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Business News of Monday, 21 February 2022


Government to roll out six major expenditure cut measures

Ken Ofori-Atta , Finance Minister Ken Ofori-Atta , Finance Minister

The government has identified six major policy measures and controls in an attempt to roll out cuts to the 2022 budget expenditure by 20 percent, as announced by Finance Minister Ken Ofori-Atta last month.

Among the policy measures is included savings of US$13.2billion from the 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. The government in the 2022 budget noted plans to suspend the approval for post-retirement contract appointments, except in cases where the skills of the retiring officer are in short supply.

This year, the government says it remains resolute with plans to restructure workers in the public sector while aiming to instill 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 labor 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.

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 minimize off-budget expenses.

“Use of the Ghana Integrated Financial Management System (GIFMIS) in initiating and processing all requests will be strictly enforced to minimize 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 percent cut to the approved 2022 budget expenditure, as the government’s fiscal consolidation agenda is primarily driven by the expenditure side with support from additional revenue.