Need for prudent spending now

That our economy is challenged is no longer in doubt.

Government officials admit that there are structural challenges facing the economy, although the medium-term prospects look bright.

The presentation of the mid-year review and supplementary budget to Parliament tells the story that the government is constrained in using the projections in the 2014 budget to meet the expectations of society.

For some time now the economy has been experiencing deficits because of revenue shortfalls from internally generated funds and donor inflows 

There are no quick fixes to the challenges that confront us in recent times, especially when major stakeholders have decided to register their frustration with street protests, creating the impression that the centre cannot hold.

The Daily Graphic recognises the right of working people and, indeed, the entire citizenry to hold the government accountable for its stewardship.

It is perfectly within the legitimate rights of all the groups to take to the streets to protest against the goings-on in our country.

The government has, time and again, bemoaned the huge staff cost to turnover of its revenue, which is about 70 per cent, arising largely out of the implementation of the Single Spine Pay Policy (SSPP).

We are also told that the standard staff cost to revenue, as prescribed by the State Enterprises Commission (SEC), is 37 per cent.

What are the options? 

The Institute of Economic Affairs (IEA) has urged the government to implement public sector reforms to downsize the public sector and reduce the size of the government.

With a workforce of 700,000 in the public sector and a number of government appointees, the public purse will be hard-pressed to sustain the sector.

Again, will the solutions being prescribed by the IEA resolve the problems or they will create social, economic and political tension in our society?

The policy of downsizing has its positive sides, as well as negative repercussions, but in an economy in which the private sector is not growing, the shedding of excess labour in the public sector will only go to aggravate an already chaotic situation.

Whatever the pros and cons of the policy options being proposed, it does not take rocket science to appreciate the fact that the present wage bill is unsustainable if productivity remains low, especially when businesses are closing down because of the high cost of doing business.

We must introduce fiscal discipline into the conduct of government business by cutting down on borrowing and government expenditure.

The Daily Graphic calls on all, including the government, to revise their taste for foreign goods, so that the country’s burden will be equally shared by all.

There is no way we can make it with the same old attitude of profligate expenditure. We have to be prudent in the use of state resources now and eschew extravagant expenditure.