E-levy not the ultimate solution to Ghana’s economic challenges now — Terkper

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A former Finance Minister, Seth Terkper, says it has become prudent for the Government to go to the International Monetary Fund (IMF) for policy credibility to enable the country have access to loans on the international market.

His proposal to the Government comes at a time that International Ratings Agency, Fitch Solutions, has downgraded the country’s credit rating from B to B-.

The downgrade, Fitch said, was because of the uncertainty about the Government’s ability to stabilise debt against a backdrop of tightening global financing conditions.

Another concern is the issue of the country’s current economic fundamentals, which some Economic and Finance experts have noted to be “fragile” to shocks, leading to the debate of the country going back to the IMF.

While admitting that Government’s borrowing to finance development projects and essential expenditure was unavoidable, Mr Terkpey said the current economy lacked that international market borrowing credibility.

He said: “Borrowing is inevitable; because your budget, including the e-levy without any major restructuring is going to pay compensation, interest (on loans), running of government business, and continuation of pipeline projects.”

He said this in a media engagement in Accra.

Mr Terkper, who once served as a Senior Economist with the Fiscal Affairs Department of IMF noted that current revenue to expenditure deficit could not make it possible for the Government to finance such expenditure.

He said: “You borrow because you have commitments and you don’t want to default but then alongside with that one, you borrow part of the money from the market to refinance and pay down some of the debt and put in other measures as we did with the sinking fund.”

He added: “When you do an IMF [bailout] programme, the World Bank, African Development Bank, and development partners have clarity [on your policy credibility], and just as the World Bank, IMF and everybody is warning us, we lack market access.”

Meanwhile, Mr John Ampontuah Kumah, a Deputy Minister for Finance, at this year’s Annual New Year School, said: “The clear position of Government is that we’re are not going for an IMF programme. We’re competent to manage our economy and we trust our ability to weave out of these difficult times.”

Mrs Abena Osei Asare, also a Deputy Finance Minister, on a media platform, said the introduction of the Electronic Transactions Levy (E-levy) would be a “homegrown solution” to the country’s current economic challenges.

She said: “Globally, there are issues everywhere and all countries are trying very hard to find space within themselves to develop and then you have [a method you can use] to raise more revenue, and you say you are shelving that and running to IMF?”

In the Appendix 3A of the 2022 budget, the Government pegged total revenue for 2022 at 100,516,846,109, with e-levy estimated to contribute 6,963,386,254 [6.92 percent of the total revenue].

The country last exited an IMF programme in 2019 after it went for $918 million loan from the international financial institution in 2015 to stabilise the economy, which the IMF said was in “trouble”.

At the time the IMF said the country was faced with a widening current account and budget deficits, rampant inflation, depreciating of the currency, out-of-control government spending, credit dry up as interest rates rose and bad bank loans piled up.

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