National Economic Dialogue: Gov’t targets economic reforms to boost revenue and ensure fiscal stabilityNational Economic Dialogue

The government plans to enhance domestic revenue mobilization by balancing equity, simplicity, and efficiency to address fiscal challenges and support its economic reset agenda.

According to Finance Minister Dr. Ato Forson, Ghana’s fiscal policy has been ineffective in recent years, leaving the macroeconomic situation fragile. He stressed the need to accelerate reforms, emphasizing that the quality of fiscal adjustments will be crucial in supporting growth and protecting the most vulnerable.

Delivering a statement on the State of the Ghanaian Economy, Dr. Forson highlighted Ghana’s underperformance in revenue mobilization compared to its peers. Total tax revenue and VAT collection remain lower than countries with similar GDP per capita and trade levels. Over the last decade, domestic revenue mobilization (DRM) has stagnated, with total revenue collection reaching only 13.5% of GDP in 2023. 

He particularly noted the low VAT collection rate, urging the government to improve efficiency in tax administration.

Key Focus Areas for 2025

To address these challenges, the government will:

Enhance domestic revenue mobilization while pursuing qualitative fiscal consolidation, protecting growth-enhancing spending and social programs.

Ensure compliance with financial and procurement laws while strengthening fiscal discipline through robust commitment controls.

Improve efficiency in public spending, prioritizing social programs and infrastructure development.

Phase out costly and ineffective subsidies in the energy sector, replacing them with targeted social programs.

Reform state-owned enterprises (SOEs) to reduce contingent liabilities and eliminate quasi-fiscal spending (e.g., COCOBOD, ECG).

Strengthen Ghana’s fiscal framework, redesigning fiscal rules, improving automatic stabilizers, and reducing budget rigidities.

Criticism of the Previous Administration

The new government has criticized the previous administration for economic mismanagement, citing staggering debt levels and financial instability. Dr. Forson pointed out that:

Despite setting an 18% inflation target for 2024, the actual rate reached 23.8%, exceeding IMF projections.

The Ghanaian cedi depreciated by 19% in 2024, following a 27.8% decline in 2023.

Public debt has soared to GH₵721 billion, while SOEs, including ECG, face massive liabilities (ECG alone owes GH₵68 billion).

The previous administration spent GH₵29.9 billion on a financial sector cleanup, yet the sector remains fragile.

The Domestic Debt Exchange Programme (DDEP) failed to secure sufficient reserves for debt servicing, unlike the 2017 government, which allocated $250 million to the Sinking Fund for debt repayment.

Mahama’s Economic Reforms

Since assuming office on January 7, 2025, President John Mahama has prioritized fiscal consolidation by cutting wasteful expenditures and reducing borrowing. His government has implemented prudent debt management strategies, resulting in:

Lower interest rates on Treasury bills: 91-day T-bill: Dropped from 28.51% to 24.48%

182-day T-bill: Dropped from 29.07% to 25.39%, 364-day T-bill: Dropped from 30.41% to 27.30%

A signed MoU with the Official Creditor Committee to ensure long-term debt sustainability and economic recovery.

Economic Outlook

Ghana’s new administration inherits an economy emerging from its worst crisis in a generation. As part of its broader recovery efforts, President Mahama has pledged to renegotiate the $3 billion IMF bailout deal, aligning it with the government’s new economic vision.

By Eugene Davis