Government plans to prevent second debt restructuring
The Institute of Economic Affairs (IEA), a public policy think-tank, has cautioned the government against another debt restructuring by deliberately raising more revenue and being fiscally responsible.
The policy think-tank said being prudent with expenditure would inspire investor confidence as the economy rebounds amid the implementation of the IMF US$3 billion Extended Credit Facility (ECF) programme.
The IEA said this in its bi-monthly Economic Outlook for November to December 2024, with the expectation that the 2025 Budget, would sustain macroeconomic stabilisation efforts in line with the IMF programme.
Ghana completed its domestic debt restructuring in February 2023, achieving about 85 per cent exchange and 98 per cent exchange on the country’s US$13 billion external debt restructuring with Eurobond holders in October 2024.
“The 2025 budget is expected to conform generally to the programme. Moving along this path is necessary to avoid another painful debt restructuring, while engendering investor confidence in the economy.”
The Institute noted that the government’s intention to abolish the e-levy, COVID-19 tax, emissions tax and betting tax, would ease the burden on the few tax-paying households and businesses.
“The resulting loss in revenue is expected to be offset by reinforced efforts to plug the numerous tax loopholes, broaden the tax net and strengthen tax administration, among other measures,” it stated.
It, however, indicated that “resuming the debt service will put pressure on the budget and the exchange rate,” and called for measures to compensate the effects of the external debt repayment.
The policy think-tank said the 2025 budget should recognise the lack of fiscal space to support economic development due to limited Government revenue and take steps to increase the tax intake.
“It will be important also to recognise the potential of the natural resource sector to provide resources for development. Tapping this potential will require changes to the natural resource fiscal regimes towards increasing Ghanaian ownership and benefits,” the Institute said.
It also called for local value-addition to the country’s natural resources by giving priority to the processing and manufacturing sectors to increase revenues from that sector.
Meanwhile, Dr Cassiel Ato Baah Forson, the Minister of Finance, has tasked the revenue mobilisation and expenditure agencies, to ensure a balance between increasing revenue and government spending.
He made this call during his first working visit to the Ghana Revenue Authority (GRA) and the Controller and Accountant-Generals Department (CAGD), last Thursday.
“As part of the IMF agreement, this year, we may have to do additional tax revenue of 0.6 per cent of GDP [Gross Domestic Product] … your work is to ensure that whatever we ask you to pay, you review it and if it meets your law,” he told the two agencies.
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