Spending arrears to be tackled as Finance Ministry announces new strategy


Spending arrears to be tackled as Finance Ministry announces new strategy

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.

The initiative was announced by the Finance Minister, Dr. Mohammed Amin Adam, during a sensitisation and training workshop for Chief Directors and Heads of Covered Entities.

Addressing attendees, Dr. Adam highlighted the urgency of tackling the issue of arrears, which has become a significant policy challenge in many emerging economies, including Ghana.

He noted that arrears constitute a substantial portion of public expenditure, necessitating urgent reforms.

“Without 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,” the minister said while  highlighting the widespread prevalence of this issue across the continent.

He added that ultimately, the issue challenges the effectiveness of fiscal policy and results in poor public service delivery to citizens.

The new strategy focuses on a two-pronged approach – clearing existing arrears and preventing future build-up. To achieve this, the government will implement various measures, including enforcing stricter adherence to the Public Financial Management (PFM) Act.

The Act, enacted in 2016, establishes regulations to ensure sound financial management practices.

One key measure involves enforcing sanctions against those who violate the PFM Act’s regulations. This aims to deter non-compliance and promote fiscal responsibility.

Additionally, the government will publish ‘league tables’ ranking covered entities based on their adherence to commitment control measures. These tables will serve as a public record and potentially incentivise better financial practices.

The strategy also emphasises stricter budget commitment control. This entails ensuring that expenditures stay within approved budgetary limits and avoiding unauthorised commitments. The minister pinpointed some of the current challenges contributing to arrears, including “unbudgeted expenditures” and “weak commitment control”.

The workshop specifically targeted representatives from Covered Entities, which are government agencies and institutions that fall under the PFM Act’s purview.

By training these officials on the new strategy and the evidentiary requirements for prosecuting financial infractions, the government aims to ensure effective implementation and deter future mismanagement, Dr. Adam noted.

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 Finance Minister emphasised the crucial role of Covered Entities in the strategy’s success.

“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,” he said, urging their collaboration to ensure the measures deliver the intended results.

The minister, while imploring the relevant stakeholders to play their parts, also stressed 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,” he noted.

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