Business News of 2014-02-18

Gov't fires wide on social targeting

The government has explained that the regular adjustment in utility tariffs and fuel prices “is to correct the inefficiencies in the untargeted nature of the subsidies where the subsidies tended to benefit the rich more.”

It said the policy was also to free more resources for the implementation of poverty-reducing interventions to benefit the poor.

“We wish to emphasise that the implementation of the policy on frequent adjustment of fuel tariffs and utility prices does not completely remove subsidies,” the Ministry of Finance said in statement released in Accra on February 11 in response to recent concerns raised by the Trades Union Congress (TUC) on the management of the economy.

The statement issued by its Public Relations Unit of the ministry said the government was currently pursuing a more diversified social intervention programmes in areas such as education, health and energy.

Social interventions

It outlined some of the social interventions meant to mitigate the plight of the vulnerable as an expanded Livelihood Empowerment Against Poverty (LEAP) programme, a national cash transfer to the poor, school feeding programme, capitation grant to public basic schools, subsidised registration costs for candidates of Basic Education Certificate Examination (BECE) and distribution of free exercise books and school uniforms to pupils in basic schools in selected deprived communities.

Others include the construction of additional Community Health Planning and Services (CHPS) compounds to improve equitable access to healthcare, the Self Help Electrification Project (SHEP) to provide electricity for rural dwellers, Kero Lantern Replacement Project, which provides solar lanterns to replace kerosene lanterns, particularly, in areas without electricity, as well as the Rural LPG programme to promote the use of LPGs in rural communities in particular.

Survey on targeting

The government’s assurances come at a time when a recent World Bank study on ‘Improving the Targeting of Social Programmes in Ghana’ has identified only LEAP to have reached more than 50 per cent of its targets, while the National Health Insurance Scheme (NHIS) reached less than 50 per cent of its targets being indigenes.

For instance, the data analysed suggested that three-fourths of the transfers provided by the LEAP reached the bottom two quintiles of the population and the share reaching the poor is estimated at 57.5 per cent.

The Ministry of Education (MoE) school uniforms’ programme, which has been touted as highly successful, also seem to have reached only 49.9 per cent of its targets, while the capitation grant reached 43 per cent of its targets.

VAT and fiscal space

Contrary to TUC views that the increment in the Value Added Tax (VAT) rate was creating hardships, the government said it deemed the increases in VAT and other fees as a prudent fiscal measure aimed at creating the needed fiscal space to accommodate the increasing infrastructure needs to sustain the country’s lower middle income status.

“The increase in VAT by 2.5 per cent is intended to support the Ghana Infrastructure Fund which will be used to address the huge infrastructure deficit in the country. The focus will be on strategic infrastructure that will lead to job creation and the growth of the economy. It is instructive to note that the 17.5 per cent VAT is consistent with the sub-regional and global averages.

On the country’s trade policy being too liberal and punishing domestic manufacturing, the Finance Ministry said the government was mindful of the need to promote industrialisation and create the necessary environment for the industrial sector to thrive.

“The 2014 Budget announces a number of measures that support private sector development and industrialisation such as the creation of an SME Fund, provision of stimulus for the private sector in the export, pharmaceuticals, poultry, textiles/garments and agro-processing sectors, among others,” the statement said.

It said as part of measures to promote local industries to make them more competitive, raw materials imported for the local printing of textbooks and exercise books would be admitted free of import duty and VAT.

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