Ghana, four others sign $8m MoU to increase domestic revenue

Ghana and four Governors of the Board of Directors of 15 Constituencies have signed a Memorandum of Understanding (MoU) to enhance domestic revenue mobilisation and spur economic growth in their respective countries.

The US$8 million MoU is to augment financing from development partners to expand domestic private sector-led economic growth and development of Small and Medium-sized Enterprises (SMEs).

It is to also enhance climate resilience and allow national budgets of the countries to contribute to the replenishment of the African Development Fund (ADF) – the soft loan arm of the African Development Bank (AfDB), starting from the 2024 financial year.

The mechanism would improve shareholdings of Ghana and its counterparts at AfDB, thereby, increasing the Bank’s financing support to their economic and development projects, including roads, agriculture, energy, and climate change.

Ghana’s signing of the MoU occurred at Sharm El Sheikh, Egypt with The Gambia, Liberia, Sierra Leone and Sudan on the margins of the ongoing annual meetings of AfDB.

The meetings, which is the 58th Annual Assembly of AfDB and the 49th meeting of ADF is on the theme: “Mobilising Private Sector Financing for Climate and Green Growth in Africa.”

In an interview with the Ghana News Agency after the signing of the agreement, Dr Mohammed Amin Adam, Minister of State at the Ministry of Finance, said the move would help to better position AfBD to support its member countries.

“Africa cannot always be at the receiving end. This is why we must take domestic initiatives to shore up our revenue to support our development efforts, while leveraging on the [financial] resources that comes from outside,” he said.

He indicated that the MoU was an important development among the Constituency countries and AfDB because it had been initiated among themselves to increase domestic efforts at developing their respective countries.

The Minister said Ghana had already committed to increasing its revenue as a share of Gross Domestic Product (GDP) from the current 15 per cent to 18 per cent by 2026 through digital revenue collection systems and other measures.

“We’ve passed a number of revenue legislation, while introducing innovative means of collecting revenue through digital platforms – the E-VAT system is being pursued, the E-levy is also being reformed, we’ve also introduced the property rates system, and all these efforts are being made to increase our domestic revenue mobilisation so that we can finance our budget,” he said.

Mr Mohamed Bashir Mohamed Adam, Vice Secretary, Economic Planning, Sudan also said: “This is the way we can help ourselves to develop our countries through private sector participation, and our Government is committed to it despite our current challenges.”

Africa faces enormous resource constraints to bridge the funding gaps for projects and activities including roads, agriculture, energy, tourism, climate change, revenue generation, debt and fiscal challenges.

The resource constraints are profound among CMCs, including Ghana, The Gambia, Liberia, Sierra Leone and Sudan where the fiscal space is getting tighter, with debt distress and other macroeconomic challenges, AfDB had observed.

Mr Rufus Darkortey, Executive Director, BDIR 15, AfDB, said the initiative by the five countries would help them “spur economic growth and development in your country, while supporting a stronger African Development Bank.”

“The goal of AfDB is to see countries grow economically to reduce poverty and create wealth. By signing this MoU, you’ve committed and expressed that in addition to what the Bank is doing in your countries, you can also do more of that,” he said.

He expressed the Bank’s appreciation to Ghana and the four other countries for accepting to contribute to the ADF replenishment – the first-time low-income countries are doing so, and pledged AfDB’s continued support to them.

Proposed actions under the MoU include dedicating $3m to enhance domestic resource mobilisation, and $2m to expand domestic private sector-led economic growth and development (SMEs).

Also, there would be a $1m financial contribution to the African Development Fund replenishment efforts, improve shareholdings within the AfDB – $1m, and enhancing climate resilience – $1m.