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Election 2024: Bawumia proposes fiscal rule amendment to reduce govt spending

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Dr. Mahamudu Bawumia, the New Patriotic Party’s (NPP) presidential candidate, has presented a plan to reduce government spending, which involves revising the fiscal rule.

The fiscal rule, which limits the budget deficit to no more than 5% of the GDP in a fiscal year, was temporarily suspended during the COVID-19 pandemic to enable the government to manage the situation effectively.

Nonetheless, Dr. Bawumia believes that the present fiscal deficit cap is inadequate for controlling government expenditures.

At a gathering with the Trades Union Congress in Accra on Wednesday, he suggested a change to the current rule. His proposed modification would cap the budget deficit at no more than 105% of the revenue from the preceding year.

“The fiscal discipline, the fiscal rule that we have before was to make sure that fiscal deficit was not above 5% of GDP. Of course, when COVID came it had to be suspended so that government could respond.

“I believe that the fiscal rule needs to come in an amended form, not just to look at the deficit, say 5% in a year. But let us make sure that government expenditure does not exceed 105% of the previous year’s tax revenue.”

“This gives you more discipline because if you forecast a tax revenue for this year which is overly optimistic and you go and spend thinking you are going to do 5% of GDP you will end up with more than 5% of GDP if those revenues don’t materialize,” he stated.

Furthermore, Dr Bawumia pledged to establish the fiscal governance council as an independent entity, thereby enabling it to scrutinize the Ministry of Finance’s actions.

“It should be given independence so that they have an independent oversight over the MoF. Because if you don’t have that independence in terms of oversight then who watches the MoF.

“We don’t have that independence and so we need an independent fiscal responsibility council. The current council as constituted in the Act is not independent and we need to have that independence of the fiscal responsibility council,” he stated.

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