Capex budget for MDAs to be affected by 20% expenditure cut – Dep. Finance Minister
Deputy Minister of Finance, Abena Osei Asare, says goods and services as well as capital expenditure budget of all ministries, departments and agencies will be affected by the proposed 20% cut in government spending for this year.
Her assertion is in view of the recently announced 20% cut in expenditure by the Minister for Finance, Ken Ofrio-Atta.
Speaking in an interview, Mrs Osei Asare noted that government is committed to matching revenue with expenditure this year.
Adding that government is working on the Government Integrated Financial Management System [GIFMIS] software which is going to help in cutting down expenditure.
According to her, the software regulates the amount of money allocated to a particular project and will not allow MDAs go over or beyond the allocated amount.
“Now everything has been placed in there [GIFMIS], so assuming you allocate about GHS 5 million and you go beyond the GHS 5 million, the system will not allow you to move beyond that. It has been keyed into the system, so its been cupped, so which ever MDA if you go over and above, you cannot even manipulate the amount in the system,” she noted.
Meanwhile, government has been advised to slash salaries and other emoluments of its appointees to demonstrate commitment to reducing expenditure and improving the fiscal economy in this difficult times.
According to financial analyst Joe Jackson, this will send positive signals to investors reassuring them of government’s commitment in addressing the challenges in the economy.
Government as part of measures to contain the fiscal imbalance, cut expenditure of its institutions including ministries by 20%, however, it did not satisfy some rating agencies including Moody’s which consequently downgraded the country’s credit rating.
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According Mr Jackson, government must do more to bring stability to the economy.
“To be honest with you, government official salary do not add up that much more to our bill, but the fact that it seems as some people are being asked to bare as a pain and some people are not, especially when those who are not there, in this case are the leaders, government should cut spending on itself so that it looks better all round and that it shows that our leaders are committed to cutting expenditure so that we know our leaders are leading by example,” he said.
Meanwhile, government’s decision to cut quarterly expenditure by an estimated 20% has been described as a major investor boost for the economy.
According to the CEO and Co-Founder of C-Energy Global Holdings and Investment Analyst, Mike Cobblah, government’s decision to reduce their projected expenditure by 20% is a move in the direct direction.
According to Mr Cobblah, the move will boost investor confidence and stabilize the economy following Fitch Ratings’ and Moody’s downgrade.
“The first thing to know is to cut your coat according to your size, so the Finance Minister’s 20% cut is a step in the right direction. That is a fantastic move, I mean to it is tell investors that we’ve realised there is a problem, so even though parliament has approved the entire budget , you are cutting it by 20%. 20% is very significant.
Now, beyond the 20% what are we going to do to fix our revenue, what other measures are you going to put in place to make sure that you’re cutting your coat according to your size.
He has advised government to desist from embarking on a universal roadshow as a means of raising funds especially following Fitch’s downgrade of the economy.
According to him, such a move will prove futile and might hasten the country’s economic collapse.
Speaking in an interview, he stated that, the precarious economic situation the country finds itself calls for more bilateral deals.
“It is easier to convince investors on one-on-one basis than to do a universal roadshow. So I would advise that government at this stage of our economy would have to do more bilateral deals, striking more bilateral deals with capital funds, funds outside rather than doing [roadshows],” he added.
He was hopeful that the country would be more successful with bilateral deals against a universal roadshow, as the former would allow the government focus their energies on friendly investors who might be more willing to invest despite the economic downgrade.
“It is time to engage your friendly investors. The economy is not bad, we’re not in that bad situation…it’s a perception don’t forget. So there are people who generally sympathise with your cause,” he said.
The downgrade of Ghana’s IDRs and Negative Outlook reflect the sovereign’s loss of access to international capital markets in the second-half of 2021, following a pandemic-related [COVID-19] surge in government debt.
Fitch in a report said, “this comes in the context of uncertainty about the government’s ability to stabilise debt and against a backdrop of tightening global financing conditions. In our view, Ghana’s ability to deliver on planned fiscal consolidation efforts could be hindered by the heavier reliance on domestic debt issuance with higher interest costs, in the context of an already exceptionally high interest expenditure to revenue ratio.”
