Gov’t revenue target still low, can be better – IEA

Director of Research of the Institute of Economic Affairs (IEA), Dr. John Kwakye, has expressed misgivings about the nation’s projected revenue growth, in GDP terms, for the period between 2022 and 2025, saying, it shows a lack of ambition.

According to the think tank, the 20 percent average annual growth rate demonstrates a lack of ambition, especially when the capacity for higher revenue receipts and the nation’s financing deficit are taken into consideration.

Data contained in the 2022 budget statement points to a 4-percentage point increase in revenue as a component of GDP, from 16 percent (GH¢ 70.3 billion) in 2021 to 20 percent (GH¢ 105 billion) 2022. The data also projects a flat growth rate of 20 percent, 20.5 percent, and 20.3 percent in 2023, 2024, and 2025, respectively.

Speaking at a post-budget forum organised by the institute, Dr. Kwakye said despite the expected jump in total revenue for 2022 by 43 percent, as a result of a raft of tax measures including the impending E-levy, review of the import benchmark policy, proposed inflation-adjusted fees and charges bill as well as the impending revised Tax Exemptions Bill, the one-off nature of the revenue growth leaves much to be desired, especially when compared to economic peers.

“It is worth noting that the proposed tax measures are projected to make a significant impact in 2022… However, after the initial sprout in 2022, the rate of increase seems to slow down markedly from 2023 to 2025… It has to be said that even at 20 percent, Ghana’s revenue to GDP ratio still falls significantly short of the average of about 30 percent for our middle-income peers,” he explained.

Dr. Kwakye thus entreated managers of the economy to scale up efforts at raising revenue over the period, saying: “It is our expectation, therefore, that more effort would be made to further scale up revenue over the medium-term.”

Resource allocation

Whilst resource mobilisation and its attendant issues have dominated national discourse, the IEA believes resource allocation deserves as much attention.

With compensation alone projected more than 25 percent of total expenditure at GH¢35.8 billion, Dr. Kwakye wondered how the state would be able to employ additional personnel in critical areas. He consequently threw his weight behind plans for a proposed staff rationalisation exercise, suggesting that it would improve efficiency.

“One wonders how we are going to be able to employ future doctors, nurses, teachers, etc. that we need so badly. We need serious reforms in the public sector and that is why it is important that the staff rationalisation exercise that the minister mentioned in the budget statement is implemented with urgency,” Dr. Kwakye said.

Additionally, a closer look at the resource allocation to Ministries, Departments, and other Agencies (MDAs), showed that of its five broad areas of application, social expenditure towered over other areas accounting for 51.5 percent. This is led by education (GH¢17.79 billion) and health (GH¢ 11 billion).

For context, total allocation for public safety is projected at GH¢ 9.25 billion and infrastructure, GH¢7.24 billion.

The IEA’s Director of Research asked the state to determine the order of priority of public expenditure and consequently, the resources allocated.

“We spend a disproportionate amount of our resources on ‘social issues’. It appears like we are a huge ‘welfare state’. But it also raises efficiency questions. In other words, could we be sacrificing economic efficiency for social welfare? I leave the government to tell its own story here,” he said.

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