Mr. Leslie Dwight Mensah, an Economist at the Institute for Fiscal Studies(IFS), has disclosed that the businesses need cheaper lending rate to benefit from AfCFTA.
According to him, the current cost of credit in the country does not create an enabling environment for SMEs to be internationally competitive.
The government indicated in the 2021 Budget Statement that it will make Ghana a hub for commerce, financial services and manufacturing to take full advantage of the AfCFTA, the world’s largest free trade area.
Moreover, recent data from the bank of Ghana show that the average lending rate of Ghanaian banks went up marginally to 21.02% in February 2021, up from 20.97% in January 2021.
Speaking in an interview with the Vaultz Media, Mr. Mensah further noted that, the current banking lending rate is noteworthy as it has remained stable.
“The cost of credit in Ghana does not make businesses, especially SMEs, internationally competitive. However, the average bank lending rate has actually been falling in the last few years, which is a good thing, even if the level remains high. Businesses obviously need much cheaper lending rates to increase their competitiveness under the AfCFTA, and achieving this should be a policy priority”.
Taxes in 2021 budget are a necessary evil
Commenting on the introduction of taxes imposed by the government’s 2021 budget reading, Mr. Mensah disclosed that they are a “necessary evil”.
He further conceded to the fact that the introduction of these taxes will likely affect business. That notwithstanding, the IFS Economist averred that this will enable improve and grow the economy.
“The taxes introduced in the 2021 Budget are a necessary evil given the current state of the public finances. Admittedly, they will hurt households and businesses in the short term but since they will also help to improve the fiscal and macroeconomic situation; that means they will yield benefits for the economy later on”.
Mr. Mensah further revealed that, Ghana needs to address a whole range of issue such as “infrastructure, regulations and ports efficiency”. The other areas he noted include the efficiency of other public services and the legal environment.
This, he disclosed, will help improve its “business environment and investment climate”.
Tax reliefs for businesses
The 2021 budget made provision for 30% rebate on the income tax for companies in hotels and restaurants as we aeducation. It will also cater for the arts and entertainment, and travel and tours for the second, third and fourth quarters of 2021.
Similarly, there’s been the suspension of quarterly income tax instalment payments for small businesses using the income tax stamp system.
Touching on the tax reliefs offered to businesses by government, Mr. Mensah revealed that the rebates will help businesses scale.
“These are tax reliefs to help small, informal businesses get through these challenging times. The issue of sustenance of their operations depends on other factors apart from the government’s assistance. For example, it depends on how quickly the country recovers fully from the pandemic and how small businesses themselves adapt to the changes around them; including changes in the demand for their products and consumer preferences”.
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