This follows a revelation the Washington-based lender made in its latest review of Ghana’s ongoing bailout programme.
Here’s how the IMF backs Ghana over tax exemptions reforms
The International Monetary Fund (IMF) has backed the government of Ghana to repair its tax exemptions regime to boost the country’s domestic revenue and help improve the performance of the local currency.
The IMF said rationalising tax exemptions in the country will improve government’s domestic revenue mobilisation.
The domestic revenue performance over the past two-three years has not met the budgeted estimates, with last year’s target falling short by about 10 per cent and prompting the government to realign its expenditure in view of the shortfall.
President Akufo-Addo in last week’s State of the Nation Address described the existing tax exemption policy as an Achilles-heel and a growing menace to fiscal stability and revenue generation.
“In the last eight years, tax exemptions in respect of import duty, import VAT, import NHIL and domestic VAT have grown from three hundred and ninety-two million Ghana cedis (GH¢392million), that is 0.6% of GDP in 2010, to GH¢4.66 billion – 1.6% of GDP in 2018.”
According to the president, this is not sustainable and the government intends to do something about it to reverse the trend – by introducing suitable measures that may disrupt the easy and comfortable arrangements many have become accustomed to.
Ghana’s progress with the IMF
The Extended Credit Facility (ECF) supported programme will end on April 3, 2019, and the IMF mission said the government of Ghana has made good progress in implementing the programme.
Ghana met the six out of nine end-December 2018 quantitative targets under the program and structural reforms are advancing.
According to the mission, Ghana’s recent economic performance as favourable, despite a less supportive external environment for frontier economies.
Real GDP grew by 6.7 per cent in the first three quarters of 2018. Over the medium-term, growth is projected to remain sustained – buttressed by recent oil discoveries while consumer price inflation, now at 9.0 per cent, is well within the band around the inflation target.
The overall fiscal deficit reached 3.7 per cent of the rebased GDP (excluding financial sector costs), and the primary surplus (overall budget balance excluding interest costs) was in line with programme targets.
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