2021-Budget will ensure economic growth

2021-Budget will ensure economic growth

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 a 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 that

prides itself on prudent, sustainable, and inclusive

 2021-Budget will ensure economic growth – 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

2021-Budget will ensure economic growth – 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 cashstrapped 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!

The Government response to Covid-19 has been swift and expensive.

For example, the National Preparedness and Response Program cost

the government about GH¢572m, total spending under

2021-Budget will ensure economic growth –

CAPBuss to support MSMEs was in excess of GH¢ 750m.

GH¢ 20m was spent to supplement incomes of frontline

healthcare workers, as well as, the launch of a

GH¢2b 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 a 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

2021-Budget will ensure economic growth –

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

2021-Budget will ensure economic growth –

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.

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

 2021-Budget will ensure economic growth –

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.