The Finance Ministry has taken steps to cut expenditure this year, consistent with suggestions by civil society and economists at the height of the debate on the proposed 1.5% E-Levy tax regime.
Economists and academics urged the government to consider reducing the waste in the system and cutting down spending instead of imposing an unpopular tax.
Former Finance Minister, Seth Terkper, for instance, told the government earlier this month that the E-Levy will not even rake in enough to shore up the economy.
Some six major policy measures have been targeted in this cut to the 2022 budget presented by Finance Minister, Ken Ofori-Atta, in Parliament last year.
This cut includes projected savings of $13.2billion from renegotiation of the Power Purchase Agreements (PPAs) with Independent Power Producer (IPP), which will effectively reduce the strain on Ghana’s electricity sector.
The ministry has tentatively noted that documentation of renegotiated agreements is underway and in progress toward effective implementation. These IPPs are: Karpower, Cenpower, Sunnon Asogli, Early Power, Twin City Energy (formerly Amandi), AKSA Energy and Cenit.
Another measure is a staff restructuring exercise.
Government in the 2022 budget noted plans to suspend the approval for post-retirement contract appointments, except in cases where skills of the retiring officer are in short supply.
This year, government says it remains resolute with plans to restructure workers in the public sector while aiming to instil efficiency into the allocation of staff to government institutions, so as to right-size the public sector workforce in the medium-term.
“Similarly, controls have been imposed to negotiate a base pay increase of 7 percent for 2022 compared to the 25 percent demanded by labour unions,” the ministry said.
The third measure is a suspension of new projects under the Infrastructure for Poverty Eradication Programme (IPEP) in 2022. It also noted that existing IPEP projects will be completed, but no new projects will be commenced in 2022. However, the payment of any outstanding claims will be spread over a period of two years beginning with 2022.
READ ALSO: I’ve not endorsed E-levy, its ‘most nuisance of nuisance taxes’ – Terkper
The next two measures are rolling out expenditure commitment control mechanisms to curb expenditure overruns; and strict use of the Ghana Integrated Financial Management System (GIFMIS) to minimise off-budget expenses.
“Use of the Ghana Integrated Financial Management System (GIFMIS) in initiating and processing all requests will be strictly enforced to minimise off-budget expenditures and enhance commitment control,” the ministry stated in the update – further highlighting that regular payroll audits will be initiated to identify ghost and unapproved workers, and accordingly expunge those names identified from the payroll.
The ministry said expenditure commitment control mechanisms are being rolled out by the government to curb expenditure over-runs, which is not expected to generate any arrears. “For the first nine months of the 2021 fiscal year, an amount of GH¢2.3billion had been spent on the clearance of arrears; and as a result, the financial sector clean-up is almost complete.”
Lastly, the ministry further indicated plans to suspend the purchase of vehicles by Ministries Departments and Agencies (MDAs) and Metropolitan Municipal and District Assemblies (MMDAs), except with the express approval from the Chief of Staff based on a pre-approved budget provision.
Last month, the Minister for Finance, Ken Ofori-Atta, announced a 20 per cent cut to the approved 2022 budget expenditure, as government’s fiscal consolidation agenda is primarily driven by the expenditure side with support from additional revenue.
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Additional reporting by B&FT