Business News

Ghana spending 103% of tax revenue to pay for interest service – Adongo

Member of Parliament for Bolgatanga Central and the Deputy Ranking Member on Parliament’s Finance Committee, Isaac Adongo is worried that interest payments are now the most significant item on the country’s wage bill.

He diagnoses the situation as part of the broader economic mismanagement by the Nana Addo Dankwa Akufo-Addo-led government

According to him, interest payments leapfrogged wage bill expenditure because of the lack of fiscal and financial space as contained in the 2022 budget statement presented by Ken Ofori-Atta on November 17.

“We have problems with the wage bill, which has now become the number two most significant item of expenditure. In fact, it has lost its place as the number one, under this government interest payment has become the number one.

“And now we are spending 103% of our tax revenue just to pay for interest service. What that simply means is that once you pay for your interest cost, no matter how the people of Ghana break their backs to give you money, it just isn’t enough, you must go to borrow.

“You notice that we run a primary balance deficit of about 8.3 billion Ghana cedis. It means that we still have to borrow for part of the interest cost. So that means that you don’t have fiscal space in the budget,” he submitted on Citi TV’s Point Blank show that aired on Monday, November 22, 2021.

He stressed that the current economic mess is the reason why in the event of a headwind like COVID-19, the economy nearly crashed.

“So when disaster struck, you economy is already gone and in that case, you cannot accommodate any additional expenditures and you can’t accommodate additional pressures,” he added.

He added that the key to better managing the economy was to create fiscal buffers to deal with headwinds. In his view, when COVID came, the government ended up squandering all fiscal buffers.

He noted further that the situation is no different in the area of financial buffers because the government has blown over a billion dollars in monies handed over to them by the erstwhile John Dramani Mahama administration.

The last budget, the Finance Minister under the heading: “Resource Allocation for 2022” stated thus:

Mr. Speaker, Total Expenditure (including clearance of Arrears) is projected at GH¢137,529 million (27.4% of GDP). The estimate for 2022 represents a growth of 23.2 percent above the projected outturn of GH¢111,645 million (25.3% of GDP) for 2021. The key drivers of expenditure growth include Capital Expenditure, funding of key Government flagship programmes including the GhanaCares “Obaatanpa” Programme, wage bill, and interest payment.

“Mr. Speaker, Compensation of Employees is projected at GH¢35,841 million (7.1% of GDP) and constitute 26.1 percent of the Total Expenditure (including Arrears clearance).

“Mr. Speaker, Use of Goods and Services is also projected at GH¢9,149 million (1.8% of GDP). This represents 6.7 percent of the projected Total Expenditure (including Arrears clearance).

“Mr. Speaker, Interest Payments are projected at GH¢37,447 million (7.5% of GDP). Of this amount, Domestic Interest due will constitute about 77.3 percent and amount to GH¢28,943 million. To reduce the cost of borrowing, Government will continue to explore options of reprofiling domestic debt in 2022.”

 

 

 

Source: ghanaweb.com

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