Mid-Year Budget Review: Collaborate for quick economic rebound - Ofori-Atta to private sector

The Minister of Finance, Ken Ofori-Atta, has assured the business community that the economy is bouncing back and called for its collaboration to make that happen within the shortest possible time. 

He stated that the country was gradually coming out of its economic challenges which resulted from the COVID-19 pandemic and was finding its way back on track, a feat that would have a positive impact on the private sector.

The Finance Minister was speaking at a meeting with the business community in Accra yesterday ahead of the Mid-Year Budget Review to solicit their inputs to revise this year’s budget.

The stakeholders who included members of the Ghana Union of Traders Association (GUTA), the Ghana National Chamber of Commerce and Industry (GNCCI), representatives from academia and civil society organisations, raised issues about the high cost of doing businesses, the unsustainable debt of the country and called for the scrapping of the COVID-19 levy and the widening of the tax net to relieve businesses of the excessive tax incidences.

IMF bailout

Mr Ofori-Atta said Ghanaians were blessed to have the International Monetary Fund (IMF) support within 10 months when other countries such as Zambia, Chad and Ethiopia were yet to receive such a support.

The Finance Minister said measures were in place and the Mid-Year Budget would firm them up to bring the economy back to the level it was before COVID-19 set in.

They explained that their businesses were suffering and not making them productive because of excessive taxes.

Mid-Year review

The Minister of Finance is expected to present a Mid-Year Budget Review to Parliament to reset its economic targets and programmes in line with the IMF programme which supports the government’s Post-COVID Programme for Economic Growth (PC-PEG).

It will provide updates on the implementation of the 2023 Budget up to half year and re-emphasise the government’s commitment to structural reforms as part of the PC-PEG medium-term programme which seeks to resolve structural weaknesses and build resilience in key areas such as tax policy and tax administration; expenditure control and arrears clearance, as well as debt management.

The minister will also capture the launch of the exchange for COCOBILLS and domestically issued US Dollar Bonds with the aim to exchange about $809 million dollar-denominated domestic bonds and notes; and about ¢7.93 billion of securities held through the Ghana COCOBOD.

“I am also assuring all the investors and the entire markets and all those who tendered their bonds that the first coupon for the new bonds is due in August 2023 and we have made adequate financial preparation for this payment without any delay as part of the sticks and carrots that cover the DDEP,” the Finance Minister said recently.

Context

Although a requirement under Section 28 of the Public Financial Management Act (PFMA), 2016 (Act 921), this year's budget review attracts special interest, especially with the objectives of the IMF programme and recent relative improvements in the economy.

It presents the government with a window of opportunity to announce measures being adopted to secure the rest of the ECF, how it intends to minimise the current economic difficulties in the short term and revert the economy back to stability in the medium to long term.

Mr Ofori-Atta is also expected to use the Mid-Year Review Budget Review to provide information on how revenue and expenditure had performed in the first half of the year, Ghana’s current budget deficit and projections for the next six months.

The mid-year budget comes after the government received the initial instalment of $600 million from the $3 billion IMF Extended Credit Facility (ECF).

The review is also expected to capture the $ 900 million Development Policy Operations the government is working on with the Word Bank as well as a $100 million Budget Support Programme from the African Development Bank, all in a bit to enforce stability and spur growth.

Right after the Mid-Year Budget Review, the government is expected to engage the IMF in September for the first review of the ECF programme.

The engagement is necessary to unlock the disbursement of the second tranche of $600 million in November this year.

The IMF Technical Mission has already completed a mission to Ghana from June 8 to 15, this year on the country’s preparedness for the September Mission.

Engagement

During the engagement with the private sector yesterday, Mr Ofori-Atta said with events that occurred during the COVID-19 period “we all cannot pretend they were unprecedented” and a major factor to the challenges the country faced but said things would get better in the coming months due to the measures put in place.

Ghanaians, he said, must not continue to focus on the negative effects that had been experienced in the past but rather consider the efforts government put in place to get the country still moving during the COVID period and its aftermath economic difficulties, especially maintaining certain key programmes such as the Free Senior High School programme, gains in the agriculture sector, among others.

The Finance Minister stated that bringing back a turnaround in the economy took time and could not be achieved by one person but needed the efforts of all stakeholders to play their part, noting that he would continue to engage the business community to enable it to come into agreement on what would be best for the economy.

Mr Ofori-Atta said the concerns raised by the private sector would be factored into the main budget in November this year but appealed to them to continue working with the ministry because “if we should agree to work together, things will improve”.

He also spoke against businesses which were not paying taxes but were enjoying the benefits of tax and said his ministry was about launching a programme that would ensure a proper framework for taxing to improve on the government revenue.

Policy rate

The Monetary Policy Committee (MPC) of the Bank of Ghana yesterday increased its monetary policy rate from 29.5 per cent to 30 per cent.

The Governor of the BoG, Dr Ernest Addison, said the increase was due to elevated risks to inflation driven by a rise in food prices.

The President of GUTA, Dr Joseph Obeng, said: “The inflation that we are suffering is a result of cost accumulation and nothing else.

So, if we want to bring inflation down we should do everything possible to bring the cost of doing business down, especially the monetary policy rate that still remains the way it is.

When we increase the monetary policy rate it compounds the cost of doing business and this is not acceptable for doing business”.

Although the ministry could not factor their input in the mid-year budget, he said the outcome of the meeting suggested that the minister was ready to listen to their concerns and engage them more before the next budget in November.

A senior research fellow and development economist at the University of Ghana, Dr George Domfeh, on the country’s debt said from January to June this year the country had been registering a positive primary balance (that is raking in enough revenue to cover present expenditure) and, therefore, urged the ministry to focus on what it was doing to continue to record such positive records.

“Today if you look at the Ghanaian economy, we are not doing bad at all, during the first quarter we grew 4.2 per cent so in terms of growth, we are doing very well and indeed the most important indicator to monitor the performance of an economy is the growth rate, so if you are growing at the rate of 4.2 per cent, you would not say you are doing badly,” Dr Domfeh said.