Government, for the first quarter of this year, spent approximately Ghs 15.6 billion as interest payments on debts taken and compensation or wages of public sector workers.
According to data contained in the Bank of Ghana’s (BoG) recently released Quarterly Statistical Bulletin, some Ghs 8.2 billion was spent on interest payments with the remaining Ghs 7.3 billion spent on compensation of public sector employees.
The Ghs 15.6 billion spent on interest payments and compensation as noted by the Central Bank, exceeded total revenue generated within the first quarter of this year by some 24.4 percentage points.
Total revenue generated within the economy for Q1 2021 was Ghs 12.5 billion – implying that government borrowed in excess of Ghs 3 billion to cover the two basic obligatory expenditures.
Recorded tax revenues generated in the first quarter of 2021 amounted to only Ghs 10.4 billion.
Aside the Ghs 15.6 billion spent on interest payments and compensation, other government expenditures for the period under review amounted to Ghs 23.4 billion.
This resulted in government having to borrow in excess of Ghs 11 billion from the domestic debt market through the issuance of 91, 182 and 364 days treasury bills to finance the expenditures.
Read: Government to borrow Ghs 21.9 billion in 3 months – Finance Ministry
The issue of high-interest payments on debt has recently gained public attention given the rising public debt. The total public debt has hit Ghs 304.6 billion as of March 2021, rising by Ghs 67.9 billion same period in 2020.
Government, on several occasions, has been urged by economists to expand the tax base of the economy in order to increase domestic revenue to cater for government expenditure, rather than resorting to expensive borrowing.
One individual who has consistently advised government on broadening the tax base as well as against excessive and expensive borrowing has been the former Minister for Finance, Seth Terkper.
According to him, the tax base should not only be targeted at the informal sector or taxing the old economy – sectors that have always been the main pillars of the economy – but also should focus on new and thriving sectors which are not adequately captured in the tax system.
“Taking from the angle of GDP, when you rebase, it means that you are changing the indices and giving more weight to sectors that were not in their prime when GDP was being measured. So the tax authorities should also realise that the structure of the economy is changing. For example, the timber industry was formerly huge, but it is no longer the case. The services sector is the one dominating. So, expansion of the tax base should not be in the traditional sense of going after street people only. It should be in the sense of looking at the new economy and covering it as well,” Mr Terkper is on record to have stated.
