(a)

      i) Implication of Government policy proposals

1. Suspension of personal income tax
   The principle of formulation and implementation of fiscal objective states that fiscal policies should ensure sufficient mobilization of revenue for development. In this case, the revenue available to government through personal income tax will reduce significantly when the tax handle is suspended. While the policy may be socially acceptable, it would not produce a desirable economic result. This may negatively affect the fiscal indicators of the country.
2. Debt-led Development
   The principle of formulation and implementation of fiscal objective requires that government should ensure that debt levels are maintained at a sustainable level. Already, the debt to gross domestic product is unfavorable (80%) and therefore continuous borrowing excessively for development may worsen the debt sustainability of the country.
3. Massive government expenditure
   Boosting development and improving living condition of the citizens are desirable objectives of government, however uncontrolled expenditure will lead to more unsustainable fiscal balance, which will worsen the existing 17% fiscal balance to gross domestic product ratio.
4. Elimination of Extravagance and Waste
   The principle of formulation and implementation of fiscal objective is to achieve efficiency, effectiveness and value for money in public expenditure. Thus, the policy to eliminate extravagance and waste will help to achieve value for money and ensure sustainable fiscal balance.

(ii)

Conditions and procedures for suspension of fiscal rules and targets under section 18 of the Public Financial Management Act 2016 (Act 921)
Under Section 18 of Act 921, a fiscal target or rule provided for in the Fiscal Strategy Document may be suspended with the prior written approval of Cabinet where any of the following events occur:

• A natural disaster, public health epidemic or war as a result of which a state of emergency has been declared by the President under article 31 of the Constitution.
• An unanticipated severe economic shock, including commodity and oil price shocks.

The suspension of the rules and targets can only be carried, despite the occurrence of the events, when the Minister for Finance is of the opinion that the implementation of any of the fiscal targets or rules would be unduly harmful to the fiscal and macroeconomic or financial stability of the country.

In suspending of the rules and targets, the Minister for Finance shall submit a memorandum to Cabinet to request for approval to suspend any of the rules or targets in the Fiscal Strategy Document, providing the following information:

• The reasons why the implementation of the fiscal rule or target would be harmful to the finances and macroeconomic or financial stability of the country.
• The period within which the fiscal rule or target is to be suspended; and
• A fiscal adjustment plan setting out the measures to return to a position of compliance with the fiscal rule or target within a period of not more than five years.                                                                                                                                                                                                                                                                                                                                                                                                    bi)

  Reasons why Ghana should subject itself to PEFA assessment.
  PEFA assessments play a crucial role in promoting good governance, fiscal discipline, and effective resource management in countries worldwide. Ghana may benefit from PEFA assessment for the following reasons:

  • Diagnostic Analysis: It provides a comprehensive evaluation of the performance of a country’s Public Financial Management (PFM) systems, identifying strengths, weaknesses, and areas for improvement.
  • Basis for Reform: The assessment results serve as a foundation for designing and implementing PFM reforms, guiding policymakers and stakeholders in prioritizing areas for intervention.
  • Monitoring Progress: It facilitates the monitoring of progress in PFM reforms over time, enabling governments and development partners to track improvements and identify persistent challenges.
  • Capacity Building: PEFA assessments contribute to building the capacity of ensuring that government and stakeholders understand and analyze PFM systems, fostering informed decision-making and reform implementation.

    ii) Limitations of the PEFA framework used in the assessment.
    PEFA Framework and the resulting assessments suffers the following limitations:

    • Disregard for unique context. PEFA assessments assumes that every state or local government faces similar circumstances and therefore may not fully account for the unique socio-political and economic contexts of different countries, leading to recommendations that might not be entirely applicable or practical.
    • Progress not measured. PEFA provides a snapshot of the financial management system at a specific point in time, which may not capture ongoing reforms or recent changes. PEFA assessments refrain from providing recommendations for reforms or assuming the potential impact of ongoing reforms on PFM performance. The role of PEFA reports is to outline the government’s reform agenda without evaluating its effectiveness.
    • Overly emphasis on Processes rather than outcomes. The framework tends to emphasize the assessment of processes and compliance over outcomes, which might not directly reflect the impact on service delivery or development goals.
    • Complexity and Resource Intensity. Conducting a PEFA assessment can be resource-intensive, requiring significant time, expertise, and financial resources, which might be challenging for some countries to mobilize.