The economy emerged as the central issue for voters in the 2024 presidential election, with many Ghanaians grappling with rising fuel and food prices.
From inflation which at a point went as high as 50% and the cedi plummeted to historic lows while the number of taxes increased. A banking sector purge that was hailed by economists but led to thousands of job losses also angered voters, as did a bloated government in which several relatives of the president and ruling party members served.
Since Ghana’s independence in 1957, it has received bailouts from the International Monetary Fund 17 times, available data suggests.
As the nation transitions into the new year under a new administration, honeymoon period will be short for John Mahama, as he is expected to hit the ground running with key economic priority areas.
In this light, economists Dr. Leslie Dwight Mensah of the Institute for Fiscal Studies (IFS) and Prof. John Gatsi of the University of Cape Coast Business School have outlined key priorities for the Mahama administration, highlighting fiscal discipline, energy sector reform, and revitalization of the banking sector.
The resident fellow at the Institute of Fiscal Studies(IFS), Dr Leslie Dwight Mensah advocates for a dual approach of increasing revenue and managing expenditure to ease Ghana’s debt service burden. He asserts that macroeconomic stability is vital for fostering business growth and job creation.
In an interview with Business24/Investment Times, Dr. Dwight Mensah said “The most significant priority is to continue to strengthen the public finances, by improving revenue and managing down expenditure. This is essential for further reducing the country’s debt service burden and for fully restoring macroeconomic stability and confidence. Other objectives of the new government, such as improving business conditions and facilitating job creation, would be elusive without a strong fiscal cornerstone.”
Further, he adds that the management of the energy sector, too, needs an overhaul. The power utilities and their relationship with the central government require total reform to break the pattern of mismanagement and perennial indebtedness that contributed to the economic crisis and threatens to frustrate the current recovery.
While the newly elected government has made countless promises to the electorate, actual delivery will be constrained by limited fiscal space and the country’s commitments under the IMF program.
Additional revenue generation is going to be critical to improving fiscal space and controlling borrowing. Much effort should be directed towards increasing revenue from the extractive sector and enhancing the yields from existing taxes, most of which are underperforming their potential, Dr. Dwight Mensah noted.
A professor of Finance and Dean of the University of Cape Coast School of Business, John Gartchie Gatsi, indicated that a new government always comes with goodwill and it behooves on the President to convert it into tangible benefits to restore economic confidence.
He also argued that one priority area should be the energy sector where he reckons efforts should be made to revive the Millennium Compact, bringing investments into the electricity sector while addressing corruption within the PDS arrangement.
Also, he stressed that there should be a review of the banking sector reforms through the establishment of a committee to review the banking cleanup to rebuild confidence, ensure fairness, and encourage local participation in the financial sector.
Address unjust revocations of banking licenses and prevent future lapses in regulatory enforcement.
Another priority area he highlighted under cost of living and economic stability, encouraging the government to focus on food production to reduce inflation and improve living standards.
Others include a reduction in the number of government appointees to build public trust.
Launch robust anti-corruption measures and pursue the recovery of looted assets.
He also revealed that the IMF program should be continued while negotiating better terms, as most of the $3 billion facility has already been utilized with limited results.
Manage debt repayments to mitigate pressure on the currency. Implement prudent fiscal policies to reduce the deficit.
Remove some taxes to ease the cost of doing business and stimulate economic activity.
Stabilize the cedi to ease business operations and enhance economic resilience. Promote inter-ministerial coordination for efficient fiscal management.
Furthermore, he advised the new government to address last-minute contracts awarded by the outgoing administration, some of which may lead to judgment debts.
Mahama’s vision for economic revival
President Mahama’s campaign promises include tax incentives for small businesses, support for startups and MSMEs, and policies to foster industrialization and job creation. His flagship initiatives, such as the “Made in Ghana Agenda” and the “Export Ghana Policy,” aim to promote local production and expand markets under the African Continental Free Trade Area (AfCFTA). Plans to amend the Customs Act to support local automotive industries and promote green technology entrepreneurship align with his vision for a modernized economy.
Recognizing the limited fiscal space, Mahama plans to balance ambitious reforms with Ghana’s commitments under the IMF program. His promise to implement a “24-hour economy” underscores his intent to drive economic activity and growth.
A Historic Comeback
As the first Ghanaian to win two non-consecutive terms, Mahama’s leadership comes at a pivotal moment. Rallying the nation under the theme “Resetting Ghana,” he faces the daunting task of translating campaign promises into tangible outcomes. The road to recovery will require bold decisions, fiscal discipline, and unwavering commitment to restoring economic confidence.
By Eugene Davis
