We must cut recurrent budget, Okonjo-Iweala insists

 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.

Okonjo-Iweala

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.

She said: “When 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.”

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.

She said: “This 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.

“We are also doing biometrics which is yielding some interesting results where we’ve done it. This is the only country where ghost workers retire and become ghost pensioners and that’s what we are seeing. So, we are weeding that out and creating quite a bit of money in the process.

“When 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.

“We 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.”

The Minister pointed out that the nation’s overall debt to GDP ratio is quite reasonable. “We 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’t seem to worry.

“If 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’s not like having external and you tell them I can’t pay in your own economy if you don’t 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’t afford that.

“So 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.”

Okonjo-Iweala criticized the previous administration for its excessive borrowing and spending, which had little impact on the economy

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