By Evelyn Udobia
Policy Alert, a non-governmental organisation, has urged the government of Akwa Ibom State to reduce the cost of governance and as well obey the fiscal responsibility law.
The NGO made the call in a Memorandum to the public consultation on the state’s 2023-2025 Medium Term Expenditure Framework/Fiscal Strategy Paper organised by the Akwa Ibom State Ministry of Economic Development.
Presenting his organisation’s position, Policy Alert’s Programme Officer, Fiscal Reforms and Anti-Corruption, Faith Paulinus noted that while the MTEF document indicates that government aims, among other things, to reduce cost of governance in the medium term, the reality on ground does not show that it is ready to do so.
“Next to declining revenues, the biggest threat to the state’s fiscal health is ballooning cost of governance. In the ten years between 2011 and 2021, the state’s recurrent expenditure has grown 273%, with spurious items such as debt servicing, cost of purchasing government vehicles, and running of Government House taking a huge chunk of overhead spending.
“This has left little fiscal space for capital investments in infrastructure and human development. Something drastic has to be done about this big elephant in the room,” he said.
The Memorandum, which was made available to the media, further stated: “We are also worried that the state has again insisted on calibrating its MTEF around Debt-to-GDP ratio. This is faulty for two reasons. First, we do not have reliable and current figures for sub-national GDP.
“Second, debt-to-GDP ratio gives a false sense of fiscal sustainability. It is the same Debt to GDP fallacy that the federal government has been relying on to over-reach its borrowing options and we see where that has kept the country today. Our advice to the state government is to base its medium term projections on Debt-to-Revenue ratio, which is a more realistic predictor of fiscal health.”
The Memorandum, however commended the planned shift in recurrent to capital expenditure ratio to 30:70 by 2025, saying it was a step in the right direction since in the absence of a thriving private sector, growth is driven by capital expenditure which serves as the public share of the total capital formation in the economy.
While also commending the state government for opening up the MTEF process to public consultation in line with the provisions of the state’s Fiscal Responsibility Law, the organisation cautioned that the continued delay in inaugurating the Fiscal Responsibility Board with inclusion of representatives from civil society and labour constitutes a violation of the law and undermines the legitimacy of the entire MTEF process.
The Memorandum also expressed concern on the rising debt profile of the state and the huge funds channeled to public debt servicing as it does not augur well for the financial health of the state.
Policy Alert is a non-governmental organisation working for improved economic and ecological outcomes in the Niger Delta.