Govt Develops ‘Home-Grown’ Policy To Fix Economy

Ghana has released what it terms a draft “home-grown” policy document to stabilise the economy, correct the imbalances that have occurred in recent years and lay the foundation for transforming the structure of the economy. The full implementation of the 25-page draft document is expected to turn the economic fortunes of the country around by simultaneously reducing public sector expenditure and improving revenue generation. The measures are expected to make interventions in key and strategic areas of the economy, such as expanding oil production, making more investments in agriculture and modernising public sector pay processing to reduce ‘ghost’ names. Aspects of the policy document, “Ghana- Economic and Financial Policies for the Medium Term (2014-2017)”, is premised on the 2013-2014 budget presented to Parliament by the government, the Public Financial Management, and Phases One and Two of the Ghana Shared Growth and Development Agenda documents currently being implemented. Revenue generation measures Six key policies are being pursued by the government to enhance revenue generation and consequently grow the national purse. They include the 2.5 per cent increase on the Value Added Tax (VAT) to bring the rate to 17.5 per cent and the broadening of the VAT base to cover fee-based financial services and real estates. The acting Director of the Economic Research and Forecasting Division (ERIDA) of the Ministry of Finance (MoF), Dr Alhassan Iddrisu, told the Daily Graphic that currently a change had also been effected on the petroleum excise tax from specific to ad valorem. That, he explained, was in line with other excise regimes. As part of the measures, there had also been an increase in corporate income tax rate of free zones companies selling on the local market from eight to 25 per cent. Similarly, there has also been an increase in withholding tax on management and technical services fees from eight per cent to 15 per cent. The document also identified the judicious use of proceeds from the communications service tax as one of the key measures of improving revenue. Dr Iddrisu explained that the tax measures were not just to raise revenue or address the prevailing challenges but also broaden the tax base, remove inefficiencies and create a fairer environment for all taxpayers. Expenditure control measures Currently the MoF has introduced the payroll audits and Electronic System Payment Voucher (E-SPV) to reduce the incidence of ‘ghost’ workers on the government’s payroll. According to the document, a policy which froze employment in some sectors of the public service would be continued while the ministry would also continue, with the moratorium on the award of new contracts and new loans with emphasis on pipeline items. There is also a continuation of the policy of bringing utility and petroleum subsidies within budget estimates and making them more targeted towards the country’s social intervention goals, and the development of a multi-year framework in the immediate term as part of wage sustainability measures emerging from the growing consensus between the government and labour. The government is also deploying three key public financial management reforms as part of the measures to control its expenditure. These are shift of all government transactions to a new Chart of Accounts expected to enhance financial transparency in the public sector, a shift of budget and financial accounting from cash to semi-accrual basis to help government better track its financial commitments and finally the deployment of all transactions onto the Ghana Integrated Financial Management Information System (GIFMIS) platform.