Policy Alert Flags Red Cost of Governance in Akwa Ibom
Policy Alert, a non-governmental organization working on fiscal and ecological justice in the Niger Delta has called on the Government of Akwa Ibom State to substantially cut down its cost of governance.
The organisation says when the government of Akwa Ibom State cuts down its high cost of governance, it will free resources for capital development programmes.
The call was made on Friday in a Memorandum to the public consultation on the state’s 2023-2025 Medium Term Expenditure Framework/Fiscal Strategy Paper organized 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, said in the ten years between 2011 and 2021, the state’s recurrent expenditure has grown 273 per cent with spurious items such as debt servicing, cost of purchasing government vehicles, and running of Government House taking a huge chunk of overhead spending.
Paulinus noted that the poor priorities have left little fiscal space for capital investments in infrastructure and human development.
While advising that something drastic has to be done about what it described as big elephant in the room, Policy Alert added ” 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, the 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, Policy Alert 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.