Working to avoid another bailout – The IMF informs the government

Company News on Tuesday, July 16, 2019

Source: Graphic.com.gh

2019-07-16

The resident representative of the International Monetary Fund (IMF) in Ghana, Albert Touna Mama, advised the government to pay particular attention to the problems likely to bring the country back to a fund rescue program.

He mentioned the high risk of over-indebtedness, low domestic revenue mobilization, off-budget transactions and the high level of fiscal risk in the energy sector, which could hinder progress towards stabilization of the energy sector. ;economy.

He added that the government needed such important foundations because they were the very reasons why Ghana had continued to run to the IMF for a bailout.

Dr. Mama gave her advice at a round table organized by a civil society organization, the Economic Governance Platform, in partnership with the IMF and Oxfam, in Accra last Thursday.

The theme of the workshop was "Addressing Ghana's Political Budget Cycle: Lessons for Ghana Beyond the IMF".

A panel discussed what could be done to ensure that Ghana does not repeat the same mistakes after the end of its 16th IMF bailout program.

Risk of over-indebtedness

In May of this year, the IMF and the World Bank ranked Ghana among the countries at high risk of over-indebtedness.

A joint debt sustainability badysis conducted by the two Bretton Woods institutions found that Ghana's debt-to-GDP ratio, debt service ratio and debt-to-export ratio exceeded required limits, exposing the country at a high risk of over-indebtedness. fear being declared a country of over-indebtedness.

The country entered the category in 2015 and was unable to exit due to strong growth in outstanding debt and its impact on other related ratios.

In May, the Bank of Ghana announced that public debt outstanding peaked at UA 198 billion in March 2019, or 57.5 percent of GDP.

Last month, Finance Minister Ken Ofori-Atta lamented the country's low levels of revenue mobilization, saying that while Ghana had a 12.6 percent revenue-to-GDP ratio, its peers in Africa sub-Saharan Africa registered 19 percent. hundred.

Returned

Regarding the debt problem, Dr. Mama said it was crucial to deploy more efforts to reduce the country's outstanding debt.

He also said that a low mobilization of domestic revenues would have negative consequences for Ghana and called for more efforts to increase the tax-to-GDP ratio, which is currently below 13%.

It is even more worrying that 97% of the total revenue collected is absorbed by non-discretionary spending such as wages and interest rates.

Other

Off-budget transactions is the third issue he warned the government about.

According to him, financial expenditures that were not often included in the budget created revenue rigidity.

He added that it also creates difficulties to know the real deficit and the level of indebtedness of the country.

With regard to the budgetary risks related to the energy sector, Mr. Mama encouraged the government to find ways to cope with the high costs of fuel and energy, as well as to solve the problem of low cash inflow. electricity bills, including non-payment practices of departments, departments and businesses. agencies (MDA).

Way forward

The President of the Tax Justice Network – Ghana, Vitus Adaboo Azeem, speaking at the workshop, expressed his optimism that rigorous enforcement of revenue collection laws in the country would help to solve the problem. the problems posed by domestic revenues.

Priscilla Twumasi Baffour, economist and lecturer at the University of Ghana, called on the Ministry of Finance to set realistic revenue targets for the Ghana Revenue Authority (GRA) and to ensure that there are have constant monitoring to make sure things are done right. .

She also stressed the need to redouble efforts to integrate informal enterprises in the formal sector, so as to have sufficient data on their activities to ensure higher income collection.

On the energy front, the Executive Director of the African Center for Energy Policy (ACEP), Mr. Ben Boakye, said it was necessary to better inform Ghanaians about the losses suffered by the country. as a result of bad contracts and contracts in the energy sector.

"This will ensure that citizens collectively express themselves against such contracts, as has been done for other national issues," he said.

IMANI Africa President, Mr Franklin Cudjoe, also called for efficiency in the use of revenues.

Thus, he said, citizens would understand the need to pay their taxes regularly to ensure the development of the nation.