Parliament yesterday passed the Earmarked Funds Capping and Realignment Bill, 2017 into an Act, to free up public funds in the Ministries, Departments and Agencies (MDAs) for other uses.
The Act provides that the earmarked funds for each financial year should be equivalent to 25 per cent of revenue.
The Minister of Finance, Mr Ken Ofori-Atta, moved the motion for the passage of the bill.
Making a case for the second reading of the bill last Friday, the Chairman of the Finance Committee of Parliament, Dr Mark Assibey-Yeboah, told the House that the bill was to empower the minister responsible for finance, in consultation with the relevant sector ministers, to review the enactments under which earmarked funds were established.
Besides, he said, It would also enable the Minister of Finance to determine whether or not a particular earmarked fund had outlived its usefulness and therefore should cease to exist.
Earmarked funds are predetermined percentages of tax revenue for predetermined uses.
Dr Assibey-Yeboah said the rigid dedication of tax revenue for predetermined uses meant, “the ability of the government to shift public spending from one expenditure line to another is severely hindered even where prevailing exigencies require the government to do so.”
He said the impact of the rigidity was compounded by the fact that the country’s total revenue was virtually consumed by three budgetary lines – wages and salaries, interest payments and amortisation and earmarked funds.
Mr Ofori-Atta told Parliament that the capping arrangement had become necessary to remove the rigidities in public expenditure.
He said the government was left with virtually nothing after taking out interest payments, compensation of employees and earmarked funds from revenues.
That, Mr Ofori-Atta said had resulted in the unsustainable cycle of borrowing by the government to fund any other important expenditure to meet the aspirations of the people.
The Minority Leader, Mr Haruna Iddrisu, said the Minister of Finance had not been able to point out the defects of the existing laws that required the passage of the Earmarked Funds Capping and Realignment Bill, 2017 for correction.
He said the Minister of Finance was not coming up with innovative ways to raise revenue to implement government projects and programmes.
That, he said, was the reason why the government wanted to put a cap on earmarked funds for each financial year.
For his part, the Majority Leader, Mr Osei Kyei-Mensah-Bonsu, said budget allocations were not able to cater for government expenditures for the year.
It was for this reason that the Minister of Finance usually went to Parliament for supplementary budgets.
Mr Kyei-Mensah-Bonsu therefore indicated that the earmarked Funds Capping and Realignment Bill, 2017 was crucial to free up some monies for other uses.