The President’s Representative at the Finance Ministry, Charles Adu Boahen has justified the proposals for new taxes saying the move is to sustain the debts incurred by the government through the various COVID-19 interventions initiated by the Presidency.
He said the only way Ghana will not be caught in a debt trap following shortfalls in revenues is to introduce such taxes to ameliorate the situation.
With the onset of the pandemic, the government said it has recorded a revenue shortfall of GHS13.4 billion (3.5% of GDP). Expenditure on the other hand had seen an increase of GHS11.8 billion (3.1% of GDP) translating into a deficit increase of GHS25.3 billion (6.6% of GDP).
But at a Citi TV/UPSA post-budget dialogue, the former deputy Finance Minister said government’s borrowing to handle the health crisis must be settled to fill the deficit gap.
“Be as it may, the pandemic expenditure created a big hole. We look at the numbers and realized that our revenues were going to be down by over GHS13 million due to COVID-19. Your expenditure goes up by GHS11 billion. How are you going to pay for that? We figured it out and that resulted in a lot of borrowing and elevated debt levels. So really and truly, that is where the problem lies. We are not able to raise enough revenue to service our debts.”
Reacting to concerns that Ghana’s rising debt stock places a huge burden on the ordinary Ghanaian, Mr. Adu Boahen said the country is on the right track with its fiscal policies.
“Right now, our interest expense is almost 50% of our revenue. Unfortunately, we were on 62% debt to GDP ratio in 2019. If we are to go on the same trajectory for 2020 and got about 7% growth, we will have ended the year with 60% debt to GDP. So we are on the right trajectory. This shock puts us into a position where all of a sudden our debts have elevated and the interest we have to pay on the unexpected money we had to borrow because of COVID-19.”
Speaking at the same program, former Finance Minister, Seth Terkper said the current woes of Ghana’s economy cannot entirely be attributed to COVID-19 because the economy started seeing challenges before the outbreak of the pandemic.
He suggested that the government continues to give false assumptions that the current problems facing the country’s economy are due to the pandemic.
“There appears to be an effort [by the government] to blame everything on COVID-19, but there were problems before COVID-19,” he said.