Upholding current tax measures in mid-year budget review good for businesses – Deloitte

The government’s choice to uphold the current tax measures in the 2024 mid-year budget review of­fers some relief to both business­es and individuals, as any addition­al tax increases could hinder the productivity of the private sector, Deloitte Ghana has stated.

In its analysis of the 2024 mid-year budget review, it noted that the business environment was already marked by notably high inflation and a decline in exchange rates; consequently, such a deci­sion was essential to mitigate the challenges faced by businesses.

The debt restructuring together with the International Monetary Fund programme has reduced the country’s interest payment from GH¢55.9 billion (largest expenditure item) to GH¢48.0 billion (second largest expenditure item).

According to Deloitte, this should generate the necessary fiscal capacity in order to execute essential government initiatives aimed at revitalising and trans­forming the economy.

The government forecast increased capital expenditure investments from 2.5 per cent of Gross Domestic Product in 2023 to 2.8 per cent of GDP in 2024.

Deloitte further indicated that the forecast highlighted a signifi­cant emphasis on enhancing social infrastructure and other essential services within the framework of the fiscal consolidation pro­gramme.

“Directing such expenditures towards priority sectors has the potential to drive robust economic growth in the medium to long term,” it said.

In the 2024 mid-year budget review, the government revised the total revenue and grants for this year upward to GH¢177.2 bil­lion compared to the 2024 budget of GH¢176.4 billion, representing a 0.5% increase.

Total expenditure for 2024 was also revised downward to GH¢219.7 billion compared to the 2024 budget of GH¢226.7 billion, a 3.2 per cent decrease.

The decline in total expen­diture, the professional services firm, indicated is expected to result from savings on interest payment from GH¢55.9 billion to GH¢48.0 billion in 2024, owing to the government’s completion of external debt restructuring (in respect of bilateral, multilateral and Eurobond debts).

The report also noted that the resumption of debt service commitment by Ghana post to the International Monetary Fund (IMF) programme presented risks to the country’s target of attaining 55 per cent debt-to-GDP at the end of 2028.

This is despite the country’s external debt restructuring result­ing in debt relief of $4.4 billion and debt cancellation of $4.7 billion over the course of the IMF Programme, which is expected to slow down the extent of the country’s debt accumulation and therefore the rise in Ghana’s debt to GDP ratio.

“Ghana has targeted a debt-to-GDP ratio of 55 per cent by the end of 2028, however, the resumption of debt service com­mitment post-IMF presents some risk to this target,” it said.