The International Monetary Fund (IMF) has cautioned governments around the world to exercise fiscal restraints in order not to reserve sound public funds.
In 2024, a record number of countries, home to more than half of the world’s population, are holding national elections., the Fund said.
It added that history shows governments tend to spend more and tax less during election years.
Deficits in election years tend to exceed forecasts by 0.4 percentage points of GDP, compared to non-election years, the IMF stated.
“In this great election year, governments should exercise fiscal restraint to preserve sound public finances,” it said.
The fund is not the only institution sounding this caution.
Accounting and auditing firm, Deloitte, has cautioned the government of Ghana against overspending.
Deloitte said spending beyond the limit could pose a severe threat to the downward trend in inflation and also the improved currency performance.
Headline inflation declined to 22.8% in June 2024 from 23.2% in January 2023, per figures churned out by the Ghana Statistical Service (GSS).
The downward trend in inflation in 2024 has been largely driven by decrease in non-food inflation, tightening monetary policy, ongoing fiscal consolidation by the government, low volatility of transport fares due to stable crude oil prices, and some base drift effect from previous price increases.
In its assessment of the 2024 mid-year budget statement, Deloitte indicated that the downward trend recorded in the year-to-date depreciation and inflation further affirms the view that Ghana’s economic recovery process is on track.
This notwithstanding, it said, the upcoming elections and its potential for increased Government expenditure beyond targeted levels, as well as the recurrent increase demand for dollars ahead of Christmas festivities in the last quarter of the year present risk to the improved currency depreciation and inflation recorded so far.
“Having highlighted the risk to maintaining the positive trajectory noted above, it is important to note that the IMF Programme, whilst serving as a check on Government’s expenditure also provides opportunity to boost Ghana’s foreign reserves.
“This, together with other inflows expected from the World Bank Development Policy Operation (DPO) might help absorb some of the FX shocks associated with the December festivities,” it said.
