The University of Professional Studies, Accra (UPSA), aftermath the organisation of its Economic Dialogue Series participated by a number of economic analysts has outlined a number of challenges to bedevil the implementation of the 2021 Budget Statement.
The challenges identified by the University and re-echoed by economic analysts which constituted the panel for the dialogue are in the area of revenue, expenditure and public debt.
In the area of domestic revenue mobilisation, the institution of higher learning asserts the introduction of a COVID-19 Health Levy of one percentage point increase in the National Health Insurance Levy and one percentage point increase in the VAT Flat Rate is going to create challenges and impact negatively on businesses in the country.
The seriousness of the impact, the University opines, will be due to the fact that both the NHIL and VAT Flat rate are not recoverable by the taxpayer as a deduction from its output VAT as was the case under the VAT credit system, hence the tendency of businesses to pass the tax increment on to consumers by way of an increase in price is high.
This, the University notes may end up impoverishing many, adding it also has the tendency to promote tax evasion among businesses.
With regards to the Sanitation and Pollution Levy (SPL) of 10 pesewas on the price per litre of petrol/diesel under the Energy Sector Levies Act and the Energy Sector Recovery Levy (ESRL) of 20 pesewas – the impact of the SPL and ESRL is a proposed 5.7 percent increase in pump prices – the University argues that challenge in the implementation of these levies will be whether the government can hold on to it without succumbing to pressures from the impact these taxes will have on consumers as well as on the prices of goods and services.
Touching on the 5 percent Financial Sector Levy on gross profits of banks to help defray outstanding commitments in the sector, the University further argued, will be pushed onto customers of the banks in terms of increase in the percentages charge on loans and other bank services noting this is going to affect businesses, individuals and may even reduce the profit margin of the banks with the accompanying ramifications of laying off workers.
In the area of public expenditure, UPSA in its analysis of the 2021 budget, highlights the country’s shortcomings in the management of Covid-19 related expenditure as a key expenditure issue in the budget.
UPSA is of the view that, considering the uncertainty surrounding the Covid-19 pandemic, huge fiscal resources are needed to effectively and fully deal with the pandemic which might however, further increase the country’s public debt.
To the University, government faces a huge challenge in the accumulation of new debt, since the primary balance for last year alone was revised from a surplus of 0.8 percent to a deficit of 4.6 percent of GDP.
Already, national debt as of December 2020 stood at GHȼ291,614.5 million (US$50,829.6 million), representing 76.1 percent of GDP or 71.5 percent when financial sector bailouts are excluded.
With rising debts, the University intimates that there is a high possibility that, Ghana could be in danger of external debt pressure, weakening its debt sustainability status.
Further urging the government to strengthen strategies to reduce interest payments through proactive debt management measures.
UPSA’s analysis of the 2021 budget statement presented to the Parliament of Ghana themed Economic Revitalisation through Completion, Consolidation and Continuity, is in line with the objectives of the UPSA Economic Dialogue – a platform to contribute meaningfully to Ghana’s economic policy and discourse – to explain the positives, negatives, and the overall impact of the budget on the citizenry.
The dialogue series focused on sharing effective alternatives that government can consider to achieve its targets pertaining to revenue, expenditure and debt as outlined in the 2021 budget.
The participants in the dialogue included top personalities from academia, government representatives, captains of industry, and the public.
