Gains from the domestic and external debt restructuring exercise as well as the gradual decline in inflation are only temporal, and government is still required to tie its spending decisions to the levels of mobilized revenue in order to keep the economy afloat, says the economic policy think-tank, Institute of Fiscal Studies (IFS).
In its analysis of the country’s current fiscal and macroeconomic performance vis-à-vis the government’s 2024 mid-year budget review, the institute identified the need for handlers of the economy to plug revenue gaps whilst shoring up mobilization.
“The Ghanaian economy remains very weak and fragile; the macro economy remains highly unstable, leading to far below par economic growth rates. This is no time to celebrate, but to remain vigilant,” Dr. Said Boakye, a senior research fellow of the institute, told journalists.
He added: “Government has to adopt more concrete policies and measures to increase revenue as its existing policies have so far not led to any significant increment in revenue relative to GDP.
Also, to ensure enduring improvements, government should address the underlying drivers of fiscal instability and unsustainability.”
Record-high inflation and the fast-paced depreciation of the local currency are strong indicators that the economy is not yet out of the woods, the think tank further emphasized.
Ghana’s consumer inflation hit 20.9pct year-on-year last month, down from 22.8pct in the previous month, against a regional average of 8.9pct as at June, 2024.
Again, it’s currency—cedi—has cumulatively depreciated by some 18.6pct against the dollar as at the first quarter of the year.
The IFS opines that the economy is in a dire state, prompting workable interventions that from the government to restore macro and micro stability, including revenue maximization—beside the excessive taxation.
“Government should not subject the fragile economy to more taxes; in its stead, tax exemptions must be reined in. More importantly, as a nation rich in natural resources, we must maximize revenue generation from our extractives sector through increased state ownership interests,” Dr. Boakye noted.
Meanwhile, the IFS admitted its excitement at the outcome of the recent debt restructuring that has led to debt service reliefs of about US$4.4bn during the implementation period of the IMF programme.
“Reliefs like these will have positive effects on the country’s fiscal and macroeconomic goals,” it noted.
By Patrick PAINTSIL
