ECONOMIC IMPACT OF COVID-19: CUTTING DOWN THE SIZE OF GOVERNMENT A SUBSTITUTE FOR THE USE OF THE HERITAGE FUND?

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ECONOMIC IMPACT OF COVID-19: CUTTING DOWN THE SIZE OF GOVERNMENT A SUBSTITUTE FOR THE USE OF THE HERITAGE FUND?

By Charles Opoku (Eastern Regional TESCON Coordinator & ER Communications Team Member)

Yesterday, the Finance Minister presented to Parliament a statement on the Economic Impact of COVID 19 Pandemic on the Economy of Ghana. He detailed measures and policies that the government, with the approval of parliament, will implement to ameliorate the debilitating woes the economy may suffer on the account of the emergence of COVID 19 in Ghana.

Among the many steps the government intend to take ostensibly to contain the looming fiscal crisis is to use part of the Heritage Fund (ghc3.4billion) – a percentage of monies accruing from Ghana’s Oil kept for future generations. This very decision by the government was greeted with fierce resistance from the Minority (NDC) in parliament.

It is imperative to note that the government and the NDC agree that the COVID 19 pandemic poses fiscal challenges to the economy and therefore, government must take steps to significantly reduce the impact. However, the point of divergence is the use of the Heritage Fund to resolve the looming crisis.

The minority through Hon. John Jinapor (Parliamentary Finance Committee Member) has suggested that government should not touch the Heritage Fund but rather cut down the size of government. Hon. Okudzeto Ablakwa (Economic guru at large) delineating this position of the Minority stated that:

1. Some Ministries must be collapsed, others merged and some Ministers and Deputies sent home.

2. Lay off all Personal/Special Assistants to Ministers, and Presidential Staffers

There are serious economic trade offs with respect to the suggestions of the Minority and as a party with established delusion to form the next government in January 7, 2021, the least they could have done was to analyze the inherent trade offs and save us the stress of educating them on such basic economic issues.

The downsize of government will have two implications on the economy (at least that’s what I have opted to focus on):

1. It will save the country an amount insignificant to make up for the gargantuan ghc9billion shortfall:

2. It will needlessly compound the unemployment situation in the country and compromise government projects, programs and initiatives under the auspices of the ministries that will be affected.

Understanding these two implications will help us appreciate the issue at hand and make an informed decision as to whether to cut down the size of government or use part of the Heritage Fund.

Collapsing and Merging Ministries and Firing of Ministers and Deputy Ministers

Let me state at the onset that reducing Ministers and Deputy Ministers to even 84 excluding the 12 Regional Ministers and their deputies in the newly created regions – just to be at par with the size of the erstwhile Mahama Administration – will have close to zero impact on the problem at hand. In other words, the savings that will be made would be woefully insignificant to close the budget financing gap.

How? The reason is simple! The total emolument and others fringe benefits of the 29 appointees that would be relived off their Ministerial positions will be a little over ghc7million for 2020.
Note that at least 15 of these 29 Ministers and deputies will be Members of Parliament who will still receive salaries close to what they enjoyed as ministers. For instance, if we collapse the Communications and Information Ministries into one, as it was the case under Mahama, the Minister who will relinquish his ministerial position (either Hon. Kojo Oppong-Nkrumah or Hon. Ursula) will still remain an MP and will continue to take salary. Let me hasten to add that the departments and agencies and staffs of the two ministries will still be in place after the merger. The only savings that will be made is the difference between the salary received as a Minister and that that will be earned as an MP which is a paltry ghc2,100 monthly (25,200 annually).

Consequently, the total sum of money that would be saved by the state if 29 appointees are stripped off their ministerial positions would be, on the high side, a meager ghc2million for 2020. Two million Ghana cedis thrown at a problem worth ghc9billion is woefully insignificant and negligible.

The economic trade off here is that individual ministries projects, initiative and programs will be derailed and possibly grind to a halt which will have serious repercussions for the economy. Therefore, it make no sense to collapse ministries and fire ministers ostensibly to reduce a fiscal shortfall of ghc9billion.

Lay of all Personal/Special Assistance to Ministers and Presidential Staffers

There are about 15 Staffers at the Presidency. Let’s assume each of the 123 Ministers and Deputy Ministers have one Personal/Special Assistant. The reality is that almost all the Ministers who doubles as members of parliament have no extra Personal/Special Assistants aside their Research Assistants who are paid by Parliament.

The total sum of salary and other fringe benefits (if any) due these 15 staffers and 123 Personal/Special Assistants of Ministers for 2020 would not amount to ghc700,000. Again, throwing ghc700,000 at a problem worth ghc9billion is clearly a drop in an ocean.

Laying off these 123 young persons who have dependents will directly affect the unemployment situation in the country and would further increase the number of poor people in the country.

In summary, the cut down of the size of government as suggested by the minority will not even reduce the fiscal shortfall by ghc10million. Throwing ghc10million at a problem worth ghc9billion is akin to hitting the thigh of an Elephant with a stone, it will have no impact.

It’s obvious that cutting down the size of government is not a strong alternative to using part of the US$591million (equivalents to ghc3.4billion) accrued to the Heritage Fund to resolve the ghc9billion fiscal shortfall.

Commentary

Clearly, the suggestion that cutting down the size of government will do the magic lacks logical reasoning. No proper thinking and analysis were done before the Minority came into this conclusion. It is the usual dishonest and shambolic politicking employed by the NDC to exploit the emotions of unsuspecting Ghanaians and I will explain with just two points:

1. Government has projected a revenue shortfall in excess of ghc9 billion as a result of the COVID 19 pandemic, an unfortunate development that has dire implications for budget financing and the economy. In view of this, any proposed solution (be it expenditure rationalization and/or enhanced revenue generation) must be robust enough to beat down the shortfall significantly. The proposed downsize falls short of this basic consideration.

2. Solutions to economic problem of this nature are not proffered in a vacuum or without data and figures. Serious mathematics and analysis must underpin such proposals. Ironically, the minority has not done that as evident in their failure to tell us even the amount of money that would be saved from the downsize of government and the impact of such savings in dealing with the bigger problem (Budget financing gap). It does appear that they just spoke because they either want to be heard or pretend to be working (opposing the government) in the sight of their fanatics.

Why’s the minority not:

1. Firing their Research Assistants who are paid by the state or pay them from their own pockets?

2. Giving up 100% of the monthly salaries for 2020 and other allowances including sitting allowance and per-diem?

If the minority cannot do these things, they should shut up and allow the innocent young Ghanaians working as PAs to Ministers and Staffers at the Presidency to do their work in the Supreme interest of the state. They are also Ghanaians and taxpayers who equally have the right to be employed by the state.

Thank you.

#Presidoo

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