Ghana Must Avoid Past Policy Mistakes – Taliercio Warns
The World Bank, in collaboration with the Government of Ghana, has launched the 2024 Ghana Public Finance Review (PFR) under the theme “Building the Foundations for a Resilient and Equitable Fiscal Policy.”
The report provides a comprehensive analysis of Ghana’s fiscal landscape and offers key policy recommendations to enhance economic stability and sustainability.
The PFR 2024 highlights critical areas, including domestic revenue mobilization, public debt, public expenditure efficiency, public financial management, the public sector wage bill, human development spending, and agriculture. It underscores the urgent need for revenue-enhancing tax reforms, improved expenditure efficiency, and stronger fiscal discipline to build a more resilient economy.
World Bank Urges Ghana to Stay the Course on Fiscal Reforms
Speaking at the event, Movenpick Ambassador Hotel in Accra, World Bank Country Director for Ghana, Liberia, and Sierra Leone, Robert R. Taliercio, urged Ghana to maintain momentum in its ongoing economic reforms to ensure long-term fiscal sustainability and economic transformation.
He highlighted the progress and challenges facing the country’s economy and stressed the need for a “reset” approach to avoid repeating past policy missteps.
Economic Progress and the 2022 Crisis
Ghana witnessed substantial economic progress in the early 2000s. Economic growth averaged 6.8% between 2009 and 2019. Poverty was reduced by half between 1991 and 2016, surpassing Sub-Saharan Africa’s progress and achieving the Millennium Development Goal on poverty reduction.
However, in the past decade, economic and social prospects declined sharply, culminating in the 2022 macroeconomic crisis. By 2022, Ghana’s debt surged to 93% of GDP, creating severe financial strain.
With 93% of Ghana’s debt restructuring now complete, Taliercio commended the government for securing an agreement with all official creditors.
While the macroeconomic outlook has improved, he cautioned that it remains fragile, warning against a premature return to international capital markets and unsustainable borrowing practices.
He pointed out that Ghana has entered 17 IMF programs in its history, spending 40 out of its 68 years under IMF-supported economic programs. Without fully completing the adjustment program to reduce the Debt-to-GDP ratio to 55% by 2028, he warned that the credibility of policy reforms and long-term growth prospects could be at risk.
Key Areas for Reform
To sustain economic recovery and prevent a return to past fiscal mismanagement, Taliercio emphasized the need for Ghana to deepen its economic reforms.
Strengthening fiscal discipline is crucial to ensure effective expenditure control. Between 2010 and 2022, government spending grew faster than GDP, with 70% allocated to public wages, interest payments, and earmarked statutory funds.
Boosting domestic revenue collection will help create fiscal space. By 2021, Ghana’s revenue-to-GDP ratio had fallen to 13%, lower than comparator countries.
Addressing rising fiscal liabilities from State-Owned Enterprises (SOEs) is necessary, particularly in the energy and cocoa sectors.
Findings and Recommendations from the Public Finance Review
The World Bank’s 2024 Public Finance Review provides an in-depth analysis of Ghana’s fiscal policies and public financial management. The report outlines key policy priorities to build a more equitable and resilient fiscal system.
Strengthening fiscal discipline requires a combination of expenditure controls, debt rules, and Public Financial Management (PFM) reforms to stabilize debt at 55% of GDP by 2028.
Enhancing domestic revenue mobilization involves broadening the tax base, improving tax compliance, and reducing tax exemptions, which currently cost Ghana 3.9% of GDP in lost revenues from VAT, PIT, and import duties.
Optimizing the financing mix is essential to ensure investment returns align with financial costs.
Protecting pro-growth and pro-poor investments in human development, agriculture, economic transformation, and climate resilience will be critical to long-term sustainable growth.
Taliercio stressed that fiscal adjustments must be fair and efficient, ensuring that the most vulnerable are protected while prioritizing productive public investments in key sectors.
The report also highlights the need to improve efficiency in public spending by focusing on outcomes in education, health, social protection, and agriculture.
Fiscal Policy and Economic Transformation
Beyond short-term fiscal consolidation, Ghana’s economic transformation requires strategic public investments. Prioritizing connectivity, trade logistics, and ICT infrastructure will enhance competitiveness. Investing in research and technological innovation will drive industrial growth.
Fiscal policy should support climate-smart initiatives, including agriculture, water and forest management, resilient cities, and clean energy transition, to build a climate-resilient and low-carbon economy.
World Bank’s Continued Partnership with Ghana
Taliercio reaffirmed the World Bank’s commitment to supporting Ghana’s economic transformation and fiscal sustainability agenda. He noted that the the Public Finance Review presents an opportunity for all stakeholders to collaborate, strategize, and implement lasting economic reforms.
“This event is an opportunity for us to learn, collaborate, and strategize on how we can build a more resilient and prosperous Ghana,” he added.
Finance Minister Reaffirms Commitment to Fiscal Reforms
In a speech delivered on behalf of the Minister for Finance, Dr. Cassiel Ato Forson he reaffirmed the government’s commitment to implementing far-reaching fiscal reforms aimed at enhancing discipline, revenue mobilization, and prudent expenditure management.
Dr. Forson stressed that these measures are essential for ensuring long-term economic stability and growth.
Economic Progress and Challenges
Ghana’s economy has experienced strong growth over the past decades, largely driven by oil production, which contributed significantly to reducing poverty between 1991 and 2016. However, economic imbalances and rising debt levels have created major fiscal challenges. By 2022, Ghana’s debt had surged to 93 percent of GDP, requiring urgent intervention to restore stability.
While efforts have been made to stabilize the economy, Dr. Forson acknowledged that Ghana’s macroeconomic situation remains fragile. The government is prioritizing fiscal discipline, boosting domestic revenue, and addressing liabilities from State-Owned Enterprises (SOEs), particularly in the energy sector.
A New Approach to Fiscal Policy
Dr. Forson outlined a comprehensive fiscal strategy anchored on the government’s 24-hour economy policy, aimed at enhancing productivity, creating sustainable jobs, and transforming Ghana into an import-substitution and export-led economy.
As part of efforts to improve tax policies, the government will broaden the tax base, review the extractive sector regime, and reform the tax exemption system to promote transparency and economic growth.
The Ghana Revenue Authority (GRA) will be restructured to enhance tax administration, while the Independent Tax Appeals Board will be operationalized. A Natural Resources Revenue Management Act will also be enacted to ensure better management of natural resource revenues.
To diversify funding options, the government plans to introduce Diaspora Bonds and explore membership in the Islamic Development Bank to broaden development financing opportunities.
To ensure prudent expenditure management, the government will complete the Treasury Single Account Project to improve fiscal oversight. The Ghana Infrastructure and Investment Fund will be revamped to support targeted projects, while the Earmarked Funds Capping and Realignment Act will be revised to ensure statutory funds are used efficiently. The government also aims to reduce unnecessary spending by running a lean administration and strengthening fiscal decentralization.
Key Insights from the Public Finance Review
The 2024 Ghana Public Finance Review (PFR), developed by the World Bank, provides critical recommendations to support fiscal consolidation and long-term development.
The report highlights the need for stronger fiscal discipline, which can be achieved through expenditure controls, debt rules, and public financial management (PFM) reforms. It also emphasizes the importance of enhancing domestic revenue mobilization by reducing tax expenditures, improving compliance, and broadening the tax base.
Efficient management of external financing is essential to ensure that investment returns align with financial costs. Additionally, the government must protect pro-growth and pro-poor investments in key sectors such as human development, agriculture, economic transformation, and climate resilience.
Commitment to Sustainable Growth
Dr. Forson assured stakeholders that fiscal adjustments would be fair and efficient, with a strong emphasis on protecting vulnerable populations and ensuring effective public spending in education, health, social protection, and agriculture.
“We are committed to deepening our collaboration with the World Bank, development partners, and all stakeholders to implement pragmatic policies that enhance fiscal discipline, promote economic transformation, and improve livelihoods,” he stated.
As Ghana refines its economic policies in response to emerging trends and global uncertainties, Dr. Forson emphasized the need for sustained dialogue and cooperation. He expressed optimism that the launch of the Public Finance Review would mark the beginning of meaningful engagements leading to actionable reforms.
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“I look forward to the insightful discussions ahead and to working collectively towards a more robust public finance management system for Ghana,” he added.
World Bank Economists Present Key Fiscal Reform Strategies for Ghana
Senior Economists David Elmaleh and Tamoya Christie have outlined critical fiscal reforms needed to strengthen Ghana’s economy in a presentation on the World Bank’s Public Finance Review. They emphasized the importance of fiscal discipline, stronger financial management, and enhanced transparency to ensure long-term economic stability.
The economists stressed the need to implement a fiscal rule to sustain debt management, leverage technology for accountability, and broaden the tax base through improved tax administration. They also highlighted the importance of carefully managing external borrowing and prioritizing investment in human development, infrastructure, and climate resilience to drive sustainable growth.
Elmaleh and Christie reaffirmed the World Bank’s commitment to supporting Ghana in implementing these reforms, emphasizing their role in fostering economic transformation and resilience.
