The Finance Minister, Ken Ofori-Atta on Monday, July 31, delivered the 2023 Mid-Year Budget to Parliament.
The Minister indicated that in 2022, the country experienced economic hardships but also assured that the economy is on a path of recovery, and will even show greater results when the measures implemented start yielding fruits.
An encouraging news for households and businesses alike in Ghana is the fact that contrary to widespread expectations, no new taxes—neither income taxes nor consumption taxes—were announced in the mid-year budget review.
However, in the aftermath, some financial, economic and market analysts have highlighted some salient areas the budget review failed to address.
There was no account of government debt
The Director of Operations at Dalex Finance, Joe Jackson says it is not enough for the Finance Minister to just say that the government is spending less when there are still several arrears and debts piled up to be paid.
Speaking in an interview after the budget statement, Mr. Jackson drew attention to the fact that the government has incurred a lot of debt and arrears this year, and to make the 2023 Mid-Year Budget more appreciable, the Finance Minister, Ken Ofori-Atta should have presented how much of the government’s debt has been settled and how much is left.
“Even more important, the Finance Minister didn’t tell us how much arrears has been incurred this year and not paid. It’s not just a simple matter of I haven’t spent, some people have come to the government and said you owe me, contractors and other people.”
“So, it would have been interesting if he had said not only have we spent less, but we’ve also reduced or kept the level of the arrears sane.”
“Because truly if you tell me this month you have spent less and you haven’t included the shares that you bought on credit which is due next month, then I won’t agree with you, and the worrying part is that they’re not paying any of those bills,” he said.
No Reduction in Utility Tariffs
Many have called for a reduction in utility tariffs which pose a burden to households and businesses alike.
The Public Utilities Regulatory Commission (PURC) increased the average end-user tariff for electricity by 18.36% for all customer groups, effective June 1, this year.
PURC explained that the decision to increase utility tariffs had been necessitated by the price of natural gas, exchange rate, hydrothermal mix, and inflation.
Business groups like the Ghana Hotels Association called on the government to address the numerous charges imposed on the sector in the Mid-Year Budget but it did not address these concerns.
The association believes this will allow the industry to meet its target of attracting over 1.5 million tourists to Ghana.
The Association of Ghana Industries (AGI) also appealed to the government to reduce the utility tariffs for manufacturing companies and industries producing and contributing to the development of the country.
AGI explained that Ghana was one of the few nations in the world where industry paid more in electricity costs than home enterprises.
They pointed out that taxes and power accounted for 30% of production expenses, making it difficult for manufacturing firms to prosper and compete globally.
There was no mention of downsizing of government
Another ground for contention has been the IMF’s insistence that the government needs to reduce its size and consequent spending in tandem with substantial increases in public revenues from taxes.
The government, for its part, has resisted strong calls from the populace for downsizing, relying instead almost entirely on revenue enhancement measures and the accumulation of payment arrears.
In the planning for the budget review, the government has made an argument to support its stance that debt restructuring will provide the fiscal space to support the financing of running the government in its current form.
No focus on how to enhance agriculture and value addition to withstand external Shocks
Economist, Professor Peter Quartey has indicated the potential threats posed by external shocks, citing the recent tensions between Russia and Ukraine as an example.
With potential disruptions in grain supplies affecting food prices, he urged the government to focus on enhancing agriculture and value addition to reduce vulnerability to global economic shocks.
“The only way we can withstand economic shocks is through diversification and adding value so we don’t rely on primary products alone. We need to add value but if we continue to rely on raw materials, in their raw form, any shock on the global economy is likely to hit us,” he explained.
While praising the government’s efforts to stabilize the economy, he emphasizes the need to continue prioritizing sectors that drive sustainable growth and mitigate external risks.
The Budget failed to address calls to scrap taxes on sanitary pads
The Speaker of Parliament, the coalition of civil society organizations, and other stakeholders had earlier urged the government to take advantage of the mid-year budget review to scrap the taxes on sanitary pads, but that was not captured in the presentation by the Finance Minister on July 31.
Mr Alban Bagbin reacting to the matter on the floor of Parliament on August 2 in the heat of the debate criticized the government’s failure to scrap it.
“On the issue of sanitary pads, the government should rethink it. Because the taxes are not only imported ones, even the locally produced ones are taxed. The businesses met me two days ago, [and told me that] even the raw materials are taxed. They were complaining about production, to the extent that some of them folded up. This is something that I take seriously. Don’t let us miss the point, I will not tax a woman, my mother for producing me. I don’t support that at all, so the state must take this matter seriously.”
“There are countries where it is for free, there are countries where a lot of taxes have been removed. That is an issue I’m very passionate about, to all governments that will come, we can do without it. How much do we make from this taxation? We like taxing the poor, we are not taxing the rich,” Mr. Bagbin indicated.
In all, the Finance Minister failed to paint a realistic picture for Ghanaians
Economist, Professor Godfred Bopkin has objected to the Finance Minister’s assertion that the Ghanaian economy is on a path to recovery and has stabilized.
According to Prof. Bopkin, the economy is still struggling to achieve normal functioning.
He stated on Tuesday, August 1 that, “with the approval of the IMF -supported programme, particularly with the inflow of the $600 million, and then also some of the fiscal consolidation measures that we are implementing, we’ve seen some relative stability, but it’s too early to say that we are out of the woods.
“It’s too early because the economy is not in full gear. You only say you have turned the corner when the economy is in full gear and all the variables are turning in the right direction. For now, the economy is not in full gear because we are not meeting all our commitments, to all our stakeholders optimally.”
Prof. Bokpin further alluded to the government owing arrears to its contractors such as independent power producers, to emphasize that there were indications that the economy has not been stabilized.
“You cannot say the numbers are turning out good because the economy is responding fully. No, your economy is not in full gear. If you have suspended certain key things, for which reason you are seeing some stability, you could not conclude that you have turned the corner.
“Of course, we can see some relative stability and all of that, but the whole architect of the economy is not in operation. So, you want to be very careful how you interpret that signal,” he advised.
He described the Finance Minister’s budget review as “overly” and “aggressively confident,” which failed to mirror reality.