{"id":9229,"date":"2011-12-09T01:17:51","date_gmt":"2011-12-09T01:17:51","guid":{"rendered":"http:\/\/www.ghanamma.net\/2011\/12\/we-must-cut-recurrent-budget-okonjo-iweala-insists\/"},"modified":"2011-12-09T01:17:51","modified_gmt":"2011-12-09T01:17:51","slug":"we-must-cut-recurrent-budget-okonjo-iweala-insists","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2011\/12\/09\/we-must-cut-recurrent-budget-okonjo-iweala-insists\/","title":{"rendered":"We must cut recurrent budget, Okonjo-Iweala insists"},"content":{"rendered":"
\n

By Oscarline Onwuemenyi
ABUJA \u2014 Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has announced plans by government to shrink the number of government agencies and commissions in its bid to bring down recurrent expenditure, beginning from next year.<\/p>\n

\"\"<\/p>\n

Okonjo-Iweala<\/p>\n<\/div>\n

Okonjo-Iweala, who delivered a keynote address at the 3rd Economic Policy and Fiscal Strategy Seminar, organised by the Centre for the Study of the Economies of Africa, CSEA, in Abuja, expressed shock that the previous government had let the level of recurrent spending to spiral against capital budgeting.<\/p>\n

She said: \u201cWhen I left the administration last time (2006), we left a recurrent expenditure level of about 66 per cent, which was even considered to be too high back then. However, upon my second coming this year, I was surprised to find that recurrent expenditure in the budget has risen to more than 74 per cent. This is unacceptable.\u201d<\/p>\n

According to her, the increase in the recurrent expenditure was made worse by the unreasonable increase in the number of Federal Government agencies and parastatals, even as she noted that the first step to cut down the recurrent budget was to drastically trim the number of government agencies and departments.<\/p>\n

She said: \u201cThis government is resolved to reduce the level of recurrent spending to a reasonable degree, starting from the next budget. And we will do that by collapsing government agencies because we have so many of them, so many parastatals, commissions, committees, agencies, each one eating up a chunk of the budget, some duplicating each other.<\/p>\n

\u201cWe are also doing biometrics which is yielding some interesting results where we\u2019ve done it. This is the only country where ghost workers retire and become ghost pensioners and that\u2019s what we are seeing. So, we are weeding that out and creating quite a bit of money in the process.<\/p>\n

\u201cWhen we reduce the recurrent expenditure, we want to increase capital because the phenomenon where our capital budget is so low, 24 per cent of the whole budget, it means we are not investing in the critical infrastructure that we need.<\/p>\n

\u201cWe want to take the capital budget back on the trajectory it used to be back to 33 per cent by the end of this administration.\u201d<\/p>\n

The Minister pointed out that the nation\u2019s overall debt to GDP ratio is quite reasonable. \u201cWe are about 20 percent which is very good but of that 16.4 is domestic debt and we want to watch that because its building up at an alarming rate and at high interest rate and people in the country don\u2019t seem to worry.<\/p>\n

\u201cIf it is external debt, everybody keeps screaming without looking at whether this is concessional or not but when its domestic there is a big complacency that you can just float bonds and all will be well. Well my message is no, all will not be well because when you rack up domestic debt you actually have to service it. It\u2019s not like having external and you tell them I can\u2019t pay in your own economy if you don\u2019t pay, institutions, pensions fund all that they will suffer, the individuals and it will create a crisis of confidence in the government so we can\u2019t afford that.<\/p>\n

\u201cSo we want to keep the stock of domestic debt at a reasonable level around 16 to 17 percent of GDP going forward. It means we will still borrow but we are going to borrow at a declining rate.\u201d<\/p>\n

Okonjo-Iweala criticized the previous administration for its excessive borrowing and spending, which had little impact on the economy.<\/p>\n

She further charged that the wasteful spending of the savings in the Excess Crude Account amassed during President Obasanjo\u2019s regime, had exposed the economy to increased volatility.<\/p>\n

She noted that the Yar\u2019Adua administration borrowed $852 billion last year and were on track to borrow 1.1 trillion to finance the deficit which is so unacceptable. \u201cSo we have to rein in expenditure look for new sources of revenue and at the same time cut back on borrowing so we will be borrowing about 794 billion which is below the idea is it will go down, go down till we are on a sustainable path.<\/p>\n

\u201cWe have over 6000 projects , we start projects then leave them and start new ones because we just want to start new ones. This is a very transactional economy and we cannot develop like that. The whole idea is not to just get up and be awarding contracts and collecting fifteen percent and then not finishing the projects. We must therefore focus on completing uncompleted projects that. But that doesn\u2019t mean we will not do any new project; we will be doing some high profile visible projects.<\/p>\n

Okonjo-Iweala said an analysis of the nation\u2019s economic growth between 1971 to 2010, showed matching percentage in total expenditure to change in oil revenue, shows extreme volatility with spending increasing and decreasing respectively with the rate of increase and crash in oil price.<\/p>\n

\u201cThere was however a remarkable difference between 2003 to 2007 showing marked stability when with the help of external agencies created a mechanism to delink the price of oil at which we budget from the prevailing price from which build the excess crude account and managed volatility in the country.<\/p>\n

\u201cWe had no mechanism for managing volatility in this country. Look at GDP growth also showing signs of volatility. I don\u2019t think there is any country that can grow and develop with this levels of volatility. You just need to find a way to manage it. It\u2019s because we\u2019ve allowed ourselves to be expressively vulnerable to external events and development. Nigerians have to pay attention.<\/p>\n

\u201cThe Yar\u2019Adua administration however stepped away from this mechanism and we were sharing resources from the ECA in significant amount. This mechanism has more or less stayed intact. We are practicing it now and hopefully we will see less sharing with the SWF in place and you will see more funds as we go along.\u201d<\/p>\n<\/div>\n

Comments are moderated. Please keep them clean and brief.<\/p>\n<\/p>\n

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By Oscarline Onwuemenyi ABUJA \u2014 Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala, has announced plans by government to shrink the number of government agencies and commissions in its bid to bring down recurrent expenditure, beginning from next year<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-9229","post","type-post","status-publish","format-standard"],"yoast_head":"\nWe must cut recurrent budget, Okonjo-Iweala insists - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2011\/12\/09\/we-must-cut-recurrent-budget-okonjo-iweala-insists\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"We must cut recurrent budget, Okonjo-Iweala insists - 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