IEA holds discussion on the 2001 budget

Ghana should fashion its poverty reduction strategy in a manner that will enhance investments in productive activities and reduce the emphasis on the provision of social services so as to encourage growth in the economy.

She must also ensure that loans and grants that accrue to the government are not used to fund recurrent expenditure but are also ploughed back in productive sectors of the economy.

This will enable the country to lay a solid foundation for any economic take-off to ensure a sustainable development.

These were the views of participants at a preliminary round table discussion on the year 2001 budget statement presented to Parliament on March 9 this year.

The forum, organised by the Institute of Economic Affairs, was to enable the public to make inputs to give direction to discussions on the budget by members of Parliament.

Mr S.K. Apea, a fellow of the Institute said information on certain aspects of the budget was scanty and incomplete, although there are firm indications that it would be revised in six months.

He said the hint on the development of a five-year plan is indicative of the government desire to fashion out a new economic blue print which goals will be more tenable, saying most of the targets of the Vision 2020 document were not attained.

Mr Apea wondered how the government can get the huge grants flow estimated in the budget, when it is aware of donor fatigue and the inability of the past government to attract donor inflows last year.

On the balance of payment, he said it would be difficult for the government to move from a deficit of 194 million dollars to 165.7 million, saying that the figure was an over estimation and much will depend on the goodwill of the donors.

Mr Apea called for the co-operation between the government and the Bank of Ghana to ensure harmony between fiscal and monetary policies to give impetus to the growth of the private sector.

He said there is the need to focus more on the non-traditional export sector through support for the sector, adding that though much was done in the past there was lack of political will to push decisions forward.

Mr Apea feared that the proposed 15 per cent reconstructive tax on the profits of the banks and its component two percent on companies may have a negative impact on the economy and scare away potential investors to the country and endanger employment opportunities.

Professor Benjamin Armah said although the projected growth rate of four per cent it was realistic considering the current economic situations that the country finds itself in at the present.

He wondered if the lowering of the value added tax threshold from 200 million to 100 million cedis would be cost effective since it will mean the commitment of more resources and personnel the cost, which might outweigh the gains.

Mr Armah said the increase in the production of cocoa will in the long-run is counter productive in the view of the falling prices of commodities in the world market.

Mr John Mahama, a former minister of communications, said conscious efforts must be made to ensure the marketing of agriculture produce to reduce cross border trade.

Mrs Grace Coleman, Deputy Finance Minister designate said the 15 per cent tax on banks would not impact negatively on the economy.

She said the lowering of the VAT threshold was to enable more traders who are outside the tax net to begin to pay tax.

Prof. Asenso Okyere said there is the need to re-think the structure of the economy to stop the over-reliance on cocoa, gold and few other commodities for the country's foreign exchange earnings.