The Institute of Statistical Social and Economic Research (ISSER) invited the media and other key stakeholders to a review of the 2021 budget statement, which was presented to the Parliament of Ghana on 12th March 2021. The event was chaired by Dr. John Kofi Mensah, an astute Banker and the Managing Director of Agricultural Development Bank (ADB), Limited.
The Head of the Economics Division of ISSER, Dr. Isaac Osei-Akoto welcomed participants and stated that the budget review by ISSER was the product of rigorous analysis by the Institute’s economic experts to understand the various policies and programmes as contained in the budget and the likely implications on businesses and livelihoods.
The Director of ISSER, Prof Quartey who delivered the presentation, noted that the annual budget review by ISSER distinguishes itself as a credible, thorough and independent alternative to the diverse comments that usually follow the release of the budget statement.
Presentation of the budget review
Prof Quartey started by highlighting the aim of the 2021 budget, which is: “implement measures to mitigate the impact of the pandemic with a view to returning the economy to strong and sustainable growth while protecting lives and livelihoods” and proceeded to give a detailed presentation that covered: overview of the world economy in 2020; macroeconomic objectives; key programs for recovery in 2021; total revenue, grants and expenditure. Others are monetary policy; sectoral developments; reflections on international trade; and implications for the private sector and livelihoods.
Drawing on the analysis and deliberations of the budget review team, here are ISSER’s projections into the impacts of the various measures (opportunities, incentives, constraints) contained in the budget statement:
- Tax increases aimed at boosting government revenue
Will increase the cost of doing business, reduce private sector investment, decrease economic activity, increased incentive for tax avoidance, businesses may pass the increased costs on to consumers making households worse off.
- Tax rebates, penalty suspension, tax waivers
Will reduce the cost of doing business, encourage employment and investment and therefore the level of economic activity has also been envisioned by the budget.
- The bank clean-up levies
Will affect stated capital, limit private sector access to credit, impact economic activity and employment.
- Expenditure on infrastructure
Will shore up economic activity, for example, by upgrading transport networks which is a need for the private sector. Will boost aggregate demand and also increase labour productivity.
- The CARES Programme
Will encourage entrepreneurship in agriculture and light manufacturing.
- Agricultural expansion and modernization through the PFJ and other related programmes
Should drive food prices down, increase availability of raw materials and moderate the effects of inflation and real incomes.
- The Bail out of 17 AMCs (GHS5.5bn)
Will inject liquidity into the system and stimulate private sector capital. Individuals will spend or invest such funds back into the economy through businesses.
- The long-term Lease-To-Own Financing arrangement for commercial vehicle owners
Would provide better vehicles on the road with less pollution, secure jobs and improve livelihoods.
Reflections and recommendations
Finally, the presentation outlined some reflections and recommendation towards mitigating and recovery from the impact of the pandemic.
- COVID-19 has worsened the already limited fiscal space.
- The expenditures and reliefs will certainly have to be paid – “There is No Free Lunch” – when and how do we clear the accumulated debts to sustainable levels in the medium term?
- Ensuring efficiency in tax collection through digitization and limiting human interface or discretion is the sure way to go.
- Wage increases in 2021 and beyond should be moderate and based on cost of living differences and improvements in productivity, else it will be counter-productive.
- Removing agro-processing bottlenecks through enhanced services sector could drive up productivity in both the agricultural and industrial sectors.
- Efficiency and reliability in the supply of electricity will play a key role in this recovery.
The 2021 budget review was organized differently due to COVID-19 restrictions: physical attendance was limited to media representatives and selected stakeholders only, with a live stream of proceedings on the institute’s Facebook page for the benefit of broader audience.
The event chairman and MD of ADB, Dr. John Kofi Mensah, was accompanied by the Chief Finance Officer of ADB, Mr. Leon Bannerman, Area Manager for Accra West, Mr. Robert Karikari Darko and the head of Marketing, Mr. Selorm Amevor. Academics from ISSER and other units of the University of Ghana also participated in-person.
The event generated several reports in broadcast (television, radio), print (including the Daily Graphic newspaper, a national daily) and online media.
The event was held with the financial support of ADB, a longstanding partner of ISSER.