Budgetary Institutions and Fiscal Consolidation in Ghana: Lessons for Transition Economies in Africa

To halt the deterioration of their national economy most African governments embarked on IMF and World Bank supported Structural Adjustment Programmes. These programmes have been criticised as neglecting social costs and promoting export-led growth in the context of unfavourable terms of trade. More recently, their lack of attention to institutional development has been emphasised. This paper focused on the budgetary institutions and procedures during structural adjustment in Ghana. The paper concludes that budgetary institutions are more hierarchical in Ghana. However, the hierarchical process had a minimal impact on fiscal consolidation for a number of reasons. The reasons include increased expenditure during consolidation, difficulty of dealing with losers after initial success, tendency to allow donor support to lead government spending and the lack of institutional capacity to assess overall impact of fiscal procedures on consolidation effort. While drawing the attention of countries with similar structural difficulties to these lessons, the paper concludes that fiscal policy will produce positive impact when budgetary institutions, procedures and outcomes are designed to influence other institutions in support of increased productivity.