2019 Budget must address revenue shortfalls - IMF to government

The International Monetary Fund has advised the government to use the 2019 budget to address the persistent revenue shortfalls.

The fund is asking the government to start tackling decisively the issue of exemptions as part of measures to improve the country’s domestic revenues.

The Ghana Revenue Authority missed its revenue target for the first eight months of the year by 7.4 per cent as it recorded a revenue of GH¢22.66 billion against a target of GH¢24.46 billion.

Staff of the IMF, after its recent visit to Ghana, indicated that on the basis of achieving end-December fiscal targets, there was the need to strengthen both expenditure discipline and tax compliance beyond measures adopted in the mid-year budget review.

In a press release that was issued after the visit, the Head of the team, Annalisa Fedelino, said the programme performance had been affected by external and domestic factors.

She said available fiscal data through end-July pointed to much expenditure front-loading on goods and services and lower-than-programmed revenue, especially VAT and import duty.

“Continued progress on fiscal structural reforms—particularly on public financial management and oversight over state-owned enterprises—is instrumental to anchor expenditure control and lasting fiscal discipline,” she stated.

New financing arrangement

Ms Fedelino continued that access to new financing arrangements and longer-term debt instruments would help fund the country’s pressing development and infrastructure needs.

She said such arrangements should, however, be implemented transparently, deliver value for money and be consistent with debt sustainability considerations.

Growth prospects

Ms Fedelino said growth prospects remained strong, supported by robust oil and cocoa production.

She commended the government for stepping up efforts to address financial sector vulnerabilities, with the recent purchase and assumption of some banks.
“However, Ghana has been affected by the volatile environment for emerging and frontiers markets, which has exerted pressure on the currency, resulting in cedi depreciation,” she noted.

She said the recent bank resolutions, however, underscored the government’s commitment to financial stability which would help improve medium-term prospects for economic growth.

“While costly for Ghanaian taxpayers, they are nonetheless necessary to address long-standing weaknesses and create a resilient financial system, improved access to credit and financial inclusion,” she said.

“The overall financial system is adequately capitalised, but weaknesses in some institutions—including high levels of non-performing loans—can adversely impact financial stability, hamper credit growth and investment, and create contingent liabilities for the government,” she added.

She, therefore, commended the Bank of Ghana (BoG) for introducing reform measures to address the remaining financial sector weaknesses with the view of improving the availability and affordability of credit to the private sector.

Monetary policy

Ms Fedelino also pointed out that the continued prudence on the monetary policy easing cycle was welcomed and inflation was expected to remain within the target bands until the end of the year.

She said the recent exchange rate pressures reinforced the call for fiscal discipline.

“Going forward, improved communication and coordination will help foster deeper and more liquid foreign exchange market, she indicated.