The International Monetary Fund (IMF) has commended government on some fiscal consolidation measures outlined in the 2021 budget.
According to the IMF, the fiscal consolidation measures to be implemented by government this year is ‘a step in the right direction but a difficult one in a pandemic.”
The Bretton Wood instistution made the assertion in its 2021 Article IV Consultations paper which is based on an assessment of Ghana’s economy by an IMF Staff Mission led by Carlo Sdralevich.
“The 2021 budget’s recent policy pivot towards fiscal consolidation is an important step in the right direction and a difficult one in a pandemic. Fiscal consolidation should be deepened and anchored around debt and debt service reduction to create space for social, health, and development spending,” the paper stated.
Adding government should rely more on progressive revenue and spending measures in undertaking its fiscal consolidation plans.
“Given the social and equity implications, fiscal consolidation should rely more on progressive revenue and spending measures, while guaranteeing fiscal support to the most vulnerable and social safety nets,” it added.
Some of the fiscal consolidation measures outlined in the budget include the introduction of the 1% Covid-19 Health Recovery Levy and the Ghs 0.20 pesewas and Ghs 0.18 per litre of petrol/diesel and Kilogramme of Liquified Petroleum Gas (LPG) under the Energy Sector Recovery Levy respectively.
As well as the imposition of the Ghs 0.10 pesewas Sanitation and Pollution Levy also under the Energy Sector Recovery Levy and also the 5 percent Financial Sector Levy on the gross profit of banks.
Monies raised from these taxes are to help government close the large fiscal gap created by the huge difference in expenditure and revenue for the year.
In a collaborative and constructive discussions with Vice President Bawumia, Finance Minister Ofori-Atta, Governor Addison of the Bank of Ghana, the IMF Staff Mission praised government’s efforts in effectively managing the Covid-19 pandemic.
“Ghana has managed very effectively the COVID-19 outbreak in the country, and thus succeeded in protecting lives. Almost 93,000 cases have been confirmed, and unfortunately 780 people have died as of today. The launch of mass vaccine rollout has been a breakthrough, with the administration of approximatively a million doses as of end-May,” Mr Sdralevich noted.
“Policy interventions in 2020 were critical to safeguard livelihoods and paved the way for a faster rebound of economic activity,” he added.