IEA wants budget that addresses huge legacy debt and restores financial sustainability

The Institute of Economic Affairs (IEA) wants a budget that would specify a comprehensive plan for addressing the huge legacy debt in the energy sector, while returning the sector to financial sustainability.

In its bi-monthly Economic Outlook, the economic think tank said there should also be a plan to ensure a stable and less-costly power to boost the competitiveness of the economy.

It also called for a budget that recognises the lack of fiscal space to support economic development due to limited government revenue.

“While taking steps to increase the tax intake, it will be important also to recognise the potential of the natural resource sector to provide resources for development. Tapping this potential will require changes to the natural resource fiscal regimes towards increasing Ghanaian ownership and benefits”, it mentioned.

It continued that local value-addition to natural resource products should also be given priority attention so as to increase receipts from the resources.

The 2025 Budget is expected to conform generally to the Economic Credit Facility programme by the International Monetary Fund.

In particular, the IEA said the ECF’s fiscal consolidation stance is expected to be followed to sustain the macroeconomic stabilisation effort.

In this regard, it is noted that the overall deficit is appropriately set to decline further to -2.7% from the projected -3.5% in 2024, while the primary surplus will increase to 1.5% from 0.5%.

“The tight fiscal stance is in line with the debt sustainability trajectory envisaged under the programme”, it pointed out.

The IEA added that moving along this path is necessary to avoid another painful debt restructuring, while engendering investor confidence in the economy.

Covid, betting taxes to be scrapped.

In line with Government’s pre-election promise, a couple of taxes are expected to be abolished, including the E-levy, Covid tax, Emissions tax and Betting tax.

The IEA alluded that the abolition of the taxes will ease the burden on the few paying households and businesses, highlighting that, the resulting loss in revenue is expected to be offset by reinforced efforts to plug the numerous tax loopholes, broaden the tax net and strengthen tax administration, among other measures.