Ghana is broke and over-borrowed – Joe Jackson
Given the low tax revenue mobilisation, the widening budget deficit and rising public debt stock driven primarily by government’s ever-rising expenditure, Director of Operations at Dalex Finance, Joe Jackson, has described Ghana as broke and over-borrowed.
According to Mr Jackson, government is at the stage where it can no longer finance expenditure without having to borrow.
Adding the economy is likely to collapse should government decide to not borrow.
“We are broke and over-borrowed, from January to September 2021, total revenues was Ghs 37.5 billion while expenditure was Ghs 70.32 billion, that’s huge.
“We raise too little tax revenues and we are consistently doing below the African average, our tax revenues have dropped from 13.1% to below 12%. Togo and Burkina Faso are even doing better than us in terms of tax revenues.
“We have borrowed so badly that it doesn’t make sense anymore and the public debt continues to grow and about our debt service, it’s a time bomb. Going on this trajectory it will get to a time we can’t service our debt,” he stated making his submissions on the 2022 budget during Frist National Bank’s virtual Economic Briefing and Post Budget Discussion on the 2022 Budget Statement.
Speaking further during the virtual event, Mr Joe Jackson noted the 2022 budget is simply about government increasing tax revenues and doing so quickly so as to prevent the economy from collapsing.
He cited the introduction of the electronic transaction levy, the 15% increment in government services, reintroduction of the 3% Flat Levy and government’s new resolve to pass the tax exemptions bill in 2022 to check revenue leakages as the immediate steps taken by government to increase revenues.
Read This: Cedi projected to depreciate by 13.3%; end 2022 at Ghs 8 to the dollar
Touching on the Cedi and interest rates in the country, Mr Jackson noted the cedi is going to be under pressure causing it to further depreciate with the BoG increasing the policy rate to 16%.
“Cedi depreciation is going to up because it’s going to be under pressure, interest rates are also going to go up with the MPC increasing the policy rate to 16% and I don’t like to say this but we may have to end up with the IMF again,” he remarked.
Total revenue, expenditure pegged at Ghs 100.5 bn and Ghs 137.5 bn
Government in the 2022 Budget Statement announced plans to raise total revenue [comprising grants] in excess of Ghs 100.5 billion for the 2022 fiscal year.
The projected revenue representing 20% of GDP, marks an increment from the projected outturn of GH¢70.3 billion, equivalent to 16.0 percent of GDP for 2021.
Domestic Revenue is estimated at GH¢99.5 billion and represents an annual growth of 44.0 percent over the projected outturn for 2021.
With regards to projected expenditure for the 2022 fiscal year, the Minister noted, total expenditure (including payments for the clearance of arrears) is projected at GH¢137.5 billion, equivalent to 27.4 percent of GDP.
The expenditure estimate for the 2022 fiscal year represents a growth of 23.2 percent above the projected outturn of GH¢111.6 billion, equivalent to 25.3 percent of GDP for 2021.
key drivers of expenditure growth, the Minister disclosed include capital expenditure, funding of key government flagship programmes, wage bill, and interest payments.
Commenting on the projected fiscal deficit on a cash basis for the 2022 fiscal year, Mr Ofori-Atta noted overall budget deficit will be GH¢37.0 billion, equivalent to 7.4 percent of GDP.
The projected deficit includes the financial sector and energy sector Independent Power Producers payments and represents a nominal year-on-year reduction of about 30.7 percent over the projected outturn of 12.1 percent of GDP in 2021.
