Finance Minister outdoors strategy to prevent accumulation of arrears in state entities

Minister for Finance, Mohammed Amin Adam has outdoored a strategy aimed at clearing existing spending arrears and preventing the future accumulation of arrears by state entities.

Accumulation of arrears, according to the finance minister, is prevalent in many emerging economies in the world and in African countries south of the Sahara. He observed that the phenomenon has been on the increase in recent years and has become a key economic policy challenge for most African countries.

In Ghana, the finance minister indicated that the accumulation of arrears constitutes a sizeable portion of public expenditure and that certainly requires pressing reforms.

The arrears accumulation challenge

Mr Amin Adam made the observation when he addressed Chief Directors and Heads of Covered Entities attending a sensitization and training workshop on the Spending Arrears Clearance and Prevention Strategy and the evidentiary requirements for prosecution held at the Labadi Beach Hotel on Thursday, 4 April 2024.

“In the Public Financial Management (PFM) Act, 2016, Act 921 and its Regulations as well as the five-year Public Financial Management Strategy: 2022-2026, the government has rightly prioritised and resolved to address this challenge.

“In moving from policy to action, the Government has designed and approved for implementation of a comprehensive strategy – Spending Arrears Clearance and Prevention Strategy – to clear and prevent the accumulation of arrears. This is in direct response to the constant accumulation of arrears, which indicates the challenges associated with effective execution of planned budget operations,” Mohammed Amin Adam said.

“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, undermines financial sector performance, raises the cost of doing business for the government, and reinforces the view that more is required to level up with the expectations of sound public finance management. Ultimately, it challenges the effectiveness of fiscal policy and results in poor public service delivery to our citizens” the finance minister added.

Measures in strategic document

In his address, Amin Adam pointed out that measures contained in the approved strategy document to prevent the accumulation of arrears “include the enforcement of sanctions under the PFM Act and its Regulations, publication of league tables for compliance with commitment control measures enshrined in the PFM Act, incorporation of clauses of GIFMIS purchase orders in national tender documents, full roll-out of GIFMIS to all Covered Entities outside the system, among others”.

“To ensure that all Covered Entities are abreast with the current Policy directions on the accumulation of arrears and the Strategy as a whole, it is important to sensitise Principal Spending Officers (Chief Directors and Heads of the Covered Entities) and Directors who are responsible for the day-to-day implementation of the National Budget on the contents of the strategy document, especially the measures to prevent the accumulation of further arrears.

“The sensitisation and training workshop seeks to bring to the attention of the Covered Entities Government’s policy to address the weak commitment controls and expenditure management as contained in the Strategy document and train representatives of the Covered Entities on the evidentiary requirements for prosecuting officials who go contrary to the PFM Act, what constitutes breaches in commitment control and how Government intends to conduct the prosecution,” the finance minister remarked.

The PFM-CD

As part of the measures to prevent future accumulation of arrears, the finance minister noted that “the government has established the Public Financial Management Compliance Desk (PFM–CD) at the Ministry of Finance”.

The work of the PFM–CD, Amin Adam said, “is to develop and propose for implementation, various measures to enhance and enforce compliance with the Public Financial Management laws, to promote strict budget commitment control, to ensure transparency in public procurement and accountability in the use of public funds”.

“The PFM-CD has therefore developed implementation measures based on the requirements of the various PFM laws with a focus on Budget commitment control compliance measures, Expenditure monitoring measures and Sanctions measures,” Amin Adam said.

“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 to ensure the measures yield the intended dividend” he added.

Embrace the reforms

The finance minister appealed to all Chief Directors and Heads of the Covered Entities assembled to embrace these expenditure reforms as [they] go through the sensitization session and provide inputs to strengthen the measures.

“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” the finance minister Mohammed Amin Adam stated.

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