Renowned Economist, Dr. Joe Abbey, says Ghanaians should brace themselves for tough times in 2016 as Finance Minister Seth Tekper prepares to present the 2016 budget today.
According to him, although 2016 is an election year and hence government is expected to spend more, the country’s programme with the IMF would force managers of the economy to streamline their expenses.
“In spite of the fact that our election years have typically ended up with large deficits, they [IMF] are saying to you that there is no room for you to spend above your means and hope you can go and borrow. You have reached the limit,” Dr Joe Abbey said.
He said although there may not be clear austere pronouncements in Mr Tekper’s 2016 budget presentation, austerity could still come by way of inflation tax.
He said this hidden tax would be borne automatically by Ghanaians if government decides to print more money to mask austerity.
“Inflation tax can erode your income. It is a more wicked tax than an open tax but inflation can used to implement austerity which is a little more difficult to put your finger on,” he said.
On plans to review tax exemptions granted to some businesses, Dr. Joe Abbey says government must tread cautiously.
Dr. Joe Abbey fears the move might be counterproductive.
Sources say government is looking at reviewing tax exemptions granted to businesses. This is part of strategies to boost revenue generation to managing its rising expenditure.
However, Dr. Joe Abbey says current challenges facing the economy make it a bad move.
According to the revised budget estimates for 2015, government is hoping to spend about 30 billion Ghana cedis by the end of this year, but it has as at August raised 20.5 billion Ghana cedis.
On the expenditure side government is looking at spending 37 billion Ghana cedis, but as at August, it expenditure stood at 24.7 billion Ghana cedis.