Ghana’s Economy Faces Uphill Battle, Urging Consideration for IMF Programme Extension
Ghana’s economic struggles have deepened, according to the Finance and Economics Professor at the University of Ghana. Speaking on Joy FM, he emphasized that the country’s current economic challenges surpass those faced when seeking IMF assistance initially.
“We are an economy that is struggling. We are in a worse situation than we were when we went to the IMF,” he remarked, urging the government to contemplate extending the programme if necessary. He cautioned that an early exit could send negative signals to investors seeking long-term economic stability.
Investors prioritize stability over short-term gains, and an abrupt departure from the IMF programme could deter long-term commitments. The professor highlighted Ghana’s limited access to international capital markets until 2027, complicating the country’s economic recovery. He referenced warnings from the World Bank, advising against rushing back to the market as countries undergoing debt restructuring typically take three to four years to rebuild investor confidence.
One major economic challenge highlighted by the economist is Ghana’s inefficient tax system. He revealed that only 41% of the economy contributes 86% of tax revenue, leaving a significant portion of economic activities untaxed.
“A large chunk of our economy is not taxable. The bigger percentage of our economy contributes just about 40% of tax revenue,” he explained. While acknowledging government efforts to improve tax education and administration, he recommended focusing on properly taxing high-net-worth individuals, potentially generating up to $160 million annually.
However, he cautioned against burdening compliant taxpayers with additional levies, warning against jeopardizing the revenue sources. These concerns arise as Ghana continues to implement fiscal measures under its $3 billion IMF programme initiated in 2023. While the government remains hopeful about meeting fiscal targets through enhanced tax collection and expenditure controls, the economist believes a more strategic approach, possibly extending the IMF programme, would benefit Ghana.
“The idea of reviewing the programme with the possibility of an extension should not be off the table,” he concluded.
In conclusion, Ghana’s economic challenges necessitate a careful and strategic approach to ensure sustainable growth and stability. Extending the IMF programme and addressing the inefficiencies in the tax system could be crucial steps towards securing the country’s economic future.
