Accra, March 15, GNA – The International Monetary Fund (IMF) identified Ghana as one of the fastest-growing economies in sub-Saharan Africa in 2019, with a projected growth rate of 8.
8 per cent.
The country’s growth was propelled mainly by oil, although it remained one of the largest exporters of gold in the world, and the second largest cocoa producer.
Few months on, the Dubai Chamber of Commerce and Industry also found Ghana as the most preferred investment destination in Africa in its 2020 Global Business Forum (GBF) survey.
However, many of the fiscal and economic gains, which brought the country to this pedestal were eroded with the onset of the COVID-19 pandemic, which saw the country go on a lockdown in March 2020.
The economy had grown at an average of seven per cent between 2017 and 2019, before experiencing a sharp decline [as a result of the impact of the pandemic] to 0.4 per cent in 2020, figures by the Ghana Statistical Service (GSS) showed.
Again, from the beginning of 2022, there has been a steady increment in fuel prices. Both petrol and diesel were trading at an average GHS6.7 per litre at the pumps. The two commodities are currently trading at an average GHS8.22 per litre at the pumps.
Associated with the increment in fuel prices is the rise in transport fares, with the Ghana Private Road Transport Union (GPRTU) increasing transport fares by 15 per cent, which many complain that it had brought about economic hardships. The reality is that transport fares have a rippling effect on the economy, especially food which enjoys a good weight in the inflation basket.
In recent times, the country’s credit worthiness have also been downgraded by international ratings firms, Fitch Solutions and Moody’s, coupled with the urgent need to increase revenue mobilisation.
In response to the adverse impact of the COVID-19 pandemic, came the introduction of the GHS100 billion Ghana CARES programme and other interventions by the Government.
As a tax measure, and means to shore up domestic revenue, Mr Ken Ofori-Atta, the Finance Minister, during the presentation of the 2022 budget announced a 1.75 per cent Electronic Transactions Levy (E-Levy) on Mobile Money (MoMo) payments, bank transfers, merchant payments, and inward remittances.
It had since mounted strong argument that the time had come for the country to benefit through taxes form electronic transactions to forestall its rising debt situation, improve on infrastructure and reduce unemployment.
However, this announcement has been received with mixed feelings and controversies with some calling for a debate on the country going to the IMF for a bailout programme to cushion the economy.
The Ecobank Group, Minority in Parliament and some Civil Society Organisations (CSOs) are of the view that the country has reached the crises level and needs to go to the IMF for loan to increase its policy credibility on the market.
The Government has reiterated on a number of occasions that it would not go to the IMF, insisting that it had the capacity to turn the fortunes of the country around.
This position by the Government is summed in the words of President Nana Addo Dankwa Akufo-Addo amid the pandemic: “We know how to bring the economy back to life.”
Some Economists spoken to by the Ghana News Agency say the country’s economic fundamentals have remained fragile for a long time, leading to these shaky economic developments.
However, they have cautioned the Government against going to the IMF for a bailout, noting that the conditions attached to it are austere, and urged it to “do the hard work” to mobilise domestic revenue and ensure its prudent utilisation.
Amid the debate and controversy surrounding the IMF bailout, the World Bank, as well as some Economists and Financial experts have pointed out that the country can revitalise and transform its economic fortunes without necessarily going to the IMF.
They opined that while taxes were necessary in increasing the country’s poor revenue generation, more could be reaped beyond the E-Levy, which had been described as a “lazy approach” to rake in more money.
It is expected that by the end of 2022, the E-Levy will bring in about GHS6.9 billion, 6.92 per cent of the expected GHS100.5 billion revenue for this year.
With the Government consistently insisting of not returning to the IMF and the delay in passing the E-Levy, what could be the way out as the government embarks on a journey of Ghana Beyond Aid?
Some proposals put forward to solve the country’s fragile economy, and make it resilient against shocks, and move beyond E-Levy and the IMF include; focusing on putting strategies in place to collect more property tax and prudent debt reduction, strong political will and commitment to fighting corruption, and cutting down on government expenditure.
Professor Gidfred Alufar Bokpin, an Economist with the University of Ghana Business School (UGBS), says, there is the need for the Government to move from relying heavily on indirect taxes.
He said: “If you look at the list of indirect taxes that we’ve imposed on this country, the conclusion on that is, it’s counter-productive. Because the more indirect taxes you impose on the citizens and businesses, the more it adds to high production cost base of doing business.”
He underscored the need to put in place structures and empower the revenue collection agency [Ghana Revenue Authority, GRA] to widen the tax net and generate more revenue through income tax, property tax and wealth tax.
Prof Bokpin, urged the Government to critically look at the exemptions regime and rationalise it, and said, “If Government had applied the same urgency which they have applied to the pass the E-Levy, to the passage of the Exemptions Bill, we would have made some progress by now.”
For his part, Dr Patrick Asuming, a Senior Lecturer at the University of Ghana Business School (UGBS), said, going to the IMF for policy credibility was a short-term measure that might help with the market economic management.
He added that: “IMF simply comes with austerity; IMF will come with expenditure rationalisation, and it will come with an attempt to raise revenues. IMF, sure is still good for macroeconomic stability in the short term. They never help promote long term development of the economy.”
On the way forward, he said: “We must do the hard things that we have to do; we must cut waste and get the Government to spend within its means. We have to ensure that cut all those freebies that we give to our government officials.”
Mr Pierre Frank Laporte, the World Bank Country Director, Africa, during a media engagement, said, the IMF would help Ghana to renegotiate some of its debts with creditors, guarantee more loans, and give the country an economic framework that would help shore up its reserves.
He, however, noted that: “The country can go forward and do things without the IMF, because what the IMF does is that it gives you a programme of reforms and gives you money that goes to help you in your reserves.”
Courage Boti, an Economist with Databank, opines that: “With the houses and residential and business properties that are dotted around the country, if we were collecting the appropriate property taxes for some of these things, we can actually rake in significant amount.”
He noted that this required the Government and policymakers to effectively deploy a unified system and devise appropriate means to collect property tax nationally.
It has become apparent that the country’s economic fundamentals - inflation, Gross Domestic Product (GDP), GDP to debt ratio, exchange rate, and gross international reserves had become fragile, exposing it to shocks.
While domestic revenue is important in shoring up the country’s revenue, imposing more indirect taxes tend to bring hardship to the citizenry and businesses, therefore, pushing the country into a vicious cycle.
It would take a lot of hard work to implement measures that would make the country earn more from direct taxes, with property tax, identified as a major constituent of widening the country’s tax bracket, and increasing revenue without necessarily burdening the “ordinary Ghanaian.”
Beyond this, streamlining and synchronising Government projects among various agencies, effective monitoring and accounting to the citizenry, the utilisation of revenues accrued, would also help in reposing confidence in the taxpayer.
It has been 65 years since Ghana gained independence, and over three decades of experiencing relatively stable constitutional democracy.
Natural resources also abound [gold, cocoa, oil, among others], and value addition to these raw materials could go a long way in creating a strong economic footing to engender national development.
Again, a strong collaboration between academia, professionals, Civil Society Organisations (CSOs), and political actors, and a legally binding national development plan, is also needed to enable country redeem itself from the shackles of “economic bondage,” and move beyond the E-Levy-IMF debate and have a “Ghana Beyond Aid.”
The Presidency, Legislature and other top public servants should also volunteer salary cut and reduce the Freebies to show leadership as Ghanaians ponder on the E levy and austere measures needed to resuscitate the economy.