The International Monetary Fund (IMF), has urged government to deepen fiscal consolidation measures outlined in the 2021 budget statement.
The call by the Bretton Wood institution, follows its commendation of fiscal consolidation measures stated in the 2021 budget.
In its May 2021 Article IV Consultation paper assessing Ghana’s economy, the IMF agreeing to the fact that fiscal consolidation measures by government during the pandemic is a difficult one, it is however “an important step in the right direction.”
The Fund therefore called for a further deepening of the fiscal consolidation measures aimed at creating enough fiscal space for government to service its debt and reduce its debt stock.
“The 2021 budget’s recent policy pivot towards fiscal consolidation is an important step in the right direction and a difficult one in a pandemic. Fiscal consolidation should be deepened and anchored around debt and debt service reduction to create space for social, health, and development spending,” stated the IMF.
Some of the fiscal consolidation measures outlined in the budget include the introduction of the 1% Covid-19 Health Recovery Levy and the Ghs 0.20 pesewas and Ghs 0.18 per litre of petrol/diesel and Kilogramme of Liquified Petroleum Gas (LPG) under the Energy Sector Recovery Levy respectively.
As well as the imposition of the Ghs 0.10 pesewas Sanitation and Pollution Levy also under the Energy Sector Recovery Levy and also the 5 percent Financial Sector Levy on the gross profit of banks.
Monies raised from these taxes are to help government close the large fiscal gap created by the huge difference in expenditure and revenue for the year.
A call for a further deepening of fiscal consolidation measures will mean increment in existing taxes or introduction of new ones coupled with a reduction in government spending or expenditure.
On the implementation of its fiscal consolidation measures for this year and in the medium term, the IMF advised government to rely more on progressive revenue and spending measures in undertaking its fiscal consolidation plans.
“Given the social and equity implications, fiscal consolidation should rely more on progressive revenue and spending measures, while guaranteeing fiscal support to the most vulnerable and social safety nets,” averred the IMF.
