Announced expenditure cuts the ‘usual’ austerity measures in every first quarter – Seth Terkper
Erstwhile Minister for Finance, Seth Terkper, seems unmoved by the announced cuts in government expenditure for the rest of the year by the Minister for Finance, Ken Ofori-Atta.
This is because per the former Finance Minister, the expenditure cuts announced by Ken Ofori-Atta, are usual austerity measures taken in relation to discretionary expenditure by every government in the first quarter of every year.
According to Mr Terkper, given the gradual pick up in revenue in the first quarter of every year, austerity measures usually in the form of cuts in discretionary expenditure are taken, with such measures sometimes lasting till the third quarter of the year.
“Yes, the fiscal measures are welcomed, particularly the expenditure cuts, but these are discretionary expenditure and they are austerity measures put in place to check discretionary expenditure by every government in every first quarter.
“And this is because, revenue is just starting to trickle in from GUTA, the Customs and others. Because you see, you have spent the revenue of 3 quarters of the previous year and so you tend to suspend those expenditure and sometimes the suspension of these expenditure even last till the third quarter,” he stated speaking in an interview monitored by norvanreports.
Adding that although the expenditure cuts are good, they are not substantial enough to get the economy out of the current crisis it finds itself.
The Finance Minister, Ken Ofori-Atta, on Thursday, announced a number of measures by the government including a 50% cut in fuel coupon allocations for all political appointees and heads of government institutions, including SOEs, a 15% reduction in fuel prices and a 30% cut in salaries for all Cabinet Ministers and heads of State-Owned Enterprises, amongst others as part of measures that are to help significantly improve the macroeconomic conditions of the country and restore confidence in the economy.
Government, in making these expenditure cuts, is expected to save a total of GHS 3.5bn.
Meanwhile, Ranking Member on Parliament’s Finance Committee, Cassiel Ato Forson, has said the new fiscal measures announced by the government lack substance and will not yield any significant result in the economic recovery process.
He contended that the various interventions outlined to enhance the economy’s growth may end up exacerbating the current economic woes bedevilling the country.
In a tweet to react to the Finance Minister’s address on mitigating the harsh economic conditions in the country, Mr Ato Forson said “the fiscal measures announced today are just cosmetic and empty; they will further erode confidence in the economy.”
The former Deputy Finance Minister suggested that “government should place a moratorium on new loans, cut 2022 foreign financed projects by at least 50% and deliver on promise to review all flagship programmes.”
Below are the various expenditure cutting measures announced by the Finance Minister:
- Discretionary spending is to be further cut by an additional 10%: The Ministry of Finance is currently meeting with MDAs to review their spending plans for the rest of the three (3) quarters to achieve the discretionary expenditure cuts;
- A 50% cut in fuel coupon allocations for all political appointees and Heads of government institutions, including SOEs, effective 1st April 2022;
- Government has imposed a complete moratorium on the purchase of imported vehicles for the rest of the year. This will affect all new orders, especially 4-wheel drives.
- Government has imposed a moratorium on all foreign travels, except pre-approved critical/statutory travels
- Government will conclude on-going measures to eliminate “ghost” workers from the Government payroll by end December 2022;
- Government will conclude the renegotiation of the Energy Sector IPPs capacity charges by end of Q3-2022 to further reduce excess capacity payments by 20% to generate a total savings of GHS1.5 billion;
- Impose a moratorium on establishment of new public sector institutions by end April, 2022;
- Prioritise ongoing public projects over new projects. This is to enhance the efficient use of limited public funds over the period by finishing ongoing or stalled but approved projects;
- Reduce expenditure on all meetings and conferences by 50%, effective immediately;
- Cabinet approved that Ministers and the Heads of SOEs to contribute 30 percent of their salaries from April to December 2022 to the Consolidated Fund
- Pursue a comprehensive re-profiling strategies to reduce the interest expense burden on the fiscal; and
- liaise with Organised Labour and Employers Association to implement with immediate effect, the measures captured in the Kwahu Declaration of the 2022 National Labour 13 Conference, including reforms towards addressing salary inequities / inequalities (e.g. Article 71 Office Holders), the weak link between pay to productivity and the sustainability of the payroll
