Ghana's expenditure is not sufficiently high - IEA explains why

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Tue, 3 Aug 2021 Source: www.ghanaweb.com

• The IEA has said the nation's expenditure is not enough

• According to the Director of the institute, a low revenue effort poses a constraint on the country's economy.

• He recommended that government needs to collect more taxes to further project the country's development agenda

The Director of Research of the Institute of Economic Affairs (IEA), Dr. John K. Kwakye, has stated that revenue mobilisation in Ghana still remains a serious challenge.

According to him, compared to other countries, Ghana's expenditure is not high enough because government fails to collect a lot of taxes.

He further explained that a low revenue effort poses a constraint on the country's economy.

"You see, the problem in this country is not that we spend too much. All that we spend is US$20 billion. In the United States, the State of Carlifornia, their budget is about US$500 billion. We are a country and our budget is US$20 billion. That is why we do not meet infrastructural needs. That is why you see dilapidated infrastructure, poor sanitation, and choking drains because we do not have enough money." Dr Kwakye noted.

The IEA boss was addressing journalists at a press conference in Accra on the back of the Finance Minister's presentation of the 2021 Mid-Year Budget Review in Parliament on July 29, 2021.

Noting one of government's biggest flaws in revenue mobilisation, he mentioned that the country's recurrent expenditure is more compared to the capital expenditure which could lead to underdevelopment.

"In terms of the levels, Ghana's expenditure is not big. Maybe the problem is that we do not allocate it properly. We spend very little on capital expenditure in other words investment because that is where government has a lot of discretion," he said.

"So we keep squeezing investment spending and inflating recurrent spending. How do you expect the economy to grow?" he stated rhetorically.

Dr. John Kwakye thus advised government to manage the budget deficit.

He also stressed the need to increase revenue effort by widening tax net and plugging numerous loopholes such as tax exemptions, payment of high salaries, illicit financial flows, tax fraud, inefficiencies in tax administration among others.

Experts estimate that plugging these loopholes could add over 10% of GDP to Ghana's tax revenue collection.

Source: www.ghanaweb.com