Editorial – A Review of Ghana’s 2022 Budget

The road to recovery for the global economy seems drawn out two years after the Covid19 broke out. A global economic rebound in 2022 has been predicted by many, although there is consensus that recovery may be uneven across countries. There is a genuine fear that recessionary ripples from some countries in the Global North may trickle down to the South in ways that may spark major economic turbulence if the pandemic, and its tentacled fallouts, are not reined in soon.

The Ghanaian economy is one of a few within sub-Saharan Africa that has shown remarkable resilience in the wake of the pandemic as highlighted in the 2022 Budget Statement. However, the Government of Ghana’s (GoG) effort to shore up the fortunes of the country within 2021 with a raft of borrowing and private sector policies announced in last year’s budget are yet to generate the much sought-after economic transformation touted by the government. As a result, the business environment and living standards have become strained by low revenues and a debt overhang that may not go away soon.

It is because of this, and the often-touted ‘Ghana beyond aid’, that we at the Bureau of Market & Social Research believe that the Government’s desire to find innovative ways of generating revenue internally is welcome. We expect that working within a conservative and a pro-private sector backdrop, the current government will seek to increase tax revenues by reducing the burden on a few and spreading it across many. The time to explore and deliver effective and efficient taxation is now.

Digital financial services(DFS) have achieved significant penetration within the country according to statistics available from the National Communications Authority. It is reasonable to deduce that digital financial services have been adopted as much by the informal sector as it has by registered businesses. The GoG’s argument that an e-levy – tax on digital transactions – provides an opportunity to draw in many informal businesses into the tax net is also a reasonable one.

However, what the Budget proposals do not show is the full mechanics of the implementation that will ensure that the penetration of DFS amongst individual and non-business users are not stalled. It is also important that formally registered businesses who are already meeting existing tax obligations are not encumbered further by the e-levy. Consultations and a rework of GoG’s initial proposal may be necessary to ensure that digital financial services tax is focused squarely and efficiently on online businesses operating informally.

New measures in the 2022 Budget such as the YouStart Initiative to stimulate youth employment and entrepreneurship are also not conceptually and strategically grounded. Ghana has much more to achieve on the Sustainable Development Goals (SDGs) and any economic stimulus to young people or the private sector must be integrated properly with other investments in energy, climate, natural resources, agriculture, technology and tourism under a broader impact investment or social entrepreneurship agenda. This Budget and future ones must show greater attempts at consolidation of sectoral efforts into strategy and fewer splintered tactics in response to emerging socio-economic development challenges.

Notwithstanding, the budget is an ambitious and creative one. To the extent that the Budget spurs private sector players on to participate in many of the government’s initiatives and proposals or – excites them enough to increase local investments – the opportunities for economic growth in the medium term may be assured.