Ghana's Growing Government Erodes Vow to Protect State Purse

  • Team of ministers and deputies to increase to 110 people
  • Unplanned spending announced in January startled markets

Ghanaian President Nana Akufo-Addo’s plan to enlarge the government may undermine his administration’s efforts to convince investors it’ll keep the purse strings tight.

Akufo-Addo has announced nominations and appointments of ministers and deputies that could increase the size of the team to run his two-month old administration to 110 people, the largest in the West Africa nation’s history and up from 84 under his predecessor John Dramani Mahama. The group of officials is 50 percent bigger than that of South Africa, the continent’s most industrialized economy, and three times the size of the ministerial team in Nigeria, where the population is seven times bigger.

Ghana’s finance ministry this month announced plans to cut the fiscal deficit as it sought to fulfill campaign promises and raise investor confidence eroded by the announcement in January of a 7 billion-cedi ($1.5 billion) hole in the budget. While Finance Minister Ken Ofori-Atta, who will now have three deputies, pledged to reduce government waste, the state has promised to provide free secondary schooling and invest in infrastructure, which will weigh on expenditure even before the cost of the enlarged ministerial group is added.

“Increasing the cost of politics at a time when the country needs to be deliberate about redirecting scarce fiscal resources to capital projects is certainly sending the wrong message,” Manji Cheto, senior vice president at Teneo Intelligence in London, said email. “Too many hands in the pot risks making the problems worse not better.”

The discovery of unplanned spending by the previous administration startled markets, with the cedi weakening 7.6 percent against the dollar and bond yields climbing 1.7 percent in February. The world’s second-largest cocoa producer’s ratio of debt to gross domestic product was 74 percent last year, the budget shortfall was 8.7 percent of GDP on a cash basis and the economy probably expanded 3.6 percent, according to government estimates, the slowest in more than two decades. The nation also relies on an International Monetary Fund program of almost $1 billion to prop up its finances.

“The president’s over-sized ministerial team sets a negative and an infamous record for the country,” Franklin Oduro, deputy director of research and programs with the Ghana Center for Democratic Development, a civil society group based in the capital, Accra, said in an interview. “The president has said that the economy was in a bad shape and that he was going to protect the public purse. All these ministers will have to be paid, housed and given state funded and fueled vehicles. This is definitely not the way to protect public purse.”

The cedi strengthened 0.6 percent to trade at 4.4985 per dollar by 8:05 a.m. in Accra on Wednesday.

Ghana’s challenges, including the persistent decline in the agricultural sector, low economic growth rate, corruption and leakage of revenue, demand bold measures, according to Akufo-Addo. The president has defended the size of his ministerial team and said it’s necessary to address the nation’s problems.

The government isn’t big “in view of the swollen challenges,” Akufo-Addo said in a broadcast on state-owned Ghana Television on March 17. “If I succeed, you will soon find out that the brouhaha is nothing, compared to the success.”

The government’s expenditure on wages and salaries will increase by 16 percent to 14 billion cedis, or 6.9 percent of GDP, this year, according to the 2017 budget.

“We thought that the president will be minded by the words he used himself in the run-up to the 2016 elections, that he will protect the public purse,” Franklin Cudjoe, president and chief executive officer of the Imani Center for Policy and Education, a research agency in Accra, said by phone. “Although the president had the constitutional right to appoint ministers of a number of his choice, it is not prudent to appoint too many” in an economy with weak fundamentals, he said.

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