Govt reduces budget of all ministries

Spread lead July 29, 2008

Story: Charles Benoni Okine

THE government has reduced by almost half the annual budget of all the ministries to enable it to save money to finance the purchase of crude oil for the Volta River Authority (VRA).
The move is also intended, among others, to spare the government the temptation of borrowing more internally, a situation which could starve the private sector of funds from the banks.
The Minister of Finance and Economic Planning, Mr Kwadwo Baah-Wiredu, told the Daily Graphic in Accra yesterday that the decision to do so had become imperative as part of measures to check the expenditure of the various ministries.
The action of the government comes in the wake of numerous measures being taken by governments across the continent to make some savings to be able to finance the purchase of crude oil.
In neighbouring Cote d’ Ivoire and in South Africa, for instance, the salaries of ministers of state and other public officials have been slashed to enable the government to save some money to finance the purchase of crude oil.
The soaring of crude oil prices on the international market has thrown overboard the budgets of many countries, including Ghana.
Over a billion dollars is being spent on the importation of crude oil for the country and that is said to be eating deep into the foreign reserves of the country, which used to stand at about four months of import cover.
Asked whether the ministries will be affected by the action of the government, the minister replied in the negative but said, “This means that they need to seriously prioritise their expenditures to be able to make do with what they will be given”.
Mr Baah-Wiredu stated, however, that the cut would not affect the personal emoluments of the workers of the various ministries.
He said most of the ministries periodically spent money on the acquisition of brand new vehicles and computers, among others, which could be postponed.
“Some spend huge sums of money on new cars every year, changing carpets and furniture and replacing computers on a large scale and upon assessment, it has been noticed that these are not necessary, hence the action,” he said.
The government has come under heavy criticisms lately for what has been described as frivolous expenditures, particularly within the ministries, departments and agencies (MDAs).
Explaining the impact on borrowing internally by the government, he said the private sector would be starved of funds to grow their businesses and that would have a dire consequence on the growth of the economy.
He said borrowing locally could also force the treasury bill rate higher, making it more attractive for people and those in business to put their money there rather than invest in ventures that could create jobs and bring other economic benefits.
As of the beginning of the year, for instance, the treasury bill rate hovered around 11 per cent but this had increased to 17.5 per cent as of yesterday.
Mr Baah-Wiredu condemned the over-pricing of some goods on the market by some traders in the systems, saying, “they also formed part of the cause of the rising inflation in the country”.
He made reference to imported alcoholic beverages on the market and said when the importers paid very little on the products, they charged more than five times the cost to the consumers.
Mr Baah-Wiredu said this practice was widespread and tasked the revenue collection agencies to check it and ensure that what was due the state came in appropriately.
He said there were leakages in the system, which needed to be blocked, and again asked the revenue collection agencies to redouble their efforts in that direction.