Dr. John Kwakye
THE INSTITUTE of Economic Affairs (IEA) is not happy that government did not introduce taxes in its 2020 budget presented to Parliament recently.
According to Dr John Kwakye, director of research at IEA, government should have considered raising some taxes, especially in the banking sector. He stressed that “you need to mobilize more resources to support national development.”
Dr Kwakye, who was speaking Tuesday, in Accra, at a press conference organised by IEA, said the 2020 Budget also lacked policies that would bring about fundamental changes that were needed to propel Ghana’s development over the medium term.
He said the Finance Minister was cautious with the 2020 budget because he endeavored to walk a tight rope between stabilization and growth.
Comparing government’s total revenue and grants of GH¢67.1 billion for 2020 which represented 16. 9? of GDP to the 2019 figure of GH¢54.6 billion (15.8? of GDP), he said “the revenue, capital expenditure and growth targets are not sufficiently ambitious.”
He continued that the Finance Minister tweaked figures to stay within the FRA (Fiscal Responsibility Act)” adding that the approach adopted, as always, appeared to be defined by political sensitivities.
He said such sensitivities seemed to dictate caution, which might not, however, lead to optimal socioeconomic outcomes that required more ambition to achieve.
Impact On Economic Growth
He also said the budget focused more on economic stabilization or consolidation rather than revenue mobilization and expenditure which he said had serious impact on economic growth.
He added that over the last three years capital expenditure has been depressed, reason for the bad roads and schools.
“Our reading of the budget shows that the allocation for infrastructure will still not be enough,” he lamented.
According to him, if care was not taken the economy could fall in the sub-optimal equilibrium level.
He bemoaned that over the last few years, government had been trying to consolidate the economy due to the 2016 overrun.
Tepid Revenue Effort
Commenting on the fiscal deficit for 2019 which has been maintained at 4.7? for 2020, Dr Kwakye said over the medium term, the deficit would fall to 3.0?, which was the ECOWAS convergence ceiling, by 2023.
However, the IEA said “the revenue effort is rather tepid.”
On the domestic revenue to GDP of 16.5? which averaged 15.9? for 2021-2023, he said figures for middle-income countries stood about 30? and 25? respectively.
The Finance Minister revealed that government was supporting the Ghana Revenue Authority (GRA) reforms agenda which was largely targeted at tax administration.
On such reforms, which Dr. Kwakye said did not reflect in significantly better revenue outcomes, he noted: “The Minister could have taken bolder steps to mobilize revenue, including through a reduction of the spate of exemption as well as effective assessment and collection of property taxes.”
He added that expenditure was equally constrained by revenue limitations.
BY Melvin Tarlue