Today, the Finance Minister, Mr Ken Ofori-Atta, will appear before Parliament to present the much anticipated 2017 Budget Statement and Government Economic Policy on behalf of the President, Nana Addo Dankwa Akufo-Addo.
The entire country, including small-scale business owners, industry players, captains of the economy and the donor community, will be glued to their radio and television sets to hear how the government intends to fulfil its campaign promises which it touted as part of measures to turn around the country’s dwindling economic fortunes.
The budget, the first by the Akufo-Addo government, is expected to capture how it intends to generate revenue, keep expenditure within limits and consider areas to cut taxes in a manner that will stimulate private sector growth.
The government, during the electioneering towards the 2016 elections, described some of the taxes imposed by the ruling NDC government after the major tax reforms as ‘nuisance’ taxes.
These included the 17.5 per cent Value Added Tax (VAT) on financial services and domestic air fares and taxes on imported raw materials for the pharmaceutical industry.
As a result, the public wants to see how the government will carry out its pledge to reduce corporate taxes from 30 per cent to 25 per cent to give companies, both state-owned and private, some breathing space to plough back their profits for expansion to employ more people.
Again, companies expect to hear whether the government is going to consider scrapping the National Stabilisation Levy, a levy many players in the private sector have consistently described as a ‘killer levy’.
Another area of promise the people expect action concerns taxes on petroleum products. Although the price of crude oil is within acceptable limits, taxes slapped on the various petroleum products by the previous administration are seriously suffocating businesses, big or small.
The cost build-up on petroleum products, such as the TOR Recovery Levy and other taxes meant to clear what was christened the legacy debt, has made petroleum products more expensive than they are in many places in the world.
One major area of interest will be the expenditure side. For many years, governments have overshot their expenditure targets. The lavish lifestyles of government appointees by way of the purchase of high fuel consumption vehicles, the bloating of the cost of government projects, among many others, have contributed to over expenditure by the government.
For instance, in his State of the Nation Address to Parliament last week, President Akufo-Addo said: “Fiscal indiscipline, once again, reared its head in the 2016 election year. Total projected expenditure for 2016 was GH¢43.9 billion (26 per cent of Gross Domestic Product (GDP), but actual expenditure amounted to GH¢50.3 billion (30.2 per cent of GDP).”
The combination of high expenditure and lower revenue than projected resulted in a significant increase in the budget deficit for 2016. Compared to a target of 5.3 per cent under the IMF programme, the fiscal deficit for 2016 was nine per cent of GDP on a cash basis and 10.2 per cent of GDP on a commitment basis (that is, on the basis of expenditure undertaken but not yet paid for).
Under the IMF programme, the government was expected to restore fiscal discipline, but the fiscal deficit was 10.2 per cent of GDP.
The increasing fiscal deficit was said to have been financed by increased borrowing, which brought the country’s debt stock to GH¢122 billion, representing 74 per cent of GDP.
Against this background, the Finance Minister is expected to tell Ghanaians how he will keep expenditure in check, while actualising the many promises made by the New Patriotic Partey (NPP), such as the free senior high school (SHS) programme.
In the area of revenue, the government’s total revenue target of GH¢37.9 billion for 2016 (22.7 per cent of GDP) could not be met. Actual revenue that came in stood at GH¢33.2 billion (19.9 per cent of GDP).
The Finance Minister will announce how he intends to raise more revenue in the wake of the many cuts in taxes as proposed.
Sources within the government have said the Finance Minister will announce innovative means to raise more revenue from sources that will not have the kind of pinching effect on businesses and individuals as is the case presently.
In spite of the targets missed, there seem to be some hope in the revival of the economy which is likely to boost the confidence of businesses.
For instance, inflation has started dropping steadily. As of the end of January this year, inflation stood at 13.3 per cent, having dropped from 15.4 per cent in December 2015.
Treasury bill rates, which hovered around 24 per cent for 91-day bills some six months ago, had declined significantly to about 15.69 per cent as of February 14.
Based on these, Ghanaians expect to hear how the government will move to further bring inflation down to a single digit and further reduce domestic borrowing to impact Treasury bill rates which have become more attractive a place to invest than projects or loans.
The daily soaring of the dollar against the cedi has stirred concern among the business community, who have asked the Finance Minister to address the issue in the 2017 budget statement.
Currently, $1 fetches GHc4.72 and the expectation of Ghanaians is for the government to take measures to halt the decline of the cedi against the major currencies.
Ghana’s GDP growth in 2016 (including oil) is provisionally estimated at 3.6 per cent, the lowest in 23 years.
Again, in the budget, Ghanaians will hear how the NPP administration will help turn around the dwindling growth situation as it promised to leverage the favourable economic environment to provide the private sector the opportunity to lead the country’s growth agenda.
The management of the economy has always been problematic for many governments because of the over-dependence on two major commodities, gold and cocoa, which are exported in their raw forms.
Oil and gas are gradually becoming major revenue items, particularly at a time when new fields, Sankofa and TEN, are on board to augment what is raked in from the Jubilee Fields.
Meanwhile, Dennis Agyei Boateng reports that many people expect that the budget will introduce measures that will stabilise the cedi and bring interest rates down to boost businesses.
An engineer, Mr Odasani d’Giorgio, said with the current unfavourable macro indicators of high budget deficit, huge debt to GDP deficit, the cedi depreciation and high interest rates, he expected the government to demonstrate specifically how it would redeem the promises made to Ghanaians in the run up to the elections.
A student of the Ghana Institute of Journalism (GIJ), Ms Eva Kupuolo, said the budget should focus on all sectors of the economy — health, agriculture, education, transportation and even the human resource.
“This is because to achieve development, all of these sectors must experience massive transformation to ensure economic growth and development,” she noted.
Reduction of taxes
Mr Moro Opoku, who sells furniture at Kantamanto, expressed worry at the high taxes on goods which had crippled businesses.
“My only problem is with the taxes. I believe if the government reduces taxes, the prices of goods will drop to impact on the economy,” he said.
Mrs Georgina Akwetey, who sells clothes at the Makola Market, indicated that interest rates were very key in the Ghanaian economy and asked the government to work on them.
Reduction of fuel prices
Some drivers expressed their frustration at the increment in fuel prices and the high cost of spare parts.
Mr Adotey Maclean said the government should reduce prices of fuel.