Poor revenue performance poses great challenge to Ghana’s economic management in 2020

Ghana Revenue Authority
Ghana Revenue Authority

As the government of Ghana seeks to spend at least 85.9 billion Ghana cedis (15.4 billion US dollars) on its activities next year, one of the challenges facing the economy would be how to raise revenue to support that expenditure in the face of low revenue generation.

Recognizing this difficulty, the government plans to embark on reform at the Ghana Revenue Authority (GRA) to ensure that the institution achieved the required revenue expectations.

Elaborating on the reforms announced by the finance minister Ken Ofori-Atta in the 2020 budget statement, a deputy finance minister in charge of revenue, Kwaku, Kwarteng said the GRA had been operating below capacity, and so needed to be reformed.

He said the poor performance of revenue mobilization in the face of the growing need for infrastructure development and economic expansion was a challenge the government faced.

“We think GRA can do better, so, we are restructuring GRA itself, creating new positions, collapsing some positions, and making sure that we put our human resources to the best use,” Kwarteng told Xinhua in an interview.

A further step under the reforms the minister said would be to ensure that GRA became fully automated, to use modern systems for revenue mobilization.

Ghana’s tax revenue to Gross Domestic Product (GDP) ratio fell to 13.1 percent in 2018, from 17.6 percent, realized in 2016.

“We are looking carefully at our revenue figures and adjusting our expenditure accordingly,” Kwarteng added.

Whiles the country waits for the reforms to yield fruits, Kwarteng said the government was aware of the fact that it could not continue to spend so much.

“In spite of the need for investment in the necessary economic infrastructure, we are controlling our expenditure to ensure that we live within our means and keep a stable macro-economy,” he added.

During the review of the 2019 budget in July, finance minister Ken Ofori-Atta announced a downward revision of the government’s revenue target for 2019 to 58.8 billion cedis (10.59 billion dollars) from 58.9 billion cedis (10.61 billion dollars).

However, Ofori-Atta told parliament on Wednesday that the revenue agencies would still miss this revised target at the end of the year, due to weak revenue performance.

Minority member of parliament(MP) for Ketu South and former deputy finance minister in charge of revenue Fifi Kwetey expressed wary about government’s “excessive borrowing” in the face of weak revenue performance.

Ghana’s total public debt increased to 205.5 billion cedis(37.02 billion dollars), by September, from 110 billion cedis (19.81 billion dollars)in 2016.

“In less than three years, this government has borrowed almost to the tune of what the previous government borrowed in eight years, and yet it has very little to show for the debt,” Kwetey said.

Kwetey cautioned that the debt situation could reach unsustainable levels if the trend continued, especially as the government had not been investing in economic infrastructure to induce growth and transformation.

The government has proposed to spend 85.9 billion(15.4 billion dollars) as total expenditure in 2020, out of which capital expenditure is projected to be 9.3 billion cedis (1.67 billion dollars).

This expenditure would be against the total projected revenue of 65.8 billion Ghana cedis for the 2020 fiscal year.

The projected expenditure is expected to result in a fiscal deficit of 4.7 percent in 2020, with an inflation rate of 8.0 percent and a 6.8 percent economic growth. Enditem

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