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Opinions of Friday, 30 July 2021

Columnist: Emmanuel Amoah-Darkwah

2021 Mid-Year budget review - Reflections

Finance Minister, Ken Ofori-Atta Finance Minister, Ken Ofori-Atta

1.Fiscal targets broadly remain on track. Revenue raised in the first six (6)
months of 2021 was GHC 28.3 billion against a target of GHC32.4 billion.
Expenditure on the other hand reached GHC 50.6 billion against the GHC 55.1
billion target. This is good towards fiscal consolidation in the medium term.

A possible ‘third’ wave could increase expenditure which will further balloon
the deficit and public debt. Containment measures are therefore urgently
needed to help curb the spread of the Covid-19 virus. Further restrictions
will slow down economic growth which has shown signs of recovery.

2.On Macroeconomic indicators, inflation target of 8% (-/+2) will likely be
achieved by close of year. Gross International Reserve (GIR) target of 4
months of import cover will also likely to be achieved with strong commodity
prices. It is unlikely that the fiscal deficit target of 9.5% of GDP will be
achieved, same as positive primary balance and overall GDP growth of 5% for

3.The Finance Minister not requesting for supplementary estimate is a step in
the right direction towards fiscal consolidation. More so, introduction of
new taxes could have been counter-productive. Attention should be on how to
mobilize revenue internally using the digital tools rolled out by government.
I expect an update on how the new taxes introduced in the 2021 Budget are
performing in the 2022 Budget.

4.Government should aggressively pursue the vaccination program. Vaccinating 20
million of the population to reach herd immunity by end of 2021 is ambitious
but can be achieved with the right investment. How will the US$ 25 million
towards vaccine development in Ghana be raised?

5.Establishment of a National Homeownership Fund: Though commendable, with the
current Universal Banking License regime, it will be difficult for
participating financial institutions to offer mortgage at 11%-12% annual
interest rate. The Ghana Reference Rate (GRR) as at June 2021 stood at 13.8%
while average lending rate was 20.6% in the same period (Bank of Ghana).

6.The establishment of Revenue Assurance and Compliance Enforcement (RACE) is
welcoming. What will be its relationship with Ghana Revenue Authority (GRA)?
Ghana loses billions of cedis through revenue leakages in petroleum
bunkering, gold and mineral export, port operations, free zones operations
etc. It is time to block the revenue loopholes.

7.Government through the Ghana Enterprises Agency (GEA) disbursed GHC 520
million out of the earmarked GHC 600 million to 299,490 MSMEs. What impact
assessment has been done? It is not enough to disburse funds but further
assess its impact on economic growth and development.

8.The National Covid-19 Trust Fund has so far received GHC 57.15 million of
which GHC 52.5 million has been disbursed. Proper accounting on this Fund is
therefore requested.

9.Government intends to create 1 million jobs by 2024 especially for the youth.
Further details are requested to know the kind of jobs (program jobs vrs
permanent jobs) etc. Unemployment in Ghana is frictional, cyclical and
structural. Attempts to create sustainable jobs should address the
aforementioned forms of unemployment.

10.Creation of ‘Youth Banc’ aimed at financing youth led start-up businesses.
What happened to YEA, NEIP, MASLOC among others? Instead of creating
multiple institutions to solve the same problem, government should rather
consolidate existing programs and properly finance and manage them.

11.The quest to use Ghana Infrastructure and Investment Fund (GIIF) to service
expensive debt and finance infrastructure is welcoming.

12.Establishment of Ghana National Petroleum Corporation (GNPC) Explorco to
acquire assets and become an operator is a forward looking initiative taking
into consideration the global outlook for fossil fuel exploration.

13.The budget was silent on the status of the Tax Exemption Bill. In our quest
to raise revenue, proper exemption law is needed to prevent abuse and
generate revenue.