Ofori-Atta promises fiscal discipline to restore macro-stability


Government has announced a revision of one of its flagship revenue measures, the electronic transfer levy (E-levy), downwards from 1.5percent to 1 percent, coupled with an increase in the Value Added Tax (VAT) from 12.5percent to 15percent rate.

This was disclosed by the Finance Minister, Ken Ofori-Atta, on Thursday when he presented the 2023 budget to Parliament.

According to him, government has received several proposals for review of the Electronic Transfer Levy and is working closely with all stakeholders to evaluate the impact of the Levy in order to decide on the next line of action which will include revision of the various exclusions. As a first step, however, the headline rate will be reduced to

one percent (1%) of the transaction value alongside the removal of the daily threshold.

He added that they identified the need to ramp-up the country’s domestic revenue mobilisation efforts to match the performance of its peers and finance development agenda. “Last year, we started with the E-Levy which has not yielded the resources as expected.”

He said “The headline rate from 1.5% will be reduced to one percent (1%) of the transaction value as well as the removal of the daily threshold,”

Among others, Mr. Ofori-Atta stated that the government intends to spend a total amount of GH¢205.4bn in 2023, including the clearance of its arrears.

This is despite government’s own revenue target of GH¢143. 9 billion – a situation which means government will have to borrow GH¢ 61.9 billion from external sources to make up the difference.

“Total Revenue and Grants is projected at GH¢143,956 million (18.0% of GDP) and is underpinned by permanent revenue measures – largely tax revenue measures – amounting to 1.35 percent of GDP as outlined in the revenue measures. Mr. Speaker, Total Expenditure (including clearance of Arrears) is projected at GH¢205,431 million (25.6% of GDP). This estimate shows a contraction of 0.3 percentage points of GDP in primary expenditures (commitment basis) compared to the projected outturn in 2022 and a demonstration of government’s resolve to consolidate its public finances”, the Minister said.

Further, on the increment in the VAT he explained that “unfortunately, with the current economic difficulties and the absence of dedicated source of funding for road construction, it is difficult to meet these demands. In that regard we are proposing the implementation of new revenue measures. The major one is an increase in the VAT rate by 2.5 percentage points.

The 2023 Budget, he announced will focus on government’s resolve to structurally

transform the economy, as it plans to aggressively mobilise domestic revenue; boost local productive capacity; promote a diversified and vibrant value-added export sector; streamline expenditures; protect the poor and vulnerable; expand digital and physical infrastructure; and implement structural and public sector reforms.

Debt sustainability

Mr. Ofori-Atta indicated that the sustainability of the debt has been continuously affected by the negative impact of exchange rate depreciation, particularly on external debt, as well as the crystallization of significant contingent liabilities in recent years.

The current debt sustainability analysis conducted reveals that Ghana is now considered to be in high

risk of debt distress, he noted.

Expenditure measures

As a first step toward expenditure rationalisation, government has approved the following directives which takes effect from January, 2023: All MDAs, MMDAs and SOEs are directed to reduce fuel allocations to Political Appointees and heads of MDAs, MMDAs and SOEs by 50%.

A ban on the use of V8s/V6s or its equivalent except for cross country travel.  Limited budgetary allocation for the purchase of vehicles. Only essential official foreign travel across government including SOEs shall be

allowed. No official foreign travel shall be allowed for board members.

Accordingly, all government institutions should submit a travel plan for the year

2023 by mid-December of all expected travels to the Chief of Staff;

Government sponsored external training and staff development activities at the Office of the President, Ministries and SOEs must be put on hold for the 2023 financial year; Reduction of expenditure on appointments including salary freezes together with suspension of certain allowances like housing, utilities and clothing. A freeze on new tax waivers for foreign companies and review of tax exemptions for free zone, mining, oil and gas companies; A hiring freeze for civil and public servants, No new government agencies shall be established in 2023; There shall be no hampers for 2022; There shall be no printing of diaries, notepads, calendars and other promotional

merchandise by MDAs, MMDAs and SOEs for 2024; All non-critical project must be suspended for 2023 Financial year.

The current GDP of the country is expected to reach US$72 billion dollars by the end of 2022.

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