In reaction to our exposure of its agreement with the IMF to ensure that petrol and utility prices are increased, government last week announced that there would be no price increases this year, effectively boxing itself into a corner.
Having declared that there would be no price increases, it would now be very difficult for the government to go back on its word especially in an election year.
It is also likely that plans to introduce the National Health Insurance Levy, which is a 2.5 per cent increase in VAT, would be dropped for similar reasons. The decision not to adjust prices of utilities as agreed on with the IMF is certainly going to place government in a difficult situation with donors who are likely going to hold back the disbursement of some funds.
Also, government is likely to have problems sealing the $60million hole in this year’s budget, which is expected to come from donor assistance. Up to 60 percent of Ghana’s development budget is donor funded.
Public institutions especially the Electricity Company of Ghana (ECG), which are relying on donor inflows to improve their operations, should not expect much. The World Bank had tied its agreement to give ECG some money to government ensuring that the utility companies recover their costs.
Source: GhanaWeb
