Poor fiscal performance, according to the former finance minister Seth Terkper, is the primary threat to the economy and a drain on resources, but there is still time to make a successful transition into a Lower-Middle Income (L-MIC) status based on improved petroleum output and revenue management.
Mr. Terkper also stated that strong fiscal policies and appropriate accounting practices, rather than a short-term or fast-track program, are the best ways to address the nation’s economic problems.
With little access to foreign markets, downgrades, domestic auction failures and high expenses, and the depletion of sinking reserves, the total public debt and its rate of increase both continue to deteriorate.
Mr. Terkper, speaking virtually at a Review and Compliance of the Public Financial Management Laws in Ghana workshop under the auspices of the Natural Resource Governance Institute in Accra, said “Ghana cannot contain debt without reducing expenditure, accounting properly for arrears and improving revenues.”
He added that the Mid-Year Review revealed that the central bank’s intervention in the economy is getting worse as it must restrict further support to remain within its legal lending threshold. He emphasized that many levies that should have been eliminated by now instead were extended to ten years, which leads to inflation because we do not receive credit for them.
The former finance minister also decried compromised, non-disclosure, and opaque fiscal accounting (offsets, arrears and bailout, energy debt and amortization as some of the negatives), stagnant income supporting expansionary expenditure and arrears spending programs, as well as these issues.
“These and others have implications on our stagnated tax revenue and so we need to strengthen domestic tax administration.”
For Mr. Terkper, despite the expansion in the economy over the last six years, the country has not expanded revenue commensurably. The highest is 16.6percent in 2016, the target 20 percent over the medium term to 2024 is not realistic.”
“All countries are managing the ongoing crisis; past lesson on “crystal balls” was to create buffers from oil revenues.
The Finance Ministry has committed to reduce spending and the anticipated budget deficit for 2022 in order to put the state’s finances back on a sound course.
In order to strengthen the cedi and combat inflation, the Bank of Ghana increased its benchmark lending rate by 850 basis points between November 2021 and August 2022.