Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, Professor Peter Quartey, has expressed worry over the recent scuffle in Parliament regarding introduction of the Electronic Levy (E-levy); saying it sends a bad signal about the investment climate in the country.
In an interview with the B&FT, Prof. Quartey said the recent sharp depreciation of the cedi is a warning signal that investors have started reacting to happenings in Parliament, where lawmakers have engaged in back-and-forth debate over approving some initiatives in the budget – especially the E-levy, which has been suspended till further notice.
According to the economics professor, the situation is creating some uncertainty in the minds of foreign investors which must be addressed, or it will hurt the economy.
“Investors do not like noise. Any little noise you make, the investor will pull out because they do not want to lose so much capital, so much money. The point I am making is that, given what we have heard and seen, investors are going to react. And that is not good for us, so we must try and correct it quickly.
“We have seen recently the speedy rate of depreciation. It is not just capital flight. Investors are withdrawing from the bond market, and I think we ought to be very careful. Nobody likes uncertainty. Any uncertainty can affect government business, so we have to be careful,” he said.
Daily interbank FX rates data published by the Bank of Ghana show the cedi is currently trading at GH¢5.7602 (mid-rate) to US$1 – indicating the local currency has depreciated by 3.2 percent as of December 21 from the 2.6 percent depreciation it recorded at the end of November.
The status of E-Levy
The E-levy, as presented by Finance Minister Ken Ofori-Atta, will cover mobile money payments, bank transfers, merchant payments and inward remittances at an applicable rate of 1.75 percent that will be borne by the sender – except inward remittances, which will be borne by the recipient.
The minority in Parliament has held the position that the E-levy will take the country backward by affecting small businesses and individuals, especially the poor. This led to some controversies in the House, leading to rejection of the budget on Friday, November 26, 2021 after the majority in Parliament walked out.
But on Tuesday, November 30, the decision was revoked by the majority in Parliament after the minority also walked out. After weeks of hot and spirited debate and disagreement in Parliament between the ruling party and opposition on the E-levy, Parliament finally passed the budget without the controversial levy – thereby disrupting government’s revenue projections, as the new tax was supposed to add some GH¢7billion to the economy.
