ACCRA, Aug. 7 (Xinhua) ?A top Ghanaian economist has attributed the continuous fiscal deficit in the execution of the government?s budget to indiscipline.? This, he noted, was the greatest source of macro-economic instability in the country where the deficit reached 11.8 percent in 2012.
?? Kwesi Botchwey (Ph D), former minister for Finance an Economic Planning, who made this observation here at a two-day Budget Advocacy workshop?on Wednesday,?urged the government to stand firm in the re-introduction of the Public Investment Program (PIP) with which it seeks to eradicate the regime of arrears it has had to deal with in recent years.
?? Botchwey referred to the deficit and huge arrears governments had been experiencing as ?echoes from the past?, referring to the same problem he had to deal with during his early days in office.
?? Ghana?s longest serving minister of Finance attributed this phenomenon to unbudgeted for expenditure by the Ministries, Departments and Agencies (MDAs).
?? ?The unbudgeted expenditure that hits the budget after budget approval results in these arrears, and these arrears build up in the year, which is difficult to deal with in the ensuing year, as the budget for the following year needs to take care of these arrears in addition to current spending,? he explained.
?? While in some cases, he blamed the arrears on wrong estimates given by the MDAs, he said in the others correct estimates were given but with a larger expenditure during execution.
?? He added that this situation ended up undermining the macro-economic environment and affected the whole economy, and urged government to put in place control measures to check the over-spending in the public sector.
?? ?If you are not ready to wind everybody back?and institute a one-shot correction, these arrears will continue to roll and create the situation where it completely undermines the macro-economic environment,? the former minister cautioned.
?? On his?support for the PIP, Botchwey explained that it was by that program that the basis for admitting a project into the budget was clearly defined, as ?the cost and value of these projects must be exactly as you have them in the budget?.
?? ??If the necessary measures are not taken, since governments cannot cut public sector wages, it is development projects that are affected, and so you see the discontinuation of contracts, which affects contractors and then traders begin to complain that there is no money in the system,? added Botchwey.
?? Botchwey, who is Board Chairman for the Ghana National Gas Company (GNGC), urged government to hold the line, establish the quantum of arrears and clear them over time to create fiscal space for development.
?? ?This will create the necessary fiscal space and affect monetary policy and productivity positively, as we take steps to enforce the payment of the right tariffs for utility services,? he stressed.
?? Botchwey became minister for Finance and Economic Planning in 1983 under the revolutionary Provisional National Defense Council (PNDC) government of Jerry John Rawlings and continued till 1996, thus becoming the longest serving minister of Finance.
?? ?At that time, the state?s gold mining companies were so broke that they were coming to the budget to get money to pay salaries,? the former minister and former professor of?The Fletcher School of Law and Diplomacy?of?Tufts University, USA recalled.
?? When he took over, the economy had recorded negative growth for three years running, and inflation was over 120 percent as farmers of cocoa, the country?s major cash-crop, abandoned their crops and farms due to the low value?of the over-valued local currency.
??? Minister for Finance Seth Terkper recalled: ?Although there were several causes of the fiscal deficit in 2012, the wage bill, clearly the single largest contributor, accounted for 50 percent of the fiscal slippage in 2012.?
?? Apart from measures being taken to address the rising wage bill, Terkper said the government had implemented other measures such as?restructuring of the country?s debt profile through the Euro bond; removal of petroleum subsidies and subsequently utility subsidies; and the?implementation of tighter budgetary control on non-wage recurrent expenditure.
?? ?In addition to the measures, oil outputs are expected to meet or exceed the target for 2013 with a resultant increase in corporate income taxes from the petroleum sector,? Terkper added.
?? The minister gave the assurance that the government acknowledged the implications of the high deficit for 2012 on macroeconomic stability and was therefore working hard through the 2013 budget to reduce the fiscal deficit from 12 percent in 2012 to 9.0 percent in 2013 and further down to 6.0 percent by 2015.
? ?The Budget Advocacy program was organized by the Institute of Financial and Economic Journalists with support from STAR-Ghana. Enditem.