E-Levy to boost government revenue to 20% of GDP in 2022 – Fitch states

Ratings agency, Fitch has stated that the 1.75% Electronic Transaction Levy (e-levy) will boost Ghana’s revenue and drive an increased in government revenue to 20% of Gross Domestic Product (GDP) in 2022.

This is compared to an estimated 15.4% of GDP in 2021.

“The government’s fiscal consolidation plans are focused on revenue measures adopted in the 2022 budget, including a new 1.75% e-levy on certain digital transactions and changes to the calculation of certain taxes and import duties. The medium-term fiscal framework envisages that these new revenue measures, together with fading pandemic-related expenditure, will drive an increase in government revenue to 20.0% of GDP in 2022 from an estimated 15.4% in 2021”.

The ratings agency issued a statement 21st January, 2022, correcting commentary published on 14th January, 2022. It corrected the rating action on Ghana’s senior unsecured debt, which Fitch has downgraded, not affirmed.

“Fitch Ratings has downgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating (IDR) to ‘B- ‘from ‘B’. The Outlook is Negative”, it pointed out.

Fitch believes that Ghana will achieve moderate medium-term fiscal consolidation, but that the government’s forecasts are overly optimistic.

“We forecast the fiscal deficit will narrow by significantly less, to 9.5% of GDP in 2022 and approximately 8.0% in 2023, as government revenue experiences a smaller increase”.

It further stated that “Ghana has struggled with earlier efforts to raise revenue/GDP and public finances were deteriorating even before the pandemic, albeit partly related to the clean-up in the financial and energy sector.”