Fiscal consolidation linked to Civil and labour agitations

Professor Peter Quartey
Professor Peter Quartey

The Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana (UG) has found out that government’s fiscal consolidation measures are contributing to civil and labour agitations.

Government is targeting a fiscal deficit of 7.4 per cent to Gross Domestic Product (GDP) in 2022 as against 12.1 percent for 2021 as it moves to salvage the country’s economy.

In furtherance of that it has introduced a number of economic policies, including the Electronic Transfer Levy (E-levy) and the restoration of the benchmark value on selected imported products to strengthen domestic revenue mobilisation and reduce borrowing.

Describing the target as ‘ambitious’, Professor Peter Quartey, the Director of ISSER, observed that retrenchment by government coupled with the biting effects of some of its fiscal measures were informing labour agitations, particularly at the public sector.
He explained that the move by government to cut down on its expenditure was having an adverse effect on the public sector.

Professor Quartey was making a presentation at the 2022 edition of the ISSER Roadshow on the state of the Ghanaian Economy Report (SGER) 2020 and Ghana’s Social Development Outlook (GSDO) held by UG in collaboration with the University of Education, Winneba (UEW).
It was held on the theme: “Harnessing stakeholder engagement and feedback for research impact.”

It provided a platform to discuss the successes and challenges of Ghana’s economy and ways to boost the economy through a nonpartisan lens.

Professor Quartey observed that Ghana’s economy suffered turbulent moments in the first quarter of 2022 owing to an array of developments both domestic and external.

He said the economy was badly hit by the rise in crude oil prices from $74.17 per barrel in December 2021 to $130 as of March 7, 2022 before going down to $115 as of March 24.

He said the Cedi had cumulatively depreciated by 15.6 percent against the Dollar, 13.4 percent against the Pound Sterling and 13.3 percent against the Euro.

“At end of the December 2021, the public debt stock had increased from GHC351.8 billion cedis which was 80.1 percent of GDP as compared to the GHC218.2 billion in December 2020,” he added.

He, however, noted that the prevailing hardship in the country was not a peculiar situation, citing the 2022 inflation rates of US, Germany and UK.

He averred that in spite of the challenges, the country was growing with good prospects.

Wading into the E-levy controversy, the ISSER Director called on government to review the rate below one percent.
According to him, the current rate of 1.5 per cent on digital transactions including Mobile Money, bank transfers and remittances was “too high and punitive”, expressing fears that it could erode the gains Ghana had made in its digitalisation agenda.

Citing the low rate in other African countries, he proposed that the levy should be pegged between 0.5 to 0.7 percent to carry everybody on board.

He maintained that E-levy was not a bad thing because it would boost investor confidence because Ghana would improve its revenue levels which led to the downgrade of the country by rating agencies and also minimise the need to borrow to finance expenditure.

He said the country needed the brakes on going to the Eurobond market, adding the running to the International Monitoring Fund was not a good idea.

However, he said with the current high rate, it could have bad implications on all forms of businesses by increasing the cost of doing business, affecting output, worsening the unemployment situation and deteriorating the cost of living.

“It will lead increased cost to consumers and users of electronic transfers and can lead to increase in cash-based transactions and other banking services,” he added.

He said E-levy had come to stay and that the focus should be on making it more effective, calling for an extensive education on the policy.

As part of the fiscal consolidation measures, Professor Quartey also urged government to reintroduce the road tolls using an electronic-pass system.

He was of the view that the outright removal of road tolls put government in a bad light as it sent wrong signals to private investors who wished to partner government.

He insisted that the said congestion at the tollbooths could be addressed through an efficient e-pass system as it was the case in some parts of the country and other countries.

For fiscal consolidation, Professor Quartey said government must embark on aggressive revenue mobilisation through efficient tax and non-tax revenue generating measures.

He noted, for instance, that the property rate of GHC468 million earmarked for 2022 was inadequate in view of the number of properties in country and urged government to do more.

On power, the ISSER Director proposed a downward review of various taxes and levies on fuel products to cushion consumers

“Negotiate excess capacity charges under the West Africa Power Pool agenda to channel any excess generation capacity from the IPPs into the pool minimise revenue losses,” he added.

Further, Professor Quartey said the State could achieve a lot by conducting regular audit of public institutions and surcharging or prosecuting staff with audit infractions, while promoting automation of revenue of collection points for fees.

He government should “review the salary structure of public sector workers and implement labour market survey reports to minimise labour agitations”.

“State-owned enterprises should be run like a business with qualified persons appointed to head these institutions with clear performance targets,” he insisted.

The professor also proposed a strong partnership between government and the private sector to enhance and sustain the Nation Builders Corps as it transitioned to the YouStart scheme.

According to him, government did not have the capacity to execute the programme alone given the huge number of youth involved.

Professor Andy Kwame Ofori Birikorang, the Pro-Vice Chancellor of UEW, who was concerned about the rate of journalistic infractions, observed that a lot of irresponsible journalism emanated from employing unqualified people.
Professor Birikorang who is a former member of the National Media Commission called on all media training institutions and media outlets to offer workshops and specialised courses on professionalism for journalists.

“The responsibility rests on all of us to ensure that we don’t become the patrons or perpetrators of irresponsible journalism,” he said.
He commended ISSER for the work it had done in research over the years for the development of country and academia and pledged the support of UEW for the Institute.

For her part, Professor Lucy Effeh Atom, the Dean of the Faculty of Social Sciences Education, UEW observed that Ghana had been on the crossroads and that the plights of the country appeared to be worsening.

She said it was, therefore, timely for academia to provide research on addressing the situation.
She urged participants and the State as a whole to take practical action towards implementing recommendations in the

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