The World Bank has cautioned government to control current expenditures, especially spending on the wage bill.
In 2016, Ghana’s wage bill as a percentage of national income was over 40 percent.
According to bank, the wage bill and debt servicing are the two largest expenditure items essential for the success and sustainability of the fiscal adjustment.
Speaking at a forum to review Ghana’s Public Expenditure, the World Bank Country Director for Ghana, Henry Kerali pointed out that the wage bill will be an important determinant of Ghana’s fiscal balance in the medium-term since the public sector remains the largest employer in the country.
“To contain its expansion, the bold steps that were taken in the last two years –such as hiring freeze and limited annual wage increases, eliminating payroll irregularities should be maintained,” he suggested.
He maintained Ghana’s fiscal consolidation process requires concerted efforts on both the expenditure and revenue sides of the budget.
On debt management, Mr. Kerali stated that the biggest macroeconomic challenge is the management of the public debt, which has rapidly risen
“Debt service costs put significant pressure on the budget. Proactive debt management is necessary to reduce interest payments and mitigate risks to the public debt profile,” he noted.
Outlining the consequences Mr. Kerali explained that limited fiscal space has reduced the level of resources available for public investment in Ghana.
He stated that if the debt levels are not controlled it will have a negative impact on growth, job creation and public service delivery.
“While currently tight fiscal space will not allow any drastic increase in capital spending in the short term, experience from other countries shows that improving the quality and efficiency of public investments could also support economic growth,” he advised.
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