF may not differ from their budget for utilizing the DDF and the UDG. We need harmonization. This means the 2015 District Assemblies Common Fund utilization guidelines must be synchronized with the guidelines for DDF and UDG utilization guidelines.

On Deepening GIFMIS Implementation in Ghana

The continuous deepening of GIFMIS is in the right direction. CLGA wish to encourage government to fast-track the process and ensure that GIFMIS is extended to all MMDAs before the roll-out of IPSAS. Government is advised to also reduce its overdependence on development partners in the implementation of GIFMIS as any delay in the release of funds may have dire consequences on the process.

On Costing of the   GSGDA II

The completion of the GSGDA II based on which the budget was prepared is a welcoming news. However, CLGA will encourage government to take steps to complete a full costing of the GSGDA II as was done for the successor document GSGDA I. By this , it gives the nation a fair idea of the total costs to be incurred in  implementation of the national development plan over the GSGDA period for effective budgeting .

On Ensuring Budget Implementation Discipline

Though the need for fiscal prudence and budget implementation disciplines has been mentioned in a number of advice documents to governments such as Senchi Consensus and the recent IMF Mission to Ghana Report, the 2015 Budget shows little commitment to attaining this. The CLGA wish to reiterate this and encourage government to ensure fiscal discipline in the budget implementation process. By this, Government is encouraged  not to  allow political expediency to override economic efficiency in the management of the 2015 budget.

On Improved Resource Mobilization

Increased resource mobilization is one area the budget dwelt so much on. CLGA wish to encourage government to continue to step up efforts at increasing resource mobilization by not only widening the tax network but also improving the tax collection systems and motivating officers and agencies responsible for tax collection. Tax mobilization projections have more often than not been understated, leading to early announcement of exceeding targets; yet these are not reflected in making such funds available for development. This must be improved with the Ghana Revenue Authority (GRA) taking a lead role in this initiative.

On Development of IGF Strategic Guidelines

Again, the organization of the National Conference on IGF is critical but the IGF Strategic Guidelines which were developed out of the Conference must be approved for implementation in order to  guide the MMDAs in the mobilization and utilization of IGFs.

On Streamlining Non-Tax Revenue (NTR) Mobilization and Management

Streamlining improvement in mobilization and management of Non-Tax Revenue will be key in the implementation of the 2015 Budget. Government has given more prominence to the mobilization of tax revenue to the detriment of Non-Tax Revenue (NTR) for both MDA and MMDAs. However, growing NTR is a condition for improved total national revenue. Though an NTR unit exists at the MoF, there is no national NTR policy. Going forward, CLGA wishes to advise government to give priority to grow NTR by developing and operationalizing a national NTR policy to rationalize, grow and ensure efficiency in the management of NTR.

On Resourcing the National Pensions Regulatory Act (NPRA)

The operationalization of the National Pensions Regulatory Act which sets up the National Pensions Regulatory Authority (NPRA) is one area government need to keep an eye on. This is most important because of the current discussions around the management of the second tier pensions systems. CLGA calls on government to properly resource and capacitate the NPRA under the budget to properly perform its functions required by the Act so that public sector workers including Civil and Local Government Workers (CLOSAG) will continue to enjoy their benefits on retirements.

On Rationalizing Social Protection Expenditure

The Budget also makes provision for various social protection expenditures. CLGA  agrees on the need for social protection interventions in a country like Ghana, but calls for a rationalization and harmonization of social protection expenditures to ensure coherence and proper targeting to avoid duplicity. This, CLGA is of the view that it would require a consolidated national social protection policy, to anchor and properly provide a policy and institutional framework to coordinate all social protection interventions in Ghana. The current fragmented and piecemeal approach to social protection interventions can affect the nation through duplication of cost and improper targeting. This has been part of the increasing public expenditure which can be reduced.

On Resuscitation of the Local Government Finance Bill and Development of the Capital Market to issue Municipal Bonds

The 2015 Budget also envisages the resuscitation of the Local Government Finance Bill to provide a framework for harmonizing local government financing. The CLGA cautions government to hasten slowly in the introduction of a Local Government Finance Bill (LGFB) especially if it will lead to local government borrowing through the issuance of municipal bonds. Though it is good to develop the capital markets of Ghana along those lines, care must be taken and ensure that IPSAS is fully adopted and extended to the local governments before operationalizing the Bill. This will introduce credibility in their financial reporting and meet especially the accrual basis of reporting required by Regulation 186 of the FAR (2004). The CLGA calls on government to fast-track the development of Ghana’s capital market to prepare the market to facilitate the issuance of municipal bond by MMDAs.

On the Use of ‘Automatic Adjustment System’  for Pricing Petroleum Products.

The benefit of applying the ‘automatic adjustment’ pricing formula for fuel is acknowledged, but government is advised to ensure that its two way benefit is attained; to the government when circumstances calls for price increases as a result of increase in petroleum products prices on the world market and a price reduction to benefit consumers when prices of petroleum fall at the world market.

On Segregation of Solid Waste

The Budget also provides for ‘A 3-way solid waste segregation programme’ was piloted within the Ministry of Local Government and Rural Development. The programme is to ensure waste reduction, reuse and recycling to facilitate value addition to the waste we generate. It involves the provision of Green, Blue and Brown coloured bins to receive organic, plastic and paper wastes, respectively.  It also indicated that ‘in 2015, the programme will be rolled-out to all MDAs and MMDAs. In collaboration with the private sector, Community Buy-back Centres will be set-up to buy sorted materials to feed relevant domestic factories’.

What has become of the establishment of a ‘Plastic Waste Recycling Fund’ required to be established under the Customs and Excise (Duties and Other Taxes) (Amendment) Act,2013, Act 863. Sources of funds were to come from 50% of the 10% on the ex-factory  price as excise duty  on Plastic and Plastic Products listed under Chapters 39 and 63 of the Harmonized System and  Customs Tariff Schedules 2012. Let us establish the Plastic Waste Recycling Fund required by the Act if not already established to support the above.

On Registration of Births and Death

The Budget also provides under Paragraph 327 that, the Births and Deaths Registry will continue to register births and deaths whilst the turnaround time for issuing of true certified copies of entries of births and deaths will be reduced from two weeks to one week. For the implementation, an amount of GH₵290,983,971.00 has been allocated. Out of this, GH₵47,721,742.00 is GoG(16%), and GH₵243,262,229.00 is from Development Partners(DP) (84%).CLGA cautions government on the over dependence on DPs for Decentralization and local government  issues as trends in the past indicated the dwindling nature of donor funding for such programmes.

On Temporary Moratorium on Adoption

Under Paragraph 105, the Ministry of Gender, Children and Social Protection (MoGCSoP)  has placed a moratorium on child adoption in Ghana ostensibly to address current challenges and protect adopted children and their foster parents. For how long and what precipitated this? Also under Paragraph 108 the Ministry aims at expanding the implementation of the LEAP to cover over 200,000 household beneficiaries to improve their socio-economic status and ensure the survival and development of children as well as to promote the welfare of the vulnerable and excluded in society. Couldn’t we have used a decentralized structure which has regional and district beneficiary system ?

On Standardization of Procedure for Land Title Registration

Paragraph 390 also provides for a ‘Standardized Decentralized Procedure for land title registration’. The CLGA wants to know how MMDAs are involved in this arrangement since they are the planning authorities and can zone and rezone an area. CLGA is of the view that they must be involved in this decentralized arrangements.

On Development of a National ‘Permitting System’

Under Paragraph 451, the budget provides for the Development of a National ‘Permitting System’. It is the view of the CLGA that MMDAs must be involved from day one to avoid any future implementation challenges.

On ‘Protection of Ghana’s Territorial Waters’

Under Paragraph 393, the budget provides for the ‘Protection of Ghana’s Territorial Waters’. CLGA is of the view that there is the need for a full disclosure of how much is going to cost Ghana in the fight against its maritime boundary case under the United Nations Convention on the Law of the Sea (UNCLOS) with the Republic of  Cote d’Ivoire.  Ghana has currently applied to the International Tribunal on the Law of the Sea ( under the arbitral procedures),  of Annex VII of UNCLOS on the determination of its maritime boundary with Cote d’ Ivoire. This is an important development for Ghana’s oil finds and Local Economic Development (LED) . The question of how much is it going to cost Ghana to prosecute this case  is important for budget implementation . The 2015 Budget is silent on this important cost element. Its disclosure becomes important when it is reported that Nigeria in 2002 spent $300 million to prosecute its case with Cameroun over the Bakassi Peninsula yet they lost the case

Source:www.thisdaylive.com/articles/presidential-panel-divided-over-bakassi/127132/     retrieved on Saturday 22nd November, 2014).

Though facts and forum of the two cases may differ, for prudent financial management we have to make some projections and prepare adequately for the case so that it does not affect any of our budgetary projections. CLGA cannot expect  the Ministry of Justice to  pursue this case with its meager budgetary provision of  GH₵74,350,282.00  under paragraph 684 of the budget.

On Sector Selective Implementation of a Local Content Policy

Under Paragraph 468, the budget provides for the implementation of a Local Content Policy for  power and petroleum downstream sub-sectors. The CLGA is of the view that, application of the local content regulations must be extended to all other sectors of the economy and  implemented in collaboration with the respective MMDAs for sustainability, effective monitoring, quality assurance  and mainstreaming into their  Medium Term Development Plan (MTDP).

On Mainstreaming of Issues of Persons with Disability into Development Plan (PWDs)

Under Paragraph 664, the budget provided for the mainstreaming of issues of PWDs into the nation’s development planning processes. The CLGA is of the view that, though this is a good move, it is long overdue considering that the Disability Act of 2006 grants a moratorium of 10 years for all existing buildings to which the public has access to make those buildings accessible to and available for use by PWDs (under sections 58 and 60 on Regulations of the Disability Act).This expires in 2016. So effective 2017 we have to enforce this requirement. However this applies to only buildings in existence before the Disability Act was passed in 2006. So what have we done on buildings constructed after the passage of the Act. The CLGA is of the view that we should not wait as a nation  to pass an  L.I before enforcing the moratorium provision to protect our brothers and sisters.  The National Disability Council has also not established its Regional and District offices as required by Section 49 of the Disability Act . This creates a big gap in the bottom up involvement of PWDs in the governance process.

In addition to the above, there is the need for designation of special parking places for PWDs by MMDAs and other operators of transport stations so that they do not struggle with able bodied persons for transport  required by section 26 of PWD Act has also not been complied with  . Also not complied with is the provision in the Act requiring the reserving of seats on all public vehicles for PWDs at all times as indicated under Section 29 of the Act.  All  the above are critical and the CLGA calls for a fast tracking approach to fully implement the National Disability Act.

On Guidelines for Tracking Corporate Social Responsibility (CSR)

Under Paragraph 387, the budget provides for guidelines for the tracking of Corporate Social Responsibility (CRS). It is the view of the CLGA that, this must be done in partnership with the MMDAs for quality assurance, reduced duplications, coordination and ensure  targeted development. Involving MMDAs has far reaching implications for its success, sustenance and proper mainstreaming into their Medium Term Development Plans. MMDAs are to consider CRS as sources of funds or resources for development. By their creation, they are to ensure better coordination of these CRS guidelines to ensure compliance. The Minerals Commission should therefore collaborate with MMDAs operating in mineral rich Districts for effective tracking to reduce social conflicts.

On Budgetary Provision for 2015 Local Level and Unit Committee Elections

In the budget, the Electoral Commission is provided with estimates to perform the following functions:
  • Conduct the District Assembly and Local Governance elections in all 216 MMDAs;
  • The Commission will sensitize the public to increase awareness of the District level electoral process and  the conduct of the District Assembly and Unit Committee Elections;
  • Audit political party accounts to enforce legal and financial compliance for political organization.

For the implementation of the above activities, an amount of GH₵35,700,455.00 has been allocated.  However, provisions for same activities were made under the 2014 budget for the EC with a higher amount of  GH¢141,082,137  . A review indicated that not even 50% of functions earmarked to be performed in 2014 were performed by EC. The 2015 Budget has also provided for similar activities with a reduced budget of .  GH₵35,700,455.00.  CLGA wants to understand the following ;
  1. Are we going to see the local government elections organized at all?
  2. Why the drastic cut in the EC’s budget from GH¢141,082,137 in 2014 to GH₵35,700,455.00 in 2015 for similar activities?
  3. Where the 2014 activities performed by the EC at all ?

On Fiscal and Monitory Policy Reconciliation

CLGA reiterates its call for the adoption of a tighter policy stance complemented by a strong and effective fiscal discipline to achieve the inflation target. This will require effective policy reconciliation between the monetary and fiscal policies of Ghana. There is the need for a formal policy reconciliation forum for the Bank of Ghana in terms of monetary policy and the Ministry of finance (MoF) in areas of fiscal policy. Such policy reconciliation forum is critical to maintain a balance in the policy space of Ghana.

On Consistency of MMDAs Composite Budget with National Budgets and Extension of PBB to MMDAs

Under Paragraph 808 of the budget, it provides for making MMDAs budget consistent with national budgets. It is the view of the CLGA that, this must be carefully done so that it does not affect the  implementation of the District Composite Budget, Programme Based Budget  (PBB) and GIFMIS so it does not affect the operations of the MMDAs. IPSAS must be operationalized before MMDA borrowing under the Local Government Finance Bill become fruition. The proposed GIFMIS rollout of P2P to at least 50 more MMDAs require a gradual phase by phase introduction of PBB. This must also fit into the operationalization of IPSAS;

On Provision for the Work of the Constitutional Review Implementation Committee (CRIC)

Nothing was also said in the  budget about arrangements and budgetary provisions for the work of the CRIC in implementing the government White Paper on the Constitutional Review Committee report.
  • Are we going to see the referendum and other amendments to the Constitution happening in 2015?
  • If so, what are the budgetary and financial requirements of the state and when is this going to happen?
  • Are we going to see it happening together with the local government elections?
  • If so, what sensitization measures are we putting in place to help citizens understand the implications of the targeted amendment for national development?

On Low IGF for Newly Created Districts

The budget provides for the IGFs of MMDAs. However there is a problem with that of the newly created MMDAs.  A review of the performance of newly created MMDAs in the greater Accra Region indicated below speaks for itself

From the above, it is clear that majority of the MMDAs who were not able to meet their IGF projections were in the category of newly created Districts (2012). Most of them have boundary disputes by virtue of the nature of their L.Is. An early resolution of this dispute and communication of same to the rate payers is critical. The budget is however silent on this important function of resolving boundary disputes among local governments and communication of same to the respective local governments. The case of  Tema Metropolitan Assembly (TMA) and Kpone-Katamanso,  Adentan and La-Nkwatanang Madina  are few that require consideration.  Questions that are begging for answers include:
  • What is the status of the MMDA Boundary Dispute Committee’s work? 
  • How is it going to affect the implementation of the 2015 Composite Budget of MMDAs?
  • What is the status of the socio economic data bases of such newly created MMDAs to warrant the mobilization of IGF?

Other areas not provided for in the budget  

The Budget did not also adequately provide for various essential areas of local government.
  1. Provision was not made for the Local Government Service (LGS) and the Institute of Local Government studies (ILGS). Administrative decentralization is going to suffer if  these two institutions are not well resourced;
  2. IMCC which has emerged as one of the strongest institutions to effectively coordinate the decentralization implementation in Ghana has not also been provided for;
  3. Provision was also not made for the resolution of the existing District boundary disputes;
  4. Provision was also not made for the operationalization of the Urban, Zonal, Town and Areas Councils and the Unit Committees which are critical for the success of any local government;
  5. Processes for permanently sharing assets and socio-economic data between the old and newly created MMDAs were also not provided for in the budget;
  6. There is an impending new Decentralization Policy (yet to be approved by IMCC and Cabinet) to replace the 2010 policy to run from 2015-2019, no mention has been made in the budget statement; is it to say that implementation will delay?
  7. In the era of Composite Budget, nothing was said about Assembly members’ ex-gratia payments;
  8. Nothing was said about the national Local Economic Development (LED) policy which has   been completed and  its implementation;
These were not given priority in the budget but has the potential of affecting the composite budget and the entire Decentralization implementation process.

Conclusion

The CLGA encourages government to continue to make adequate provisions for local government and decentralization in Ghana as that is the only way by which the nation can achieve accelerated development through a bottom up approach.



Other Related Links

Other Related Links