Ken Ofori Atta on GDP

Finance Minister presents budget statement today

Finance Minister Ken Ofori Atta will this morning March 2nd, 2017, deliver his government’s first budget and economic planning statement after winning the 2016 Parliamentary and General elections with a resounding and historical victory.

The budget will give into detail Government’s expenditure and revenue generation plan for the year 2017.
There is heavy interest in today’s statement from stakeholders in all sectors of the economy due to the number of promises made by the NPP led by its Flag bearer and now President of the Republic of Ghana, Nana Addo Danquah Akuffo Addo and his running mate, an economist by profession Dr Mahamadu Bawumia, prior to winning the elections.

Ghana’s economic challenges

Ghana has been for close to six years now been wobbling in a number economic challenges which have seen a decline in its economic growth, a plunge in Government’s revenue, rising unemployment and increasing agitation among business operators over high taxes, a depreciating currency and weak economic fundamentals.

In his first state of the nation address, President Nana Akuffo Addo painted a gloomy picture of the economy, reiterating among others earlier reports by the Finance Minister, that the country’s current debt stock had ballooned to GH¢122 billion, leaving Ghana’s debt stock at 74% of GDP.

Adding that three key targets set under the IMF program – growth, fiscal deficit were missed.

What budget will focus on

it is expected that the Finance Minister will lay out key reforms Government will be rolling out to deal with the country’s current challenges including high debt levels, declining growth levels, increasing the budget and fiscal deficits, unemployment, private sector challenges and corruption among others.
A statement from the Finance ministry said The 2017 Budget is expected to focus on stimulating growth and job creation through private sector development.
The budget will also be heavy on key reforms and policies aimed at restoring fiscal discipline and tackling corruption and revenue leakage in the public sector.

”The Budget will include measures to restore fiscal discipline and good economic governance, transparent and accountable use of public resources in accordance with the new Public Financial management law and to provide a credible basis for economic policy clarity going forward”. A statement from the Finance Ministry said.
Key sectors that the budget will focus on include the power industry, education, health, agriculture, infrastructure and the private sector.

Tax cuts

It is also expected that Government will also reveal a tall list of initiatives and strategies aimed at propelling the growth of the private sector, as part of that a number of tax cuts aimed at cementing its moves to propel the growth of the private sector will be announced.
It’s unclear which taxes will be removed but the Special Import Levy, the 17.5% VAT on imported medicines not produced in the country as well as the 17.5% VAT on Financial Services, 17.5% VAT on domestic airline tickets as well as the 5% VAT on Real Estate sales make up the list of taxes likely to be abolished.

While import duties on raw materials and machinery for production within the context of the ECOWAS Common External Tariff (CET) Protocol, reduction of corporate tax rate from 25% to 20%, review of VAT for micro and small enterprises from the current 17.5% to the 3% Flat Rate VAT among others are on the list.
Also, one of the two energy sector levies may be removed or scrapped.

Spending cuts

Meanwhile, Citi Business News has gathered there will be a heavy slash in spending in some sectors of the economy.
It unclear which areas will affect the most.
The government had earlier announced a 7 billion cedi unplanned spending incurred by the previous government.
However, areas such as infrastructure, health and education are expected to experience some high level of spending.
The government is also expected to announce and bring to finality how it intends to pay for its free SHS policy on education.

Economists on budget

Meanwhile, Economist, Dr Adu Owusu Sarkodie has made a strong case for a revision of all statutory funds captured in the budget.
He argues that the funds have been constrained as the government has not been consistent with its allocations in addition to their inefficient management.

Currently, the District Assembly Common Fund (DACF), accounts for 7.5 percent of all domestic revenue.
But Dr Sarkodie tells Citi Business News the continuous contribution of the earmarked funds to the negative fiscal spaces make a revision inevitable.
“I want to see a drastic review; either reduction of the rates or complete abolishment of all or some of the ten earmarked funds. This is because only three components caused the negative fiscal space…Wages and salaries, interest payments and earmarked funds in 2013 accounted for 9.6 percent more than total revenue and grants. The figure recorded 6.9 percent in 2014 and 6.2 percent in 2015,” he argued.
Another Economist Daniel Amarteye Anim has urged the government to be tough in monitoring the utilization of revenue.

He contends that the lack of proper reconciliation with expenditure has partly contributed to budget overruns.
The CEO of the ICEG also advocated a decentralized system to guide the control of public expenditure.
“We need to watch the efficient utilization of resources. How do we ensure that the little money that is accrued is used in a manner that ensures value for money or how money allocated is used judiciously even at the district assembly levels. We need to decentralise our systems and that would be a better way to address some of these imbalances in expenditure,” he stated.

Expectations of business associations

Ahead of this morning’s presentation, industry players and business associations have reiterated calls for the solutions to their numerous needs to be captured in the budget.
In an interview with Citi Business News, the President of the Association of Ghana Industries (AGI), James Asare Adjei said, he anticipates among others a reduction in the numerous tax charges currently levied on businesses.
“There are a number of taxes that AGI considers as a nuisance and there are others too that we think that when they are done away with it will boost the production capacity of our businesses…if you remove the 5% import duty on raw materials we will definitely be competitive as industries and for that matter, it will be able to promote exports,” he observed.

“The whole issue goes beyond how much revenue you are looking for but then what extent do you expand the tax net such that more people will be roped in because you have a tax friendly environment if those taxes which have outlived their usefulness are also removed.” He added.
In a related development, labour unions are highly confident of policies to favour the provision of jobs.
The labour unions contend that employers should be able to absorb more labour if they are cushioned with lower costs of production.

The General Secretary of the Industrial and Commercial Workers’ Union (ICU), Solomon Kotei told Citi Business News government would also need to settle all outstanding issues with pensions and welfare of labour.
“Our core thing is that we are looking for a budget that will bring hope for job opportunities because unemployment has been a serious challenge to this country and we will see how job openings will rear its head in the current budget.

We will also look forward to seeing a budget that will address the issues that people who are on pension are even currently facing. As I talk to you people on pensioners have not received their salaries from January, February and now we are in March.” Solomon Kotei said.

Source: Citi Business News