Adnan Adams Mohammed
As part of measures to meet the dictates of the International Monetary Fund vis-a-vis the recently-approved US$3 billion bailout, government is expected to prioritize fiscal adjustments to ensure it meets the performance criteria for the disbursement of the other loan tranches.
In this regard, President Nana Akufo-Addo has admitted that Ghana’s fiscal deficit is “way above” the five per cent ceiling set by the fiscal responsibility law, indicating that there was a need to bring it down, as he pledges his government’s commitment to cutting expenditure.
The Fund has already indicated that, Ghana government will be under pressure to cut down its expenditure following the approval of the country’s US$3 billion deal.
“Rationalisation of our expenditure is something that we have given the assurance [about],” President Akufo-Addo said while speaking at the Qatar-Africa Economic Forum in Doha. “Domestic revenue mobilisation is absolutely critical for us, and, already, we are seeing signs.”
Also, he said: “We have a fiscal responsibility law in Ghana that has pegged our fiscal deficit at five per cent but, already, we are way above that,” noting: “And the sooner we can bring that to more acceptable levels, the better for us.”
In an interview last week, the IMF Representative in Ghana, Dr. Leandro Medina posited that; “On the fiscals there is quite a sizeable adjustment in the 2023 budget and what we expect in the duration of the program, On the structural transformation, it has to do with the reforms and measures that improve the business climate and the growth of private sector”,
“So, there are a lot of reforms within the context of the program that look at what you can do within these three years to ensure that there is a strong foundation in growth and that is the effect of that structural transformation”, he added.
The Fund has also justified the adoption of three mobilization measures as well as the increase in utility costs as Ghana attempts to fix its balance of payment problems.
Despite criticisms, the Excise Duty, Growth and Sustainability, and Income Tax Amendment laws aim to generate GHS4 billion for the country each year.
These, along with the expected tariff increases in June, are deemed crucial components of the country’s US$ 3 billion, three-year Extended Credit Facility with the IMF.
Dr. Leandro Medina, argued in favour of adjustments in the face other tough economic conditions.
“The revenue measures that have been passed between December and April are part of the prior actions. It’s very important to mobilize revenue. Revenue to GDP in Ghana is very low as compared to other countries. Ghana is making a huge effort to increase revenue, and this will be done mainly by increasing the tax base. What is important to say is that this is a large and front load fiscal consolidation”, he added.
