Ghana faces the persistent challenge of accumulating arrears in its public expenditure. These arrears can harm the country’s economy, hindering growth, and undermining public trust. Therefore, this issue must be tackled head-on by implementing effective strategies to address the accumulation of arrears.
To address the persistent challenge of accumulating arrears in public expenditure, the government has rolled out a comprehensive strategy aimed at both clearing existing arrears and preventing further accumulation.
“Without a doubt, the socio-economic implications of accumulating unsustainable arrears are enormous and far-reaching. It impacts the operations of businesses and enterprises – whether small or big sized, undermines financial sector performance, raises the cost of doing business for government and reinforces the view that more is required to level-up with the expectations of sound public finance management.”
Dr. Amin Adam, Minister of Finance
Minister of Finance Dr. Amin Adam cited examples where some revenue lines are earmarked for Statutory and Other Earmarked Funds, 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.
Weak financial management systems and practices within government agencies exacerbate the arrears problem. Inefficient procurement processes, inadequate record-keeping, and inadequate monitoring mechanisms contribute to the accumulation of arrears.
Moreso, Ghana relies heavily on donor funds to finance various development projects. Delays in the disbursement of these funds can lead to arrears, as government agencies struggle to fulfill their commitments without the necessary financial resources.
Dr. Amin Adam also stated instances of the non-application of the Public Financial Management (PFM) sanctions to serve as a deterrent to culpable officials as part of the reasons for adopting the Spending Arrears Clearance and Prevention Strategy.
Persistent arrears create an unfavorable investment climate, deterring both domestic and foreign investors. Businesses and individuals may be hesitant to invest in an economy where the government struggles to honor its financial commitments.
Strategy Aimed at Preventing the Accumulation of Arrears
To address the persistent challenge of accumulating arrears in Ghana’s public expenditure, the government should consider implementing robust financial management systems, including efficient procurement processes, accurate record-keeping, and transparent monitoring mechanisms, is crucial. This will help ensure timely payments and reduce the accumulation of arrears.
The Public Financial Management Compliance Desk (PFM-CD), established by the Ministry of Finance, will play a central role in these efforts. The PFM-CD is tasked with developing and implementing measures to strengthen compliance with PFM laws and promote transparency in public spending.
The government should allocate sufficient funds to meet its financial obligations promptly. Adequate budgetary provisions will enable government agencies to settle their debts promptly and avoid arrears.
“The effectiveness of these measures is subject to the full cooperation of principal spending officers, budget officers, procurement officers, internal auditors and the Internal Audit Agency.”
Dr. Amin Adam, Minister of Finance
Furthermore, the government should prioritize effective debt management and explore options for debt restructuring to reduce the debt burden. This will free up resources that can be utilized to address arrears and prevent their further accumulation.
The minister, while imploring the relevant stakeholders to play their parts, also stressed the government’s commitment to these reforms.
“I would, therefore, appeal to all Chief Directors and Heads of the Covered Entities to embrace these expenditure reforms… 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. I assure you of the government’s commitment to these interventions.”
Dr. Amin Adam, Minister of Finance
Addressing the persistent challenge of accumulating arrears in Ghana’s public expenditure is crucial for sustainable economic growth and development. By implementing robust financial management systems, ensuring adequate budgetary allocations, enhancing revenue collection, strengthening donor coordination, and adopting effective debt management strategies, Ghana can overcome this challenge.
By doing so, the country can restore public trust, attract investment, and create an enabling environment for economic prosperity.
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