Ambitious revenue drive underway
The government plans to aggressively mobilise domestic revenue, boost local production and cut spending in order to increase revenue and reduce the country’s dependence on borrowing.
It will also provide funding for 30,000 youth-led businesses and raise spending to protect the poor and the vulnerable as part of efforts to mitigate the impact of rising prices on individuals and firms.
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The Minister of Finance, Ken Ofori-Atta, who announced the stream of measures when he presented the 2023 Budget and Economic Policy of the Government to Parliament yesterday, said the budget also sought to stabilise the economy and transition it into an upper middle-income status.
He said the government acknowledged that the citizenry had been severely impacted by the current economic challenges and had, therefore, lined up appropriate policies and programmes to help address the challenges.
Revenue measures
On revenue, the Finance Minister sought Parliament’s approval to increase the Value Added Tax (VAT) by 2.5 per cent from 12.5 to 15 per cent as part of measures to increase local resources and help reset the economy onto the path of growth.
Mr Ofori-Atta said the 2.5 percentage increase in the consumption tax handle was expected to rake in more than GH¢2 billion next year.
He said accrued funds would be channeled into supporting the roads sector and the government's digitalisation agenda.
The minister also announced a reduction in the rate of the Electronic Transfer Levy (E-Levy) from 1.5 per cent per transaction to one per cent.
However, he said the first GH¢100 exemption threshold, which was to cushion the vulnerable, had now been scrapped, meaning that any amount of money transferred would now attract the E-Levy.
The minister said the new tax measures were expected to complement existing ones to raise domestic revenue to GH¢143.95 billion, equivalent to 18 per cent of gross domestic product (GDP), next year.
Social interventions
Aside from the revenue measures, the budget will double allocations to the Livelihood Empowerment Against Poverty (LEAP) payment per beneficiary household from the current GH¢45 per month to GH¢90.
The government would also increase the number of beneficiary households of LEAP from the current 344,185 households.
“These measures will increase the current budget on LEAP from GH¢197.5 million in 2022 to GH¢395 million; increase the budget on school feeding caterer payment by additional GH¢138 million in 2023,” Mr Ofori-Atta said.
Spending cuts
While stressing the need to grow revenue, Mr Ofori-Atta said the government was keen on cutting spending to help bring the deficit down.
He said a raft of expenditure rationalisation measures had been approved and due for implementation next year.
Among others, he said, all ministries, departments and agencies (MDAs), metropolitan, municipal and district assemblies (MMDAs) and state-owned enterprises (SOEs) had been directed to reduce fuel allocation to political appointees and their heads by 50 per cent.
“This directive applies to all methods of fuel allocation, including coupons, electronic cards, the chit system and fuel depots.
“Accordingly, 50 per cent of the previous year’s (2022) budget allocation for fuel shall be earmarked for official business pertaining to MDAs, MMDAs and SOEs,” he said.
He said the government had also banned the use of big engine vehicles, popularly known as V8s/V6s or their equivalent, within the city, except for cross-country travel.
The Finance Minister said the government would also limit budgetary allocation for the purchase of vehicles, while restricting the purchase of new vehicles to locally assembled ones.
He expressed optimism that the measures would lead to lean public spending, equivalent to 1.35 per cent of the value of goods and services produced in the economy (GDP).
Consequently, he said, total expenditure, including arrears clearance, for next year was estimated at GH¢205.43 billion, equivalent to 25.6 per cent of GDP.
With total revenue and grants estimated at GH¢143.95 billion, the minister said, the government was hopeful to register a fiscal deficit of GH¢61.5 billion, equivalent to 7.7 per cent of GDP.
Revamping production
Mr Ofori-Atta said the COVID-19 pandemic had raised the need to reset the economy through industrialisation.
“This budget reflects our resolve to reset the economy and restore macroeconomic stability. But, to do so, we need the support of the people of Ghana and the cooperation and approval of this Parliament,” he said.
To that end, the minister said, the government was keen on cutting imports and boosting domestic production to help reset the economy.
For a start, he said, public sector institutions that relied on imports, either for inputs or consumption, would see their imported material demands halved from next year.
He said the government would work with the Ghana Audit Service and the Internal Audit Agency to ensure compliance.
The Finance Minister also pledged support for the aggressive production of strategic substitutes, including the rice, poultry, meat and vegetables.
Beyond that, he indicated, the government cared deeply about the people and had prepared the 2023 Budget with high consideration for the aspirations of Ghanaians and the brighter prospects of the economy transitioning into the upper middle-income status within a decade.