29th January 2019

The Honourable Minister

Ministry of Finance

Accra

Dear Sir,

RE: CONCERNS AND QUESTIONS ABOUT GHANA’S FISCAL RESPONSIBILITY ACT

OccupyGhana® is delighted that Ghana has passed a fiscal responsibility act. It’s a step in the right direction.

But we at OccupyGhana® are still grappling with the basic question: “will the Act actually control excessive government expenditure now and in the future?”

For instance, according to the law, “… the overall fiscal balance on cash basis for a particular year shall not exceed a deficit of five percent of the Gross Domestic Product for that year; and an annual positive primary balance shall be maintained.”

We note that:

Overall budget balance = (Primary balance) + (Government Interest Payments).

From this, the following questions and concerns arise:

  1. If the primary balance must be positive, why doesn’t the Act specify how big it must be (say as a proportion of GDP)?
  2. Is it not the case that without specifying the size, arguably, any small positive amount (even GHC 100) would satisfy the law?
  3. Wouldn’t a cynically pro-spending government have the incentive to choose a primary balance approximately equal to zero?
  4. Then given that the primary balance is approximately equal to zero, we get: Overall budget balance = interest payments. That would be legal, but wouldn’t that defeat the aims of the law?
  5. We note that the law caps the budget deficit-GDP ratio at a maximum of 5%. Doesn’t this imply that a government could always borrow to pay interest payments such that annual interest payments are equal to 5% of GDP?
  6. Would it then not be the case that Parliament cannot reject it because it is the law and also that with the primary balance at almost zero, only borrowing can finance interest payments?
  7. How does the law prevent a government from rolling over the debt perpetually by borrowing to service its debt?
  8. In each year, the government sells additional bonds (debt) to pay the interest on the debt and to pay off holders of maturing government debt. However, if the annual interest payments on the debt (before the law became effective) exceed 5% of GDP, would this not imply that the primary balance must have a sufficiently big and positive value?
  9. How do we ensure that a self-interested government cannot game this law?
  10. Section 3 states the circumstances under which the fiscal responsibility rules may be suspended. These include occurrences such as natural disaster, public health epidemic, drought, an unanticipated severe economic shock including commodity price shocks; and periods where the Gross Domestic Product growth rate is one per cent or less. Although this provision appears necessary for fiscal flexibility, aren’t there any chances that it could weaken the law?
  11. What if a minister of finance claims that because tax revenue fell unexpectedly, pushing the primary balance to be negative, the overall budget had to exceed 5% of GDP? Technically this might not be a violation of the law. In fact, the minister would have considerable discretionary power because the law provides that the “… unforeseen economic circumstances referred to … shall be such that as a result of the occurrence of the circumstances specified, the Minister is of the OPINION that the implementation of any of the fiscal responsibility rules would be unduly harmful to the fiscal, macroeconomic, or financial stability of the country.”
  12. Perverse fiscal incentives may not arise if the circumstances that warrant the suspension of the fiscal rules are outside the control of politicians. Commodity price shocks in global markets and natural disasters are examples of events that are outside the control of politicians. But a GDP growth rate of one per cent or less or a low tax revenue need not be events that are outside the control of politicians. They could be the result of mismanagement by politicians and bureaucrats. Why then does the law not define “severe” in “unanticipated severe economic shock”?
  13. If a shock is severe but anticipated or should have been anticipated, does this scenario fall under section 3?
  14. Further, doesn’t a positive primary balance imply that all non-interest expenditure must be financed from revenue, not borrowing?
  15. Is it consistent with this government or any government’s big plans (e.g., infrastructural plans)? For instance in September 2018, President Akufo-Addo said that his government may issue a 100-year $50 billion bond for infrastructural and industrial development.

We note that India enacted a Fiscal Responsibility and Budget Management (FRBM) law in August 2003. However, the impact of the 2008 global financial crisis disrupted the fiscal consolidation process, leading to a progressive loosening of fiscal targets and eventually an amendment of the FRBM Act in 2012.

We ask these questions and raise these concerns because historically, although the Bank of Ghana (BoG) Act places a limit on advances from the BoG to government, this has been violated by nearly all governments. And, parliament has really never provided effective fiscal oversight of the executive.

Thus while this law is a step in the right direction, we must admit that no law is perfect and laws tend to have technical loopholes. It would appear to us that this law needs “a few good men and women” for it to work.

However, that is a quality that we cannot guarantee and that is why we wish to raise these questions and concerns, aimed at exploring ways in which the law could be further tightened to prevent future abuse.

Yours in the service of God and Country,

OccupyGhana®

OCCUPYGHANA® SALUTES AUDITOR-GENERAL ON DISALLOWANCES AND SURCHARGES AND URGES THE PROSECUTION OF PERSONS FOUND CULPABLE

OCCUPYGHANA® SALUTES AUDITOR-GENERAL ON DISALLOWANCES AND SURCHARGES AND URGES THE PROSECUTION OF PERSONS FOUND CULPABLE

3rd JANUARY, 2019

OCCUPYGHANA® PRESS STATEMENT

OCCUPYGHANA® SALUTES AUDITOR-GENERAL ON DISALLOWANCES AND SURCHARGES AND URGES THE PROSECUTION OF PERSONS FOUND CULPABLE

OccupyGhana® has received and studied a copy of the first ever Special Audit Report of the Auditor-General on Disallowance and Surcharge. This is the report as at 30th November 2018, that mentions how much has been saved to the nation in Disallowances, how much has been surcharged, and how much has been recovered. We salute the Audit Service, led by the current Auditor-General for this. We are however concerned that there appears to be little effort at prosecuting those who have committed these infractions, and call upon the Attorney-General to commence prosecutions in this regard.

The heart of every Ghanaian would be gladdened at the saving of the net total of GHS 5,445,676,134.53, which some government officials fraudulently claimed was owed on various government contracts, but which had been already paid. This attempt to fleece Ghana of this colossal sum was only stopped by the Auditor-General issuing Disallowances. Further, the recovery of GHS 67,137,517.86 as a result of the Auditor-General’s Surcharges and recovery efforts must be lauded by all Ghanaians. Meanwhile, there are Surcharges of almost half a billion Cedis outstanding, waiting for enforcement.

For us at OccupyGhana®, this Report and the developments it contains are a major manifestation of the victory Ghana won in OCCUPYGHANA V. ATTORNEY-GENERAL, where the Supreme Court stated emphatically that:

“…the Auditor-General is expected to NAME the persons who commit irregularities etc., under article 187(7)(b) and section 17 of Act 584 respectively, RECOVER the amounts from them and thereafter those persons be made to FACE appropriate punishment. THAT SHOULD BE THE WAY FORWARD” [Emphases added.]

For us, this Report is also the culmination of the journey that started on 12th November 2014 when we first wrote to the Auditor-General then, demanding the exercise of the Disallowance and Surcharge powers given to that office by the Constitution. We cannot forget the quick 13th November 2014 response of the Acting Auditor-General then, first reminding us of the independence of the office and then offering to educate us “on the validity or otherwise of matters raised in your letter concerning disallowances and surcharges.”

We vividly remember our 25th November 2014 response in which we pointed out to the then Auditor-General that his independence did “not preclude the power of the court from inquiring into whether or not you have performed your functions according to the Constitution.” We reminded him that the Constitution “places a mandatory duty on administrative bodies and officials like you to comply with the legal requirements imposed on you, and then vests in persons dissatisfied with your work, such as us, a right to seek redress by commencing court proceedings against you.” We concluded that “simply, either you have done your work or you have not done your work.”

What followed this initial fiery exchange of letters, was a year and a half during which the then Auditor-General pretended to collaborate with us to institute the Disallowance and Surcharge regime, but failed to take any concrete steps. He even formed a Joint Working Group with us, which was never duly constituted and never worked. It was not as if we were just spoiling for a fight. That is why in this period, we were honoured with the opportunity to draft and submit to the Rules of Court Committee the rules that were finally passed into law as the HIGH COURT (CIVIL PROCEDURE) (AMENDMENT) (NO. 2) RULES, 2016 (CI 102). This law inserted a new Order 54A in the High Court Rules to regulate Disallowances and Surcharge appeals, in compliance with article 187(9) and (10) of the Constitution. It was therefore with great reluctance that on 21st June 2016, we filed the action titled OCCUPYGHANA V. ATTORNEY-GENERAL (WRIT NO. J1/19/2016) in the Supreme Court.

In its seminal judgment dated 14th June 2017, the Supreme Court rejected each defence that was put up, including challenging the jurisdiction of the Court to hear the matter. The Court granted each of the reliefs that we sought, pointing out that

“…the ‘may’ in article 187(7)(b) of the Constitution, 1992, becomes a mandatory ‘may,’ and no longer permissive. This affords us the opportunity to enforce the provisions of article 187(7)(b) which will deepen probity and accountability.”

For us that was not a personal victory or even a vindication. It was a colossal victory for Ghanaians who would read, on a yearly basis, a merely journalistic recount by the then Auditors-General to Parliament of blatant stealing of national wealth, accompanied by obviously impotent recommendations, and which saw no tangible or concrete results. What was even more painful were these words that featured prominently and repeatedly in each of the Auditors-General’s annual report:

“The cataloguing of financial irregularities in my Report on MDAs and Other Agencies has become AN ANNUAL RITUAL THAT SEEMS TO HAVE NO EFFECT…” [Emphasis added.]

We applaud the bold steps taken and results obtained by the current Audit Service under the leadership of the current Auditor-General, Daniel Domelevo. We urge them not to relent in enforcing the judgment of the Supreme Court, prevent, where possible, the theft of the nation’s monies, and recover for Ghana whatever is stolen.

We conclude by urging the Attorney-General to commence the prosecution of the persons who either caused, attempted to or conspired to cause these losses to Ghana. The Supreme Court was clear that there must be “appropriate punishment” and stated thus:

“…the Attorney-General is hereby ordered to take all necessary steps to enforce the decision or steps taken by the Auditor-General… to ensure compliance including in some cases criminal prosecutions.”

The Auditor-General appears to have done his part. The ball is now firmly in the court of the Attorney-General.

Yours, for God & Country,

OccupyGhana®