The Director of Research at the Institute of Economic Affairs (IEA), John Kwakye, has said that the government will be better off adopting, on its own, measures which the Bretton Wood institution is known to prescribe to avoid going to the International Monetary Fund (IMF) for assistance.
In his view, this is necessary following the economy buckling under the weight of internal and external pressures – rising inflation, a fast-depreciating local currency as well as foreign investor attrition.
Dr. Kwakye believes such austere actions will ensure the state attains policy credibility without which the economy is likely to continue in a free-fall and heighten concerns over the nation’s ability to meet its obligations.
In an interview with the media, he claimed that failure to do so will see Ghana eventually returning to the IMF, adding that it will lead to reduced confidence by the international community in the country’s ability to manage its affairs.
“Government need not go to the IMF if it can adopt some of the key measures that the IMF is known to prescribe for members seeking its assistance… If we do not take these steps and restore investor confidence in our credibility, it will snowball to a point beyond government’s control,” he said.
Topping the list of proposals for the state to adopt, Dr. Kwakye touched on the need to resolve the ongoing impasse over the E-levy in Parliament, with a proposal to split the levy between telecommunication service providers and end-consumers.
“Government must work to resolve the current budget stalemate in Parliament over the E-levy as a matter of urgency. To that end, we suggest splitting the proposed rate of 1.75 percent between telcos (1 percent) and consumers (0.75 percent). We believe this is a compromise that both the Majority and Minority can accept,” he said.
Further measures, ranging from short-term to long-term, are focused on revenue generation. These include a swift passage of the Tax Exemptions bill to reduce the scope and scale of exemptions as well as enforce tax compliance, especially by professionals.
Others are introducing segregated corporate tax ranging from the current level of 25 percent for indigenous companies to 35 percent for foreign companies, as well as a temporary ‘windfall tax’ of 10 percent on ‘excess profits’ of mining companies, oil companies, telcos and banks.
“They should also abolish the current import benchmark discount of 30 percent for general goods and 10 percent for vehicles,” he added.
According to the economist, the government must introduce urgent measures to reduce expenditure, whose level and composition remain problematic.
The IEA’s Director of Research also proposed restructuring and downsizing the ministries from the current 30 to a maximum of 20 – a move that would consequently see the number of ministers and their deputies drop from 86 to 56 – in addition to reducing salaries of the Executive by 20 percent.
Following the announcement in January of a 20 percent cut to the budgets of ministries, departments and agencies (MDAs), as part of measures to ensure fiscal consolidation, Dr. Kwakye called for its enforcement.
With the Minister for Finance disclosing that the Free Senior High School (SHS) had cost the nation GHC7.62billion as of July 2021, he also called for the introduction of a government-parent cost-sharing arrangement.
Other steps proposed to reduce the quantum of expenditure include scrapping the Nation Builders Corps (NABCO) programme; freezing allowances for nursing and teacher trainees; and imposing a temporary freeze on recruitment into the public service.