Fiscal Openness (GH0017)

Prudent management of public expenditure is necessary to avoid budget overruns in a manner that endangers national fiscal stability. Several works have been done by Civil Society Organizations in the area of compiling essential information on the need for a Fiscal Responsibility Bill. Under the 2013-2014 Action Plan, Ghana is committed to enact a Fiscal Responsibility Law that would instill discipline in her fiscal management with the view to determining when expenditures are veering off approved estimates. The implementation of this commitment has not been achieved.
The aspiration in the West African Region is that there is the need for a common fiscal and monetary policy that will establish a fiscal ceiling for all member states of the regional body.
However within the specific context of Ghana opinion is divided on whether or not there is need for a stand-alone law on Fiscal Responsibility.
Therefore, during the planned period, OGP Ghana undertakes to facilitate the building of national consensus on the need for the Law.

4. Fiscal Responsibility

Commitment Text:

Prudent management of public expenditure is necessary to avoid budget overruns in a manner that endangers national fiscal stability. Several works have been done by Civil Society Organizations in the area of compiling essential information on the need for a Fiscal Responsibility Bill. Under the 2013-2014 Action Plan, Ghana is committed to enact a Fiscal Responsibility Law that would instill discipline in her fiscal management with the view to determining when expenditures are veering off approved estimates. The implementation of this commitment has not been achieved.

The aspiration in the West African Region is that there is the need for a common fiscal and monetary policy that will establish a fiscal ceiling for all member states of the regional body.

However within the specific context of Ghana opinion is divided on whether or not there is need for a stand-alone law on Fiscal Responsibility.

Therefore, during the planned period, OGP Ghana undertakes to facilitate the building of national consensus on the need for the Law.

Action:

·  Organize one (1) international conference on international best practice within enacting and implementing a Fiscal Responsibility Law in Ghanaian context by May, 2016

·  Organize 1 national two-day consultative workshop on the need for and content of a Fiscal Responsibility Act by August, 2016

Editorial note: The first action in the language of the commitment was split into two separate milestones (4.1 and 4.2) in the table below to capture the government’s commitment to “enacting and implementing a Fiscal Responsibility Law in Ghanaian context.”

Lead Instituions: Office of the Chief of Staff, National Development Planning Commission (NDPC), Ministry of Finance (MoF)

Supporting Institutions: Parliamentary Select Committee on Subsidiary Legislation, Centre for Economic Policy Analysis, Institute of Economic Affairs, Natural Resource Governance Institute (NRGI)

Start date: Not specified                                              End date: August 2016

Context and objectives

The commitment to enact a Fiscal Responsibility Law (FRL) was in the previous action plan but the bill was not passed. The FRL is part of the Public Financial Management (PFM) bill. The PFM bill was designed to address persistent weaknesses and promote discipline, transparency and accountability in the management of public funds. The FRL bill will introduce permanent rules of fiscal discipline. It also contains a requirement for managing fiscal risk by improving the development and execution of fiscal policy and providing a clear budget process map.   ^{"Ghana needs Fiscal Responsibility Act - Bawumia," GNA (26 Mar. 2014), http://www.ghananewsagency.org/economics/ghana-needs-fiscal-responsibility-act-bawumia-72666.}  

International Conference: The conference intends to consider international best practices within a Ghanaian context of enacting and implementing the law. Ghana belongs to the West African Monetary Zone (WAMZ). WAMZ members want to introduce a single currency, to be called ECO, and a monetary union. Prior requirements to the adoption of ECO for all WAMZ countries include attaining a set of primary and secondary criteria, including single digit inflation rate and a fiscal deficit of no more than four percent of the GDP. ^{These criteria divided into two namely Primary Convergence Criteria (4) and Secondary Convergence Criteria (6). For a full list of Primary and secondary criteria, please see “West Africa’s single currency reliant on economic growth” at http://www.africanreview.com/finance/economy/west-africa-s-single-currency-reliant-on-economic-growth}  FRL provides the legal basis or framework for the enforcement of the criteria and ensuring fiscal discipline. Therefore, it is necessary to hold an international conference to establish a common fiscal and monetary policy that will establish a fiscal ceiling for all member states of the regional body. While sharing best practices for fiscal discipline could contribute toward building support for the FLR, this milestone is of unclear relevance to OGP values.

Pass FRL: The government tends to overspend and borrow money from central banks, therefore creating inflationary trends in the country. ^{"Ghana needs Fiscal Responsibility Act - Bawumia," GNA (26 Mar. 2014), http://www.ghananewsagency.org/economics/ghana-needs-fiscal-responsibility-act-bawumia-72666..}  FRL would set an important legal basis for ensuring prudent management of public spending to avoid budget overruns. From the language of the commitment, it is unclear whether the bill will advance OGP values of better access to information or public accountability. Nonetheless, the potential impact of the law could be transformative in instilling discipline in government spending.

Consultations on Need for Fiscal Responsibility Act (FRA): This milestone aims to organize a two-day consultative workshop on the need for FRA but lacks detail on the workshop’s attendees. Because the language of the commitment does not specify whether actors outside of government would be invited to the workshop, the relevance of this milestone to OGP values is unclear. Given the aim of the PFM Act and the efforts to build national and international consensus, the researcher coded the impact moderate because bringing diverse stakeholders together to agree on the Act’s content is crucial to the sustainability of such a law.

Completion

The commitment is coded as having ‘‘limited” completion. Within this review period, one milestone was being worked on by the government, and two were not started.

International Conference: According to the respondent in charge of implementation of the law, the international conference was not carried out.

Pass FRL: The respondent at the Ministry of Finance (MoF) stated Ghana’s new PFM Law, Act 921, incorporated fiscal responsibility and hence fulfilled the commitment to enact a fiscal responsibility law. The researcher procured the PFM Act and Sections 13 to 17 do indeed focus on fiscal responsibility. This legislation was passed on 3 August, 2016, after the period of implementation under consideration, but this updated completion level will be reflected in the end-of-term report. Stakeholders such as the Institute of Chartered Accountants unsuccessfully opposed the passage of the bill under a certificate of urgency (as the bill was passed urgently), arguing that it did not give them sufficient time to “contribute to the development of this most important law.” ^{Abu Mubarik, "Fiscal Discipline: Parliament passes Public Financial Management Bill," Pulse.com.gh (4 Aug. 2016), pulse.com.gh/finance/fiscal-discipline-parliament-passes-public-financial-management-bill-id5341709.html.}    

A press statement issued by MOF said with the passage of PFM, fiscal management shall be carried out in accordance with best practices and standards. MoF also gave assurances that timely fiscal information shall be made available to enable effective scrutiny of fiscal policy and public finance management.   ^{"Ghana's New Public Financial Management (PFM) Law Act 921," Ministry of Finance (Press Conference: 20 Sept. 2016), http://www.mofep.gov.gh/sites/default/files/news/Presentation%20on%20the%20New%20PFM%20Act%20-%20media.pdf.}  

Consultations on Need for FRA: While MoF did not organize a two-day consultative workshop on the content of the bill, it held a consultative process to build a national consensus on the bill. ^{Ministry of Finance official in charge of the PFM law, discussion with IRM researcher, 19 Sept. 2016.}  The respondent at MoF provided evidence of scanned PDF copies of invitation letters for a series of meetings on the bill. ^{The respondent provided about sixteen different invitations letters on the consultation process.}  The meetings ranged from internal discussions within MoF to inter-sector meetings between heads of government institutions. Additionally, other meetings involved non-state actors like development partners, research institutions, academia, and CSOs. MoF met the following groups to solicit views and comments on the first draft of the PFM Bill: all the heads of the public institutions on 3 November 2015; CSOs and academia on 4 November 2015; and all development partners on 5 November 2015. ^{Information obtained from the copies of the scanned invitation letters provided by the Ministry of Finance}  The IRM researcher could not follow up with attendees of the meetings to ascertain the outcome of the meeting. The media also reported that two stakeholder meetings were held; “The ministry held two stakeholder engagements with civil society organizations, professional bodies and academia such as the of Chartered Accountants Ghana (ICA), […] the Trades Union Congress (TUC), the Ghana Employers Association (GEA) and the Ghana National Association of Teachers (GNAT).” ^{“Parliament Passes Public-Financial Management Bill,”  (access 21 Sept. 2016), http://www.graphic.com.gh/news/general-news/parliament-passes-public-financial-management-bill.html.}  

Early Results (if any)

According to some civil society stakeholders when passed, the law can be used to “punish persons who misuse public funds.” ^{"Kan Dapaah calls for fiscal responsibility” (access 21 Sept. 2016), http://www.ghanaiantimes.com.gh/kan-dapaah-calls-for-fiscal-responsibility/}  However, stakeholders add that the legal framework is not robust enough “deter people from “stealing from the state.”   ^{"Kan Dapaah calls for fiscal responsibility” (access 21 Sept. 2016), http://www.ghanaiantimes.com.gh/kan-dapaah-calls-for-fiscal-responsibility/}   

Next Steps

Moving forward, MOF could give progress reports on fiscal responsibility, including debt management. MOF could begin implementing PFM.

Commitment Text:

Prudent management of public expenditure is necessary to avoid budget overruns in a manner that endangers national fiscal stability. Several works have been done by Civil Society Organizations in the area of compiling essential information on the need for a Fiscal Responsibility Bill. Under the 2013-2014 Action Plan, Ghana is committed to enact a Fiscal Responsibility Law that would instill discipline in her fiscal management with the view to determining when expenditures are veering off approved estimates. The implementation of this commitment has not been achieved.

The aspiration in the West African Region is that there is the need for a common fiscal and monetary policy that will establish a fiscal ceiling for all member states of the regional body. However, within the specific context of Ghana opinion is divided on whether or not there is need for a stand-alone law on Fiscal Responsibility.

Therefore, during the planned period, OGP Ghana undertakes to facilitate the building of national consensus on the need for the Law.

Action:

• Organize one (1) international conference on international best practice within enacting and implementing a Fiscal Responsibility Law in Ghanaian context by May, 2016
• Organize 1 national two-day consultative workshop on the need for and content of a Fiscal Responsibility Act by August 2016

Editorial note: The first action in the language of the commitment was split into two separate milestones (4.1 and 4.2) in the table below to capture the government’s commitment to “enacting and implementing a Fiscal Responsibility Law in Ghanaian context.”

Lead Institutions: Office of the Chief of Staff, National Development Planning Commission (NDPC), Ministry of Finance (MoF)

Supporting Institutions: Parliamentary Select Committee on Subsidiary Legislation, Centre for Economic Policy Analysis, Institute of Economic Affairs, Natural Resource Governance Institute (NRGI)

Start Date: Not specified End Date: August 2016

Commitment Aim:

The commitment to enact a Fiscal Responsibility Law (FRL) to introduce permanent rules of fiscal discipline and mitigate fiscal risk was not completed and thus carried forward from the previous action plan. The FRL is part of the Public Financial Management (PFM) bill that was designed to address persistent weaknesses and promote discipline, transparency, and accountability in the management of public funds. Specific milestones were the organization of an international conference to discuss best practices and establish a common fiscal and monetary policy for the West Africa Monetary Zone, passage of the FRL, and the holding of a two-day consultative workshop on the need for a Financial Responsibility Act.

Status

Midterm: Limited

Completion at midterm was limited for this commitment. The international conference did not hold. The Ministry of Finance (MoF) did not organize a two-day consultative workshop on the content of the bill. However, it provided evidence of a consultative process to build a national consensus on the bill that included internal discussions within the MoF, inter-sector meetings between heads of government institutions, and meetings with development organizations, research institutions, academia, and civil society organizations (CSOs).6 The media corroborated these reports. For more information, please see the 2015–17 IRM midterm report.

End-of-Term: Substantial

International Conference: This milestone was not started. The IRM researcher’s efforts to reach the MoF OGP contacts were unsuccessful. The researcher was unable to obtain evidence from the media that the international conference was held or was discussed in the reporting period.

Pass the FRL: This commitment was coded as completed because the Parliament passed the Public Financial Management Act (Act 921) and was assented by President Mahama in August 2016.[1] In July 2017, Cabinet proposed to amend Act 921 by limiting the national fiscal deficit to three to five percent of gross domestic product (GDP) from 2018 as part of steps to ensure greater fiscal discipline.[2],[3],[4] In the same month, Cabinet approved the submission of the proposed amendment to Parliament.[5] A media statement by the Natural Resource Governance Institute (NRGI) in October 2017 revealed that the amendment was pending at that time.[6] The IRM researcher could find no evidence that the amendment was made in the reporting period or that any preparations occurred toward a legislative instrument.

Consultations on Need for FRA: A media report announcing the passage of the FRA stated that the process leading to the law began in 2014 and was “comprehensive, interactive and consultative.” The MoF and the Attorney General prepared successive drafts and held consultations with several groups, including civil society organizations (CSOs), and various professional bodies.[7] In an August 2016 statement, the Civil Society Platform on Ghana’s International Monetary Fund (IMF) Programme, a coalition of Accra-based think tanks and non-governmental organizations (NGOs) working in the areas of social accountability and anti-corruption, criticized the unusually fast pace with which the act was passed, on grounds that it did not leave room for public input, especially by relevant expert individuals and institutions.[8] This suggests that consultations did not take place. Related events include a February 2017 PFM Act sensitization-training workshop for finance officers.[9] Also in 2017, the MoF presented to Parliament a mid-year Fiscal Policy Review of the 2017 budget, as required under the PFM 2016 (Act 921).[10]

Did It Open Government?

Access to Information: Did Not Change

Civic Participation: Did Not Change

Public Accountability: Did Not Change

The government’s stated aim of this commitment was to enhance public financial transparency and accountability by passing the FRL and building consensus around its importance. However, as implemented so far, the government has not improved the quality or quantity of information released to the public, neither has it put in place any public-facing accountability mechanism. As it stands, the passage of the FRL may have represented an end in itself as opposed to a means to greater financial transparency. This is evidenced by the 2016 Auditor-General’s report which details “cash irregularities” of up to 32.6 million Ghana Cedis, attributed to violations of financial management rules by district assemblies.[11] A separate media report alleged a loss of up to 8 billion Ghana Cedis (about 1.8 billion USD) to broader infractions in 2016 alone.[12]

One outstanding limitation is that the PFM framework is contained in several separate laws and policies,[13] making it hard to understand how they interact. This could be addressed in future interventions.

Carried Forward?

The milestones for this commitment as captured in the 2017–19 national action plan (NAP) largely sought to build on the passage of the PFM by pursuing laws and structures needed to support its implementation. The incomplete milestone of the international conference on best practices was not carried forward.