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Free SHS implementation threatens Ghana’s debt sustainability – expert

The manner in which government is implementing its flagship Free Senior High School (SHS) programme could threaten Ghana’s debt sustainability, Economist John Gatsi of the University of Cape Coast has observed.

He said the accumulation of debts to suppliers who have been asked to supply goods for the implementation of the programme could create problems for the economy.

Speaking to members of the Journalists for Business Advocacy (JBA) on Wednesday during a two-day seminar by Bank of Ghana and regional bank, ECOBANK on the role of “Monetary Policy, Tools for Economic Development the economist said government needs to create a dedicated source of financing for some of its initiatives to avoid accumulation of arrears.

“In order to reduce some of the burden the government needs to bring about sustainable ways in financing some of the policies being implemented

“ Even though government clearly indicated that they want to reduce taxes and they have reduced some of them and we have seen the reflection in lower Tax-To-GDP ratio, I believe government should just forget about whatever people might say and align the Free SHS to a source of revenue that is related to taxation,” Gatsi urged.

Using the Ghana Education Trust Fund (GETFund) for Free SHS would be difficult because the burden of putting up infrastructure in the SHS in the next 10 years is huge with the increasing need to double the dormitory facilities; double the classroom facility; and double the furniture needs of the various schools across the country.

Moreover the economic lecturer who recently also got called to the BAR pointed out that since there was no clear criteria to making any graduate from Junior High Schools a day student in SHS there could be agitations soon to convert some day schools into boarding schools.

“So we should allow GETFund to continue to finance infrastructure in the SHS while we find a way of financing the Free SHS. As we speak now 80 percent (of capitation) that was left for the Free SHS has not yet been released so what is happening is that we are engaging in a cycle of accumulation of arrears,” he pointed out.

The economist added: “We have asked Ghanaian business people to provide food and other items that the students will need on credit so what we are eventually doing is that we are promoting the cycle of accumulation of arrears, and those arrears ought to be paid.”

To prevent an aggravated accumulation of arrears Gatsi was of the view that the coming on board of a tax measure will relieve the government and for that matter the country.

“I think that the clearest sustainable roadmap for financing Free SHS is to introduce an Indirect Tax for it. We can find a way within the current indirect taxes for example Value Added Tax (VAT) to bring about a one percent tax that should finance Free SHS. We can even go to the Road Fund and see what we can do about that. That will be very important,” he urged.

On the 2018 budget, the economist said it should be a budget that focuses on revenue mobilization and expansion, calling for strategies to do that, since some of the strategies being used are long term.

“For example, you cannot introduce an electronic platform and believe that it will integrate all tax payers within a year to increase your revenue. When you introduce policy it takes time for the policy to have a pass-through effect to achieve your expectation,” he indicated.

Gatsi projected: “So we may have the introduction of electronic platforms in revenue mobilization but that by itself will not bring out the excepted revenue in 2018. So 2018 will continue to be a very difficult year in terms of revenue mobilization.” Enditem

Source: Xinhua/