[ 2021-03-12 ]

2021 Budget will ensure recovery and macroeconomic stability
The 2021 Budget will ensure recovery and
macroeconomic stability through well-thought out
tax measures in a difficult time. In previous
budgets, the NPP Government sought to ensure that
economic growth and its benefits trickled down to
all citizens; and that the benefits are tangibly
felt by everyone. Nuisance taxes imposed by the
previous Government were abolished and as a
listening government, taxes that were earlier
introduced such as the luxury vehicle tax and the
adjusted Pay As You Earn (PAYE) tax rates that had
noticeable impact on the middle class were removed
when concerns were raised by the public.
These are a few examples of actions taken by a
government which prides itself on prudent,
sustainable and inclusive economic policy
decisions and actions. However, we have been
confronted by a pandemic (Covid-19) whose impact
on the global and our domestic economy has been
devastating. This unexpected turn of events
required swift action to ameliorate the negative
impact on livelihoods.



These actions came at a cost that we must begin to
address and take the tough decisions that bring us
back to the path of economic growth that is felt
tangibly. Thus, the 2021 Budget must balance the
need to support the economy through the difficult
Covid-19 impact; and yet at the same time seek a
burden-sharing paradigm through tax relief for low
income earners and marginal tax increases for the
middle and upper classes. Burden- sharing is
important so that the Managers of the economy can
balance recovery spending with macroeconomic
stability.

Clearly, the impact of Covid-19 on the economy in
2020 was pronounced. There have been reported
revenue losses for media houses, hotels and
restaurants amongst others, while retail outlets
have rationalized their staff levels, resulting in
a 50% reduction in some cases. Indeed, the
Covid-19 fallout on the private sector has been
severe as most businesses continue to be cash-
strapped and cannot operate at optimal levels or
maintain their current payroll. For Government,
the slowdown in economic activity has resulted in
revenue shortfalls and a simultaneous increase in
spending. It is expected that Governments fiscal
deficit target will likely double in 2020 on
account of Covid-19 pressures!

Osei Kyei Mansah Bonsu, to present 2021 Budget
Statement

The Government response to Covid-19 has been swift
and expensive. For example, the National
Preparedness and Response Program cost the
government about GH0572m, total spending under
CAPBuss to support MSMEs was in excess of GH0
750m. GH0 20m was spent to supplement incomes of
frontline healthcare workers, as well as, the
launch of a GH02b Guarantee Scheme to support
banks to lend to Corporates. These expenditures in
addition to free water and electricity provision
across the country, support for frontline health
workers, among others, made the Government the
most responsive and efficient within the region.



Across the globe, more advanced countries have
also responded to the pandemic with similar
measure, with the US, for example, passing the
Coronavirus Aid, Relief, and Economic Security
(CARES) Act, which released about $2.08 trillion
for intervention in its economy. In fact, the
measures taken by the US, UK and the EU were far
reaching; and combined with their monetary policy
measures are some of the most large-scale
liquidity events for these economies in decades.

Just like more advanced countries, Ghana must show
its commitment to spend to support households and
businesses during the pandemic - as it is doing
effectively and evidence by a stronger GDP growth
projection of about 5% for 2021, but at the same
time ensure that its economic policy is prudent
enough not to compromise its macroeconomic
stability. The launch of the Ghana CARES program
to invest in infrastructure, housing, regional
hubs, as well as, the capitalization of the
Development Bank of Ghana (DBG) for private sector
led growth is in the right direction to ensure a
strong post Covid-19 recovery for Ghana,
potentially pushing GDP growth to about 8-10% on a
sustainable basis. Yet there must be sacrifices -
sacrifices that require reorientation and
burden-sharing by the citizens if the stability of
the economy is not to be derailed.

The more advanced countries are showing us the
need for this burden-sharing. South Africa, for
example, through increased spending and support
for the private sector is expecting its GDP growth
to rebound to 3.3% in 2021 from a contraction of
7.2% in 2020; but has increased its fuel levy by
27c per liter and also imposed an 8% increase in
excise duties on alcohol and tobacco products in
its recent national budget policy. The UK in its
2021 budget also signaled an increase in its
corporate tax from 19% to 25% in 2023, a magnitude
of increase said to be unprecedented since the
company tax rate for the UK was increased in
1974.

Pre Order Ghana Year Book 2021
Similar measures must be taken by Ghana as a
necessary strategy to reduce government borrowing
requirements, stabilize the budget and ensure that
the macroeconomy remains stable. As the Government
is about to read the 2021 budget, indications are
that there may be tax increases to support
Covid-19 related expenditure. If this is the case,
it is expected that the public understands the
need for Government to increase some consumption
related taxes for this purpose. These tax measures
must however be supported by relief or tax
suspension for low-income earners and rebates for
companies hard hit by the pandemic. This burden
sharing - a well thought-out revenue measure to
ensure adequate support and safety net for
low-income earners whiles requesting for some
sacrifices from the middle and the upper income
brackets will be important for this budget.

Given the efforts of Government to provide relief
for households and businesses during this
challenging time imposed by the pandemic, the
private sector, particularly must support the
efforts of Government in trying to restore the
economy and improve the livelihood of the people
of Ghana.



As much as every Ghanaian is feeling the impact of
this global pandemic which has shattered homes,
destroyed businesses and shrunk many economies
around the world, it will take a patriotic
approach to subdue this impact. The experiences of
other countries have taught us that to win the war
against the pandemic, we need to adopt the power
of collaboration as a people. The whole idea of
this collaboration is to share the burden brought
to us by this overwhelming and unprecedented
pandemic.

Source - Graphic Online

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