- VAT rate up by 2.5%
- E-levy drops to 1%
- Deficit projected at 7.7% of GDP
Amid repeated criticism over its use of public funds, particularly with regard to its outlay on number of appointees as well as allegiance to its flagship programmes, government has promised enhanced fiscal discipline and accountability.
In his presentation of the 2023 Budget Statement and Economic Policy on the floor of parliament, Minister for Finance Ken Ofori-Atta said the state’s new posture is born out from acknowledgement of the fiscal adjustments that are required to revive and eventually transform the economy.
“My pledge to this House is that there will be fiscal discipline; that every pesewa we ask the Ghanaian people and businesses operating in Ghana to contribute will be spent well,” he stated, while repeating calls for “broad-based sacrifices”.
Mr. Ofori-Atta disclosed that government seeks to achieve its targets under the broad framework of the Post COVID-19 Programme for Economic Growth (PC-PEG) – which is anchored on domestic revenue mobilisation; the streamlining and rationalisation of expenditures; boosting local productive capacity; and promoting and diversifying exports.
Others are comprehensive protection of the poor and vulnerable; expansion of digital and climate-responsive physical infrastructure; and implementation of structural and public sector reforms.
As part of measures aimed at enhancing revenue generation, the finance minister stated that the Value Added Tax (VAT) rate will see a 2.5 percent upward adjustment from 12.5 percent to 15 percent.
Additionally, the E-levy, which was reviewed by the middle of the year to GH¢611million – 8 percent of its initial GH¢6.9billion – will see its headline rate go down from 1.5 percent to 1 percent with the daily threshold of GH¢100 also taken off, coupled with the introduction of an additional income tax bracket of 35 percent.
He also promised that implementation of the Unified Property Rate Platform will be expedited in the upcoming fiscal year.
This comes as Total Revenue and Grants for the period is projected at GH¢143.96billion – 18 of Gross Domestic Product (GDP); and a rise in total expenditure (including clearance of arrears) to GH¢205.43billion – 25.6 percent of GDP.
A breakdown of the projected expenditure items shows that compensation of employees is projected at GH¢45billion (5.6% of GDP); interest payment is projected at GH¢52.6billion (6.6 percent of GDP), with capital expenditure (capex) trailing at GH¢27.7billion (3.5% of GDP).
“Other expenditures, mainly comprising Energy Sector Levies (ESL) transfers and energy sector payment shortfalls, are estimated at GH¢26.7 billion,” the finance minister stated, even as the budget deficit for the period is pegged at 7. 7 percent of GDP (GH¢61.5billion).
While the minister did not explicitly indicate how much has been realised on the estimated GH¢3.5billion saving from the expenditure cuts introduced this year, he disclosed that government will continue with the 30 percent cut in salaries of political office holders.
Additional measures include a reduction in imports for public sector institutions by as much as 50 percent, with local substitutes to be preferred – even as the minister announced that 296 factories are at various stages of implementation under the One District-One Factory (1D1F) initiative.
“Out of these 126 are currently operational, 143 are under construction and 27 are pipeline projects,” he noted.
There will also be a cut in fuel allocations to political appointees and heads of MDAs, MMDAs and SOEs by 50 percent; a ban on the use of V8s/V6s or equivalents except for cross-country travel; with state-owned vehicles to be registered with green Government Vehicle (GV) number plates beginning January 2023.
Similarly, there will be a limit on budgetary allocations for the purchase of new vehicles, with purchases restricted to locally-assembled vehicles.
“There will be a freeze on new tax waivers for foreign companies and a review of tax exemptions for the free zone, mining, oil and gas companies,” the minister noted.
Other measures include a limit to travel, salary and hiring freezes, as well as a suspension of establishing new government agencies and acquiring promotional stationery.
Mr. Ofori-Atta added: “All non-critical projects must be suspended for the 2023 Financial Year”.