Ghana has raised its 2017 economic growth forecast to 7.9 per cent and expects 6.8 per cent growth next year as the economy recovers.
Yesterday’s Budget and Economic Policy Statement presented to Parliament, the second since President Nana Addo Dankwa Akufo-Addo assumed office in January, came as the country tries to adhere to an International Monetary Fund programme to reduce its fiscal deficit and the public debt and stabilise the volatile local currency.
The government aims to cut the budget deficit to 4.5 per cent of GDP in 2018 from a revised 6.3 per cent. Inflation is projected at 8.9 per cent, compared to 11.2 per cent previously.
It plans to spend a total of GH¢62 billion, the equivalent of 25.7 per cent of GDP and 14.5 per cent more than the previous year’s budget. The planned expenditure includes provisions for debt arrears payments.
There was macroeconomic stability in the first half of the year, with most key indicators, including inflation, the exchange rate, interest rates, external accounts and international reserves, gradually showing some improvement.
It is assuring to note that the strong performance was achieved despite revenue under-performance, as the government was pushed to cut down on its spending on account of poor revenue flows.
The poor revenue performance led to a reduction in expenditure of GH₵4.6 billion or 16.7 per cent, more than the revenue shortfall.
Total expenditure was reduced from the target of GH₵27.6 billion to GH₵23.0 billion, with the reduction spread across all the major components.
The Daily Graphic is, however, worried because the government’s inability to meet its projected revenue performance poses a considerable danger to fiscal consolidation efforts.
The low revenue-to-GDP ratio suggests that the country’s actual domestic revenue falls short of what its economic potential and institutional development should generate.
While we hail the budget as a blueprint for the country’s turnaround, we wish to remind the government that budgets and policies are meant to be achieved and not to be deferred.
We need not remind it of the several misses in its major flagship programmes, such as the one-village, one-dam, one-constituency, one million dollars, one-district, one-factory and others.
We know that these are well-intentioned programmes but revenue shortfalls have hindered the government from implementing them.
The Daily Graphic, therefore, urges the government to review some of the concessions granted by the Free Zones Act to enable operators in the zone to contribute to government revenue.
We add our voice to the call by the Institute of Fiscal Studies on the Ministry of Finance to transparently and comprehensively capture, monitor and report on the financial situation of state-owned enterprises (SOEs) to Parliament during the budget presentation.
There is an even greater opportunity for the use of technology to facilitate informal sector taxation. Of interest is in the use of mobile banking to make tax payments.
Such an approach, if adopted by the government, has the immediate benefit of reducing interaction between tax officials and taxpayers, with the consequent risk of harassment, collusion and corruption.
When these suggestions are carefully implemented, domestic tax revenue will increase and the government will have the fiscal space to carry out its programmes.