Ghana’s Finance Minister Kenneth Ofori-Atta presented the 2023 budget to parliament on Thursday, raising taxes and planning a debt swap while the country negotiates a loan from the International Monetary Fund (IMF).
Ofori-Atta is facing calls for his sacking as the West African state grapples with an economic crisis, with inflation at more than 40 percent and a sharp decline in the cedi currency.
Ghana is hoping to get up to $3 billion in IMF loans this year to shore up public finances after the government originally said it didn’t need to go to the multilateral lender.
“The challenges we face are daunting,” the minister said in a statement to lawmakers. “I therefore urge all of us to play a constructive role in putting our nation back on track.”
In order to increase revenue, VAT will be increased by 2.5 percent to 15 percent in the 2023 budget. The so-called e-tax on electronic transactions will be lowered from 1.5 percent to 1.0 percent to encourage more transactions.
The government will also freeze public servant hiring for the next year.
Ghana, a leading cocoa and gold producer, also has oil and gas reserves, but its debt service payments are high and its revenues low. Like the rest of Africa, it has been hit hard by the economic fallout from the global pandemic and the Ukraine war.
Year-to-date, the Cedi currency has depreciated more than 53 percent. That compares to an average annual depreciation of seven percent between 2017 and 2021, the finance minister said.
Inflation reached 40.2 percent in October.
The devaluation of the local currency against the dollar has added 93 billion cedis, or $6 billion, to Ghana’s external debt stock this year alone, the minister said.
He said the government would launch a debt swap program but gave no details on how it would be done.
Earlier this year, President Nana Akufo-Addo changed his government’s position, saying the country would turn to the IMF for help.
Critics have questioned what austerity measures might need to accompany any lending deal. Ghanaians are already struggling with the high cost of living.
Ofori-Atta said IMF talks made “significant progress” with agreement on “pathway to fiscal adjustment, debt strategy and financing”.
The government is under mounting pressure over the country’s economic woes, and Ofori-Atta last week faced a scrutiny from lawmakers over his financial management.
Speaking in parliament on Friday, he apologized to Ghanaians for the fighting they were facing.
Earlier this month, Akufo-Addo fired the government’s deputy finance minister, Charles Adu Boahen, on bribery allegations after he appeared in a documentary about illegal gold mining.
