September 27, 2020

Gov’t likely to opt for borrowing instead of new taxes in mid-year budget – Economist

A Professor of Economics at the Institute of Statistical, Social and Economic Research (ISSER), Prof. Peter Quartey, says he doesn’t expect government to introduce new taxes in the upcoming mid-year budget presentation.

The Finance Minister, Ken Ofori-Atta, is expected to present the Mid-Year Budget Review and Supplementary estimates to Parliament in July.

Mr. Ofori-Atta proposed a revenue target of GH¢65.8 billion for 2020 during the main budget presentation in November 2019, but has since stated that Ghana will record a significant drop in revenue due to the COVID-19 pandemic, because the country is recording a huge decline in revenue from the ports, petroleum revenue receipts as well as tax revenue.

Speaking to Citi Business News, Prof. Peter Quartey said he expects government to borrow more at concessionary rates to make up for its revenue shortfall.

“I won’t be surprised if there will be more borrowing, because increasing taxes in this era when revenues are going down and people are struggling, if you try to increase taxes it will not be ideal. Moreover in an election year government is very careful not to increase taxes. It will be very politically unwise to increase taxes. So I expect some more borrowing, and if that happens, at very concessionary rates as well as expenditure prioritization.”

 Ghana loses GHS 9.5bn to Coronavirus outbreak – Finance Minister

The Finance Minister in late March announced that Ghana may lose about GHS9.5 billion in the fight against the COVID-19 pandemic, a situation that may move the 2020 budget deficit to over 7 percent.

This will be 2.5 percent of Ghana’s revised GDP.

“Speaker, the total estimated fiscal impact from the shortfall in petroleum receipts, shortfall import duties, the shortfall in other tax revenues, the cost of the preparedness plan, and the cost of Coronavirus Alleviation Programme is GHS9,505 billion,” the Minister said when he appeared in Parliament.

Ultimately, there will be a “fiscal gap of GHS11.4 billion,” the Minister added.

Import duties, for example, will fall short of target by GHS808 million for the 2020 fiscal year, the Minister indicated.

The pandemic will also take a toll on Ghana’s GDP growth.

Mr. Ofori-Atta said a preliminary analysis of the impact of the virus “on the real sector shows that the 2020 projected real GDP growth rate could decline from 8 percent to 2.6 percent with an outbreak and 1.5 percent with a partial lock-down.”

Source: Business