There is an obvious confusion in the Akufo-Addo government as the Finance Ministry is seen correcting claims put out by the Minister of Information, regarding the decision to slap the COVID-19 levy on Ghanaians.
It has also emerged that the GHc19 billion that Vincent Kojo Oppong-Nkrumah mentioned as having been incurred as expenditure on government’s freebies on COVID-19, is untrue. Portions of the 2021 budget, have revealed that it rather spent GH¢1.7 billion on the pandemic.
The Information Minister, had last week indicated that the government’s new taxes, including the COVID-19 levy mentioned in the 2021 budget are to help address the huge fiscal gap of GHc19 billion created as a result government’s 2020 water and electricity freebies.
His claim has brought the government under pressure forcing a statement from the Ministry of Finance on Friday, March 19, 2021, in which seven key areas on which it intends to spend the funds accrued from the levy were outlined.
According to the statement, the free water and electricity of 2020 “ought not to be misconstrued to mean the new taxes of 2021 are a direct charge for those services.”
Providing details on the appropriation of the levy, the statement noted that funds from the levy will be used in the procurement, distribution and administration of Covid-19 vaccines, establishment of 14 medical waste treatment facilities across the country for safe disposal of medical waste and the completion of 33 major health projects approved for implementation.
The statement also added that the levy will be used for the construction of 100-bed district hospitals in 101 districts with no hospitals, seven regional hospitals for the new regions under the government’s Agenda 111, recruit more health care professionals to fill the 111 district hospitals and supplement the 100,000 health workers recruited so far under the current administration.
President Akufo-Addo, had insisted that he was giving Ghanaians many freebies, including water, electricity, food and even loans to revive their businesses as a way of cushioning them against the effect of the COVID-19 pandemic, but this has turned out to be a lie per Kojo Oppong Nkrumah’s revelations.
According to him, the government spent about GH¢19 billion of borrowed funds to provide free water and free electricity among other expenses to fight the COVID-19 pandemic and that amount must be repaid.
Information Minister, had insisted that Ghanaians will have to pay for the free provision of water and electricity introduced by the government in 2020 as part of measures to curb the spread of the novel coronavirus.
President Akufo-Addo in April 2020, announced a free utility package for the vulnerable in the country to lessen the virus’ negative impact, following a lockdown in Accra and Kumasi.
Again, Akufo-Addo in his 21st address to the nation, he said, “With the continuing difficulties occasioned by the pandemic, I want to state that the government intends to continue to support the most vulnerable in our society.
“Government will, thus, continue to pay the electricity bills for our nation’s one million active lifeline customers for the next three months, i.e. January, February and March.”
However, Kojo Oppong Nkrumah, in an interview on Joy News stated “That GH¢ 19 billion has to be paid for at some point. The liabilities we have incurred have to be paid for. COVID-19 expenses are going to be with us at least for the medium-term… It does [include free water and electricity] which is part of the COVID-related expenses.”
But it has emerged that Oppong Nkrumah’s claim of GH¢19 billion on the fiscal impact of Covid-19, is untrue.
Accra-based Joy News checks from the 2021 budget have revealed that the government spent ¢1.7 billion on the pandemic.
The said the amount covered relief to health workers, soft loans for Micro, Small, Medium Enterprises (MSMEs), evacuation of stranded Ghanaians, support to household, and other expenditure.
Appendix 12 A and B of the 2021 budget on Coronavirus Alleviation Program (CAP) shows that even though ¢2.5 billion was approved to support households, relief to health workers, soft loans for micro, small and medium enterprise, ¢1.7 billion was utilised.
The document has further revealed that ¢16.4 billion out of the ¢19 billion (budgeted for Covid-19 expenditure) was spent on deficit financing.
Information Minister, Kojo Oppong Nkrumah, has explained that the move is to help stabilise the economy without engaging in more borrowing from other countries.
“The reality is that the gap between expenditure and income is widened. That widening has been compounded by Covid-19 and we are at a point where we have to make a choice to either continue to let that gap widen, if we do, we may get to a point where our economy cannot pay for basic services its debt, pay wages and salaries and do things that prior to 2016 we found ourselves doing and so the government has to take a responsible decision that we have to close this gap,” he said.
The Ofoase Ayeribi MP added, “We need to get our people to understand that at some point at some point we have to get out of this economic conundrum in which we find ourselves.
“To do that, we cannot instantly borrow our way out of our problems. Domestic Resource mobilisation has to be tweaked and it has to be done in a way that you can raise resources without overburdening the people.”
The government, through the caretaker Minister for Finance, Osei Kyei-Mensah-Bonsu in delivering the 2021 budget last week, announced the government’s proposal of introducing six new taxes.
These taxes include a COVID-19 Health Levy; 1% increase in National Health Insurance Levy and 1% increase in flat VAT rate as well as a 30 pesewas increase in fuel prices to take care of excess power capacity charges [20 pesewas] and Sanitation and Pollution Levy [10%].
Some analysts and Ghanaians have already expressed their disagreement with the proposal, indicating it will only lead to more hardship on them. But Information Minister, Kojo Oppong Nkrumah explained that to the extent that the government has to repay the monies it used to provide some reliefs and support for citizens at the height of the pandemic in 2020, such taxes are necessary.
“It is free to you, it wasn’t free to the treasury. When we say free electricity, it doesn’t’ mean the Independent Power Producer is also going to say because the President has said free electricity, I won’t charge for electricity. The government will have to pay. The government for example had to borrow money with fiscal impact of about GH¢ 19 billion to make all of those expenses happen and in addition to that, there are going to be expenses in the medium term because of COVID-19,” he explained.
He said the government considered the country’s economic situation due to the impact of COVID-19 and arrived at the decision to introduce the new taxes to avert a situation where those debts will create bigger challenges for the country.
“Can we continue to accommodate this COVID-19 black hole in these already- widening gap of our finances, or do we have to introduce a revenue handle that can take care of it and the government comes to a view that with the greatest of respect, can we take 1% VAT to pay for that, so that COVID does not become an overburdening expenditure item for us,” he added.
But speaking on PM: Express last Monday, Mr Nkrumah said “It was free to the people of Ghana at the time” adding “When we say free electricity it doesn’t mean that the IPP producer is also going to say because the President has said free electricity I won’t charge for it.”
Speaking to Evans Mensah, the minister said “But that 19 billion cedis has to be paid for at some point, the liabilities we have incurred has to be paid for,” he indicated Monday night, adding “So I am going back to Ofoasi to explain to my people why we need to ensure that we all pay that 1% extra so that we can continue to provide those services for the people of Ghana to protect lives and livelihoods.”
This, according to him, will help ameliorate the economy and bridge the gap between the country’s income and expenditure.
Mr Oppong Nkrumah said the gap has been widened even further by COVID-19, adding that “we are at a point where you have to make a choice.”
He noted that there is a need to, “get our people collectively across the device to understand that at some point, we have to get out of this economic one-step-forward half-a step-back, sometimes one step forward, two steps backwards conundrum in which we find ourselves.
“To do that, we cannot consistently borrow our way out of our problems, domestic resource mobilisation has to be tweaked and it has to be done in a way that you can raise resources without overburdening the people.”
The Information Minister said “everything we consume in this country is paid for.”
“If not, we will arrive at that graph you showed us earlier where the gap keeps widening.”
According to him, the government’s decision to provide the free utilities was a strategic choice made on behalf of Ghanaians.
He cited: “If we are at war and the government has to make a decision that we have to procure ABCDEFG to go war and win that war and does not necessarily task the population for it today and mobilises for us to achieve it, it is well in order for the government when we have won the war or on a clear path to winning the war.”
He, therefore, observed that failure to introduce some tax components to solve the problem means “we will get to a point where our economy cannot pay for basic service debt, pay wedges and salaries and do things that prior to 2016 we found ourselves doing.”
Meanwhile, Former Deputy Finance Minister, Dr Cassiel Ato Forson on the same programme maintains the government has been reckless with its expenditure, adding the impact of Covid-19 on the economy is not as bad as the government seeks to portray.
Source: www.theheraldghana.com
