Adnan Adams Mohammed
The immediate past Board Chair of Ghana Revenue Authority has objected to an official comment from the Finance Minister purporting that the country has no financial resources to pursue its budgetary allocations and developmental agenda.
Prof Stephen Adei in his reaction to the minister’s comment expertly indicated that, despite the current challenges the economy is going through, Ghana cannot be said to be a ‘broke nation’ but in a short-term economic crisis.
In his relentless effort to justify the need for Ghanaians to accept the passage of the Electronic Transaction Levy (E-Levy) into law despite stiff opposition, Ken Ofori-Atta speaking at a town hall meeting last week in the Upper West regional capital, said, although the demand for salary increment by public sector workers is legitimate, the country has no money. Indicating that there is the need to generate more money because the country has no money, thus the need for all to support government’s proposed tax on electronic transactions (E-levy).
“It is a short-term economic crisis, nobody should deny that one. It is a fact”, the former Rector of the Ghana Institute of Management and Public Administration (GIMPA) said in an interview last week.
“I think we have a good country with a good future but we have a short-term challenge; it is quite obvious. We know that at the end of last year, the fiscal deficit was 12.1 per cent, inflation has started climbing up to 12.6 per cent; the currency, which was quite stable – in fact, two years ago, we were the best-performing currency in Africa; I think – is now depreciating very fast; I think the latest, even the official one is about 6.8 per cent [at the bureau]; petrol prices have almost doubled, recently there was a Fitch downgrading of the rating of Ghana to B-.”
However, he warned: “If we don’t manage it well, it can lead us into trouble but I don’t think that we can say that the country is broke”.
“Let me quote former Senior Minister Yaw Osafo Marfo; when he was a Minister of Finance, one day he said, ‘Na who cause am?’”
Apparently, Mr Ofori Atta justified his ‘Ghana is broke’ excuse noting that; “I look at teachers and civil servants for example, and I will be the first to admit that the salaries are indecent, nobody will argue with that. At the same time, it is 60 per cent of all the revenue we collect from 700,000 people [go into salary payment,] that is also a fact.
“So yes, there is a legitimate demand for more and there is a legitimate reality that there is no money. So what do we do as a society? Then you ask me to give you more salary, which is fine, then I say, but it is your colleague civil servants who collect the money, so how can you responsible for collecting the money, not collect it and then tell me to give you the money. That will be another issue.”
A few weeks ago, international rating agency (Moody’s) downgraded Ghana’s long-term issuer and senior unsecured debt ratings to Caa1 from B3 and changed the outlook to stable from negative.
Moody’s said on Friday, 4 February 2022: “The downgrade to Caa1 reflects the increasingly difficult task the government faces addressing its intertwined liquidity and debt challenges”.
“Weak revenue generation constrains government’s budget flexibility, and tight funding conditions on international markets have forced the government to rely on costly debt with shorter maturity”, Moody’s noted.
Moody’s said its projection shows that more than half of the country’s revenue will go into the payment of interests for the next few years, and proposals by the government to fix the challenge does not seem to be feasible, especially given the fragile post-pandemic environment.
“While Ghana’s external buffers and moderate external debt amortisation schedule in the next few years afford the government a window of opportunity to deliver on its strategy, balance of payments pressures will build up the longer government’s large financing requirements have to rely on domestic sources,” it noted.
Apart from the long-term issuer and senior unsecured debt downgrade, Moody’s also downgraded Ghana’s bond enhanced by a partial guarantee from the International Development Association (IDA, Aaa stable) to B3 from B1, “reflecting a blended expected loss now consistent with a one-notch uplift on the issuer rating.”
It also lowered Ghana’s local currency (LC) and foreign currency (FC) country ceiling to respectively B1 and B2 from Ba3 and B1.
“Non-diversifiable risks are appropriately captured in an LC ceiling three notches above the sovereign rating, taking into account relatively predictable institutions and government actions, low domestic political, and geopolitical risk; balanced against a large government footprint in the economy and the financial system and current account deficits,” Moody’s said in its report.
About a month before the Moody’s rating, Fitch also downgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B-’ from ‘B’ with a negative outlook.
