At a time when the government is bent on ensuring fiscal discipline to curb rising debt, unnecessary expenditure amid economic reforms, a finance expert says setting fiscal rules alone cannot be the silver bullet.
The Chief Director of the Ministry of Finance, Dr. Patrick Nomo, says legislating fiscal rule rules is necessary but not sufficient to address the menace of public finance mismanagement.
Dr. Nomo, who was delivering a keynote address at the IMANI & IISD event on fiscal councils and fiscal rules, reminded the nation of a simple but often overlooked truth that rules alone don’t guarantee fiscal discipline.
The Chief Director of the Finance Ministry argued that while fiscal rules such as limits on borrowing or spending are useful tools, they cannot work in isolation without strong institutions and reliable data systems to back them up.
Dr. Nomo emphasized that even the most eminent experts cannot succeed without access to accurate and timely data. To buttress his argument, he pointed to the recent clashes in Parliament over conflicting fiscal figures from different state agencies as a worrying example.
For ordinary citizens, his point is easy to relate to. Imagine running a household budget. You may decide not to spend more than you earn, but if your income records are scattered, or if your family members keep making unapproved withdrawals, your rules won’t mean much.
In the same way, Ghana’s fiscal rules can easily collapse without coordination and enforcement.
Fortunately, Dr. Nomo did not leave his argument hanging as he outlined three conditions that he said are essential for a successful fiscal council.
He noted that the power of reliable data systems can not be underestimated. He said timely, accurate numbers are the foundation for monitoring rules. Without them, policymakers are “flying blind.”
Given the country’s political economy, Dr. Nomo maintained that managing political pressures is key. Fiscal indiscipline often comes from political decisions, such as election-year spending or populist policies. For him, rules alone cannot restrain leaders if the political will to enforce them is weak.
Last but not least is what he describes as institutional coordination. He calls for fiscal and monetary authorities, along with data-producing agencies, to work together. Conflicting numbers only weaken confidence in the system.
“It is very easy to set fiscal rules around revenue, expenditure, debt, or asset management, but if we don’t have a systematic way of collecting data to monitor them, the fiscal council will struggle. Our best people can only succeed if they have the data they require… The issue of political economy is also significant when it comes to economic management … and we must strengthen coordination and collaboration among fiscal and monetary institutions, as well as all holders of data in the fiscal space,” he indicated.
Ghana has trodden the path of fiscal rules before, dating back to the mid-2000s, but repeated fiscal slippages, especially during election cycles, show that rules on paper are not enough.
Dr. Patrick Nomo concludes that fiscal rules alone can’t guarantee fiscal discipline without a complement from strong institutions, accurate and timely data, and strong political will to stick to the rules.
