Given that the coronavirus pandemic effects are still evolving with its associated uncertainties, the First Deputy Governor of the Bank of Ghana, Dr. Maxwell Opoku-Afari has called for redoubling of revenue mobilization to lessen debt levels to more sustainable levels.
According to the Bank of Ghana, data for the first quarter on the execution of the budget show a widening of the deficit relative to what was observed for the same period in 2019. As at the end of the first quarter, a deficit, equivalent to 3.4 percent of GDP had been recorded compared with a deficit target of 1.9 percent of GDP.
The larger deficit has been a result of shortfalls in tax revenues — on the back of shortfalls in international trade taxes, taxes on goods and services and taxes on income and property in response to unfavourable external and domestic conditions — and higher pace of spending, which included some unbudgeted COVID-19 related expenditure.
The expanded deficit led to an increase in the debt stock to 59.3 percent of GDP as at the end of March 2020.
Speaking at an IMF webinar dubbed; Crisis to Recovery: Strengthen Economic Institutions in Sub-Saharan Africa during COVID-19, Dr. Opoku-Afari said, “By the end of the crisis, all fiscal space would have been depleted and debt levels will rise. Redoubling efforts toward revenue mobilization will be critical to generate the appropriate primary balances to bring down debt levels to sustainable levels.”
“Revenue generation will be also necessary to create fiscal space, to address anticipated renewed demand for the provision of public services to help support faster growth,” He added.
Currently, the crisis has shed light on the need for more reforms in critical sectors of governments operations and further strengthening Public Financial Management (PFM) frameworks in accounting for the effectiveness in the delivery of COVID-related expenditures, the First Deputy Governor stated.
“It is important to strengthen and implement reforms aimed at dismantling bottlenecks in domestic revenue mobilization and administration while undertaking legal reforms that ensure property rights protection,” he said.
Dr. Opoku-Afari also recommended that the bureaucratic constraints in the delivery of government services should as much as possible be removed to allow for maximum benefits from government services, adding, “These processes will no doubt be critical going forward for a sustainable recovery.”
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