5% budget deficit capping could be difficult in election year

Economist, Dr. Ebo Tuckson is warning that government’s attempt to cap the budget deficit at 5 percent could suffer a setback in an election year if labour agitations for salary increase are not addressed.

He argues that government will have to be strict and firm if it intends to maintain fiscal discipline.

Vice President, Dr. Mahamudu Bawumia recently announced that government will start capping budget deficit to GDP at 5 percent from 2019.

Some financial observers have said that there must be a corresponding policy that will punish persons in ministries, and government agencies who overspend in a given year.

But commenting on the issue, Dr. Tuckson stated that it will be too difficult to implement a policy that will punish critical ministries that go beyond their budget due to their importance.

“How do you punish for instance the Ministry of Education, or the Ministry of Health, if health or education workers agitate for an increase in their wages and it is an election year? If government decides that let’s meet them halfway, and then it increases our expenditure, it will increase the budget deficit,” he said.

Dr. Tuckson observed that moments of emergencies may even require some critical sectors of the economy to spend more, leading to overruns.

“So who do you punish”, he quizzed, adding that it will be difficult to maintain the budget of some critical state agencies in an emergency period.

Recommending some solutions, Dr. Tuckson stated that government should focus on fixing the fundamentals of the economy.

He argued that such fiscal stability will create an enabling environment for businesses to grow, reducing agitations from labour.

“One way the government can ensure that the macro indicators are good. When an economy is stabilized, and inflation is very low and prices are not increasing, I don’t think that workers will have the appetite to agitate,” he stressed.

Source: citibusinessnews.com