Ghana’s Finance Minister, Ken Ofori-Atta, has stated that government is aiming at using digitization to double its tax revenue mobilization in the next three years to about 28% of the country’s Gross Domestic Product (GDP).
“We really want to be able to double our tax revenue to about 28% of GDP using digitalization, so we can create a much more vibrant economy in the next three years”.
Low revenue mobilization has been a major problem to Africa’s top gold producer over the years. This year, Ghana is targeting a budget gap of 9.5% of GDP from a 11.7% shortfall in 2020.
As a result, the government is working to improve tax revenue collection, which has historically been low compared to regional peers.
Earlier, President Nana Akufo-Addo stated that the tax base will grow more than fivefold to 15.5 million after the government merged its databases in April 1, 2021. The implementation of this system allows all national identification numbers to serve as tax numbers.
Vaccine Shortage
In an interview with Bloomberg, Mr. Ofori-Atta expressed worry about the new wave of the COVID-19 in the country. According to him, government’s plan to revive the economy and deepen the state purse remain vulnerable to a new wave of the pandemic. This further casts uncertainty on the recovery prospects of the economy which was forecast to expand 5% in 2021 after a sluggish growth of 0.4% last year.
Moreover, Mr. Ofori-Atta indicated that Ghana’s ambition of reaching herd immunity by vaccinating 20 million people against COVID-19 has become a challenge. The Minister attributed this mainly to vaccine nationalization.
“The Western world may have about 68 doses per 100 people while Ghana has 2 doses per 100 and that cannot continue”.
Ghana has failed to secure vaccines beyond the 1.3 million free shots it’s received mainly from the World Health Organization-backed Covax Initiative. Nevertheless, there are smaller donations coming from the Indian government and Africa’s biggest mobile operator, MTN Group Ltd.
Ghana to issue green and social bonds
Furthermore, Mr. Ofori-Atta hinted that Ghana is planning to issue green and social bonds of up to $2 billion by November this year. This would make Ghana the first African country to sell debt to fund development programs.
“The expectation is that the bonds will be issued in the fall and the maximum can be $2 billion”.
According to the Minister, the proceeds from these sustainable bonds will be used to refinance debt used for social and environmental projects including the free SHS policy. Overall, parliament approved up to $5 billion borrowing on international markets in 2021.
The minister averred that Ghana has already sold $3.03 billion in March out of the $5 billion. Out of the total, $3.5 billion will be used to refinance debt already raised, the minister said. Consequently, Mr. Ofori-Atta said “our actual new debt will be $1.5 billion”.
Social bonds have seen a boom since the outbreak of the coronavirus pandemic. However, only a few sovereigns have sold them so far, including Chile and Ecuador.
Yet, Mr. Ofori-Atta said sustainable bonds “are not cheap, there is no discount”; “we will seek to negotiate for the best terms though”.
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