The World Bank on Wednesday said that Ghana needs to maintain fiscal consolidation to achieve long-term debt sustainability and growth.
The Ghana Public Finance Review report released by the World Bank provided an in-depth analysis of the efficiency, equity, and impact of public revenue and expenditure in recent years, focusing on a number of critical areas.
The report commended the West African gold, cocoa, and crude oil exporter for completing 93 percent of its debt restructuring under the reforms that commenced in May 2023.
“The risk now is a fallback into complacency with these achievements and returning to a business-as-usual mindset, which was a recurring error in the past,” it cautioned.
In the past, the report said, Ghana’s high economic growth was characterized by weak expenditure controls in the fiscal regime, which occasioned a vicious circle of reduced fiscal space and unsustainable debt accumulation.
It said Ghana’s crisis was aggravated particularly by the overreliance on external commercial debts due to declining tax revenue in the years preceding the recent economic crisis.
Going forward, the report said Ghana should adopt stronger domestic revenue mobilization to create the necessary fiscal space for critical development priorities.
Post-debt restructuring, the report said, Ghana now needs to stay the course of ongoing reforms and deepen some of them to maintain debt sustainability and support long-term growth.
“Ghana should adopt a simple fiscal rule to bring debt down and achieve a debt-to-GDP ratio of 55 percent by 2028. Afterwards, implement a simple rule that considers the business cycle,” the report stressed.
“It is important to initiate a “reset” and maintain momentum, stay the course with ongoing reforms while deepening efforts in specific areas, and strengthening fiscal discipline to ensure effective expenditure management and control,” it added.
It urged the government to strengthen the fiscal council’s institutional independence and clarify its mandate to ensure transparency in fiscal reporting.
The report also urged Ghana to strengthen its tax administration, improve compliance, and broaden the tax base, among other revenue improvement measures.
Amid the recent economic crisis, Ghana contracted a 3-billion-U.S.-dollar loan from the International Monetary Fund in 2023 to implement reforms and steer the economy toward recovery.