Dealing with arrears accumulation: Embrace expenditure reforms - Finance Minister tells Chief Director
Chief Directors and heads of the Covered Entities have been urged to embrace the ongoing government expenditure reforms to prevent accumulation of arrears which over the years has become a key economic policy issue.
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To this end, they are to effectively implement the government’s Spending Arrears Clearance and Prevention Strategy which is to address the country’s arrears accumulation.
The Minister of Finance, Dr Mohammed Amin Adam, gave the charge when he addressed participants at a sensitisation and training workshop in Accra last Thursday on the Spending Arrears Clearance, Prevention Strategy and the evidentiary requirements for prosecution.
Covered Entities are all organisations and agencies of the state that are covered under the Public Financial Management Act, 2016 (PFMA Act, 921).
He stated that the accumulation of arrears, which was prevalent in many emerging and sub-Saharan African economies, had increased in recent years and become a key economic policy challenge for the country.
The workshop was organised to bring attention to the government’s policy on Covered Entities to address the weak commitment controls and expenditure management as contained in the strategy document.
It was also to train representatives of the entities on the evidentiary requirements for prosecuting officials who went contrary to the PFMA Act and show them what constituted breaches in commitment control and how the government intended to conduct prosecution.
The Finance Minister said to ensure that all Covered Entities were abreast of the current policy directions on the accumulation of arrears and the strategy as a whole, it was important to sensitise principal spending officers (chief directors and heads of the Covered Entities) and directors who were responsible for the day-to-day implementation of the national budget to the measures to prevent the accumulation of further arrears.
Arrears
“In Ghana, arrears constitute a sizeable portion of public expenditure that requires pressing reforms. In the Public Financial Management (PFM) Act, 2016, Act 921 and its Regulations, as well as the five-year Public Financial Management Strategy: 2022-2026, the government has rightly prioritised and resolved to address this challenge,” Dr Adam stated.
He said the Spending Arrears Clearance and Prevention Strategy was, therefore, to deal with the constant accumulation of arrears which had resulted from challenges associated with the effective execution of planned budget operations occasioned by the rigidity of the budget.
The challenges, Dr Adam added, had resulted from unbudgeted expenditures, weak commitment control and poor expenditure management, including issues of MDAs committing government without recourse to the Ministry of Finance and the Medium-Term Expenditure Framework, as well as the non-application of Public Financial Management (PFM) sanctions to serve as a deterrent to culpable officials.
The Finance Minister indicated that the impact of accumulating arrears on the operations of businesses and enterprises, whether small or big, undermined financial sector performance.
“It also raises the cost of doing business for government and reinforces the view that more was required to level up, with the expectations of sound public financial management,” he added.
Dr Adam said the measures contained in the strategy document included the enforcement of sanctions under the PFMA Act and its regulations, publication of league tables for compliance with commitment control measures enshrined in the PFMA Act, the incorporation of clauses of the Ghana Integrated Financial Management Information System (GIFMIS) purchase orders in national tender documents, the full roll-out of GIFMIS to all Covered Entities not yet connected, among others.
“I would count on you to engage your political heads on the government’s policy direction to ensure the effective implementation of the measures at your various entities,” he said, assuring them of the government’s commitment to the interventions.
