Adnan Adams Mohammed
The International Monetary Fund (IMF) in it’s revised forecast, has projected Ghana’s economy to record an end year tax revenue to Gross Domestic Product ratio of 16.5 percent, the highest growth in the last 10 years.
The ratio would be an improvement from 14.7% recorded in 2021. the Fund is anticipating that, in 2023 and 2024, the country’s tax-to-GDP ratio will fall to 16% and 16.2% respectively.
IMF’s April 2022 Fiscal Monitor also revised its forecast of an end year inflation of 16.3% from an initial forecast of 8.8%. This means the country will miss the Bank of Ghana target of 8%+\-2. It indicated that, the rising inflation has been triggered by higher commodity prices such as crude oil and cereals as a result of the Russia/Ukraine conflict.
“Inflation is expected to remain elevated for longer than in the previous forecast, driven by war-induced commodity price increases and broadening price pressures”, IMF’s April 2022 World Economic Outlook Report said. “For 2022, inflation is projected at 5.7% in advanced economies and 8.7% in emerging market and developing economies —1.8 and 2.8 percentage points higher than projected in January.”
It expatiated that, “The ongoing war in Ukraine, associated sanctions, market participants’ actions in response to the global outcry, and rising counterparty risk have caused severe disruptions in commodity markets and supply chains across the globe. Amid sharply rising volatility, prices have skyrocketed across the commodity complex, causing severe pressures in commodity financing and derivatives markets. Shipping costs of commodities have increased, and higher commodity prices have raised the financing needs of commodity traders and those involved along the supply chain”.
Although a gradual resolution of supply-demand imbalances and a modest pickup in labor supply are expected in the baseline, easing price inflation eventually, the IMF said uncertainty again surrounds the forecast.
Ghana Statistical Service (GSS) reported that, March 2022 inflation hit the highest in nearly 13 years to record 19.4%. The higher inflation was pushed largely by food prices.
The Fund’s further details on the tax to GDP ratio projection explained that, the expected revenue growth due to a number of measures announced by the government will shore up revenue this year.
These include the implementation and collection of the revised Property Rate and the implementation of the E-VAT/E-Commerce/E-Gaming initiatives by the end of April 2022.
Others are the prioritisation the Revenue Assurance, Compliance, and Enforcement (RACE) Programme to plug revenue leakages especially at the ports and the infamous fuel bunkering and small scale mining exporters cabal.
The Electronic Transaction Levy (E-levy) is also expected to generate some revenue for the country.
Meanwhile, the IMF said government expenditure to GDP will reduce marginally in 2022, despite the drastic cut in spending.
According to the Fund, government expenditure will decline to 25.2% of GDP in 2022, from 26.3% recorded in 2021.
This is expected to put the fiscal deficit to GDP ratio at 9.8%.
However, in 2023 and 2024, the Fund is forecasting expenditure-to-GDP ratio of 25.2% and 23.9% respectively.
In the last eight years, the year with the lowest government expenditure-to-GDP ratio was 17.6% in 2017.
From 2015 to 2020, the country’s expenditure to GDP ratios were 18.6% (2015), 19.9% (2016), 17.6% (2017), 20.9% (2018), 21.1% (2019) and 29.0% (2020) respectively.
