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Ghanaians should brace themselves for a tougher economic situation next year per the 2023 Budget Statement and Economic Policy presented by the Finance Minister, Ken Ofori-Atta on behalf of president Nana Addo Dankwa Akufo-Addo on Thursday, November 2022. The hiring freeze on civil and public sector servants and an increase in the Value Added Tax (VAT) by 2.5% which is expected to create higher cost for businesses and impact prices of goods and services are some austere measures contained in the Statement presented to Parliament.
Announcing some hardline fiscal measures on Thursday, Mr. Ken Ofori-Atta called on Ghanaians to welcome the 2.5% increase in VAT to “directly support our roads and digitalization agenda” as part of the government’s seven-point agenda “aimed at restoring macro-economic stability and accelerating our economic transformation as articulated in the post-COVID 19 Program for Economic Growth (PC-PEG)”. The increment, which represents a 20% rise from the current rate of 12.5% will further burden the cost on production which will translate into higher prices of products for consumers. With this, the general and excruciating cost of living that Ghanaians are currently experiencing is expected to even worsen in the coming year. The Budget, according to the Minister, is anchored on the agenda to aggressively mobilize domestic revenue, streamline and rationalize expenditure, boost local productive capacity, promote and diversify exports, promote the poor and vulnerable, expand digital and climate-responsive physical infrastructure and implement structural and public sector reforms. The government has also reduced the E-levy from 1.5% to 1% but has scrapped the daily threshold. This move widens the tax net as it will capture mobile money transactions which were previously exempted from the tax, a further burden on the poor.
In his presentation in Parliament on Thursday, November 23, Mr. Ken Ofori-Atta noted that as a first step towards expenditure rationalization, Government has, among others, imposed a freeze on the employment of civil and public sector workers. The freeze will affect recruitments into the military and police service, judicial service, public transport services, Electoral Commission, public education and healthcare services in 2023. The move forms part of a series of Government’s austere measures as it seeks to court the endorsement of the International Monetary Fund (IMF) for a financial assistance which the Nana Akufo-Addo-led NPP government sought from the Washington based institution earlier this year. ” Mr. Speaker”, the finance minister continued, “All Ministries, Department and Agencies (MDAs), Metropolitan, Municipal and District Assemblies (MMDAs) and State-owned Enterprises (SOEs) are directed to reduce fuel allocations to Political Appointees and heads of MDAs, MMDAs and SOEs by 50%. This directive applies to all methods of fuel allocation including coupons, electronic cards, chits’ system and fuel depots. Accordingly, 50% of the previous year’s (2022) budget allocation for fuel shall be earmarked for official business pertaining to MDAs, MMDAs and SOEs”, he announced as part of the measures approved by Cabinet to cut expenditures. In addition, there will be no new Government Agencies established in 2023.
The Central Bank raised Ghana’s lending rate to a 5-year high of 24.5% to tame the current inflation which is galloping at a 20-year high 40.4% as announced by the Ghana Statistical Service (GSS) for October, 2022. The 2023 Budget Statement and Economic Policy is expected to be debated and subsequently approved by Parliament in the coming weeks.