Experts doubt Ghana’s ability to reduce inflation amidst new tax measures
The recent passage of new tax measures by Ghana’s parliament has sparked concern from both the Dean of the University of Cape Coast (UCC) Business School and the Association of Ghana Industries (AGI), who both question the government’s ability to bring down inflation by over 2,000 basis points by the end of the year.
Professor John Gatsi of the UCC Business School has expressed doubts about the achievability of such a reduction in headline inflation, which he considers overly ambitious. He argues that the new revenue measures will make it even more difficult to achieve the government’s target. In his view, expenditure rationalisation remains the most prudent way to address the ongoing economic crisis. He believes that the focus should be on cutting down expenses in areas where expenditure can be rationalised. If this is not done, he warns, it could lead to the private sector being squeezed even further.
The AGI has expressed disappointment over the recent passage of the Excise Duty, Growth and Sustainability Levy, and Income Amendment bills by parliament. In a statement signed by its CEO, Seth Twum-Akwaboah, the Association said the approval of these bills will have dire consequences for the industry, which is already facing a harsh business climate. The CEO of AGI called for an immediate reversal of the 172 percent hike in water tariff for beverage producers and urged the government to engage stakeholders in future fiscal policy decisions.
The passage of these bills is viewed as a blow to the industry, which has been grappling with a range of challenges, including high inflation rates, increases in VAT, water and electricity tariffs, and levies on imported raw materials. The recent taxes, in particular, have raised concerns about their potential impact on businesses already struggling to absorb these costs.
The AGI CEO highlighted the various challenges that local industries are currently facing, including the high inflation rate, VAT increase, water tariff increment, electricity tariff increment, policy rate hike, and levies on imported raw materials. He noted that local industries are already struggling to absorb these costs, and the recent taxes will only compound their problems. He further emphasised that government’s ambitious revenue projections largely rely on the performance of industry. However, with the recent taxes, he foresees a contraction in manufacturing and other related business activities. This, he said, could lead to businesses cutting down on expenditure and production levels to stay within budget, which could ultimately impact the government’s revenue targets.
The AGI CEO urged the government to prioritise fiscal prudence and engage stakeholders in future fiscal policy decisions. He emphasised the need for the government to sustain agriculture and the industrial sector, which he believes hold the key to job creation in the country. The Association also called on the government to engage AGI on measures that incentivise local industries, so as to forestall the negative consequences of these policies.
The recent passage of new tax measures by Ghana’s parliament has raised concerns about the government’s ability to bring down inflation by over 2,000 basis points by the end of the year. The UCC Business School Dean and the AGI have both expressed doubts about the achievability of this target and the potential negative impact of the new revenue measures on businesses, particularly in the manufacturing sector. The AGI CEO called for an immediate reversal of the 172 percent hike in water tariff for beverage producers and urged the government to engage stakeholders in future fiscal policy decisions. He emphasised the need for the government to prioritise fiscal prudence and sustain agriculture and the industrial sector, which he believes hold the key to job creation in the country.
