In recent weeks, Ghana has seen increasing protests on the economy that is quickly detailed in the country. The wave of popular discontent has been driven by the increase in inflation, which reached 27.6%, an 18 -year record, in May, while growth has been reduced to a meager 3.3%.
Unfortunately, recent economic developments in Ghana, one of the largest and most prosperous economies of Africa, reflect the travel direction of the continent. In all of Africa, the increase in cost thrust inflation and the decrease in growth rates are increasingly limiting government ability to relieve poverty or invest to stimulate economic recovery. With the fiscal space that shrinks throughout the continent, it is as important as the governments of Africa urgently recover the precious tax revenues lost by the informal economy, the evasion of special taxes and the undersalized subsidies.
Throughout the world, inflation is demonstrating to be a great headache. The increase in food and oil prices, which were already rising before the invasion of Russia of Ukraine, are feeding the inflation of cost thrust that is saving few national economies, if any. Therefore, most central banks around the world, with the remarkable exception of Turkey, have begun to address inflation by adjusting monetary policy, raising interest rates at their highest levels in twenty years.
But the dark cloud currently around the global economy seems to be particularly sinister in Africa. Although recent projections still place the average inflation rate of the continent by 13.5%, the increase in basic products prices has begun to affect several of the largest economies in Africa, including Egypt, Rwanda, Ghana and Nigeria, with rates that reach between 15 and 30 percent.
For Africa, however, inflation is only part of the problem. According to the African Development Bank (AFDB), and recent analysis of the World Bank, increasing prices are increasingly combined with slow growth rates to produce stagns in several African countries, including Ghana. This phenomenon exerts even greater pressure on governments, with the highest cost of loans, which makes it increasingly difficult to invest in stimulating growth or financing measures to relieve economic anguish.
Trapped between the need to harden fiscal policy and to protect citizens from growing levels of poverty, Africa governments have begun to prioritize the cut of excess spending. In an attempt to forge a greater fiscal space, Ethiopia, for example, has recently reduced its fuel subsidies. However, the result has been an increase of almost 30% during the night in the price of gasoline, which has contributed to growing popular concern and discontent.
Carving more space
However, there is a way for African governments to continue financing the necessary expense without risk Avoidance of the main corporations. According to the latest annual report of the Fiscal Justice Network, African countries lose more than $ 17 billion in annual tax revenues due to fiscal evasion by multinational companies and individuals.
Among the most atrocious criminals are the main corporations involved in extractive industries. In fact, IMF's investigation found that, while many African countries nominally impose taxes and royalties of higher corporations in mining and other lucrative sectors, governments often significantly reduce these rates during negotiations with investors. In essence, this means that the effective amount of taxes paid is much lower than the tax for legal fees. This naturally has a great impact on the finances of a country. In Zambia, for example, companies that extracted $ 4.28 billion
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