Weak state of economy must guide government policies – IFS

The Institute of Fiscal Studies (IFS) has warned that the Ghanaian economy remains weak, despite reported growth rates.

It has consequently advised the government to ensure that it does not develop or implement economic measures in an election year that would undermine the efforts to revitalize the economy.

“This requires it to choose prudence over populism even as it campaigns for power in this year’s elections. Thus, politicisation of economic policy decisions and choices must stop,” said Dr Said Boakye, Senior Research Fellow at the IFS said during a press briefing on the Mid-year Budget.

“All the relevant macroeconomic indicators are still presently performing much below par relative to recent historical trends. The government should not, therefore, behave as if all is well. Rather, the fragile state of the economy should be made to inform its policy choices,” he said.

Outlining the Institute’s policy brief, Dr. Boakye stated that it was important for Ghanaians to understand that the current fiscal improvements recorded since 2023 were temporary and could be attributed to reduced debt service expenditure because of domestic and international debt restructuring programmes.

He therefore urged the government to take advantage of the window by implementing measures to address the weak fiscal fundamentals to enhance economic performance over time.

Dr. Boakye cited several negative fiscal fundamentals, including low revenue collection, excessive fiscal rigidities, corruption, and politically motivated spending decisions. 

“The government must focus more on plugging revenue gaps by closing revenue leakages and improving collection. Thus, the government should not subject the fragile economy to more taxes,” he said.

The IFS has questioned the government’s ability to raise GH¢177.2 billion to meet the raised mid-year revenue target of 17.4% of GDP.

It also raised concerns about the increased domestic financing of the national budget due to the country’s inability to access the Eurobond market.

Source: GNA

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