Examine the average annual growth of five percent to stimulate development

Dr John K. Kwakye, Research Director at IEA

The Institute of Economic Affairs (IEA) has called on the government to consider revising the country’s average annual growth to a higher notch to accelerate growth and improve the economic well-being of citizens.

In its 2021 budget, the government set the average annual medium-term growth of the country (2021-2024) at 5%.

Dr John K. Kwakye, director of research at the IEA, speaking on the 2021 mid-year budget review, said the government needs to revisit growth estimates if it is to achieve rapid growth and improve the standard of living of the population.

He said the five percent annual growth target was woefully insufficient to spur the much needed development the country so longed for.

He therefore urged the government to take advantage of the many untapped natural and human resources as well as excess production capacity to accelerate growth.

“The budget review does not contain medium-term growth projections like the 2021 budget itself,” he said. “The minister maintained the gross domestic product (GDP) growth of 5.0 forecast for 2021 in the November budget. Although this figure is relatively high, it should be seen as coming from a low GDP base in 2020. “

“We’re more concerned with the medium-term growth estimates, which average five percent. We maintain that as a developing country with abundant untapped natural and human resources and excess productive capacities, we should be able to take advantage of these resources and capacities so that we can grow faster and lift our population out of the world. poverty faster, ”said Dr Kwakye.

Regarding revenue mobilization, the research director advocated widening the country’s tax net and closing all tax loopholes to allow the country to maximize revenue collection.

Ghana loses more than GHC 5 billion per year due to tax exemptions alone.

Dr Kwakye also noted that although the country generated little income, the allocation of that income by the government was poor and inefficient, claiming that little was spent on capital spending.

Ghana’s total spending, in 2021, is estimated at GHC 114 billion and what Dr Kwakye noted was insufficient given the plethora of projects and initiatives the government has had to undertake.

“In fact, in terms of GDP, spending in 2021 is 25 percent, which is well below the middle-income country average of around 35 percent.

The problem is that our spending is limited by our equally low revenue effort because the budget deficit must be somewhat contained, ”he said.

“A major problem with our relatively low spending is that it is heavily skewed in favor of recurrent spending and at the expense of capital spending (CAPEX),” he added.

Ghana’s recurrent expenditure for 2021 is estimated at GHc 109.9 billion, or 20% of GDP, while CAPEX is around GHc 17.6 billion or 4% of GDP.

Dr Kwakye advised the government to invest more in capital spending to spur rapid economic growth.

“As a developing country, we should allocate 10-15% of our national income (GDP) to CAPEX as this is what will allow the economy to grow rapidly and move the country up the ladder fairly quickly. development, ”explained Dr Kwakye. .