The Institute of Statistical, Social and Economic Research (ISSER) says the government needs to accelerate the domestic revenue mobilization effort to reduce borrowing to finance the fiscal gap.
It said the overall fiscal deficit of 5.1 per cent of Gross Domestic Product (GDP) fell marginally short of the 5.2 per cent of GDP programmed for the first half of 2021.
Professor Peter Quartey, Head of ISSER, made this known when the Institute reviewed the Mid-year Review of the Budget Statement and Economic and Supplementary Estimates of the 2020 Financial Year in Accra.
He said if the government could raise the projected revenue above its programmed target and ensure that the expenditure envelop was intact, then the economy could outperform the revised fiscal deficit of 9.4 per cent for 2021.
“This will invariably be a giant step in returning to the path of fiscal consolidation even before the expected date of 2024,” he added.
He said there seemed to be some bright spots in the economy after the intense pressure from COVID-19 in 2020.
Prof Quartey said the government was playing its role to ensure that fiscal targets were met but what remained to be seen was, whether the government would be able to keep the expenditure envelop intact.
He said the government also needed to ensure that critical expenditures planned for recovery/revitalization and transformation of the economy as outlined under the CARES Obaatanpa programme were carried out efficiently.
The Economist said the new tax measures introduced in the 2021 budget yielded GHC249.7million in revenue for the first half of 2021 and fell below its programmed target of GHC358.1million.
He said the COVID-19 Health Levy and the Financial Sector clean-up Levy seemed to be performing better than the others.
“A critical assessment of these taxes is needed to ascertain whether they are efficient means of raising revenue rather than a “nuisance” tax that stifles private businesses,” he said.
On industrialization, the Head of ISSER, said the restructuring of loans for defaulting firms by financial institutions would also help to keep businesses afloat.
Therefore, additional support to businesses that would help them to shore up their profitability and increase their capacity to repay their loans will be helpful.
He said this was an issue, which could be taken up by the Ghana Enterprises Agency (GEA), to provide the needed evaluation and tailor-made training for struggling firms.
In the area of international trade and payments, Prof Quartey said the government must leverage its recent agreements with AfCFTA, the UK, and the EU to improve manufacturing and trade of processed and light manufactured products, which attract higher export revenue.
He said the government through relevant agencies must take advantage of the removal of tariffs on intermediary goods and technology from partner countries to allow Ghanaian businesses to source cheaper inputs for domestic production.
“This may well enhance Ghana’s competitiveness in regional, continental,
and global value chains,” he added.
He said given that the implementation of the CARES programme would depend on the extent to which the government was able to garner funding support from the private sector close collaboration with their associations would be critical.
The Economist said the programme would, therefore, hang in the balance if the private sector which was already stressed from the effect of COVID-19 was not able to undertake new investments as the government expected.
He said it was also not clear from the budget review, how the government would raise 30 per cent of the funding in the short to medium term.
“Government’s hopes of increasing tax to GDP ratio from 14 per cent to 20 per cent, of which the additional revenues can fund the Ghana CARES, appears too optimistic in the short to medium term,” he added.