In difficult times like the one presented by Covid -19, every country goes into firefighting mode with all missiles to combat and defeat the challenge for the public good and political capital. Meanwhile, the ordinary business of government continues: salaries are to be paid, goods and services to be supplied and interest expense obligations to be honoured.
The economic impact of Covid-19 on the fiscals and businesses is enormous to be contained within the national budget. Tax revenues (both direct and Indirect) will fall significantly, revenue from oil will reduce thereby decreasing the Annual Budget Finding Amount (ABFA).
On the other hand, the business will be directly affected adversely and therefore require some stimulus packages from the government. These shocks to the fiscal performance of government need to be contained, as intended by the statement presented by Minister of Finance to Parliament very recently. This again exerts unanticipated pressure on the government budget.
Under the public financial legislations, the Contingency Fund and other funding resources, including budget realignments are open to government for dealing with the COVID-19 challenge.
The primary source of funding of unexpected events of government is the Contingency Fund under Article 175 & 177 of the 1992 Constitution. In the wisdom of the Constitution, Article 177 (re-echoed by PFM Act 2016, Section 36), events such Covid-19 should be addressed using the resources accumulated in the Contingency Fund. It provides:
Undoubtedly, this arrangement would have helped to address the COVID-19 significantly. However, successive governments since 1993 have failed to build up the Contingency Fund for the reason of lack of funds. In the instant case, the Minister of Finance is proposing the funding for the Contingency Fund amidst the Covid-19, which is rather late. Perhaps, other countries were able to announce huge packages for the combat of Covid-19 out of their contingency funds built over time. Obviously, the country fails to think ahead for a day like this and this is where our problem originates, not Covid-19 per say.
The Minister of Finance is empowered, subject to the approval of Cabinet and Parliament, to allocate and reallocate resources of the State within the fiscal framework. In addition, the Minister of Finance is responsible for the general management of the finances of the country. Thus, the Statement of Minister of Finance to Parliament on the impact and implications of Covid-19 asking for realignment of certain resources towards the fight is in order.
Accordingly, he made seven proposals to Parliament: recapping the Stabilization Fund, deferment of interest payment, Adjustment of Expenditures, World Bank DPO, IMF RCF, Reduction of Net carried and Participation Interest and finally the withdrawal from the Heritage Fund (MOF, 2020). All these measures except the use of the heritage fund are reasonable and acceptable.
Ghana Heritage Fund and COVID -19
The Ghana Heritage Fund (GHF) is established under the Petroleum Revenue Management Act (PRMA) 2011, Act 815 and later Amendment in 2015. The object of the GHF is toprovide an endowment to support development for future generations when petroleum reserves have been depleted and receive excess petroleum revenue. Thus, the law intends to ensure that the future generation is factored into the use of the petroleum revenues in a sustainable manner.
The PFM Act 2016 emphasizes the importance of generational balance in fiscal policy formulation. Section 13 (1 a) provides that fiscal policy shall be developed in a manner that takes into account the impact on the welfare of the current population and future generations. Undoubtedly, moneys in the GHF is not for the current generation but for the welfare of future generation.
The country must learn to provide better lives for the generations yet to come for a better and prosperous Ghana in many years to come. Ghana has already mortgaged the future revenues to huge debts and therefore taking away the little resource dedicated to the future generations will be unfair. The current generations are quick, over the years, to propose the depletion of the GHF for satisfying current needs at the blind side of the future generation.
Covid-19 is a wake-up call for government to consider the establishment of Contingency Fund with alacrity, by ensuring that certain amounts are voted annually into the Contingency Fund in a sustainable manner. Special donations should also be channelled into the Fund to increase the capacity of the Fund to meet future unexpected happenings without the need to run to donor partners. This will help government to meet any future contingencies with confident.
In the instance, the government is discouraged from depleting the GHF resources at the detriment of future generations. The depletion of GHF to meet the demands of Covid-19 is not a fair proposal as it works against generational balance principle in public financial management. Government should consider other means of funding the Covid-19 that have less implications for the future generations.
For example, compensation of employees in the public sector takes a significant portion of the revenues of government and asking for pay cut in the public sector for an agreed period will contribute a lot to the fight of the Covid-19. Goods and Services and capital expenditure (CAPEX) alone should not suffer the cut, compensation of employees should suffer too. In the midst of the fight, collective effort is need to win as a country.
The writer is a Senior Lecturer in Accounting at University of Professional Studies Accra (UPSA) and a PhD Student of School of Public Service and Governance, Ghana Institute of Management and Public Administration (GIMPA).