Addressing economic imbalances:

Govt outlines tough measures

  • Cuts expenditure by 20%
  • Reduces fuel prices
  • To mobilise more revenue
  • Shore up cedi to halt depreciation

The government yesterday announced a cocktail of measures to help address the imbalances in the economy and also to mitigate the prevailing economic hardships in the country.

The measures which are expected to have wider implications for the economy and provide reliefs for Ghanaians in the midst of the current global crisis include, expenditure cuts, fuel price reduction, raising of more revenues and financing arrangements to shore up the cedi.

Addressing a news conference in Accra yesterday, the Minister of Finance, Ken Ofori-Atta, said these measures had become necessary due to the twin crisis of the COVID-19 pandemic and the invasion of Ukraine by Russia and its attendant impact on the global economy.

He said government would cut its discretionary spending by additional 10 per cent bringing the total cut in this area of spending to 30 per cent for the next three quarters of the year.

Further to cutting down on discretionary spending, fuel coupons allocations for all political appointees and heads of government institutions, including State Owned Enterprises are to be cut by 50per cent.

In addition to this, the Minister of Finance said a complete moratorium on the purchase of imported vehicles for the rest of the year and this would affect all new orders, especially 4-wheel vehicles.

“We will ensure that the overall effect is to reduce total vehicle purchase by the public sector by at least 50per cent for the period,” he emphasised.

Mr Ofori-Atta noted that these expenditure cuts were projected to save the country an estimated figure of about GH¢3.5 billion and help government achieve the 7.4 per cent deficit target set in the 2022 budget.

On fuel price measures, he said though the rise in crude oil prices should have been to the country’s benefit on net basis, the import of petroleum products amounted to 5.2 times the value of proceeds from the country’s crude oil export.

“In 2021, we exported $3,947.70billion of which Ghana’s portion was $513 million. However, we imported $2,719 billion of crude oil and finished products. The purported windfall gain in foreign exchange is a mirage,” he said.

He explained that from January to date, the average ex-pump price of diesel and petrol had increased by 57 and 45per cent respectively.

However, he said unlike other countries where the hike in crude oil prices and exchange rate volatility were leading to shortages in supply of petroleum products, the government was implementing measures to guarantee constant supply of Petroleum products.

To mitigate the impact of rising cost of petroleum products at the pump for the next three months, government had decided to reduce margins in the petroleum price build up by a total of 15pesewas per litre with effect from April 1.

He gave the breakdown of the 15pesewas as the Bulk Oil Storage and Transportation (BOST) margin reduced by two per cent, Unified Petroleum Pricing Fund margin reduced by ninepesewas per litre, Fuel Marketing margin, reduced by onepesewas and Primary Distribution Margin reduced by three pesewas.

“These reductions in margins are expected to reduce petrol by 1.6per cent and diesel by 1.5per cent. We anticipate that the measures taken to strengthen the currency will help further stabilise the prices at the pump,” he stressed.

In furtherance to this, he said the National Petroleum Authority (NPA) was in discussion with the Oil Marketing Companies (OMCs) to reduce their margins within the spirit of burden-sharing.

On measures to increase revenue, government would begin the implementation and collection of the revised property rate, implement the E-VAT/E-commerce/E-Gaming initiative by April this year, roll out simplified tax filing mobile application for all eligible taxpayers by July, impress on Parliament to fast track the passage of E-levy Bill, Tax Exemption Bill and the Fees and Charges Bill.

In addition to this, he said the government would partner the private sector to introduce digital systems to monitor quarrying, sand winning and salt winning to get more revenues from the country’s natural resources as well as enforce immediately the “No Duty, No Exit policy at the MPS terminal at the Tema Port to improve revenue collection.

Touching on the depreciating currency, Mr Ofori-Atta said government would soon conclude external financing arrangements of up to $2billion to shore up the cedi.

This he said was in line with the approved external financing for 2022 and for liability management.

Also he noted that the Ministry of Finance would work with the Bank of Ghana to review the foreign exchange retention policy to ensure multinational companies in the extractive sector retain foreign exchange earnings from the sale of the country’s resources.

The Minister further said in the medium term, all public tertiary institutions would be weaned-off from government payroll and provided with a fixed amount “block grant” instead.

Also the government would pursue reforms to address structural challenges in public financial management including procurement and commitment control, payroll management and human resource management.

Mr Ofori-Atta said even though it was too early to say the COVID-19 pandemic was over, it was good to acknowledge that Ghana handled it excellently.

“We have emerged from its deadliest and most economically damaging phase. If the measures we have outlined in our economic recovery programme are executed as planned, the Ghanaian economy should return to pre-pandemic levels across most economic indicators by the end of the year.

He charged Ghanaians to express optimism and contribute their own quota in the rebuilding exercise, stressing that “we need not pay attention to the doubters and naysayers but believe in ourselves and know that we can do it.”

 BY CLIFF EKUFUL

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