IFS on Government Priorities to Address Economic Challenges

The Institute for Fiscal Studies (IFS), led by Senior Research Fellow Dr. Said Boakye, has outlined key priorities for the newly elected government of President John Dramani Mahama to address Ghana’s ongoing economic difficulties. Speaking at a press conference, Dr. Boakye emphasized the urgent need for strategic policy measures to overcome the nation’s economic challenges.

Economic Challenges and Context Ghana’s economic health has been deteriorating in recent years. Over the past three years, the country has faced a debt crisis, macroeconomic instability, and low economic growth, leading to declining living standards, rising unemployment, and widespread disaffection with the government. Dr. Boakye attributed these challenges to a prolonged period of excessive debt accumulation and large debt service payments. This resulted in Ghana’s credit rating downgrades in early 2022, causing the country to lose access to the international bond market.

Since the previous administration implemented an International Monetary Fund (IMF)-supported program in 2023 to address the crisis, there have been some improvements. However, the economy remains fragile, with fiscal and macroeconomic conditions still posing significant challenges.

Given this backdrop, the new government, led by President Mahama and the National Democratic Congress (NDC), faces a crucial task in preparing the 2025 Budget and Economic Policy Statement. As the first budget of its term, it is expected to set the direction for the government’s economic policies.

IFS Recommendations for Economic Recovery The IFS has proposed six key policy priorities for the government to consider:

1. Ensure Macroeconomic Stability through Fiscal Consolidation and Controlled Monetary Growth
   The government must achieve significant revenue growth beyond previous years. However, excessive taxation on low-income citizens and struggling domestic businesses can have negative consequences. Instead, innovative revenue generation strategies must be explored.
2. Boost Economic Growth and Reduce Unemployment through Expenditure Prioritization and Strategic Agricultural Interventions
   The government should mobilize the youth for large-scale agricultural production by providing them with capital on credit, regardless of political affiliation. Additionally, it should facilitate land acquisition for farming and enforce strict repayment mechanisms for loans to ensure sustainability.
3. Restructure the External Sector by Changing Ownership of Key Export Industries
   The government should take a more active role in the gold and oil industries by securing significant stakes through joint venture arrangements. This will enhance national control over key revenue-generating sectors.
4. Set Realistic Budgetary Targets to Ensure Fiscal Credibility
   The Ministry of Finance should review its macro-fiscal forecasting framework to eliminate overly optimistic revenue projections. For example, in 2022, actual revenue from the e-levy was only 8.5% of the projected amount, highlighting the need for improved revenue estimation methods.
5. Avoid Over-Reliance on the International Bond Market
   The government should learn from the past three years, during which Ghana operated without borrowing from the international bond market. Maintaining a low fiscal deficit will reduce borrowing needs and enhance financial stability.
6. Strengthen Anti-Corruption Measures
   Corruption must be tackled decisively, with swift and severe punishment for offenders, regardless of political affiliation or social status. Public institutions should be reviewed to identify corruption-prone areas for reform. Additionally, the public sector must be run on a merit-based system to enhance efficiency and service delivery.

Conclusion The IFS acknowledges that the new government has a daunting task ahead. However, Dr. Boakye expressed confidence that if these recommendations are implemented with dedication and commitment, Ghana can make significant progress in overcoming its economic challenges.

By Madjid Diallo || GhanaNewsOnline