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Prof. Peter Quartey Calls for Digitalization to Curb Illicit Financial Flows and Boost Revenue

At the launch of the World Bank’s “The Middle-Income Trap” report on October 10, 2024, Prof. Peter Quartey, Economist and Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana, stressed the need for enhanced digitalization in Ghana’s financial systems to curb illicit financial flows and improve revenue mobilization.

He pointed out that the country’s informal economy and porous borders contribute significantly to the loss of revenue and make it difficult to track financial transactions.

“Because of the informality that we have, a lot of informal activities and underground economy takes place, and we are not able to track them. If we are to digitalize most of our systems, our financial systems, we would be able to address these issues,” Prof. Peter Quartey stated.

He contrasted Ghana’s situation with that of other jurisdictions, where financial transactions are tightly regulated, making it harder for illicit money transfers to go unnoticed. “In other jurisdictions, you cannot change money into any foreign currency without supplying your passport, without going through the documentation. If you receive money above a certain threshold, they will track you.”

Prof. Peter Quartey highlighted the problem of cash smuggling through Ghana’s porous borders and called for more rigorous border controls. He emphasized that digitalization could play a critical role in tracking financial flows and reducing opportunities for corruption and tax evasion.

“In our case, people can carry money in suitcases and get out of the country. Our borders are porous. To really address illicit financial flows, we have to seal the borders. We have to infuse technology, digitalization, so that every transaction is tracked,” he explained.

He also noted that foreign companies operating in Ghana often transfer large sums of money out of the country, sometimes contributing to the issue. By digitizing financial systems, the government would be able to track such transactions and ensure more transparent revenue flows.

“Even the foreign companies, they are also complicit in this. We are able to track how much they transfer, and that will help us.”

Prof. Peter Quartey stressed that technology is key to improving revenue mobilization, as it reduces human interference in the tax collection process and ensures that payments go directly into government accounts. He lamented that a significant portion of the revenue collected does not reach the government due to the involvement of intermediaries.

“Technology is key. The human interface is too much. Once we bring in technology, paying taxes becomes easier. You don’t have to always see somebody to use discretion to pay,” he said, adding that digitization would reduce opportunities for revenue to be lost through corruption.

His remarks reflect the broader challenges faced by middle-income countries like Ghana, where informal economic activities and weak regulatory frameworks hinder economic growth.

The push for digital transformation in financial systems is seen as a crucial step in addressing these challenges and helping Ghana move closer to achieving upper middle-income status.

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