ANALYSING THE 2022 BUDGET - What does it mean for Businesses/Industries?

Published on 23 Nov, 2021.


The 2022 budget statement and economic policy of the Government was read in Parliament Wednesday 17th November 2021. It is a mix of good and bad for individuals and businesses per our assessment. What we observe is an emphasis on revenue mobilization against expenditure rationalization or value for money. The 2021 fiscal year has not been too good as the Government had challenges with meeting its revenue target. Figures released by the central bank, BoG, suggests that as of September 2021 (Q3) government missed its target by GH¢4 billion, an indication that we are most likely going to miss the GH¢72.452 billion target set in the 2021 budget. Considering the huge fiscal gap and the debt burden, the 2022 budget outlines measures including two new taxes to enhance its revenue mobilization efforts.

This paper analyses the implications of the 2022 economic policy document on businesses/industries.

Key highlights of the budget statement include:

  • Total revenue, including grants is projected at GH¢100.5 billion (20% of GDP)
  • Domestic revenue is estimated at GH¢99.5 billion and represents an annual growth of 44% over the projected outturn for 2021
  • Two new taxes have been introduced to complement existing taxes and other efficiency measures to meet the projected revenue: these taxes include a 15% hike in all government charges/fees, and a 1.75% E-Levy
  • These two new taxes are expected to raise the tax revenue from GH¢65billion to GH¢80billion.
  • Total expenditure, including arrears is also projected at GH¢137.5b (27.4% of GDP)
  • Total expenditure estimate for 2022 represents a growth of 23.2% above the projected outturn of GH¢111.6 billion
  • This leaves a fiscal gap of GH¢37 billion (7.4% of GDP)
  • The Government intends to close the fiscal gap by borrowing GH¢27.9b domestically through the sale of securities and GH¢ 9.1b externally – from IMF’s Special Drawing Rights.
  • Two expenditure items; compensation of employees and interest payment constitute 54% of the total expenditure.
  • For the 2nd time, interest payment (GH¢37.5 billion) exceeds compensation of employees (GH¢35.8 billion)
  • Capital expenditure in the short to medium term (2022-2025) is projected between GH¢16 billion to GH¢20 billion. This trend is very disturbing as development and productive sectors of the economy will be greatly affected.


Debt Stock

The provisional nominal debt stock, including financial sector bailout costs and energy sector IPP payments stood at GH¢ 341.76 billion, equivalent to 77.5% of GDP as of end-September 2021. The debt level is expected to increase beyond 80% to GDP in 2022 considering the fiscal gap of GH¢ 37 billion that must be closed, all things being equal. As highlighted, more borrowings will be done domestically compared to external borrowings. This has become necessary following the reduction in investor confidence as a result of the high debt burden. Ghana’s debt burden has reached unsustainable levels. The World Bank and IMF recently listed Ghana among countries that are “Highly Indebted Poor.” Also, the current global economic sphere is not in a good position amid the C-19 pandemic. Countries are trying to work their way out of the doldrums of the economic shock. Considering these, the government seeks to raise more domestic revenue and borrow more domestically. Businesses risk losing out as access to credit will be reduced, hence hindering private sector growth and overall GDP growth. In 2020, financial institutions lent more to the Government than the private sector due to the low risks. The crowding out of the private sector is expected to continue in 2022.


To widen the tax net, an E-Levy – 1.75% will be charged on all electronic transactions by individuals and businesses. It is one of two new taxes introduced in the 2022 budget. The two new taxes introduced are expected to increase tax revenue from GH¢65 billion to GH¢80 billion. The public reaction towards this policy initiative has not been good. There is a high probability that Government will not meet its revenue expectation from this policy. This threatens the gains made in terms of financial inclusion as some people we have spoken to, including Analysts, opined that transactions through digital platforms will reduce. Mobile money vendors (momo) have expressed shock withdrawals after the budget reading.

BoG data showed that between February 2020 and February 2021 alone, Ghana saw an increase in e-transactions of over 120%. The days of holding physical cash will return. We are of the view that the rate set by the Government is too high. A much lower rate (less than a percentage point) would have been ideal and accepted by the populace. Aside from a relatively low rate, we are of the view that the nature of transactions to be targeted under this policy should be well thought through. Interbank transactions, and momo to bank transactions and vice versa should not be charged. We expect these to be brought up on the floor of Parliament to improve this policy initiative in the interest of Ghanaians. If this is approved without proper scrutiny or adjustments, individuals and businesses will have their cost of living and doing business increase.

Government Fees/Charges

The other new tax introduced is a 15% increase in all government fees/charges. Businesses and individuals that want to engage the services of the state will be required be bear an extra 15% charge on the current fee. This is set to take effect in January 2022. In addition, this policy will be subjected to an annual automatic adjustment to the rate of inflation as published by the Ghana Statistical Service, but with the prior approval of the Minister of Finance.

Business at the Ports

Following pressures from the Association of Ghana Industries (AGI), the 30% and 50% benchmark policy imposed on some 32 imported goods will be scrapped following parliamentary approval. This action is expected to make local businesses competitive. The rationale for this action has been questioned considering we are an import fed country. To many analysts, this policy which was implemented 2½ years ago was more political than economic. It has denied the state the needed revenue and crippling local businesses. As a result of the reversal of this policy, businesses that trade in any of these 32 imported products/inputs will have their cost of doing business at the ports increased, which will increase their production costs and hence an increase in the price of final products on the market. In as much as forex earnings will be improved, there is the likelihood of experiencing imported inflation.

Small-scale Gold Mining

Tax evasion from small-scale gold mining will be addressed. The budget makes provision for the reduction of the withholding tax on the sale of unprocessed gold by small-scale miners from 3% to 1.5%. The current high 3% rate is one of the reasons for the smuggling of the precious mineral out of Ghana. It is expected that the reduction will incentivize small-scale miners to go through the right channel for exporting the gold and pay the required tax to the state. This is expected to take effect from 1st January 2022.

VAT Relief for Textile Industry

The government has decided to extend the tax relief it initiated for textile manufacturers in 2019. This policy intended to enable textile manufacturers to resuscitate their operations and provide affordable textiles to the market. It is however noted that this policy has seen some positive results as textile companies have been stabilized. The relief has been extended for another 2 years to enable these textile companies in the country to consolidate the gains made and expand their businesses.

VAT Flat Rate

To make local businesses competitive, the government has restricted the 3% of the sale price of goods to only retailers. The policy which was initially implemented in 2017 was restricted to both wholesalers and retailers. This new development will make local businesses competitive.

Exemptions Bill

The exemptions bill has been completed and laid before Parliament, which is expected to pass the bill in Quarter 1 2022 to check some of the leakages in the economy. Businesses in the mining and oil and gas sectors especially should be prepared for additional taxes or new taxes once it is passed.


The 2022 budget seeks to enhance revenue mobilization efforts. For the first time, Ghana’s revenue target has crossed GH¢100 billion. An ambitious move which we think will be a tough hurdle. Our analysis reveals challenges ahead in the rollout of these policies. Evasion will increase and that will likely prevent the Government from realising its target for the fiscal year. This will coerce the Government to reverse some of the policies later in 2022 or the next budget. The private sector should prepare for the implications of these new initiatives. We are of the view that the government is not addressing the fundamental issues affecting the Ghanaian economy. The tax approach has been a problem since 1992 (4th Republic). The same taxpayer base is mostly being asked to pay more. There is a need to diversify the economy and break the dependence on commodities (gold, cocoa, and oil). Economic growth does not translate into jobs and the ever-growing debt levels – now at an unsustainable level - need to be properly addressed to take the country out of a vicious economic conundrum.

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