Budget review July 25; Direct IMF inflows into agric - Sector players urge government
Players in the agricultural sector have advised the government to direct part of the inflows to be secured from the International Monetary Fund (IMF) into the sector.
The players said increased investment into the sector, backed by solid policy measures, was crucial to help stabilise the rising cost of food products in the short to medium term and support the revival of the economy.
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The players are the General Agricultural Workers Union (GAWU) of the Ghana Trades Union Congress (TUC) and the Peasant Farmers Association of Ghana (PFAG), two groups that represent a large segment in the agricultural value chain.
Others, including two tax experts and business associations, also called on the government to pass the Tax Exemption Bill, bring back the road tolls, review electronic transfer levy (E-Levy), capture night traders into the tax net and introduce enhanced revenue collection efforts in the mid-year budget which is due for presentation to Parliament on July 25, 2022.
The Tax Specialist at Oxfam in Ghana, Dr Alex Ampaabeng; Executive Director of the Revenue Mobilisation Africa (RMA), Geoffrey Kabutey Ocansey; President of the Ghana Union of Traders Association (GUTA), Dr Joseph Obeng, and the Accra Chairperson of the Association of Ghana Industries (AGI), Tsonam Cleanse Akpeloo, in separate interviews with the Daily Graphic in Accra yesterday, said improved fiscal policy measures would help the country to generate enough revenue to support and stabilise the economy.
Mid-year budget review
The Mid-Year Review of the Budget Statement and Economic Policy of the Government and Supplementary Estimate for the 2022 financial year in Parliament has been postponed to July 25, 2022.
The review is in pursuance of the Public Financial Management Act, 2016 (Act 921).
The Majority Leader and the Leader of Government Business in Parliament, Osei Kyei-Mensah-Bonsu, last Thursday, July 7, 2022 announced that the review was expected in Parliament on Wednesday, July 13, 2022.
He said this when he presented the Business Statement for the eighth week beginning Tuesday, July 12, 2022 and ending on Friday, July 15, 2022 to the House.
But on Tuesday morning, Mr Kyei-Mensah-Bonsu explained that due to the meetings with the International Monetary Fund (IMF) currently ongoing, which involves the Minister of Finance and his team, the review has been postponed two weeks further.
It cannot be held next week because the Speaker of Parliament has also indicated that he will not be available hence the postponement to July 25, the Minister of Parliamentary Affairs explained.
The government is expected to outline renewed efforts to inject stability and growth into the economy for the rest of the year when the Minister of Finance, Ken Ofori-Atta, appears before Parliament tomorrow to present the mid-year budget review.
Presentation of the mid-year budget review is in accordance with Article 179 of the 1992 Constitution and the Public Financial Management Act, 2016 (Act 921).
The review comes after the fiscal policy measures announced in the 2022 budget to generate more revenues and undertake transformational projects performed below expectation.
The measures were expected to help generate about GH¢100.52 billion by the end of the year, but the first quarter results which have been released indicate that GH¢16.71 billion had been raised, less than a quarter of the projected revenues, according to figures from the Ministry of Finance (MoF).
The 2022 budget proposed from January 2022 to implement a unified common platform for property rate (yet to start), remove discount on imports (was reviewed partially in March), pass exemption bill (yet to be passed), impose a 1.75 per cent E-Levy (took off on May 1, with the tax revised to 1.5 per cent tax), among other fiscal policy measures.
Convinced that revenue targets will suffer and further hurt the economy, the government last week opened formal discussions with the IMF towards securing an economic support programme that can inject up to $3 billion into the economy.
This year's budget review will attract huge interest from almost all Ghanaians with the IMF in the picture, a situation which comes mostly with austere measure.
Attention on agriculture
The General Secretary of GAWU, Edward Kareweh, and the Executive Director of PFAG, Dr Charles Kwowe Nyaaba, said the review should channel more increased investment in agriculture to address challenges in the sector.
Mr Kareweh said addressing the challenges within the agricultural sector would provide a sound basis for the country’s economic transformation and also tame rising food prices.
“And so, we expect the budget review to focus on a two-fold approach; that is policy direction and financial support for the agricultural sector,” he said.
The government should prioritise agriculture based on the central role it played in the general economic development of the country, Mr Kareweh added.
Tame food inflation
Corroborating the views of the GAWU General Secretary, Dr Nyaaba stated that PFAG expected the minister to use the review to push more investments into the agricultural sector to revive the economy.
“Food inflation is leading the 27.6 per cent inflation basket in May and so any government that wants to stabilise the economy will pay more attention to the agricultural sector,” he said.
Dr Nyaaba added that PFAG did not expect the government to inject additional capital into the Planting for Food and Jobs initiative because it did not reflect the expectation of farmers.
Rather, the reviewed budget should target specific interventions for smallholder farmers.
That, he said, was because smallholder farmers supplied up to 80 per cent of the farm produce on the market.
Dr Nyaaba explained that once the government had been able to target those farmers with support to access inputs and mechanisation services, their cost of production would come down and consequently impact market prices of foodstuffs.
Revenue shortfall
Dr Ampaabeng also told the Daily Graphic that with the trend in the macroeconomic data, the government was likely to suffer a revenue shortfall by more than 20 per cent.
“Based on the first-quarter data, it looks like all the revenue mobilisation measures put in place are not yielding the desired result and that was not surprising because the economy is just recovering from the COVID-19 pandemic,” he said.
The specialist said he expected the minister to use the review to revise the key fiscal policy measures in ways that could meaningfully expand the tax net to help increase revenue collection.
Dr Ampaabeng explained that initially the government wanted to avoid an IMF programme by making its books look tidy and for that reason set unrealistic revenue targets but now the evidence indicated that there was the need to review the projections.
Road tolls
He said to improve the country’s revenue, there was the need to bring back the road and bridge tolls, review E-Levy and make its operation better.
The tax advisor maintained that the country could have raked in some GH¢1.5 billion from tax exemptions for the first six months if the government had refocused its attention on the exemption bill and ensured that it was passed for implementation by January this year.
He said the government needed to take a bold and decisive step to get the bill passed into law.
“The IMF projects that the country loses up to five per cent of its annual gross domestic product (GDP) to tax exemptions (freebies) to foreign firms.
“It means that Ghana is losing more than GH¢22 billion a year to tax exemptions, while it is seeking close to a similar amount in an IMF-backed programme to stabilise the economy in the next three years,” Dr Ampaabeng added.
The Executive Director of the Revenue Mobilisation Africa (RMA), Geoffrey Kabutey Ocansey, called on the government to use the budget review to announce a comprehensive policy that could enhance revenue generation to support economic growth.
He said there was the need to enhance rent tax, property rates, capture the night traders into the tax net and improve on the general accountability of revenue utilisation.
“Some of the metropolitan and district assemblies should be weaned off the Consolidated Fund because that is the root of Ghana’s woes, that is out-of-control government spending, largely to pay salaries of an overgrown civil service,” the tax expert, who is also a member of the Ghana Tax Justice Coalition, added.
GUTA’s position
Dr Obeng said the government should not turn to the usual victim of new taxes in an attempt to narrow the revenue gap but rather improve the effort to collect more.
He said any attempt to use new or additional taxes to boost revenue would be a nightmare to businesses.
“We are not expecting new taxes but if the government wants to bring into the tax net new people that are not paying taxes, GUTA will welcome that initiative,” Dr Obeng said.
Let’s inspire businesses
Mr Akpeloo, for his part, stated that the AGI expected a mid-year review that would inspire businesses for growth and not new fiscal policies that added to the cost of doing business in the country.
He explained that a review that spurred growth, expansion, jobs and revenue generation within the local economy would yield optimal returns in the long run.
