Estimating potential funds for Ghana Infrastructure Plan (GIP) (a component of Ghanas 40 Years Development Plan, also called Ghana@100) The new development framework under consideration envisages that by 2057, the country should be ranked among high-income countries of the world, with an industrialised, diversified and export-oriented economy that is resilient. An economy driven by Ghanaian entrepreneurship and characterised by high-value services, dynamic and globally competitive manufacturing sector; as well as an efficient agricultural sector capable of feeding the nation and exporting to global markets. Good infrastructure facilitates productivity and lowers production costs, but it must expand fast enough to accommodate growth. Therefore, the countrys infrastructure should conform to that of high-income standards. The long-term planning framework is expected to facilitate Ghanas transition from low-income to high-income status. The NDPC has modelled the scenario shown in Table 2. In the literature, a number of infrastructural investments and revenue projections are given as proportions of GDP. It is important to realize that the essence of the GIP is to change course and to ultimately move GDP onto a growth path that is higher and different from the current path. It is investments being proposed in the GIP that are expected to cause the desired GDP to happen. Table 2: Indicative socio-economic forecasts for the Long-Term Plan Nominal GDP USD Population Estimated per capita Income 2018 45,564,368,220 28,595,511 1,545.61 2021 72,985,307,591 31,350,200 2,237.81 2025 119,000,617,944.12 34,256,905 3,350.00 2029 194,027,367,132 37,145,602 4,959.90 2033 310,794,325,134.34 40,329,218 7,336.34 2037 497,832,413,869 43,590,722 10,927.58 2041 783,348,941,258.02 47,031,554 16,156.14 2045 1,189,178,848,428.63 49,862,784 23,133.56 2049 1,728,448,467,519.97 52,442,784 31,969.99 2053 2,512,267,596,736.01 54,895,789 44,434.28 2057 3,651,533,230,870.54 56,998,784 62,202.57 Source: NDPC, 2015 Government Revenues Table 3: Government revenues as proportion of GDP (%) High Income OECD Upper Middle Income Lower middle income GHANA Government revenue 41.5 28.5 26.4 23.0 Total taxes 35.4 20.7 17.7 18.8 Income Tax 12.9 5.4 5.0 8.0 VAT revenue* 6.8 5.2 5.0 6.4 Trade Tax 0.6 4.6 4.9 3.2 Non-tax revenue 6.1 7.8 8.7 4.1 Grants 0.1 0.6 0.8 0.8 Source: Mascagni et al. (2014)1. Last column, authors calculations. Table 3 is a comparison of Government revenues for High Income OECD countries, Upper Middle Income countries, Lower Middle Income countries and of Ghana. For example, Ghanas taxes on income (and property) averaged 8% of GDP. It is higher than Upper Middle Income (5.4%) and Lower Middle Income countries (5.0%) but much lower than High Income countries average of 12.9%. Value-added tax (VAT) is also referred to as taxes on domestic goods and services. Ghanas average of 6.4% compare favourably with Upper Middle Income (5.2%) and Lower Middle Income countries (5.0), but still lower than High Income countries (6.8%). Ghanas tax on international trade (3.2%) is lower than Upper Middle Income (4.6%) and Lower Middle Income countries (4.9%). At an average of just over 4%, Ghanas non-tax revenue is lower than all groups. Grants are the least source of revenues for Ghana and for the groups of countries. Unfortunately, recent budget statements suggest that Government revenue as proportions of GDP have been going down. The explanation may be that they use rebased GDP (but that is focusing only on the denominator of the ratio. The figure in the 2021 Budget for Government revenue as a ratio of GDP was projected to be 14.1%. Suppose, deliberate and conscious efforts are undertaken to increase Government revenue as a proportion of GDP to reach 28% by 2030 and then reach 35% by 2057, thanks to the Ghana Identification System (GIS). Recall what we did in class to estimate efficiency gains as a source of funds for GIP and what you did for the homework on reducing illegal flows. They are your guide. Work on annual basis, and in the end provide a figure of estimated amount potentially realizable to fund infrastructure in constant 2021 USD over the years until 2047. You are in Ghana. Make, state clearly and justify any reasonable assumptions that you need. TO DO a) Under suitable and justifiable assumptions, please state them clearly Project Ghanas GDP for end 2021 and then annually through end 2057. Empirically, linear interpolations between the years is not realistic. b) Next, estimate Government revenue that can be expected to be available to Government annually under the following assumptions: That, Government revenue as a ratio of GDP at the end of 2021 is 15% resulting from first impact of the GIS and that, the ratio increases by half a percentage point annually up to the end of 2025, Thereafter, the system works into full gear and the ratio increases by one percentage point until the end of 2030, thanks to relentless efforts by all of us, and Finally, that the ratio settles down to a more normal half a percentage point annual increase until 2057.