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Opinions of Tuesday, 30 November 1999

Columnist: Kwame Appiah-Yeboah

Government Revenue and Expenditure

The NDC government did quite well in expanding the tax base of the country. They taxed anything that moves, breathes or has life. However, P/NDC did a much better job in squandering national resources. They actually spent beyond the taxes, loans and subsidies that the nation generated. Government appendages like ACDR, 31st DWM, Commandos, hundreds of ministers of state and their deputies, office of the president and all those wasteful organs of state had access to the national kitty. GNPC led by Tsikata also did its best to help squander some of the state's revenue. NDC as a party was financed by the state to the detriment of national programs. Revenue from divestiture was not collected or if collected, came in piecemeal and did not help the nation. To add insult to injury, most of the state enterprises were undersold to cronies of the government.

Revenue generation in itself is not a bad thing and neither is government expenditure. The problem comes when expenditure is not matched with revenue. The nature of the expenditures also left much to be desired (A few examples are mentioned above). This is where I will fault the NDC government. In its' zeal to spend the government resorted to borrowing from the private sector. This serves to deprive the private sector of capital for investment and also tend to raise the interest rate in the economy. It is not surprising that interest rates in Ghana have hovered around 40% for the last four years. This tends to slow down economic activity and thus reduce tax revenue. Thus, government is forced to borrow and the cycle continues.

The P/NDC governments tried he age-old trick of printing money and/or money creation through the markets. This resulted in excess supply of cedis on the local market. This helped the cedi to depreciate against all foreign currencies (from the Naira, through the CFA Franc to the almighty dollar). This was not helped by Ghanaians appetite for foreign products. The private sector was thus faced with very high interest rates and very expensive dollars. In such a climate, the economy will remain stagnant or even record negative growth. No wonder the economic picture is so gloomy.

The incoming NPP government can take the following measures to reduces or control government expenditure.

Cut down on the number of ministers and their deputies. Merge some of the ministries if possible and allow the technocrats in the ministries much freedom. Ministers like Sports, Mobilization and Welfare among others can be eliminated outright. They can all be placed under the ministry of local government. The position of deputy regional ministers can be eliminated. The cost of official cars (about 70 million cedis each (2000 cedis)), pay diems, salaries and wages that will be saved can pay for 20 ambulances a year. Serious efforts should be made to make the cedi stable. This can be done by discouraging imports, increasing agricultural production, diversifying the export base of the nation and encouraging Ghanaians abroad to invest in the motherland. Tax treaties should be signed with developed countries so that a part of the taxes Ghanaians resident in those countries pay, are paid to Ghana (Imagine that a quarter of the taxes our footballers, boxers and professionals pay to foreign governments is coming to Ghana). Exports of Ghanaian talent to developed and developing countries can also yield foreign currency for the nation (Cuba exports doctors to Ghana). Ghana can expand its training of nurses, doctors, teachers and computer scientist who can then be exported to generate foreign revenue. Countries like South Africa, Botswana, Namibia etc hold Ghanaian professionals in very high esteem.

A drastic reduction in the VAT rate and the prevailing interest rate will jump start the economy as local and foreign investors will be free of the high rates and depreciating cedi. If the cedi is stable, government can borrow from outside at say 6%. This frees local capital for the private sector and repayment of the debt is not too much of a burden as the cedi is stable.

The above steps coupled with an open and honest government will point the economy in the right direction.