The country needs to generate more revenue to cover its recurrent expenditure and not depend on borrowed funds for that purpose, the Presidential Advisor on the Economy, Seth Terkper, has said.
Speaking at the maiden Daily Graphic/Ecobank Economic Forum in Accra yesterday, he emphasised that the country should only borrow for capital projects that could generate enough revenue to repay the loans, rather than burdening taxpayers.
Mr Terkper said that such an approach would help the nation to manage its debt sustainably and reduce the strain on its finances.
He recalled that during his tenure as Finance Minister between 2012 and 2016, the government had to curtail consumption to build infrastructure such as the Atuabo Gas Processing Plant, the Terminal Three of the Kotoka International Airport, and expansion at the Tema and Takoradi ports when the country was under an International Monetary Fund (IMF) programme.
This was made possible by ring-fencing revenue that would have otherwise been used for consumption, either by state-owned enterprises or the government.
The thought-leadership forum was aimed at fostering a comprehensive discussion on the economy and its prospects for development.
The event was on the theme: “A broad review of the economy of Ghana: Then, now, and the way forward”.
Policies
Mr Terkper also said that the country’s tax-to-Gross Domestic Product (GDP) ratio should be around 18 per cent to 20 per cent to manage the economy effectively, adding that policies were not moving at pace with its transformation.
The Presidential Advisor highlighted the need for Ghana to move beyond its current economic status and adopt policies that would propel it to upper-middle-income status.
He emphasised that comparing itself to low-income countries would result in losing concessional financing and grants, ultimately pushing the country to the debt market.
Mr Terkper stressed that Ghana’s economic transformation required a robust tax system that could support its development needs.
Tax
On the tax system, Mr Terkper provided some background, indicating that Ghana was one of the countries that implemented tax reforms in the 1980s and 1990s.
These reforms included granting operational autonomy to tax agencies, such as the then Internal Revenue Service and the Customs, Excise and Preventive Service.
He mentioned that the tax system had four pillars: income tax, Value Added Tax (VAT), excise duty and import duty.
Income tax, he explained, was levied on individuals and corporations, while VAT was a consumption tax that replaced the sales tax and service tax.
Mr Terkper said Ghana’s services sector had overtaken agriculture, but the country’s policies and behaviour still reflected an agrarian economy.
He stressed the importance of adding value to agriculture to serve the country’s purpose and promote economic diversification.
He said the government would implement policies that would boost revenue generation and promote economic growth, ensuring that Ghana’s economy was managed sustainably and effectively.
Mr Terkper’s remarks highlighted the need for Ghana to prioritise revenue generation and adopt a more robust tax system to support its economic development.
By doing so, the country can reduce its reliance on debt and promote sustainable economic growth.
As Ghana moves forward, policymakers must take a comprehensive approach to managing the economy, prioritising revenue generation and promoting economic diversification.