All eyes on 2023 budget today; experts call for confidence-boosting policies

The 2023 budget and economic policy must prioritise economic stability and recovery, with local solutions at the centre, says the Ghana National Chamber of Commerce and Industry GNCCI and the Association of Ghana Industries (AGI).
File photo: Finance Minister Ken Ofori-Atta going to present a budget in parliament

The 2023 Budget Statement and Economic Policy will prove to be the most important in the fourth Republic, as it will not only define the medium-term fortunes of the economy but have significant long-term developmental consequences.

It will focus on government’s strategies to restore and stabilize the macro economy, build resilience, and promote inclusive growth and value creation.

The budget will also  feature updates on Ghana’s engagement with the IMF for an IMF-supported Programme; year-to-date macro-fiscal performance of the economy; the YouStart initiative under the Ghana CARES Programme; climate action strategies; fiscal measures and debt management strategies to ensure fiscal and debt sustainability and promote growth.

Speaking with the B&FT on the eve of the Budget presentation, Dean of the University of Cape Coast (UCC) Business School, Professor John Gatsi, said government must strike a fine balance between fiscal consolidation, which foreign investors are keenly monitoring and stabilising the economy.

“It is expected that the Budget will look at a drastic cut in some flagship projects, with an eye on efficient expenditure,” he said.

This is the position of some experts across industry and academia, who believe significant measures must be introduced to restore confidence from investors and the general public, which is currently at its lowest in years

With inflation accelerating to 40.4 percent in October – a two-decade high and the cedi depreciating by almost 60 percent against the US dollar on a year-to-date basis, the conversation around raising domestic revenue has gathered steam.

Prof. Gatsi however believes that revenue and growth targets will not be dissimilar to those from the current fiscal year.

“We do not expect to see any drastic change in 2023. We anticipate around US$100billion in revenue and US$135billion in expenditure and some attempts will be made to expand the tax net,” he noted.

The Institute of Economic Affairs (IEA) in a pre-budget event described the budget as being presented “at a time when Ghana is at a crossroads, experiencing one of its worst economic crises”.

Its Director of Research, Dr. John Kwakye, noted that 2023 Budget is “a make or break one”; adding that failure to get it right would lead to “near-irreversible damage to the economy”.

“Most importantly, the budget must not be business as usual. It must break from the past and chart a new course to restore macroeconomic stability, while laying the foundation for long-term sustainable growth and poverty alleviation,” he explained.

“Ghana’s resource constraint, which has impeded its progress, is self-inflicted and not unsurmountable,” he added.

Dr. Kwakye cited the comparatively low tax to Gross Domestic Product (GDP) ratio of 12 to 13 percent and revenue to GDP, which is in the region of 16 percent, as unambitious for a nation with evident developmental needs.

“Previous budgets have been less ambitious in terms of revenue mobilisation. The 2023 budget must break from this unacceptable past. We believe that we should be able to increase tax revenue/GDP to at least 15 to 16 percent in 2023 and further to 18 to 20 percent in 2024. At the same time, total revenue to GDP could be increased to 18 to 20 percent in 2023 and 22 to 25 percent in 2024,” he elaborated.

With Producer Price Inflation (PPI) following the general deterioration and reaching 65.2 percent for October 2022, the highest in recorded history, and average lending rates jumping on the back of the Ghana Reference Rate hitting 30.56 percent in November, the Association of Ghana Industries (AGI) has bemoaned its impact on business.

The Association has warned that new taxes will cripple local businesses, saying technology should be applied for more efficient taxation as opposed to introducing new tax handles.

This comes as the E-levy, which was introduced in the last budget, has failed to live up to its expectation, raising only a pittance of the GH¢6.9billion target due to citizens’ disaffection with the tax.

Eyes are keenly fixed on the IMF engagements as an additional tool to restore investor confidence, even as the Ghana Stock Exchange’s Composite Index (GSE-CI) has fallen by 11.68 percent since beginning of the year.

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