Government says its 2014-2016 budget guidelines will instruct all government agencies to provide realistic budgets for the compensation of their employees as part of broader measures to avert fiscal explosion, Minister of Finance and Economic Planning Seth Terkper has disclosed.

Appropriate sanctions will be applied to Ministries Department and Agencies (MDAs) and Municipal, Metropolitan and District Assemblies (MMDAs) that fail to comply with the guidelines related to budgeting for compensation of employees, he said.

Mr. Terkper outlined this directive when he spoke to journalists on a wide range of economic issues at a two-day programme organised by the Institute of Financial and Economic Journalists in collaboration with Star Ghana on the performance of the 2013 budget and expectations for 2014.

Mr. Terkper said: “All MDAs and MMDAs are to budget realistically for the compensation of their employees using the new chart of accounts. Salary and salary-related allowances, and other allowances, are to be budgeted for and supported with copies of approval of conditions of service by the Fair Wages and Salaries Commission and the Public Services Commission.”

He explained that only net recruitment of staff will be permitted for MDAs with an automatic recruitment policy in 2014 and into the medium-term. He also said salaries of employees of MDAs and MMDAs will be paid by the Controller and Accountant-General’s Department only after the heads of these institutions have certified a pre-list of persons and amounts to be paid.

There have been calls on government to trim expenditure on wages, which have become a bane to the national economy with critics insisting that the Single Spine Salary Structure is the cause of the huge wage bill.

Approximately 73 percent of domestic revenue from taxes is used to pay public service workers. The wage bill jumped from about GH¢2billion prior to the implementation of the new pay policy to about GH¢7billion in 2012, according to data from that year’s budget.

Recent data from the Ministry of Finance also indicate that about GH¢3.5billion was spent on wages and salaries from January to May this year, and this was about 22.4 percent higher than the budget target of GH¢2.9billion.

The International Monetary Fund (IMF) in April this year sounded the alarm over the country’s rising wage bill and warned that if it was not tamed, it would increase the country’s debt portfolio to levels which could pose a risk to its transformational agenda.

Touching on the huge budget deficit registered in 2012, he said government hopes to reduce the gap to 9 percent of GDP in 2013, and further down to 6 percent by 2015.

Proposed supporting measures to fix the fiscal challenges include an upward adjustment in petroleum prices to address the burden of subsidies on the budget. The strategy is to implement frequent petroleum price adjustments, he emphasised.

The high interest cost is being addressed with plans to refinance government debt through substitution of short-term debt that has high interest rates with medium- to long-term low interest debt.

Government, according to the Finance Minister, will also conduct closer scrutiny of monthly expenditure relative to forecasts to ensure that expenditure targets are achieved.

The economy is expected to grow at 8% in 2013, with an end-period inflation of 9% and gross international reserves equivalent to not less than three months of imports.