Prez & team reduce salaries to support healthcare projects
The President, the Vice-President and ministers have decided to voluntarily reduce their salaries by 10 per cent in 2014 and dedicate the money accruing from there to fight maternal mortality in rural communities, the Minister of Finance, Mr Seth Terkper, has announced.
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Presenting the 2014 Budget Statement and Economic Policy of the government to Parliament yesterday, Mr Terkper said, “Mr Speaker, in the spirit of the partnership from the Ho forum, President John Dramani Mahama, his Vice-President, ministers and appointees have decided to take a voluntary 10 per cent pay cut for 2014.”
The 2014 Budget is on the theme: “Rising to the Challenge: Re-aligning the Budget to meet Key National Priorities”.
The budget was presented in the programme-based budgeting (PBB) format. Unlike the activity-based budgeting approach which has been used in the last 15 years, focus will shift from inputs and activities to service delivery and results.
This will add to several ongoing public financial management initiatives such as the Ghana Integrated Financial Management Information Systems (GIFMIS).
Fund for health
Mr Terkper explained that the salary cut, which would be deducted at source by the Controller and Accountant-General, would be paid into a fund to be dedicated to special purpose Community-based Health Planning Services (CHPS) focusing on maternal and neonatal health.
The construction of CHPS compounds is consistent with demands by some civil society bodies, such as the Integrated Social Development Centre (ISODEC), which want more CHPS compounds constructed for the country to achieve the Millennium Development Goal Five (MDG 5) of reducing maternal mortality.
The Finance Minister said the measure by the Executive to reduce their salaries by 10 per cent was part of a cocktail of initiatives meant to realign public expenditure to national priorities.
The realignment would include a steady funding of infrastructure to the benefit of the social and agricultural sectors, support for local industries and what Mr Terkper described as “innovative debt management strategy”.
Transformational budget
Mr Terkper said the budget was truly transformational, partly because it had created a new critical body, the Ghana National Infrastructure Fund into which all the proceeds accruing from the additional 2.5 per cent increase in the Value Added Tax (VAT), matched with other funds such as from bonds, would be paid to finance major infrastructure projects.
He said besides the fund, the budget intended to improve revenue mobilisation through the modernisation of processes by the Ghana Revenue Authority (GRA), realigning the key budget items and enhancing the efficiency of public expenditures and reviewing capital expenditures and the strategy for financing them.
Mr Terkper said the budget would also focus on the completion of pipeline projects to reduce medium-term fiscal risks, as well as refinance and extend tenure of the country’s public debt.
Revenue mobilisation
He said in 2014 the government intended to raise estimated total revenue and grants, including those accruing from the oil sector, of GH¢25.99 billion, equivalent to 24.6 per cent of the total value of goods and services produced within the country, otherwise known as the Gross Domestic Product (GDP).
Total non-oil revenue and grants for 2014 are estimated at GH¢24.277 billion, equivalent to 25 per cent of non-oil GDP. The figure will represent a 26.3 per cent increase over the projected outturn for 2013.
Revenue from oil is estimated at GH¢1.71 billion or 1.6 per cent of GDP in 2014.
Resource allocation for 2014
Total expenditure, including provision made for the clearance of arrears and outstanding commitments in 2014, is estimated at GH¢34.96 billion, equivalent to 33.1 per cent of GDP.
The envelop also represents an increase of 17.7 per cent over the projected outturn for 2013.
While GH¢2.82 billion, representing 8.1 per cent of total expenditure, will be used to clear arrears and outstanding commitments, GH¢10,597.3 million, representing 54.1 per cent of non-oil tax revenue and 52.1 per cent of tax revenue, will be used in compensating employees by way of wages and salaries, allowances, pensions, gratuities and social security contributions.
Wages, salaries and allowances alone will swallow GH¢8.97 billion of the estimated expenditure on compensations, with GH¢678.9 million, GH¢224.2 million and GH¢726.4 million, respectively, earmarked for pensions, gratuities and social security.
The government will spend GH¢1.53 billion on goods and services.
Infrastructure
As part of plans to narrow the infrastructure deficit in the country, the government announced a 31.3 per cent increase in the allocation for capital expenditure, amounting to GH¢5.97 billion.
Mr Terkper said about 24 per cent of the total amount would be financed from domestic sources and the remaining from foreign sources.
Fiscal performance
Based on the expected revenue and expenditure estimates for next year, the budget is expected to result in an overall deficit of GH¢8.97 billion, equivalent to 8.5 per cent of GDP, which would be financed more with foreign sourced funds estimated at GH¢4,921.9 million than from domestic sources estimated at GH¢4,117.9 million.
The minister indicated that records on the first nine months of the year indicated that both revenue and expenditure were below their respective targets for the period.
The resulting fiscal deficit on cash basis was, therefore, equivalent to 8.4 per cent of GDP, against a target of 7.2 per cent.
However, he said, through prudent fiscal and financial management, the government was able to reverse the 2012 shortfall of GH¢384.1 million from corporate taxes from the petroleum sector and was now projected to end the year with a positive variance of GH¢224.6 million (0.3 per cent of GDP).
Petroleum subsidy adjustments, as well as utility price increment, are projected to reduce the budget deficit from GH¢339 million to GH¢244.9 million.
“Our budget strategy continues to include justifiable and targeted cross subsidies as part of our well-diversified social intervention policies, notably in the agricultural, educational, health and energy (gas and solar) sectors,” Mr Terkper said.
Other initiatives
In line with the policy of completing existing projects before new ones are commenced, the government earlier this year started an exercise to compile a comprehensive database of government contracts.
“Government decided to suspend the award of new major contracts in 2013 to enable MDAs to focus on ongoing projects. New contracts were approved on exceptional basis only and the database has greatly aided our shift from cash to accrual or commitment basis for government accounts,” Mr Terkper said.
The Finance Minister announced that after a thorough review of existing loans and facilities, the government had decided to contract new loans only on exceptional basis as part of a comprehensive debt restructuring and management review.
He said the government would continue with all the ongoing infrastructure projects in all sectors, as well as the social intervention programmes.
