Date: March 5, 2013, 11:19 am


1.0 Introduction

The Institute for Fiscal Policy (IFP) is a Non-Profit and Non-State Institution promoted by the Integrated Social Development Centre (ISODEC). It is devoted to the pursuit of transparent and accountable economic governance through research, training, policy advice and advocacy towards sustainable development in Ghana and West Africa.

As part of its tradition, the Institute collaborates with ISODEC in analyzing the Budget Statement and Economic Policy of the government of Ghana to ascertain the impact of government policy on the poor. This has always been preceded by a pre-budget analysis that brings to the fore the expectations of the two (2) institutions for the national Budget.

 The Institute will be glad to use your medium to circulate the analysis and expectations of the 2013 Budget Statement and Economic Policy. It is envisaged that this circulation will go a long way to educate the general public on what to expect from the budget.

2.0 Analysis and Expectations

2.1 Macroeconomic Outlook

2.1.1 Gross Domestic Product (GDP) growth and Job Creation

Government Budgets for the past four years have focused on infrastructural development and job creation but this objective is not being met as the country continuous to face chronic and growing levels of unemployment.

The Institute expects to see in the 2013 budget a targeted GDP growth rate that is pegged on job creation not only in the Oil and Gas sectors but in other sectors with greater potential to reach a larger proportion of the vulnerable population such as Agriculture.

Given that women constitute a higher proportion of the poor,  IFP expects  clearly defined policies  on addressing the level of unemployment  with a  focus on investment in areas related to women such as the Food Crop sectors in Agriculture, Agri-businesses, Trade, Distribution and Catering, Craft and related trade.

2.1.2 Fuel Subsidies

Fuel Subsidies have become a burden on the government of Ghana but their removal will have adverse impact on the economic wellbeing of the poor.

It is expected that, in the 2013 national budget, Government will lay out clearly defined policies and programmes that will aim at mitigating the potential hardships emanating from the reduction of fuel subsidies.

2.1.3 Taxes

Government, in the 2012 fiscal year, increased the threshold for presumptive tax from GH₵ 90,000 to GH₵ 120,000. This range includes micro enterprises whose annual turnover range between GH₵ 1000 – GH₵ 10,000.

In the 2013 fiscal year, Government should charge taxes to businesses with turnover in the range of GH₵ 1000 – GH₵ 10,000 based on assessment of activities and turnover and apply the presumptive tax on those businesses with turnover within the range of GH₵ 11,000 to GH₵ 120,000.

2.2 Education

2.2.1Basic Education Resource Allocation

Basic education allocation in 2008 was 55.7 per cent of total sector allocation. In subsequent years declining trends emerged, resulting in consistent drops in expenditure allocation (actual) to 48.9 per cent in 2009 and a much further decline to 45.1 per cent in 2010. This implies that the financing targets set in the Education Sector Strategic Plan (2010 - 2020) may not be achieved if the current declining trend continues and this will seriously affect education outcomes in the future.

Given this allocation trend, the 2013 education sector budgetary allocation is expected to be scaled up to bridge the funding gap to the respective stages of the basic education sector.

2.2.2 Resource Allocation to Capitation Grant

Resource allocation to the Capitation Grant has experienced considerable reduction. The percentage share of allocation to this category declined from 1.35 per cent in 2008/2009 rose to 2.99 per cent in 2010/2011 and started to decline in 2011/2012 reaching 2.53 per cent, a 0.45 per cent drop. This pattern of allocation has serious implications for quality service delivery.

The Capitation Grant coverage is has to be expanded and well resourced in the 2013 education sector budget to specifically target the School Performance Appraisal Meetings (SPAM) and the in-service training initiatives at school level. It should also provide for reading materials for the KG stage on account of the inherent potential that this could have as a catalyst to effect the desired changes in performance outcomes. 

2.2.3 Resource Allocation to the School Feeding Programme

The School Feeding Programme had a 20 per cent increase in allocation for 2012. It also saw a rise in the number of beneficiaries by about 61.7per cent.

The 2013 budget is expected to develop a mechanism for proper targeting to be done in the 2013 budget especially by ensuring that most of the schools in the deprived areas benefit from this programme. It is also expected that there will be an increase in the amount allocated which should be commensurable to the number of beneficiaries to provide the right nourishment to pupils.

2.3 Health

2.3.1 Sector Resource Allocation

Government of Ghana (GOG) allocations to the health sector for 2012 shows a considerable increase in investment of 5.6 per cent above the 2011 investment allocation to the sector. Although Wages and Salaries continue to dominate the expenditure for 2012 as it was for 2011, their share   declined by 5.3 percent compared to 2011.

The investment component of the 2013 budgetary allocation to the education sector is expected to be increased above the 2012 allocation.

2.4 Water and Sanitation

2.4.1 Sector Resource Allocation

The water sector in Ghana has over the years been donor dependent. In 2010, the donor component alone accounted for 78% of the total budgetary allocation to the Ministry of Water Resources Works and Housing. The share of donor went up to 94.85% in 2011 of the total allocation to the Ministry and 73% in 2012. This high dependence on donor funding could be detrimental to the sector in that its contribution could reduce drastically in subsequent years in view of the global financial meltdown. In the final analysis, this will negatively affect programme execution in the sector.

Given the donor dependent nature of the water sector in Ghana we expect that Government, in the 2013 budget statement, should proffer alternative ways of generating revenue to support the sector, particularly the allocation of a percentage share of domestic revenue.

2.5 Social Protection

2.5.1 Trend in Budgetary Allocation

The Ministry of Employment and Social Welfare (MESW) and the Ministry of Women and Children’s Affairs (MOWAC) were previously the main public institutions charged with the social protection mandate in Ghana.  From 2009 to 2012, MESW received its largest expenditure allocation in 2012, when it received GHC 37,928,026, representing an 8.7 per cent increase over its 2011 allocation. MOWAC’s expenditure allocation followed a similar trend: in 2012 it received GHC 15,688,200, representing17.63 per cent increase over its 2011 allocation. How these increases impact on the quality of service delivery is very important. With the creation of the Ministry of Gender, Children and Social Protection, the portfolio is broadened and if care is not taken, social protection could be compromised.

We expect an increase of allocation to the newly formed Ministry of Gender, Children and Social Protection to enable it to improve its service delivery. This allocation, it is expected, will take cognizance of its new mandate of social protection.

2.5.2 Livelihood Empowerment Against Poverty (LEAP)

In the 2010 national budget statement, the number of households covered under the LEAP was about 45,000. Although the number of households covered increased to 65000 in 2011, it remained the same in 2012. Compared with a national household size of about 5 million, the 2010 coverage represents some 0.8 per cent of the national household size and 1.2 per cent in 2011 and 2012.Considering the national poverty headcount rate of 28.5 per cent and the global financial crises with its adverse impact on poverty eradication, the number of poor households covered is inadequate.

Given this inadequate coverage level of the programme, Government is enjoined to increase its coverage by at least 5 per cent based on the increase from 2010 and 2011 household level.

3.0 Key Findings

  1. The social sector in Ghana is still under-resourced and this could negatively affect policies and programmes with direct impact on women and children.
  2. Although government’s policy stance as far as the national economy is concerned entails achieving both stabilisation and growth, these have not been employment inducing.

4.0 Conclusion

The Ghanaian economy is certainly in a tight corner. The huge amount of money going to cater for public sector wages and salaries ( at 9.27 % of GDP in 2012) coupled with the potential reduction in donor funding due to the global financial crises portend that prudent management of the national economy is imperative. In mapping up policies in this direction, the plight of the poorest poor should remain central.





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