Gov’t in hot waters over Single Spine

Government’s quest to score cheap political points with the implementation of the Single Spine Salary Structure (SSSS) appears to have backfired given the confession it is making in recent times.

According to Finance Minister, Seth Terkper, expenditure on wages and salaries totaled GH¢5,022.9 million, which was 2.2 percent higher than the budget target of GH¢4,905.2 million and 17.1 percent higher than the outturn for the same period in 2012.

“In addition to this, an amount of GH¢674.8 million has been spent on the clearance of wage arrears. The trend in the wage bill for the first eight months of the year is worrying, given that the 10 percent 2013 wage increment for public sector workers is not reflected in the end-August wage bill.”

The minister said: “Compensation to public sector employees alone continues to take a very significant percent of tax revenue (73.9 percent as at end-August), resulting in less revenue being available for other important expenditure items under the goods and services, as well as capital components under the Budget. Together with interest payments, it has also resulted in delays in payments to statutory funds and other transfers.”

Interest payment from January to August totaled GH¢2,972.2 million, 40.5 percent higher than the budget target of GH¢2,115.5 million and 117.3 percent higher than the outturn for the same period in 2012. Of this amount, domestic interest was 43.6 percent higher than the budget target.

On a year-on-year basis, domestic interest grew by about 133 percent, reflecting very high domestic borrowing in 2012 to finance the deficit and the high interest rate associated with it.

“The high expenditure on wages and salaries as well as interest cost has led to a crowding out of spending on other important expenditure items such as capital and goods and services,” Mr Terkper admitted, adding that “For example, an amount of GH¢463.2 million was spent on goods and services against a budget of GH¢926.3 million for the period. Similarly, an amount of GH¢2,713.9 million was spent as capital expenditure against a target of GH¢3,209.8 million.”

Owing to the higher expenditure on compensation to employees and interest costs, spending on items such as the provision of funds for orphanages and other social spending (i.e. school feeding, school uniforms, capitation grant and LEAP), as well as payment to road contractors and other Government service providers had to be curtailed, he revealed.

“The 7.3 percent budget deficit for the first eight months of the year was financed from both domestic and foreign sources. Net domestic financing (NDF) of the budget was GH¢3,570.0 million (equivalent to 4.0 percent of gross domestic product). Domestic debt constituted about 55 percent of total financing for the period, indicating an improvement in the financing mix following the recent Eurobond issue. Foreign financing of the budget was GH¢2,872.1 million, representing about 45 percent of total financing.”