One fiscal year inadequate to achieve gov’t target – C-nergy Ghana
Investment banking firm C-nergy Ghana Limited has said that the government’s aim of rapid growth may not materialise within a year due to the lingering COVID-19 pandemic.
The firm has subsequently proposed a staggered approach that would result in an ultimate recovery from the adverse impact of the pandemic.
“The pursuit of recovery, consolidation, and accelerated growth, in our opinion, is a bit aggressive for government to achieve within one fiscal year when the threat posed by COVID-19 persists,” the firm noted in its post-budget analysis.
Among other targets, the government hopes to hit a Gross Domestic Product (GDP) growth rate of 5 per cent by the end of 2021.
The government hopes to achieve that using the GH¢100 billion Ghana CARES ‘Obaatampa’ Programme.
However, C-nergy believes “this projected growth target will be partly flattered by a favourable base effect”.
The government aims to spend GHS113.8 billion to achieve three pillars of recovery, consolidation, and aggressive growth.
At least six additional taxes introduced in the budget are expected to raise the revenue of GHS72.5 billion.
For C-nergy Ghana, “a phased approach and a more medium-term execution of these laudable policies” that would not impose “additional tax burdens on consumers and businesses” is ideal.
They believe that the effects of COVID-19 are still present, and revenue generation measures via taxes would be counterproductive.
“The passthrough effect of these taxes could generate inflationary pressures and push the year-end single-digit inflation target off course. Demand remains depressed, and businesses are still struggling to recover”.
“Improved agricultural productivity would determine whether the single-digit inflation target would be achieved. It would also be interesting to see the net effect of the new tax measures and improved food production on inflation at the end of 2021,” it added.
The company further highlighted the need for government to develop domestic tourism.
“This would require direct Government interventionist policies to spur private sector interest and investment in the sector. Direct Government spending on infrastructure development would also give a major push to this industry”.
They, however, commended the Akufo-Addo administration for “a budget that seeks to give hope to the ordinary Ghanaian, businesses, and foreign investors as we anticipate a sharp economic recovery in 2021 after an extended period of slowdown in 2020”.
As part of the interventions, C-nergy suggested widening the tax bracket within the framework of Ghana’s digitization agenda to remove excessive human intervention in tax collection.
Their recommendation resonated with that of the Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Peter Quartey.
He was concerned about the Ghana Revenue Authority (GRA) inefficiency in tackling revenue leakages, especially in the extractive sector due to underreporting.
“Why do we continue to rely on people’s discretion for valuation? We should put in some automation in the mining sector to capture production,” he said in an earlier interview with theghanareport.com.
Additionally, C-nergy called for the rationalization of property taxes to be re-aligned with realistic property values across the country.
This, they believe, would be a major source of government revenue.
Furthermore, C-nerfy proposed closure of State-Owned Enterprises (SOEs) that are draining state coffers.
They want the government to take bold steps “to shut down SOEs that have major financial leakages on the government purse, while those with prospects and foreign exchange earning capacity should be restructured; taking advantage of the new insolvency and restructuring laws, and re-capitalized to take their pride of place in national development”.
Parliament has adopted the 2021 Budget Statement presented by Minister for Parliamentary Affairs Mr Osei Kyei-Mensa-Bonsu in the absence of Finance Minister-designate Ken Ofori Atta.