GhanaCard: Herald of a New Economic Prosperity
One of the 85 economic achievements during the first term of the Akuffo Addo- Bawumia administration is the implementation of the “Ghanacard Identification Initiative ”. The GhanaCard is a unique national identity card issued by the National Identification Authority of Ghana (NIA) to Ghanaian citizens – both resident and non-resident, and legally resident foreign nationals.
However, there seems to be a general misconception about the Government’s main thrust regarding this initiative, which begs the need to clarify its purposes.
What is the Government’s thrust for the initiative?
Indeed, switching Tax Identification Number (TIN) for the GhanaCard number has helped increase the number of persons under the tax system. However, some analysts have inadvertently narrowed the cards purpose to only tax revenue generation. The GhanaCard will serve much more strategic and critical objectives such as:
Improvement in Ease of Doing Business:
The latest 2020 Ease of Doing Business report by the World Bank ranked the country four places lower compared to its 2019 ranking. This less than desired ranking was attributed to the Covid-19 pandemic and partly to the tax management system, which is complicated and costly for businesses. The initiative would help resolve the tax complications issues and eventually reduce the cost of doing business in the long run. The Government aims to rise to the highest rank in terms of ease of doing business in Sub-Saharan Africa.
Efficient and Effective Fiscal Policies:
One of the biggest challenges faced by many developing countries in the midst of the COVID-19 pandemic is the mean of efficiently and effectively reaching low-income households. How does the GhanaCard resolve this problem? Since the identity card is linked to the digital address of individuals, the Government can easily identify and track the most financially vulnerable households in the economy. This would, in turn, help improve the country’s financial resilience and also help mitigate the growing income inequality which is prevalent in developing countries.
Cheaper Banks Lending Rate:
Government’s desired goal is to drive the Average Commercial Banks Lending Rate to its ultra-year lows. A report by the Bank of Ghana shows that Government’s effort has yielded significant success in this regard. The average commercial banks lending rate had consistently reduced from a peak of 28.1% as of year-end 2016 to a 20-year low of 23.5% in 2019 – indicating a total of 460 basis points decrease in three (3) years.
However, with the GhanaCard linked with a digital address system, banks could develop a credit rating database, leading to a reduction in their non-performing loans as they are able to assess the creditworthiness of borrowers at the loan origination stage. Data from the World Bank reveals how the rise in Private Credit Bureau Coverage in the last four years has led to a significant fall in banks’ non-performing loan book size. However, the Government’s end goal is not only to see the lending rate fall but also to maintain it at these lows, sustainably.
This laudable initiative is expected to help the Government consolidate its economic digitalization project, which is touted to usher in a new economic prosperity phase for the country in the recent IMF Country Report No. 19/368.
By Kwasi Nyame-Baafi
The writer is an Economic Advisor at the Office of the Vice-President