Government in a dilemma over fiscal policy – Prof. Osei-Assibey

Economics lecturer at the University of Ghana Prof. Eric Osei-Assibey has said the government has had a hard time balancing fiscal consolidation while pursuing economic growth.

According to him, the 2021 budget and economic policy was careful in balancing fiscal consolidation and growth.

“The budget as presented is actually trying to carefully balance fiscal consolidation and also growth through a well specific sector-based incentive package for businesses”, he said at the PwC 2021 Post Budget Forum.

He believes that although government took a refreshing fiscal consolidation approach, it also comes with come implementation risks.

“We are looking at fiscal consolidation and often for that, we are looking at two key things which are either the government is generating more revenue through taxation or reducing its expenditure or a combination of the two.

“This will definitely undermine economic growth, particularly in the short run. We want to pursue fiscal consolidation but at the same time, we are also looking to grow the economy by five percent and non-oil GDP by 6.7 percent,” he explained.

Professor Osei-Assibey also applauded the government on its bid to raise more revenue through taxation. However, he advised that government be guided by the unintended consequences of the newly introduced taxes.

On March 12, caretaker Finance Minister, Osei Kyei-Mensah-Bonsu, delivered the statement to Parliament, giving an update on Ghana’s financial state detailing Government’s expenditure in 2020 and its proposed expenditure in the new year.

The statement also included the introduction of new levies in health, petroleum and sanitation, and the upward review of the country’s road tolls.

Members of Parliament have begun debates on the Government’s budget statement for 2021. The debate is expected to last till the end of March.