Mid-year Budget Review: Minister unveils revenue strategy

The Minister of Finance has outlined measures to increase revenue and improve the efficiency of resource allocation to drive economic growth, without the introduction of new taxes. 

They include the provision of incentives to Covered Entities (state and quasi state institutions) that exceed their revenue target for the year to retain more, as well as the introduction of a simplified digital solution for both the modified taxation scheme and the electronic bookkeeping system.

The government also wants to bring on board 2,000 more taxpayers through the electronic invoicing system (e-VAT) by the close of the year. The Minister of Finance, Dr Mohammed Amin Adam, announced these when he presented the Mid-Year Fiscal Policy Review to parliament in Accra yesterday in fulfilment of Section 28 of the Public Financial Management Act, 2016 (Act 921).

He said the ministry would deepen engagements with the Ghana Revenue Authority (GRA) and relevant stakeholders to effectively implement policy, administrative and regulatory measures to ensure that the revenue targets were met.

The Finance Minister said the government would also re-institute the integrated property tax system by synthesising data from metropolitan, municipal and district assemblies (MMDAs), Lands Valuation, the Electricity Company of Ghana (ECG) and other relevant government agencies to create a comprehensive digital property record database that would transform property data management and ensure a more efficient and accurate property tax system.

“Mr Speaker, to enhance revenue mobilisation by internally generated fund (IGF)-reliant Covered Entities, discussions would be held around provisions of incentives to those institutions that exceed their revenue target for the year,” Dr Amin Adam said.

The review, which was scheduled to start at 10 a.m., finally got underway at around 3:04 p.m.

The presentation started after the House had debated some procedural issues concerning laying the review and other issues. Dr Amin Adam, adorned in a blue-black smock with white stripes and a cap to match, was well received in the House where he represents the people of Karaga as a sitting member.

Unlike previous mid-year budget review presentations, there was decorum in the House throughout the two hours he addressed the Members of Parliament (MPs). Soon after he finished his address, which was not greeted with boos or frequent disruptions, Dr Adam was seen enjoying a warm reception from both sides of the House.

Following that, the Majority MPs stood up and started singing "Aba mu awie" to wit "a prophecy or promise coming to pass". This mid-year budget review stood out as one of the finest moments in the House over the past eight years as cool heads prevailed.

The presentation attracted some dignitaries, including the Chief of Staff, Akosua Frema Osei-Opare; the Senior Presidential Advisor, Yaw Osafo-Maafo, and the Attorney-General and Minister of Justice, Godfred Yeboah Dame.

Disclosure of retained IGFs

Dr Amin Adam said in line with its commitment to ensuring full disclosure of retained IGFs by public institutions, the government had deployed the Ghana.Gov Platform, a payment platform, to over 1,500 public institutions.

It had also rolled out the Ghana Integrated Financial Management Information System (GIFMIS) to 287 IGF-reliant public institutions, he added.

The minister said as of the end of June, 140 public institutions, including the Ghana Revenue Authority (GRA), had gone live and received GH¢56.4 billion payments through the platform, an increase of 34.6 per cent compared to the same period last year.

Dr Amin Adam indicated that the ministry would continue the deployment of the Ghana.Gov Payment Platform to the remaining public institutions and ensure that all those already on board went live.

“Additionally, the outstanding activities for the full rollout and utilisation of GIFMIS for the processing of IGF expenditures will be completed by the end of the year,” the Finance Minister added.

Road toll back?

The road tolls, which were abolished in 2021 to illicit a buy-in for the Electronic Transfer Levy (e-Levy), are on the radar for reintroduction in 2025 as the Finance Minister said the government would develop a framework for the road and bridge tolls to facilitate the processes for the implementation of a modernised and efficient road and bridge tolling system, starting next year. 

Build back better

As part of measures to build back better, Dr Amin Adam also issued a number of expenditure measures as part of the fiscal consolidation process.

“We have undertaken a stocktaking exercise and the prioritisation of projects within the medium-term capital expenditure ceiling; initiated a Blanket Purchase Agreement to fully capture multi-year commitments or contracts in the GIFMIS; streamlined earmarked funds as part of the ongoing expenditure rationalisation measures, and issued a circular to all Covered Entities on the implementation of the sanctions regime in respect of the non-compliance with Public Financial Management (PFM) requirements,” Dr Amin Adam stated.

He said 856 procurement entities had also been enrolled on the Ghana Electronic Procurement System (GHANEPS), saying “we will also enforce the Cabinet approved expenditure measure to reduce purchase of imports by public institutions by 50 per cent and purchase locally produced substitutes”.

Recovery exceeds expectation

Dr Amin Adam said the economy was rebounding stronger than anticipated, with key indicators showing significant improvement. He said the growth rate for the first quarter of the year was 4.7 per cent, exceeding the government's expectations of the revised target of 3.1 per cent.

Dr Amin Adam said inflation had also declined, with the end-June rate of 22.8 per cent representing a 31 percentage points reduction since December 2022.

The exchange rate, he said, had largely stabilised, with an 18.6 per cent depreciation rate to the dollar as of June 2024, an improvement over the 22.0 per cent recorded for the same period last year.

“Gross International Reserves have also increased, reaching 3.1 months of import cover as of end-June 2024,” the Finance Minister said. 

Policies

Dr Amin Adam attributed the strong economic performance to the government's policies and programmes, including the successful conclusion of the second review of the Extended Credit Facility (ECF) with the International Monetary Fund (IMF), which led to the disbursement of $360 million.

He said the government had also completed its Debt Restructuring programme with the Official Creditor Committee (OCC), resulting in approximately $2.8 billion of debt relief.

Negotiations with Eurobond holders have also been concluded, leading to a cancellation of $4.7 billion of debt and providing debt service relief of $4.4 billion between 2023 and 2026.

Additionally, Dr Adam said the government had reined in expenditures, ensured revenue targets were met and cleared outstanding Bank Transfer Advice (BTAs) up to 2022.

The minister assured Parliament that the government would stay on the right path and continue to make the right choices to ensure Ghana's economic recovery remained strong and sustainable.

Revised targets

Based on the strong performance, the Minister of Finance announced the revision of the 2024 fiscal framework in ways that did not affect the initial target to achieve a surplus of 0.5 per cent of GDP on a commitment basis, in line with the IMF-supported Post COVID-19 Programme for Economic Growth (PC-PEG) objectives.

Total revenue and grants have been revised upward by 0.5 per cent to GH¢177.2 billion (17.4 per cent of GDP) in 2024, from the 2024 Budget target of GH¢176.4 billion (16.8 per cent of GDP), which, Dr Amin Adam said, largely reflected an increase in non-oil non-tax revenue.

That revenue position increased from GH¢14.8 billion (1.4 per cent of GDP) to GH¢15.6 billion (1.5 per cent of GDP) to reflect dividends from interest accrued in the Energy Sector Energy Act (ESLA) accounts.

Total expenditure based on commitment also had been revised downward by 2.1 per cent to GH¢219.7 billion (21.5 per cent of GDP) from the original budget projection of GH¢226.7 billion (21.6 per cent of GDP).

“This revision is largely on the back of interest payments which has been revised downwards by GH¢7.9 billion to reflect the impact of the external debt restructuring on external interest payment,” Dr Amin Adam stated.

The revisions would affect the overall balance on commitment deficit target of GH¢42.5 billion (4.2 per cent of GDP), from a deficit of GH¢50.3 billion (4.8 per cent of GDP), he said.

The deficit is expected to be financed from both foreign and domestic sources. While the net foreign financing would amount to GH¢15.2 billion (1.5 per cent of GDP), representing 28.1 per cent of the total financing for 2024, the domestic financing would amount to GH¢38.9 billion (3.8 per cent of revised GDP), representing 71.9 per cent of the total financing for the year, Dr Amin Adam told parliament.

The Finance Minister said the domestic financing was expected to be sourced from “the issuances of debt at the short end of the domestic market and inflows from Ghana Petroleum Funds”.