The Institute of Statistical, Social, Economic and Research (ISSER) has raised concerns over the growing economic inequality in Ghana despite positive economic indicators. The think tank emphasizes the need for income redistribution to bridge the gap between the rich and the poor.
Economic Growth vs. Real Hardship
ISSER’s recent report, following the Mid-Year Budget Review, highlights the disparity between the country’s economic figures and the daily hardships faced by its citizens. While per capita income increased from $1,979 in 2016 to $2,365 in 2023, inequality remains rampant. The report cites evidence from Afrobarometer surveys that indicate growing hardship due to rising food prices, transport fares, and fuel and cement costs.
Professor Peter Quartey, Director of ISSER, stressed the importance of implementing policies that ensure the poor benefit from economic growth. “In a market economy, as you grow, the rich get richer and the poor get poorer. We need to find a way for the poor to also enjoy some of the gains,” he said. Quartey suggested streamlining indirect taxes and subsidizing essential goods consumed by the poor to reduce their tax burden.
Recommendations for Tax and Debt Management
The ISSER report critiques the current tax system, particularly the 15 percent Value Added Tax (VAT) and other levies, which it argues make Ghana unattractive for business. The think tank advises the government to streamline these taxes to create a more favorable environment for the private sector, which is crucial for job creation and reducing youth unemployment.
Professor Quartey expressed disappointment that the harmonization of taxes did not occur during the Mid-Year Budget Review. “There have been several calls for the government to harmonize some of these taxes and levies, and we were hoping that this would have happened in the mid-year review, but it did not,” he stated. ISSER recommends incorporating some levies into the VAT to allow businesses to claim input taxes, thereby reducing their overall tax burden.
On debt management, ISSER’s report notes that by June 2024, Ghana’s central government and guaranteed debt stood at GH¢742 billion ($50.9 billion), which is 70.6 percent of GDP. This marks a 22 percent increase from the end of last year, primarily due to exchange rate depreciation. The report urges the government to support banks and private sector institutions affected by the Domestic Debt Exchange Programme and to seek cheaper funding from bilateral and multilateral institutions.
Focus on SMEs and Economic Stability
ISSER also calls for targeted support towards small and medium enterprises (SMEs) involved in high-value addition sectors such as agriculture, light manufacturing, hospitality, tourism, information and communication technology (ICT), and trade of domestically produced goods. The think tank recommends using existing databases of SMEs to ensure that established businesses with track records benefit from government support.
The report highlights the importance of effective monetary and fiscal policy coordination, urging stronger partnerships between the Bank of Ghana, fiscal authorities, and international financial institutions to unlock resources for economic recovery. ISSER emphasizes the need for efficient tax collection and reducing rent-seeking activities at ports by rotating personnel every two years and implementing strict rules for Ghana Revenue Authority staff.
Despite positive GDP growth, ISSER stresses that more needs to be done to address high food inflation and exchange rate volatilities that contribute to the high cost of living. “Despite the growth rate, we are still not out of the woods due to issues of inflation, which is affecting prices on the market and people’s livelihoods,” Quartey noted.
In conclusion, ISSER’s report calls for comprehensive policies that promote income redistribution, streamline taxes, manage debt effectively, and support SMEs to ensure that economic growth translates into real benefits for all citizens.
Source: Graphic Online
