IEA proposes GHS 45bn in annual savings to mitigate DDEP impact
The Institute of Economic Affairs (IEA) in Ghana has outlined a series of measures that could save the government over GH¢45bn annually and mitigate the impact of the Domestic Debt Exchange Programme (DDEP) on the economy.
The proposals, which are anchored on fiscal measures such as expenditure cuts and ambitious revenue mobilisation, include a 10% reduction in expenditure across the medium-term budget, targeted spending in specific areas, significant reductions in public sector compensation, renegotiation of Power Purchase Agreements (PPAs) with Independent Power Producers, reduction of infrastructure spending, and scaling back expenditure in other areas such as goods and services, energy sector debt transfers, and flagship programmes.
In addition to curtailing expenditure, the IEA has also recommended enhancing revenue through a sweeping hike in the base tax rates for corporate entities, particularly those operating in the extractive, telecommunications and financial sectors, which it estimates could raise an additional GH¢15bn annually. Other measures include the introduction of an e-commerce levy, enforcing laws on property taxes and tax exemptions.
Dr. John Kwakye, Executive Director of the IEA, stated that the DDEP cost should be spread across the economy as widely as possible in the spirit of burden-sharing. He acknowledged that public sector compensation is a sensitive subject, but emphasised that there is considerable room to reduce this item and that a complete review of the system for public sector salaries, allowances, retirement benefits, etc is needed to foster fiscal and debt sustainability.
The IEA’s proposals will be discussed by a technical committee set up by the Ministry of Finance, together with representatives from the Individual Bondholders Forum (IBF), to explore viable alternatives to the DDEP’s existing terms. The committee is tasked with seeking fiscal space in the 2023 budget to allow for exempting the most vulnerable classes of investors.
