Economists have proposed measures to stabilize Ghana’s economy, addressing issues like poor revenue generation and excessive borrowing. Key recommendations include fiscal discipline, tax reforms, and enhancing public sector efficiency. Implementing these strategies is essential for restoring investor confidence and stabilizing the economy.
A team of economists has identified critical steps to stabilize Ghana’s economy, attributing the country’s ongoing economic challenges to poor revenue generation, ineffective public expenditure management, and excessive borrowing. This analysis emerged from the Macroeconomic Stability Group’s interim report presented at the National Economic Dialogue (NED) on March 4 at the Accra International Conference Centre, as outlined by economist Leslie Bright Mensah.
The key recommendations involve fostering fiscal discipline, implementing tax reforms, ensuring exchange rate stability, and enhancing public sector efficiency to avert future economic downturns. Mr. Mensah emphasized the importance of macroeconomic stability for Ghana’s long-term development while underscoring the continuous challenges in achieving it, particularly highlighting unsustainable fiscal policies and rising debt service costs.
Mr. Mensah revealed that during the five years preceding the 2022 economic crisis, Ghana faced an average budget deficit of 9 percent of GDP, with debt service consuming nearly 70 percent of public revenue. He pointed to persistently high inflation, exceeding 20 percent over 34 consecutive months, and noted substantial depreciation of the cedi, which lost 19.2 percent of its value in 2024 as significant complications.
To bolster the economy, the economists recommended simplifying the tax framework and ensuring consistent tax policies. Mr. Mensah remarked, “The government must adopt a medium-term approach to tax policies to give businesses certainty and encourage compliance.” He advocated for a review of the VAT system to close the existing compliance gap, suggesting that lowering VAT rates could enhance revenue collections.
Moreover, they called for improvements in property tax administration through technological means to enhance compliance rates, citing a concerning under-collection rate of over 60 percent within the Accra Metropolitan Assembly, Ghana’s affluent local government.
To improve public financial management, Mr. Mensah emphasized the strict enforcement of the PFM Act, urging the Finance Minister to ensure adherence to expenditure reporting requirements to solidify fiscal discipline. Additionally, they recommended revising the Fiscal Responsibility Act to mitigate excessive government spending and improve scrutiny by parliament.
Regarding exchange rate stability, Mr. Mensah urged better regulation of foreign exchange bureaus while advocating the elimination of illegal forex markets and improved collaboration between the Ministry of Finance and the Bank of Ghana. He further suggested integrating fintech liquidity into the formal banking sector and adjusting foreign exchange retention policies in sectors like mining to relieve pressure on the cedi.
In terms of banking sector resilience, the group proposed capitalizing the Bank of Ghana to enhance its monetary policy oversight. They also called for a feasibility study on non-interest banking to provide alternative financing avenues and extend financial inclusion. Mr. Mensah concluded that adopting these strategies would facilitate recovery of investor confidence, stabilize the cedi, and foster a more predictable business environment.
The National Economic Dialogue 2025 convened economic specialists, policymakers, and government representatives to explore strategies for strengthening Ghana’s economy and preventing future crises.
In summary, experts have underscored the urgency of implementing comprehensive measures to stabilize Ghana’s economy, focusing on fiscal discipline, effective tax reform, and rigorous public financial management. Recommendations include enhancing property tax collection, stabilizing the cedi, and bolstering the banking sector’s capital base. These actions are vital for restoring investor confidence and creating a robust economic framework to avert future crises.
Original Source: www.graphic.com.gh
