Ghana Finance Minister lays out plans for the economic crisis
The Ghanaian government spent last weekend discussing Ghana’s current economic crisis, defined by its recent ratings downgrades, currency depreciation and high inflation rates. And yesterday, Finance Minister Ken Ofori-Atta delivered a statement detailing the governments planned response. It is significant for at least two reasons: (a) the expenditure/revenue commitments themselves, and (b) recognition of the extent of the problem.
The latter includes acknowledgment of today’s public debt position, difficulties passing signature policies through parliament, and comparatively inhospitable international environment. See: Ghana's credit rating moment. This is not withstanding the predictable back slapping about past government successes necessary to the ruling party because it might inspire confidence and because electioneering does not stop in Ghana’s two-party system.
A third and fourth significance – are that no clear mention is made of an IMF programme or privatisation. Rather, this is another ‘homegrown’ strategy. Major elements are detailed below:
1 Revenue measures
Parliament is still a central vehicle in the government’s plans. See for example, lingering hopes to pass legislation introducing a tax on digital transactions (the e-levy) and a review of tax exemptions. However, unless and until compromise is reached with either the opposition National Democratic Congress (NDC) or the ruling party holdout, Sarah Adwoa Safo[1], government’s powers here are limited, as we have seen.
Consequently, much of the revenue raising energy in the Finance Minister’s plan goes to administrative measures regarding:
Property rates
Customs administration at the ports
Small scale mining exports
Quarrying, sand winning and salt winning
In addition to this, the government hopes to (a) conclude an up to USD2 billion external financing arrangement by the first week of May and to review policy on foreign exchange retention.
2 Expenditure measures
Discretionary spending is to be cut by 10%. This is in addition to the 20% expenditure reduction committed to in January 2022.
For political appointees, and this is important for symbolism and messaging – 30% cuts in salaries for ministers and heads of state-owned-enterprises[2], 50% cuts in fuel coupon allocations for political appointees, 50% reduction in vehicle purchases by the public sector, 50% reduction of spending on meetings and conferences, and a moratorium on all foreign travel unless critical and/or pre-approved, as well as the creation of any new public sector institutions. Meanwhile, emphasis is to be given to completion of existing public projects rather than beginning any new developments.
More slow moving, but within the government’s gift, a plan to remove ‘ghost workers’ from the government payroll by the end of December 2022[3]. Again, slow moving but now further from the control of the authorities, are plans to conclude the renegotiation of aspects of energy sector IPPs by end Q3 2022.
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[1] New Patriotic Party MP for Dome Kwabenya and Minister for Gender.
[2] Framed as a donation to the budget’s Consolidated Fund
[3] NB, this is a thing that has been promised by all fourth republic administrations.
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