Senior Lecturer at the Department of Economics here at the University of Ghana, Dr. Adu Owusu Sarkodie, has commended the government for the successful completion of the Domestic Debt Exchange Program (DDEP) and the impressive Gross Domestic Product (GDP) growth rate achieved.
While many countries typically reach a GDP growth rate of 1.5% during fiscal consolidation and domestic debt exchange programs, Ghana achieved a 3.1% growth rate.
Speaking on the “Behind the Headlines” show on discussions of the Mid-Year Budget Review on Radio Univers, Dr. Adu Owusu Sarkodie described this achievement as remarkable, noting that no other country has managed to attain such results.
“For a country to have a large fund-loaded fiscal consolidation program, for which 70% of the fiscal deficit has been achieved, and then for the country to go through domestic debt exchange and still record a higher performance in their DDEP. God really has blessed this country because if you speak to the officials of the Ministry of Finance, they say no country has gone beyond 1.5% GDP growth rate and that is why they projected 1.5%, because of the fear that you cannot go through fiscal consolidation and go through DBEP at the same time and have an expanding economy to that extent. (0:49) So I must say that God has blessed us to record 3.1% instead of 1.5%.
Dr. Adu Owusu Sarkodie also emphasized that Ghana is not in a position to remove taxes, as doing so would harm the economy.
“When we are doing a fiscal consolidation, in other words, you want to up your revenue and down your expenditure and narrow the gap between revenue and expenditure, this is not a time to ask for any scrapping of taxes unless the tax is an extreme nuisance. So the minister by now should be asking for more revenue, but he has also realized that if he asks for more taxes, it will be politically and economically suicidal, so what he has done is to make an upward adjustment to our revenue, even though he is not asking for extra taxes.”
He also pointed out the need for the government to address the issue of low tax revenue growth, with Ghana consistently recording a rate of 1.5%, which is below the 2.5% expected for a growing economy.
“According to experts in public sector economics or public finance, the ideal tax revenue growth rate should be about 2.5 times the GDP growth rate, so if your GDP is 5 and your tax revenue is not growing by 2.5 percent, that means you are below your potential. We have been doing 1.5 for years now. So as a country, this way we must be thinking of how do we grow our tax revenue to be 2.5 (1:43) times the GDP growth rate estimate for every year.”
Story by: Alexander Kuuku Osei-Baidoo | univers.ug.edu.gh
