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28.01.2005 Business & Finance

World Bank calls for debate on Government Payroll

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Accra, Jan. 28, GNA - Mr Marts Karlsson, World Bank Country Director in Ghana, on Friday said the high level of Government's expenditure on payroll and transfers required a national debate because of its implications for structural reforms.

He said there was also the need to look at the extent to which quasi-fiscal deficits served as a threat to the future ability of Government to use public expenditure to influence growth and poverty.

Mr Karlsson made these remarks when he presented a paper on "Conditionalities, Budget and Debt Management" at a two-day roundtable discussion to explore macroeconomic issues and policy options to enhance Ghana's efforts at poverty reduction.

Over 25 local and foreign economists participated in the workshop, which began last Thursday under the tutelage of the Integrated Social Development Centre (ISODEC) and the United Nation Development Programme.

Mr Karlsson said the composition of the budget was dominated by payroll expenditures, especially in health and education sectors, but there was the need to increase the non-salary component of the poverty-related expenditures.

He, however, commended the Government for managing to protect the poverty-related expenditures, which he said had shown an increasing share over the last three years.

On debt management, Mr Karlsson said having reached the completion point of the Highly Indebted Poor Countries Initiative (HIPC) and its attendant benefits; Ghana was now faced with how to ensure long-term debt sustainability.

He said debt overhang from external or domestic sources constituted a major constraint on Government's ability to use public expenditure to influence growth and poverty reduction objectives.

He said for Ghana to maintain a stable debt post HIPC completion point, the nominal Gross Domestic Product (GDP), export, and revenue generation growth would have to increase as rapidly as the debt stock and debt servicing requirements over the medium and long-term.

The constraint here for Government, Mr Karlsson said, was the extent of non-concession borrowing that the country could afford.

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