Government outlines cost-cutting measures in 2023 “Nkabom” budget

As part of measures to reset the Ghanaian economy, and restore macroeconomic stability, the government has announced cost-cutting measures to be implemented next year, once the 2023 Budget Statement and Economic Policy is approved by Parliament.

Presenting the document in Parliament yesterday, the Finance Minister, Ken Ofori-Atta, said the government’s goal for the coming year is to significantly enhance revenues, significantly cut down the cost of running government, significantly expand local production, invest more to protect the poor and vulnerable, continue expanding access to good roads, education and health for every Ghanaian everywhere in Ghana and the diaspora.

Breakdown

Outlining the cost-cutting measures to the House, Mr Ofori-Atta said the government had directed Ministries, Departments and Agencies (MDAs), Metropolitan, Municipal and District Assemblies (MMDAs), and State-Owned-Enterprises (SOEs) to reduce fuel coupons, chit system allocations, amongst others, to government appointees by 50%.

“This directive applies to all methods of fuel allocation including coupons, electronic cards, chit system, and fuel depots. Accordingly, 50% of the previous years (2022) budget allocation for fuel shall be earmarked for official business pertaining to MDAs, MMDAs and SOEs,” he added.

He further announced a ban on the use of V8 and V6 vehicles by government officials effective January 2023, except for cross-country travels, as well as the limited budgetary allocation for the purchase of vehicles.

“For the avoidance of doubt, purchase of new vehicles shall be restricted to locally assembled vehicles,” he said.

He also announced that only essential official foreign travel across government, including SOEs, shall be allowed, adding that no official foreign travel shall be allowed for board members.

To this end, all government institutions are expected to submit a travel plan for the year 2023 by mid-December. This directive excludes the Chief of Staff.

Additionally, the government has directed that, as far as possible, meetings and workshops should be done within the official environment or government facilities.

“Government sponsored external training and staff development activities at the Office of the President, Ministries and SOEs must be put on hold for the 2023 financial year,” he said, adding that they would be reduction of expenditure on appointments, including salary freezes together with suspension of certain allowances like housing, utilities and clothing.

He further announced a decision by the government to halt granting of new tax waivers for foreign companies, and a review of tax exemptions for free zone, mining, oil and gas companies.

He also announced that there would be “a hiring freeze for civil and public servants, no new government agencies shall be established in 2023, no hampers for 2022, no printing of diaries, notepads, calendars and other promotional merchandise by MDAs, MMDAs and SOEs for 2024, and all non-critical project must be suspended for 2023 Financial year Expenditure.”

Mr Ofori-Atta explained that the aforementioned are geared towards expenditure rationalisation, in the wake of the current economic challenges.

2023 expenditure

The Finance Minister announced that the government intends to spend a total amount of GHC205.4 billion in 2023, including the clearance of its arrears.

“Total Revenue and Grants is projected at GH¢143,956 million (18.0% of GDP) and is underpinned by permanent revenue measures – largely Tax revenue measures – amounting to 1.35 percent of GDP as outlined in the revenue measures. Mr. Speaker, Total Expenditure (including clearance of Arrears) is projected at GH¢205,431 million (25.6% of GDP). This estimate shows a contraction of 0.3 percentage points of GDP in primary expenditures (commitment basis) compared to the projected outturn in 2022 and a demonstration of Government’s resolve to consolidate its public finances”, the Minister said.

Mr. Ofori-Atta explained that out of the amount, GH¢45 billion will be spent as compensation for employees, which represents 5.6% of Gross Domestic Product (GDP).

He said GH¢8.048 million will be expended on goods and services which will cover 1.0% of GDP, adding “Interest Payment is projected at GH¢53 billion representing 6.6%”.

“Mr. Speaker, grants to other government units are estimated at GH¢30,079 million, representing 3.8% of GDP. Mr. Speaker, Capital Expenditure (CAPEX) is projected at GH¢27.694 million representing 3.5% of GDP.

“Mr. Speaker, Other Expenditure, mainly comprising Energy Sector Levies (ESL) transfers and Energy Sector Payment Shortfalls, is estimated at GH¢26,739 million”, the Minister of Finance mentioned.