QUESTION 1

Recently at a press conference, Network of Critical Governance (NCG), a collation of civil society organisation (CSOs) in governance and accountability, has described the fiscal condition of the country as abysmal and cautioned that if care is not taken the country will fall into a bottomless pit. However, NCG did not provide any evidence to support their claims and prediction. They only directed the press and the public to go and fetch the fiscal data of the year and find out for themselves.

After the press conferences, a leading Media House in the country has downloaded the fiscal data of the year 2020 from the website of government and posted it on the social media for everyone to see. The data posted, which is verified to be true, is as follows:

Direct taxes

Indirect taxes

Other revenues Compensation for employees Goods and Services

Interest Expense Capital expenditure Other expenditures Domestic debt

External Debt

Gross Domestic Product

GHmillion 35,000 45,000 6,000 61,000 12.,000 42,000 4,000 24,000 125,000 185,000 372,000

The Minister of Finance, however, insists that the NCG does not know what they are about and that they are politically motivated. He concludes that the fiscals of the country are robust and unprecedent in the history of Ghana despite the COVID-19 disruptions. He advises the public to ignore the noises of the collation.

The Minister further explains that the government is considering abolishing the annual budgeting practice so as not to put too much information in the public domain about the fiscal plans of government. He is optimistic that Cabinet will give approval to the proposal and the noises will stop. He added that abolishment of budget preparation will do more good to the country than harm.

Another concern of NCG is how government is going about the procurement of COVID-19 Vaccine for the entire population. It contends that government should use the international competitive tendering method of procurement in order to ensure value for money. Again, the Minister debunked the view indicating that the country will proceed with the single source procurement method in order to save lives. The most important thing is the vaccines arrive at the Kotoka International Airport, he added.

2

NCG also raises issues about the porous public financial management system (PFM) of the country, expressing that the country needs a robust PFM to achieve its development goals. It has cited the Public Expenditure and Financial Accountability (PEFA) report to make the case that Ghana is performing poorly in PFM. It observes that all the seven pillars of PFM are very weak and porous and government must do the necessary investments to improve the system. The Minister agrees with the NCG and indicates that government welcomes proposals as to how the PFM system can be improved to deliver the intended outcomes. The Minister discloses that the government is proposing to establish a fund purposely for improving the PFM. The PFM Fund, when established, will bring total transformation to the PFM in Ghana.

Required:

a) Based on the computation of relevant fiscal indicators in accordance with the Public Financial Management Act 2016 (Act 921), discuss the fiscal performance of the country and indicate (with reason) whether you agree with the assessment of NCG.

(10 marks)

b) Based on your computations of fiscal indicators in question (a) above, suggest three (3) fiscal policies to government to improve the situation. (6 marks)

c) Discuss the merits of the proposal of the Minister of Finance to abolish national budgeting, and clearly indicate your position on the acceptability and feasibility of the proposal. (4 marks)

d) Discuss the strengths and weaknesses of the proposal of NCG to use international competitive tendering method to procure the COVID-19 Vaccine for the entire population and make an informed judgement on the use of the proposed method.

(5 marks)

e) Examine the merits of the proposal of the Minister of Finance to establish a PFM Fund for the improvement of PFM system in Ghana and suggest three areas that the monies

accruing to the fund should be applied.

(5 marks) (Total = 30 marks)