Allocate greater shares of new loans to productive capital expenditures …Deloitte Ghana urges govt
The government needs to allocate a greater share of new loans towards productive and self-sustaining capital expenditures in order to enhance revenue generation for the timely repayment of the nation’s debt, Deloitte Ghana has stated.
.According to the firm, “That is the most feasible option for achieving the optimal debt to Gross Domestic Product ratio.”
Deloitte Ghana in an analysis of the 2024 mid-year budget review said the resumption of debt service commitment post International Monetary Fund (IMF) presented some risk to the economy and targets sets under the programme.
“Given that the debt will most likely continue to increase overtime, the most feasible option for achieving the optimal
debt to Gross Domestic Product ratio is to direct increasing portions of additional loans into productive and self-financing capital expenditure to expand the economy whilst generating inflows to pay down these loans,” Deloitte Ghana emphasised.
Ghana is currently enjoying a freeze on debt payment to its official and bilateral creditors as a result of the country’s debt restructuring programme and will resume payment in 2026.
The country’s external debt restructuring has resulted in debt relief of $4.4 billion and debt cancellation of $4.7 billion over the course of the IMF Programme and is expected to slow down the extent of debt accumulation and the rise in Ghana’s debt to GDP ratio, which is projected at 55 per cent by end of 2028, from the current which is above 70 per cent.
As of the end of June 2024, total public debt stood at GH¢741.95 billion, which
represents 70.6 per cent of GDP and an increase of 22 per cent from the previous year’s GH¢608.4 billion as of December-end 2023, constituting 72.3 per cent of GDP.
On the cut in budget expenditure and increase allocation to capital expenditure, the Deloitte Ghana noted that the government should invest in critical sectors of the economy in order to promote growth of the economy.
“Allocation of such spending to priority sectors can spur strong economic performance in the medium to long term,” it said.
The Finance Minister, Dr Mohammed Amin Adam, presenting the mid-year budget review highlighted that government intended to increase capital expenditure investments from 2.5 per cent of GDP in 2023 to 2.8 per cent of GDP in 2024.
Deloitte Ghana on tax explained that it was encouraging the government did not introduce new taxes and announced
tax incentives for the private sector to spur the growth of the sector
“The proposed extension of tax incentives to cover private sector players partnering government in road construction project will be a novelty if implemented on a national scale,” it said.
The auditing and accounting firm indicated that the proposal to extend tax incentives to manufacturers of two-wheeled and three-wheeled electric vehicles as an indication of government’s continuing agenda of incentivising eco-friendly transportation in Ghana to help meet Ghana’s Nationally Determined Contributions under the Paris Agreement.
BY KINGSLEY ASARE
