Terkper cautions against fiscal sustainability risk of Free SHS

A Former Finance Minister, Mr. Seth Terkper, has cautioned government against the fiscal sustainability risk of its flagship Free Senior High School (SHS) programme in the future, as it requires long-term effective planning.

“Although the current discussions are focused on the 2018-2019 academic year, we should bear in mind that in 2020-2021 we are going to have the first batch of the Free SHS students going into the tertiary level. The question is whether or not we are prepared already.

“It is not a matter of making fiscal plans for the next two-three years, but for long-term sustainability of the programme,” Mr. Terkper told the B&FT during a telephone interview. 

According to Mr. Terkper, in commitment to budget responsibility laws, the advocacy means stopping numerous budget imbalances which are created by unfunded mandates. Examples he mentioned include the mistakes in introduction of the Free SHS.

“We can use resources more efficiently by amending the Public Financial Management Act, 2016, (Act 921) to ensure that tax cuts and spending proposals will keep some core expenditures properly funded,” he advised.

Mr. Terkper proposed that promises such as the Free SHS must come with revenue-raising or cost-cutting measures in order not to compromise stated budget thresholds. These include fixed percentages of revenue allocated for compensation, amortisation, and transfers as well as current and capital expenditures.

“An impressive government programme may not necessarily be fiscally sustainable. We’re a nation that could not sustain subsidies and brought our energy sector down, so I’m only posting a caution to ensure that we plan effectively.”

Mr. Terkper said the programme’s high cost is already throwing government’s budget out of gear - warning that other critical sectors of the economy will be cash-strapped if allocations meant for them are diverted to finance the Free Senior High School project.

“Free SHS helps a lot of poor people, no question about that. But what is the cost? We have taken a lot more of our oil revenue there. We said we would raise revenue for Free SHS; but now we are using the traditional sources of revenue,” he stated.

Professor Ernest Aryeetey, former Chancellor of the University of Ghana - speaking at the Stanbic Breakfast meeting in Accra on the theme ‘Financing Free Quality Education in Ghana – Sustainable Funding Options’ - said the strong growth in cost of the Free SHS will be influenced by its maturity from the current two streams to three streams.

Advancing, his argument, Mr. Aryeetey stated that it will cost the economy about GH¢3.3billion to fund the Free SHS Policy in the next academic year - an amount that is exclusive of salaries for staff and is more than double the GH¢1.3billion budgeted for Free SHS in the 2018 budget.

He indicated that the cost estimate was based on data obtained from running SHSs nationwide, adding that the cost of Free SHS could be pegged at GH¢5billion per annum in the coming years.

Prof. Aryeetey recommended that in order to finance free quality education in the country, it should be possible to categorise schools depending on their endowments and conditions, and set eligibility criteria.