Professor Peter Quartey, the Director of the Institute of Statistical Social and Economic Research (ISSER), has cautioned the Nana Addo government to suppress its appetite for high-interest loans.
According to Professor Peter Quartey, Ghana’s ongoing US$3 billion loan-support programme with the International Monetary Fund (IMF) could soon position the country to access loans on the capital market.
The Economist thus, cautioned saying “When we go to the capital market, we borrow at six, seven, or eight per cent – that’s is a recipe for disaster because repayment becomes a big challenge.”
Professor Peter Quartey urged the Government to be more aggressive on raising domestic revenue by wetting the appetite of Ghanaians to willingly pay taxes, rake in more Foreign Direct Investment (FDI), and show evidence of prudent expenditure.
Prof Quartey explained that financing Ghana’s development requires generating enough revenue, including FDI, which the country had not perform well over the years, making it go for capital market loans and IMF support programmes.
Prof Quartey asked the Government to resort to concessional loans, which offered interest rates between one and three per cent, noting that such circumstances would be better and create avenues for Ghanaians to easily pay taxes at affordable rates.
The Economist noted that just about one million Ghanaians paid taxes, as such government’s efforts of digitising the processes of paying taxes was a good signal for compliance.
“People are not willing to pay tax and we’re told that if you move out of Accra to other places, very few people pay taxes, so, until we strictly enforce the law, we won’t generate enough revenue,” he said.
The Need For Government To Make Ghanaians Voluntarily Pay Taxes
The Director of ISSER emphasized the need for government to make Ghanaians voluntarily pay taxes by making the citizenry have evidence of the benefits of paying their taxes through provision of quality social services. “If I pay property tax, yet have to pay for private refuse collection, and the streetlight is not functioning, then people start to question, where does the money go to?” He quizzed.
Data contained in the mid-year fiscal policy review of the 2023 budget statement shows that the country’s total revenue and grants for the first half of year was GHS59.3 billion.
That represents 7.4 per cent of Gross Domestic Product (GDP), and 8.4 per cent below the target of GHS64.7bn, which is 8.1 per cent of GDP.
Total expenditure stood at GHS68.5bn (8.6 per cent of GDP), which was 26.3 per cent below the programmed expenditure of GHS92.9 billion (11.6 per cent of GDP).
Ghana Investment Promotion Centre (GIPC) data also shows that FDI for the first half of 2023 was US$229.82 million, lower than the US$279.51m recorded for the same period in 2022, representing a decline of approximately, 18 per cent.
Meanwhile, the ISSER Director’s call came at the time when Ghana’s public debt increased by a fifth in just four months, driven partly by the inclusion of short-term loans from the central bank to the state.
Ghana, which defaulted on a Eurobond payment earlier this year, is restructuring most of its debt to make it sustainable under a $3 billion International Monetary Fund program, which was approved in May.
The country completed the first part of a domestic debt exchange in February, with investors exchanging 87.8 billion cedis in obligations for new securities that paid as little as 8.35%, versus an average of 19% on the old notes.