President Nana Addo Dankwa Akufo-Addo said in his address to Muslims at an Eid-Ul-Adha (Feast of Sacrifice) ceremony on Saturday, July 9, 2022, that the government had cut discretionary spending by about 30% and 50% fuel coupons. The scope of these cuts extends to ministries and related entities and political appointments.
These measures are overdue, but good news, as it seems that the government is becoming more serious and active in managing the national budget deficit. It could also be seen as an obvious part of the austerity measures that are likely to be demanded by the IMF as part of “restoring macroeconomic stability”.
The government may find itself in a situation where it has become imperative to take these steps because there may not be many other feasible and viable options.
It could also be proactively preparing ahead of any formal request from the IMF. It may be a reactive response to a formal request that has yet to be announced, as getting the budget in order is likely part of IMF austerity measures, an unsurprising and common prerequisite for a monetary support. It should be noted that the government has already engaged the IMF for support in restoring financial stability.
A constructive question is whether there are other additional steps that could be taken, and the answer is yes. It is possible to derive a financial strategy in the face of budgetary constraints from the “real options theory”, which gives us three choices; option to delay, option to follow and option to abandon.
Starting from this theory, I believe that there are other practical measures that could be taken, including the extension, suspension, substitution and, in some cases, the complete elimination of “certain” projects or expenditures . In doing so, budget expenditure items should be thoroughly reviewed and ranked from critical to less critical projects and expenditure items. This will allow budget controllers to determine the areas in which to impose flexibility, restriction, substitution and budget cuts.
In the process of implementing these measures, the government should manage change carefully to ensure success, otherwise it could backfire and lead to resistance in a manner similar to events surrounding the electronic direct debit program. Perhaps, there may be a need for an external change agent, who would lead and manage the change process to avoid or minimize resistance and to ensure that effective budgetary expenditure control measures are taken into account and implemented without bias.
While some stakeholders may understand and enthusiastically support change, others will exhibit resistance, including passive resignation, passive resistance, and proactive resistance. The management of resistance by civil and political actors will be the key to successful implementation. All change management initiatives may be required, including education and communication, facilitation and support, negotiation and agreement, manipulation and co-option, and the implicit and explicit exercise of power.
What may also be necessary after the implementation of these measures or reforms according to “Lewin’s 3-step change management approach”, is to freeze or anchor these reforms or measures in the culture of the ministries and their related entities.
I hope these measures can be sustained to allow for serious fiscal recovery and stability.