IMF, govt discussing alternative measures after suspension of VAT on electricity

The International Monetary Fund (IMF) has indicated its willingness to consider alternative measures to tackle Ghana’s revenue shortfall following the suspension of the Value-Added Tax (VAT) on electricity.

The Fund said it acknowledges the concerns raised regarding the implementation of the tax and its potential effects on households and businesses, emphasizing its sensitivity to the public sentiment surrounding the issue.

Answering a question from Citi TV/Citi FM‘s Vivian Kai Lokko in a meeting with selected journalists during her visit to Ghana, IMF Managing Director Kristalina Georgieva assured of the Fund’s collaborative efforts to reach a mutually beneficial option that will bridge the debt gap and consolidate economic gains.

She added that the Fund is still engaging Ghanaian authorities for a favourable policy option that will bring down debt levels and consolidate the macroeconomic gains.

“We understand that the people in Ghana have been impacted and for the low-income household, any additional cost is a problem that is very difficult to bear. We have to look at the objective of getting strength in the fiscal position of the government. There are different measures that we can adopt to achieve this.”

The Government of Ghana officially suspended the planned implementation of the 15 percent Value Added Tax (VAT) on domestic consumption of electricity in February.

The decision came after the Ministry of Finance instructed both the Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCO) to halt the imposition of the levy for extensive dialogue with industry players and labour unions.

The Ministry of Finance stated that the suspension was also to engage in further talks with the International Monetary Fund (IMF), as the VAT on electricity constituted a crucial element of Ghana’s post-COVID-19 program for Economic Recovery.

“So we are still discussing but government needs to look within on how to achieve this to ensure the debt and fiscal sustainability. So our team will help in this regard to achieve it”, Kristalina Georgieva added.

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