Proposed Measures for Stabilizing Ghana’s Economy at the National Economic Dialogue

Economists presented proposals at the National Economic Dialogue to stabilize Ghana’s economy, citing revenue generation issues, poor expenditure management, and excessive borrowing as core problems. Recommendations include fiscal discipline, tax reforms, and enhanced public sector efficiency to prevent future crises and restore investor confidence.

A group of economists has proposed essential measures to stabilize Ghana’s economy, attributing the challenges to poor revenue generation, ineffective public expenditure management, and excessive borrowing. This proposal was presented at the National Economic Dialogue (NED) 2025, where economist Leslie Bright Mensah highlighted the need for strategic recommendations to address ongoing economic issues, such as fiscal discipline, tax reforms, exchange rate stability, and enhancing public sector efficiency.

Mr. Mensah emphasized that maintaining macroeconomic stability is crucial for Ghana’s development but has proven problematic. He traced the recent economic difficulties to unsustainable fiscal policies, marking excessive budget deficits and rising debt service costs as significant factors. “In the five years leading up to the 2022 economic crisis, Ghana’s budget deficit averaged 9 percent of GDP,” he noted, highlighting that debt servicing consumed nearly 70 percent of public revenue in 2021, contributing to the current fiscal challenges.

Additionally, high inflation, which has exceeded 20 percent for over 34 consecutive months, and the significant depreciation of the cedi, which lost 19.2 percent of its value in 2024, were identified as pressing concerns. To enhance the economy, the group recommended simplifying the tax system and ensuring consistency in tax policies, with Mr. Mensah asserting, “The government must adopt a medium-term approach to tax policies to give businesses certainty and encourage compliance.”

The recommendations included reviewing the VAT system to bridge the substantial compliance gap and addressing property tax administration through technological advancements. For instance, Mr. Mensah pointed out that “the Accra Metropolitan Assembly, one of Ghana’s wealthiest local government bodies, has a property tax under-collection rate of over 60 percent,” which requires immediate attention.

On the topic of public financial management, Mr. Mensah called for strict adherence to the Public Financial Management (PFM) Act, which mandates regular reporting on expenditures. “Many of these reporting requirements have not been followed. If the Finance Minister ensures compliance with the PFM Act, it will help strengthen fiscal discipline,” he stated, further recommending a review of the Fiscal Responsibility Act to curb excessive spending.

For exchange rate stability, stronger regulation of foreign exchange bureaus was advised, alongside eliminating illegal forex markets and enhancing collaboration between the Ministry of Finance and the Bank of Ghana. He suggested incorporating fintech liquidity into the mainstream banking system and re-evaluating foreign exchange retention in critical sectors, such as mining.

The group also proposed to recapitalize the Bank of Ghana to bolster its monetary policy management capabilities and urged conducting a feasibility study on non-interest banking to expand financing options and financial inclusion. Mr. Mensah asserted that the implementation of these recommendations would restore investor confidence and stabilize the business environment as a whole.

The National Economic Dialogue 2025 facilitated discussions among economic experts, policymakers, and government officials on strategies to reinforce Ghana’s economy against future crises. The proposed measures reflect a proactive approach to overcoming the current economic difficulties and fostering sustainable growth in the future.

In summary, the recommendations put forth by economists at the National Economic Dialogue 2025 are essential for addressing Ghana’s economic challenges. Emphasizing fiscal discipline, tax reforms, and public financial management, these strategies aim to stabilize the economy and restore investor confidence. Ensuring compliance with existing laws and exploring new financial mechanisms will be crucial in facilitating a more sustainable economic future for Ghana.

Original Source: www.graphic.com.gh