Dr Mahamadu Bawumia, vice presidential candidate of the opposition New Patriotic Party (NPP), has lambasted government for the reckless management of the country’s economy.
In his latest lecture at the National Theatre in Accra, Dr Bawumia bemoaned the imposition of numerous taxes on every conceivable item in an attempt to raise funds to fill the ‘deep hole’ government had dug.
“In their desperation, taxes were imposed on condoms, cutlasses, savings and investments etc., while already existing rates have all seen increases – sometimes astronomic increases.”
Killer taxes on businesses
He stated that taxes on businesses have been increased dramatically while new taxes have also been introduced.
“For example, increases in capital
gains tax (from 10 percent to 25 percent), withholding tax (from 15 percent to 20 percent) and the introduction of the Energy Levy (10 percent), VAT on Electricity (17.5 percent), VAT on Financial Services (17.5 percent), Special Import Levy, etc. Taxes have also been introduced on ambulances and bicycles.”
The former deputy Governor of the Bank of Governor (BoG) also touched on the abolishment of all forms of allowances and expenditure by government.
“These insensitive cuts have included cuts to research allowances for lecturers, nursing training and teacher training allowances.”
Tall arrears to contractors
He further said government was accumulating arrears in payments to contractors and other service providers.
“This situation notwithstanding, the government’s supplementary budget asserts that under the IMF programme, there is a process of fiscal consolidation taking place with a decline in the fiscal deficit to 6.7 percent in 2015. But is fiscal consolidation really taking place?
“When Ghana received an IMF bailout, there was a clear expectation that the process of fiscal consolidation (a sustained decline in the fiscal deficit/GDP ratio) would take place. This, after all, is what IMF austerity programmes are supposed to achieve.”
According to him, the decline in the fiscal deficit was supposed to bring down inflation, improve debt sustainability, help lower interest rates to support private sector activity, crowd-in the private sector, increase investment and above all increase economic growth to help create jobs and alleviate poverty.
Weird consolidation
What Ghana is experiencing is a unique type of fiscal consolidation which has defied all expectations, Ghana’s fiscal consolidation is apparently taking place in the midst of unsustainably high public debt levels, inflation that was stubbornly high at 16.7 percent (8th highest in Africa), the seasoned economist declared.
He further noted that there was “a rising black hole of state-owned enterprise (SOE) debt, which together with the debts owed by government to the Bulk oil Distribution Companies (BDCs) and the lack of adequate supervision of microfinance companies can potentially collapse the banking system.
“In addition, we have rising interest rates, crowding out of the private sector, reduced business confidence and declining economic growth.
The Ghanaian experience is exactly the opposite of what fiscal consolidation is supposed to achieve. Fiscal consolidation is not the end in itself but a means to an end.”
By Samuel Boadi