Institute of Fiscal Studies (IFS) has criticized government for its social intervention programs, amid the pandemic stating that they were poorly executed and lacked fiscal prudence.
With government debts intake standing at 72% of Ghana’s revenue, the IFS warns that government’s fiscal position will be the worse if austere measures such as immediately seeking debt release from debtors and slashing down employees’ salaries are not taken.
In addressing the media, Dr. Saeed Boakye a senior research fellow at IFS indicated that at the end of last year, the country had “clearly fallen into a debt trap since borrowing was no more a choice but an imposition of the fiscal state of the country”.
“This cycle can only be reversed if, one, revenue is able to grow at a very unusually high rate; growth in employee compensation drastically reduces. There is debt forgiveness as happened in the 2000’s or there is a combination of some or all of these”.
Dr. Saeed Boakye
He added that some stringent measure will have to be undertaken to address service expenditure incurred by some staff.
“However, as we are all aware none of these were achieved in practice even before the pandemic hit. Cutting and making compensation grow lower than it is, you know Ghanaian workers, and you know the powerful labour behind them. Their service expenditure, how do you reduce it, whereby you’ve already entered into obligation with your creditors and you know what has been happening to revenue.
“The government has tried as long as it could but revenue growth is still… so trying to reverse the situation that the country found itself by end of 2019 was very difficult even before the pandemic hit.
“Now the third implication or the consequence is that… capital expenditure which is needed to the base of the economy decreased to the lowest levels in 2018 and 2019 since 1983. Because compensation and debt service expenditure are taking everything, where is the money to invest in the economy in terms of capital expenditure?”
Meanwhile, the Institute of Statistical Social and Economic Research (ISSER) has proposed the development of a sustainable system to track government funds that are ear marked for expenditure purposes amidst covid-19.
At an engagement to review the 2020 midyear budget, Director of ISSER, Prof. Quartey said such a system will enhance transparency, further warning that failure to have such a system will to uncontrolled expenditure which could hurt the economy.
“Government will have to use innovative ways or strengthen its revenue mobilization strategies. Digitization is very critical, that we try to mobilize more resources, domestically to fund greater proportion of the items listed in the midyear review, rather than resorting to borrowing”.
“There are new areas springing up and due to Covid, a lot of businesses are going online, there is the need to try and rope them into the tax net. At the moment we’ve seen the national identification card being issued… people registering for TIN. These are all means by which to know where people are and what they are doing…people should also realize the benefit of the tax”.
