The Functions of a Well Crafted Budget; Ghana’s 2018 Fiscal Year as a Case Study.

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The Functions of a Well Crafted Budget; Ghana’s 2018 Fiscal Year as a Case Study.


Every thriving Economy in any part of the world must clearly define its main objectives according to purpose to meet the standard expectations of its citizenry.

The following as it were are some clear cut objectives of any committed government:

  1. The reallocation of SCARCE Resources.
  1. Strategic leverage – managing inequalities in income and wealth through policy engineering.
  1. Economic Stability through stern fiscal adjustments.
  1. Efficient management of the Public Sector – GOVERNMENT BUSINESS.
  1. Economic Growth and
  1. Reducing regional disparities towards the #MDGs and #SDGs with #CLIMATE CHANGE and its management in mind without nepotistic influences.

The well knitted budget must fulfilling certain objectives. These objectives are the direct outcome of government’s economic, social and political policies – Tax to GDP ratio notwithstanding.

Let me zero in as I elucidate terms in principle for the average Ghanaian to catch a glimpse of the matters arising from the budget presented by the Finance Minister on 13th November, 2017 at the Parliament house of Ghana.

1.1 The reallocation of SCARCE Resources:

In principle, the Government aims to reallocate resources* in accordance with the economic (profit maximisation) and social (public welfare) priorities of the country through the budgetary policy.

The allocation of scarce resources are influenced by the Government of the day after some strategic consultations (MoFEP / IMF and other relevant economic forces) through

▪Tax subsidies

This is an investment booster for businesses. This way, government can give tax subsidies or cuts to thriving industries. A Government body like the FDA discourages the production of harmful consumption goods (like alcoholic beverages etc.) through heavy taxes and encourages the use of locally manufactured products by providing subsidies to that effect to bring economic balance.

1.2 Strategic leverage – managing inequalities in income and wealth through policy engineering:

Economic inequality is an inherent part of every economic system. Government aims to reduce such inequalities of income and wealth, through its budgetary policy. Government aims to influence distribution of income by imposing taxes on the rich and spending more on the welfare of the poor. It will reduce income of the rich and raise standard of living of the poor, thus reducing inequalities in the distribution of income.

1.3 Economic Stability through stern fiscal adjustments:

Government budget is used to prevent business fluctuations of inflation or deflation to achieve the objective of economic stability. The government aims to control the different phases of business fluctuations through its budgetary policy. Policies of surplus budget during inflation and deficit budget during deflation helps to maintain stability of prices in the economy.

1.4 Efficient management of the Public Sector – GOVERNMENT BUSINESS:

There are large numbers of public sector industries (especially natural monopolies), which are established and managed for social welfare of the public. Budget is prepared with the objective of making various provisions for managing such enterprises and providing those financial help.

1.5 Economic Growth:

The growth rate of a country depends on rate of saving and investment. For this purpose, budgetary policy aims to mobilise sufficient resources for investment in the public sector. Therefore, the government makes various provisions in the budget to raise overall rate of savings and investments in the economy.

There are options to borrow or place our securities (natural resources) in high yielding stock returns based on the measured indices to create conducive environments for both formal and informal sectors. Due to the regulations and its operatives, timing remains the differentiator. Bonds could be considered after proper monitoring and evaluations against performance is measured accordingly.

1.6 Reducing regional disparities towards the #MDGs and #SDGs with #CLIMATE CHANGE and its management in mind without nepotistic influences:

The government budget aims to reduce regional disparities through its taxation and expenditure policy for encouraging setting up of production units in economically backward regions.

That notwithstanding, in and outbound logistics of the Economic cycle and value chain needs critical attention so that we can have a sustainable budget function that won’t defy principles since we intend to build a resilient / robust Economy.

2.0 Conclusion

The strategic forecast outlined in the BUDGET looks bright though there were some rhetoric and omissions as it were knowing very well what the average Ghanaian was expecting in terms of utility, external mobile money tax functions, unemployment issues, fiscal leakages and duress on petrochemical products in terms of pricing by the OMCs etc.

We look forward for the majestic exhibitions of the necessary without complacencies so that Ghana can become the beacon of hope.

Lastly, I hope this 2018 budget is reviewed to capture every sector to meet the #2030 MDGs. The #SDGs 1(Poverty reduction) and 4 (Equity in access to Basic/Primary and Secondary education).

Many thanks for your kind attention.

In your service,

Bismarck Kwesi Davis

Procurement Department

Methodist University College, Ghana.

Thursday 16th November, 2017

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