Ghana’s budget deficit mgt: What is being done, what could be done, and the need for effective change?

President Nana Addo Dankwa Akufo-Addo stated in his address to Muslims at an Eid-Ul-Adha (festival of sacrifice) ceremony on Saturday, July 9, 2022, that the government has cut down on discretionary expenditures by about 30% and fuel coupons by 50%. The scope of these cuts extends to the ministries and related entities and political appointees.

These measures are overdue, but welcome news, as it appears the government is becoming more serious and active about managing the national budget deficit. It could also be seen as an obvious part of the austerity measures that is likely required by the IMF as part of “restoring macroeconomic stability”.

The government may be in a situation where it has become imperative upon it to take these measures as there may not be many other feasible and viable options.

It could also be that it is pro-actively preparing ahead of any such formal request of the IMF. This may possibly be a reactive response to a yet-to-be-announced formal request, as putting the budget in order is likely part of the IMF’s austerity measures, an unsurprising and common pre-condition for monetary support. Note that the government has already engaged the IMF for support in restoring financial stability.

A constructive question is, whether there are other additional measures that could be taken, and the answer is yes. It is possible to draw financial strategy in dealing with budgetary constraints from the “theory of real options”, which provides us with three choices; option to delay, option to follow and option to abandon.

Drawing from this theory, I believe there are other practical measures that could be undertaken, including project delivery milestone extension, suspension, substitution and in some cases complete elimination of “certain” projects or expenditures. In doing so, items of budgetary expenditure need to go through detailed examination and ranking from critical to less critical projects and expenditure items. This will enable budget controllers to ascertain areas to impose budget flexibility, restraint, substitution and cuts.

In the process of implementation of these measures, the government would have to manage change carefully to ensure success, else it may backfire and lead to resistance in a way similar to events surrounding the e-levy tax program. Perhaps, there may be a need for an external change agent, who would lead and manage the change process to avoid or minimise resistance and to ensure real effective budget expenditure control measures are considered and implemented without bias.

While some stakeholders may understand and enthusiastically support change, others will exhibit resistance including passive resignation, passive resistance and pro-active resistance. The management of resistance by both civil and political stakeholders will be key to successful implementation. All change management initiatives may be required, including education and communication, facilitation and support, negotiation and agreement, manipulation and co-optation, and implicit and explicit exercise of power.

What may also be required after these measures or reforms have been implemented as per “Lewin’s 3-step change management approach” is to freeze or bake these reforms or measures into the culture of the ministries and their related entities.

I hope these measures could be sustainable to allow for serious budgetary recovery and stability.