Ahead of election 2020, some key stakeholders in the economy have reiterated the need for political commitment to ensure Fiscal discipline (i.e an ideal balance between revenues and expenditure of government) in the short to medium-term.
A key step to ensure such discipline came in the Fiscal Responsibility Act which was assented to by President Akuffo-Addo in December 2018, to help ensure fiscal responsibility, macroeconomic stability, debt sustainability, and capping of Ghana’s annual budget deficit at 5 percent of GDP on a cash basis. Research on this topic shows that Ghana’s budget has been in deficit every single year over the past 30 years.
The deficit to GDP ratio has ranged from the lowest level of 1.3 percent in 1991 to the highest of 11.5 percent in 2012, with the worst performances coming in election years excerpt 2004.
With the fiscal responsibility law and the fiscal council now in place however, many onlookers say the 2020 election provides a unique opportunity to break the cycles of high fiscal deficits in election years.
But speaking at a Graphic Business/Stanbic Breakfast meeting on the theme “Election Cycles, Democratic Governance and Fiscal Stability: Lessons for Ghana”, here in Accra, Professor of Economics Eric Osei Assibey said the cycle can only be broken through political discipline and commitment. Such discipline he said will help ensure a strong fiscal space during and after election 2020.
“There are certain things we cannot control or foresee like the direction of oil prices, and revenue collection challenges among others. But if you are committed to fiscal discipline and prudency you would make sure that you would adhere to the rules as stated in, for example, the Fiscal Responsibility Law.”
On his part, the Chief Executive of Stanbic Bank Ghana Alhassan Andani, has cautioned that efforts at ensuring that government raises enough revenue to keep up with its expenditure, will prove futile if citizens and corporations do not pay enough taxes.
According to the Ghana Revenue Authority (GRA), the rebasing of the economy has reduced the Tax-to-GDP ratio from approximately 16 percent to 13 percent which is a far cry from the middle-income average of 20 percent. A situation that demands more effective policies and strategies to generate the needed tax revenue.
Speaking to Citi Business News on the low level of taxes collected in Ghana, Mr. Andani called on citizens to play their role in helping the government raise enough revenue to keep the countries budget deficit below the 5 percent threshold stipulated by the Fiscal Responsibility Law.
“Are we collecting enough taxes in this country? The answer is simply no. The citizens have a massive responsibility to correct this situation. After exercising our right to choose a government, it then becomes our responsibility to provide them with the needed taxes to carry out their mandate.”