The Member of Parliament for Ejisu and Deputy Minister of Finance, John Kumah had admitted that although the country is facing economic challenges currently, it is but for a short term.
He expressed confidence that the country will overcome the current economic challenges due to the collective efforts on the part of both government and the citizenry.
According to him, Government has been working hard to deal with the current economic challenges and very soon, “we will all start reaping the benefits of our collective efforts.”
Hon. John Kumah stated some promising measures that government is implementing to ensure that Ghana is able to emerge stronger at the end of the current challenges.
He talked on the Fiscal Consolidation, Expenditure measures, and Debt Treatment Programme which he said are key pointers in the economic restructuring agenda by the government.
He averred that Government under the NPP administration has fully assessed the current economic challenges facing the country and put in place a comprehensive programme: Post-COVID-19 Programme for Economic Growth (PC-PEG), among others to Establish a sustainable macro-fiscal path; and Restore debt sustainability and macroeconomic stability underpinned by key structural reforms and social protection.
Below is the full statement released by Hon. John Kumah
Current Economic Challenges is but for a short term, we shall overcome
Government has been working hard to deal with the current economic challenges we face and very soon we will all start reaping the benefits of our collective efforts.
So far:
1. Government has fully assessed the current economic challenges facing the country and put in place a comprehensive programme: Post-COVID-19 Programme for Economic Growth (PC-PEG), among others to:
▪ Establish a sustainable macro-fiscal path; and
▪ Restore debt sustainability and macroeconomic stability underpinned by key structural reforms and social protection.
2. The impending Fund Programme will significantly support the PC-PEG and will:
▪ Bring creditability and confidence to Government’s fiscal policymaking;
▪ Provide funding assurance by Bilateral and Multilateral Partners to Government; and
▪ Support the structural reform agenda.
3. The PC-PEG is tackling the economic challenges through:
▪ Fiscal Consolidation;
▪ Debt Treatment Programme; and
▪ Structural reforms
Fiscal Consolidation
4. Recall that in 2022, government introduced a raft of fiscal and monetary measures to rein in expenditures and improve revenue mobilisation, including a cut in discretionary spending, a cut in the salaries of the executives, freeze on foreign travels, among others.
5. The 2023 budget indicates government’s desire to continue with the fiscal consolidation efforts and reduce the fiscal deficit in line with the pending IMF Programme. Government expects to record one of the lowest deficits this year, much lower than the GH¢64.0 billion announced in the 2023 budget.
Expenditure measures
6. Key expenditure measures being undertaken by government include:
▪ Reduction in the threshold on earmarked funds from the current 25% of Tax Revenue to 17.5% of Tax Revenues;
▪ Migrate all earmarked funds onto the GIFMIS platforms and ensure they use the GIFMIS platform to process all their revenue and expenditure transactions;
▪ Continue with 30% cut in the salaries of the President, Vice President, Ministers, Deputy Ministers, MMDCEs, and political office holders, including those in State-Owned Enterprises;
▪ Review of government flagship programmes;
▪ Place a cap on salary adjustment of SOEs to be lower than negotiated base pay increase on Single Spine Salary Structure for each year;
▪ Negotiate public sector wage adjustments within the context of burden-sharing, productivity, and ability to pay;
▪ Manage public sector hiring within budgetary constraints.
▪ Reduction in fuel allocations to Political Appointees and heads of MDAs, MMDAs and SOEs by 50%.
▪ A ban on the use of V8s or its equivalent, except for cross-country travel. All government vehicles would have to use GV number plates from January 2023;
▪ Only essential official foreign travel across government, including SOEs, shall be allowed.
▪ As far as possible, meetings and workshops should be held within the official environment or government facilities;
▪ Reduction in the size of all convoys;
▪ A freeze on tax waivers for foreign companies while tax exemptions for companies in the free zone will be reviewed, including mining, oil and gas companies.
▪ A freeze on recruitment into the civil and public service, except in very critical cases;
▪ Moratorium on the creation of new government agencies in 2023;
▪ All non-critical projects that can wait for a year be suspended.
Revenue Measures
7. Key Revenue measures being undertaken are:
▪ Leveraging technology to enhance tax administration, identify and register taxable persons and improve tax compliance;
▪ Value Added Tax (VAT) rate revised by two and a half percentage points from 12.5% to 15%;
▪ benchmark discount fully phased out;
▪ Electronic Transfer Levy reviewed;
▪ Sale of 5G Electromagnetic Spectrum in consideration;
▪ Enhance Rent Tax Compliance;
▪ Pursue Additional Oil Entitlement (AEO) in relation to the Jubilee Field; and
▪ Revised Income Tax to exclude unrealised exchange losses from deductions and ensure that realised exchange losses on capital assets are capitalised.
Debt Treatment Programme
8. Government is also undertaking a comprehensive debt treatment programme (domestic and external) to address debt sustainability concerns, reduce fiscal deficit and create fiscal space for the budget.
9. Domestic Debt Exchange: this is part of a comprehensive agenda to restore debt sustainability and support fiscal stability efforts in line with the PC-PEG.
▪ It remains vital to unlocking the much-needed IMF-supported Programme.
10. This programme aims to alleviate the debt burden in a most transparent, efficient, and expedited manner while minimising its impact on investors holding government bonds.
11. The DDEP has been crafted to address the specific concerns of the different categories of holders, including;
▪ Category A- Collective Investment Schemes and Natural Persons below the age of 59,
▪ Category B- Natural persons 59 years old or older and finally
▪ General Category Holders- representing all other holders except Category A and B.
12. DDE is a Voluntary exchange backed by an Exchange Memorandum. It covers locally issued bonds and notes of Government, ESLA Plc and Daakye Plc bonds.
13. Under the exchange, holders are requested to exchange their existing bonds for new ones with new terms per the various categories.
14. The exchange will have a significant positive impact on domestic interest payments and also budget deficit projections.
Structural Reforms
15. Among the structural reforms being undertaken are:
▪ Full implementation of Section 88 (2) (b) of the PFM by all Covered Entities to improve accountability and transparency;
▪ implement and monitor measures for the effective management of public resources;
• closing the revenue mobilisation gap, accurately assessing tax liability, and improve tax audit functions;
• Strengthening Internal Audit function in MDAs;
• Restructuring of the Internal Audit Agency; and
• Expenditure commitment & Procurement control;
▪ Increase Domestic revenue from 13% to 18% in the medium term comparable to Ghana’s peers; and
▪ Alignment of Ghana’s National Digitalization Programme.
Other factors (Gold Reserves, IMF Support, Gold For Oil programme):
16. These new initiatives by Government and the IMF programme will reduce the pressure on our reserves and improve Ghana’s balance of payment, leading to a reduction in budget deficit.
17. Government has demonstrated its commitment to fiscal consolidation and structural reforms through the raft of measures being implemented.
18. Support for the DDEP will further strengthen the good efforts to restore debt sustainability and ensure macro stability. Ultimately, implementing these measures would lead to a reduction in fiscal deficit.
Together we will win