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Expenditure Estimates of the 2023 Budget Are Unreliable: Fitch Solutions
According to research and market intelligence company Fitch Solutions, a rise in the Value Added Tax (VAT) rate and other tax initiatives will enable Ghana to dramatically increase its revenue collection in 2023.
Despite its precarious budgetary position, it is concerned that the expenditure projection for the upcoming year is far higher than its 2022 aim.
Mike Kruninger, a Senior Country Risk Analyst at Fitch Solutions, voiced concern about the outlook of the Ghanaian economy for 2023 and expressed concern that the 2022 Budget was expansionary rather than contractionary and did not address the weak economic fundamentals.
To that effect, he iterated as follows:
“Minister of Finance, Ken Ofori Atta, presented the 2023 Budget in late November [2022]. As we expected, the budget details a couple of pretty significant tax reforms in order to improve revenue collection including an increase in the Value Added Tax rate up to 15% from 12.5%.
The Finance Minister also announced the introduction of a new income tax bracket of 35%, and given that income tax is a vital source for fiscal in-takes for government, we do expect these measures to boost revenue collection in 2023”.
“However, the 2023 budget was significantly more expansionary than we had anticipated”, he pointed out.
In light of this, Mr. Kruninger lamented that the government’s projected spending for 2023 is far more than expected, which could hamper attempts to reduce the fiscal imbalance.
“While the Minister of Finance did announce a couple of spending reforms including ‘high in-freezer of public servants and placing salary adjustments on state enterprises, he did not announce large-scale spending plans”.
“Indeed, the spending target for 2023 is well above the spending target for 2022”, he added.
Conclusion
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