ACCRA, February 12, 2025 - The World Bank Group's latest Public Finance Review report, titled "Building the Foundations for a Resilient and Equitable Fiscal Policy," highlights that Ghana's impressive GDP growth of 6.8% annually from 2008 to 2019 was driven by oil production and debt accumulation, leaving the country highly vulnerable to global shocks. The report notes that Ghana's recent debt crisis was fueled by weak expenditure controls, inefficient public spending, underperforming revenue collection, and costly borrowing. Despite taking decisive steps to stabilize its economy since 2022, Ghana needs to accompany fiscal consolidation with structural reforms to address the root causes of the crisis and support economic transformation and sustainable development.
"Ghana needs to persist in its ambitious fiscal consolidation efforts, ensuring that adjustments are both fair and sustainable," said Robert Taliercio, World Bank Country Director for Ghana, Liberia and Sierra Leone. "It is crucial to protect pro-poor and pro-growth investment, while enhancing domestic revenue mobilization. Additionally, Ghana must address the increasing fiscal liabilities stemming from the energy and cocoa sector."
Ghana's fiscal deficit averaged around 4% of GDP from 2008 to 2019, double that of 2000 to 2007. During the same period, total expenditures averaged 19% of GDP-6 percentage points higher than in 2000 to 2007.
"To accompany fiscal consolidation efforts, the report calls for strengthening fiscal institutions and enhancing its public financial management and procurement systems," said David Elmaleh, Senior Economist and author. "This includes implementing a fiscal rule that ensures debt sustainability and increasing transparency and accountability through greater demand for timely fiscal data and the independence of the Fiscal Council."
In the medium term, the report proposes that Ghana tackles the root causes of its macro imbalances and builds the foundations of a robust fiscal system, which can support its long-term development. To this end, it outlines four high-level policy priorities.
a. Fiscal Discipline and Oversight:
- Entrench fiscal discipline through a fiscal rule, effective spending controls, and better oversight of contingent liabilities.
- Leverage technology to enhance accountability and transparency.
b. Domestic Revenue Mobilization:
- Sustainably enhance domestic revenue mobilization to support Ghana's development goals.
- Strengthen tax administration and broaden the tax base.
c. Financing Mix Management:
- Carefully manage the financing mix to match the return on investment with financial costs.
- Develop a coherent policy on non-concessional external borrowing and clarify the expected amount and intended uses of external funds.
d. Investment Spending:
- Ring-fence investment and prioritize public goods spending on human development while addressing inefficiencies.
- Target investment spending to support economic transformation and climate resilience through infrastructure development and technological innovation.
"The report's recommendations are critical to ensuring Ghana's fiscal stability and fostering sustainable economic development," said Tamoya Christie, Senior Economist and co-author. "The World Bank Group stands ready to support Ghana in implementing these strategies to achieve lasting prosperity and resilience."
