Mr Ken Ofori-Atta yesterday stepped into office as the Minister of Finance, with a firm pledge to help create wealth and improve the lives of all Ghanaians.
“We will create wealth and improve people’s lives by ensuring economic freedom as the mainstay of the economy,” he said in a release issued in Accra.
“I am committed to cleaning up our public finances, managing the enormous debt that we have inherited in order to create the needed fiscal space, invest in critical infrastructure and empower the private sector to create jobs,” he explained.
The release further indicated that the Finance Minister’s immediate priority would be to protect the public purse and stabilise the country’s macroeconomy.
Mr Ofori-Atta, who is noted for his passion to duty, further pledged to spearhead anti-corruption, increase revenue and introduce policy initiatives to grow the economy for the private sector to thrive and create jobs.
Economic challenges
The Finance Minister’s commitment comes against the backdrop of an economic environment many analysts describe as having weak fundamentals and being incapable of supporting the major policy initiatives promised by the new administration.
For instance, the minister will have to grapple with the country’s huge debt situation. The total debt is estimated at GH¢120 billion, which is about 72 per cent of gross domestic product (GDP).
Reports also indicate that the overall budget deficit target of 5.3 per cent for 2016 was missed, as the figure now stands at almost 7.0 per cent.
Analysts also claim that of the revenue that will accrue to the government this year, more than 99 per cent will be used to pay interests on the huge debts, the emoluments of public sector workers, including the restoration of allowances to nurse and teacher trainees, as well as settle statutory payments which have been in arrears for many months.
This will leave the government, which has promised to deliver many projects and programmes for the people, with virtually nothing to depend on.
According to the 2016 mid-year budget review, total revenue and grants amounted to GH¢32,040.4 million (22.9 per cent of GDP) in 2015, against a target of GH¢30,526.2 million (22.8 per cent of GDP). In nominal terms, the provisional out-turn was 29.5 per cent higher than the out-turn for the same period in 2014.
The performance in total revenue and grants for the period was driven mainly by taxes on goods and services resulting from the implementation of new tax measures, particularly the imposition of the special petroleum tax of 17.5 per cent, as well as the implementation of the Value Added Tax (VAT) on fee-based financial services, the five per cent flat rate on real estate, among other taxes.
As a result, total tax revenue amounted to GH¢24,140.9 million, 4.4 per cent higher than the revised budget target of GH¢23,127.9 million.
From this scenario, it is clear that taxes imposed on many areas, such as the 17.5 per cent VAT on financial services, among other taxes, helped the past government to exceed its revenue target.
However, the VAT on financial services is expected to be scrapped, per the manifesto promise of the ruling government, while the five per cent VAT on real estate will also be dropped.
Again, the government intends to reduce corporate tax from 25 per cent to 20 per cent in a bid to stimulate the private sector which, it is believed, has the ability to turn around the fortunes of the country.
Capabilities
But the Finance Minister is optimistic about the future, as the release said: “Mr Ofori-Atta, a former Executive Chairman of Databank, brings to the Ministry of Finance over 30 years’ experience in the Ghanaian and international financial sector.”
He is expected to help maintain a professional institution with global standards in treasury and risk management to give effect to enforcing the Public Finance Management Act (PFMA).
The release said he also intended to work hard to get the economy growing eventually at double digits through policies and strategies that would increase revenue, reduce waste, control spending and grow the economy to create jobs.
It explained that the three-year IMF programme was needed to achieve fiscal consolidation, though it was presently in a delicate state.
“I am committed to an IMF programme which addresses our current predicaments and will ensure that we also meet all the necessary structural benchmarks that may be suggested.
“As our President has stated, we now need to get Ghana working again in order to create jobs,” the release added.
It further gave an assurance that the minister would deliver on the NPP’s manifesto pledges, in spite of the daunting economic challenges.
The release was optimistic that in the President’s first budget, there would be a clear path towards fulfilling the manifesto pledges and opening economic space for the private sector to thrive.