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University of Ghana http://ugspace.ug.edu.gh UNIVERSITY OF GHANA COLLEGE OF HUMANITIES DEMOCRATIC ELECTIONS AND FISCAL MANAGEMENT IN GHANA’S FOURTH REPUBLIC, 1992-2016 BY ABDUL HAKIM AHMED (10086974) THIS THESIS IS SUBMITTED TO THE UNIVERSITY OF GHANA, LEGON IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF PhD POLITICAL SCIENCE DEGREE JULY, 2019 University of Ghana http://ugspace.ug.edu.gh DECLARATION I certify that this thesis with the exception of quotations and references duly cited and acknowledged in the study, is my original work and therefore I am solely responsible for all its limitations including errors, lapses and omissions. Further, I undertook this study at the Department of Political Science under the supervision of the undersigned. ………………………………. …….. ABDUL HAKIM AHMED (STUDENT) ………………………………………. PROF. (EMERITUS) KWAME AKON NINSIN (LEAD SUPERVISOR) ………………………………………. DR. MAAME GYEKYE-GYANDOH (SUPERVISOR) ……………………………………….. DR. OWUSU MENSAH (SUPERVISOR) i University of Ghana http://ugspace.ug.edu.gh ABSTRACT The Ghanaian state was ushered into multi-party democratic governance in 1992. Unlike its predecessors, the 1992 Constitution of Ghana which shepherded the democratic transition has so far survived seven successive competitive elections and three turnover of power from one democratically elected government to another, surpassing Huntington’s “two turnover test” criterion for democratic consolidation. However, fiscal policy management by successive elected governments since the beginning of the Fourth Republic has failed to adequately respond to the democratic gains made by the state over the last two and half decades. Using the concurrent triangulation strategy of mixed methods data collection, this study investigates the interplay between democratic elections and fiscal policy management in Ghana’s Fourth Republic. The study reveals the existence of political business cycles (PBC) in Ghana’s electoral process since 1992. Thus, by overwhelming majority, Ghanaian voters support the proposition that since the inception of democratic rule in 1992, all incumbent governments had tried to manipulate fiscal policy for electoral advantage. This, they did by increasing public sector wages and salaries, scaling up of infrastructure development and reducing or relaxing their commitment in the collection of taxes, government fees and charges during election periods. Again, in almost all cases, this had led to macro-economic instability which led to reduction in economic growth and the economic well-being of the citizenry. Another significant revelation from this study is that Ghanaians had greater preference for infrastructure development when voting than any other consideration. Thus, infrastructure by far ranked the highest in terms of preference, leaving behind other key issues such as social intervention programmes, and wages, salaries and allowances of public sector workers during election periods. Finally, the study shows that Ghanaian voters under the Fourth Republic were both “myopic” and “rational” when electing ii University of Ghana http://ugspace.ug.edu.gh their political leaders. Thus, voters’ myopic views on incumbents’ economic policies during election times underscored the existence of PBC in Ghana’s electoral process. It may also explain why incumbents won in the 1992, 1996, 2004 and 2012 elections. Conversely, their “rationality” and “forward looking” behaviour may also account for the electoral defeat of incumbents in the 2000, 2008 and 2016 elections despite attempts at manipulating fiscal policy for partisan, electoral and opportunistic purposes. The study proposes some recommendations to restrain incumbents from manipulating the economy, particularly fiscal policy during election periods. These include the formation of an independent fiscal institution such as the fiscal council to serve as fiscal watchdog against fiscal indiscipline and expansionary fiscal policy at all times, particularly during election times. Moreover, there is the need for the establishment of fiscal rules with clear-cut mechanisms of enforcement. The study also recommends strict adherence to all the norms of good governance and transparency such as the passage of the right to information bill in order to enhance fiscal accountability. Other recommendations include the proscription of the winner-takes-all type of politics being practised under the 1992 Constitution, introduction of a seven-year non-renewable presidential tenure to ensure reasonable fiscal policy continuity, enhancement of civic education for Ghanaian citizens and by legislation, strict adherence to a long-term national development plan by all elected governments. iii University of Ghana http://ugspace.ug.edu.gh DEDICATION This study is dedicated to my family. iv University of Ghana http://ugspace.ug.edu.gh ACKNOWLEDGMENT Navigating through this academic journey has been difficult and arduous. Many people of diverse backgrounds have played immense roles to ensure that this study is completed. After appreciating the God Almighty for his bountiful favour in helping me complete this study, the contribution of my lead supervisor, Emeritus Professor Kwame Ninsin is immeasurable. Apart from his tremendous efforts in reviewing this work, his dedication, personal support and encouragement spurred me on and got the best out of me. I will forever remember him for that. My sincere appreciation also goes to other members of the supervisory team, namely: Dr. Maame Gyekye-Gyandoh and Dr. Owusu Mensah. Their selflessness, encouragement and dedication to this work cannot be quantified. Furthermore, the contribution of Dr. Kwame Asa- Asante to this work has been timely, enormous and incalculable. I also wish to thank the former Head of Department (HOD) of Political Science, Dr. Bossman Asare for his encouragement and support. I am also grateful to all senior members and administrative staff of the Department of Political Science, University of Ghana, for playing diverse roles in my PhD programme. Their support, encouragement, criticisms and advice helped greatly in shaping this study. I am also grateful to the former Governor of the Bank of Ghana (BoG) and former Finance Minister, Dr. Kwabena Duffuor for his support. Moreover, I wish to thank Dr. Said Boakye of the Institute for Fiscal Studies (IFS-Ghana) for his encouragement and advice. I am also grateful to my friend and former class mate, Dr. Nelson Oppong of Bath University, UK, for his assistance. I also thank the MP for Bole-Bamboi, Hon. Yusif Suleimana for facilitating my data collection within Parliament. Lastly, I am grateful to my former colleagues at both the Ministry of Finance and the Bank of Ghana who assisted me one way or the other in completing this study. v University of Ghana http://ugspace.ug.edu.gh LIST OF ACRONYMS BoG Bank of Ghana MOFEP Ministry of Finance and Economic Planning NDC National Democratic Congress NPP New Patriotic Party CDD Centre for Democratic Development IMF International Monetary Fund IDEG Institute for Democratic Government ACET African Centre for Economic Transformation MDAs Ministries, Departments and Agencies IFS Institute for Fiscal Studies, Ghana ISSER Institute for Statistical, Social and Economic Research CPP Convention People’s Party PNDC Provisional National Defence Council CODEO Coalition of Domestic Election Observers GIR Gross International Reserves CEPA Centre for Policy Analysis IEA Institute of Economic Affairs GDP Gross Domestic Product MPC Monetary Policy Committee ECF Extended Credit Facility GoG Government of Ghana GRA Ghana Revenue Authority NDPC National Development Planning Commission CAGD Controller and Accountant General’s Department vi University of Ghana http://ugspace.ug.edu.gh LDCs Less Developed Countries SAP Structural Adjustment Programme LTU Large Taxpayer Unit ERP Economic Recovery Programme HIPC Highly Indebted Poor Country EMU Economic and Monetary Union SGP Stability and Growth Pact OECD Organisation of Economic Co-operation and Development PBC Political Business Cycles SPSS Statistical Package for the Social Sciences IDEG Institute for Democratic Governance AGI Association of Ghana Industries TUC Trades Union Congress PAMSCAD Programme of Action to Mitigate the Social Costs of Adjustment MDRI- Multilateral Debt Relief Initiative PUFMARP Public Financial Management Reform Programme MTEF Medium Term Expenditure Framework BPEMS Public Expenditure Management Systems PRGF Poverty Reduction and Growth Facility ESAF Enhanced Structural Adjustment Facility GPRS Ghana Poverty Reduction Strategy NHIS National Health Insurance Scheme ESP Education Strategy Plan NYEP National Youth Employment Programme ECOWAS Economic Community of West African States vii University of Ghana http://ugspace.ug.edu.gh GSGDA Ghana Shared Growth and Development Agenda MDGs Millennium Development Goals SSSS Single Spine Salary Structure SSNIT Social Security and National Insurance Trust GIFMIS Ghana Integrated Financial Management Information System TSA Treasury Single Account NIR Net International Reserves YEA Youth Employment Agency NABCO Nation Builders Corps SDR Special Drawing Rights viii University of Ghana http://ugspace.ug.edu.gh LIST OF TABLES Table 1: The sample of the interviewees ………………………………………………… 100 Table 1A: Do you think incumbent government deliberately increased salaries, wages and allowances of public sector workers during the 1992 elections in order to enhance its chances of winning?…………………………………………………………………………………… 124 Table 1B: Do you think government