Dr Mahamudu Bawumia has proposed plans to cut down the government’s spending. He said for tighter control over government spending, the existing fiscal rule needs to be amended.
The NPP flagbearer made the proposal when met with the Trades Union Congress, today, May 28, 2024. Bawumia said the existing rule allows room for the government to overstep, something he says does not enforce discipline.
“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.
According to the Vice President, an amended fiscal rule should cap the government’s spending to not more than 105% of the previous year’s revenue. He said that would offer some control over the current rule.
“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.
Also, Dr Bawumia said there is a need for an independent Fiscal Governance Council with the sole purpose of ensuring the Ministry of Finance is held in check. He said currently there no such oversight authority with complete independence to monitor 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.”