Expectations of 2019 Post-IMF Budget

The 2019 budget and economic policy of Ghana must clearly identify measures to speed up growth, boost revenue, strengthen the cedi, create sustainable jobs, improve the viability of the free SHS policy and deal with the side effects of the IMF’s prescriptions.

The 2019 Budget is expected to be quite distinctive in the sense that it will be the first post-IMF Budget since the implementation of the Extended Credit Facility in 2015. The government must come out with programs to fast-track the growth of the economy beyond the IMF’s diagnosis.

The steps taking by the BoG to salvage struggling Banks to enhance soundness in the financial sector are commendable especially as Ghana is moving from the IMF’s intervention. The BoG must operationalise the deposit protection scheme established under the Ghana Deposit Protection Act, 2016 (Act 931) and address specific risks from high non-performing loans, poor corporate governance and poor risk management systems. The regulator must ensure that Banks implement the International Financial Reporting Standards, and strengthen the capacity and resources of the Banking Supervision Department to improve supervisory procedures.

On the revenue side, the budget must widen the tax base and encourage corporate entities to file their tax returns. The Finance Minister has disclosed that lots of corporate companies have defaulted in paying taxes to the tune of Three Billion Ghana Cedis (GH¢3bn). Many of the Pay as You Earn companies in the country have issues in paying taxes. The 2019 budget must strengthen GRA to collect taxes for the country with optimum efficiency as mandated by Section 3 of the Ghana Revenue Authority Act, Act 791.

According to the GRA, 80% of businesses and Ghanaians in the informal sector are not paying taxes due to lack of historical database with which to track them. We expect the 2019 budget to outline measures to synchronize the various digital systems introduced by the government to manage database on taxation.

As at June 20, 2018, the cedi had depreciated by 1.11 percent against the dollar but gained 1.32 percent and 2.38 percent against the pound and euro respectively. Even though the cedi has seen less depreciation in 2018 when compared to previous years, the economy’s reliance on foreign production means the slightest movement in global markets may have significant effects on the cedi. External developments such as the rise in the crude oil prices, strong dollar, expected increases in interest of investment assets in US and the Federal Reserve rate have also set off a domino-effect impacting on the cedi. The 2019 budget must focus on supporting private companies to produce more and be able to export. More investment is required to produce more food and reduce the country’s huge food import bill.

Given the fact that, an average turn out of graduates in Ghana is about 300,000 each year and with the economy not expanding enough to engage all of the graduates, convenient measure like NABCO absorbing about 100,000 of unemployed graduates is laudable. Youth unemployment is a serious threat to national security. The problems in securing jobs after school may increase the vulnerability of young people to social evils and disorders.

In the 2019 budget, we expect the government to outline measures of sustainability to support the NABCO intervention. We don’t want the country to face a shock therapy when paying the participants in future. There is the need for the government to collaborate with the local government authorities, private sector and civil society organizations to fashion out a sustainability strategy. Whilst implementing the NABCO model, efforts must be made to create permanent and decent jobs for the teeming unemployed graduates. It is time for the private sector to be supported to complement initiatives to create jobs. A strong private sector can offer the best sustainable solution to the unemployment challenge.

The free SHS policy implementation is importance investment that Ghana is making in the youth and in the future of our country. This is commendable and all stakeholders must contribute to its success. The 2019 budget must provide room for minimizing the infrastructural deficit that called for the introduction of the double track system. Considering the current economic situation of the country and the fact that the public debt stock reached GH¢159.4 billion as at August 2018 as reported by BoG, it is important for government to think of other possible sources of funding the Free SHS program. The 2019 budget may consider the establishment of an endowment fund and a special levy.

The IMF program had little room for addressing technical/vocational training and economic empowerment of vulnerable and excluded groups. These issues must be prioritized in the 2019 budget statement. Ghanaians are expecting policies and programmes that will translate economic growth and macroeconomic stability into tangible improvements in their lives.