The IFS has recommended that the Ghanaian government set realistic budget targets to enhance fiscal credibility and economic stability. Historical trends show a consistent underestimation of revenue projections leading to budget shortfalls. The institute cautions against hasty borrowing and encourages the exploration of alternative economic strategies to prevent future debt crises.
The Institute for Fiscal Studies (IFS) has called upon the government to establish realistic budget targets in order to enhance fiscal credibility. This recommendation comes in light of the need for sound financial management and the promotion of economic stability, crucial elements for sustainable growth.
Historically, Ghana has struggled with accurately projecting revenue, leading to consistent budget shortfalls. From 2013 to 2023, Ghana’s actual revenue and grants fell short of budget estimates annually, averaging a 7.4% deficit. This trend has undermined confidence in the nation’s fiscal policies and management capabilities.
Furthermore, the IFS warned against the government’s potential haste in borrowing from international markets, citing previous debt crises, including the 2001 HIPC initiative and the 2022 crisis caused by excessive debt accumulation and loss of international bond access. Such history underscores the risks associated with rapid borrowing.
To avert future economic distress, it is recommended that the government maintain low fiscal deficits and consider alternative economic stimulation methods. For instance, leveraging natural resources can provide avenues for growth without accruing more debt, as illustrated by the successful Gold Purchase Programme implemented by the central bank.
The institute emphasized that reducing dependence on foreign borrowing is paramount for achieving long-term economic stability. This approach requires careful fiscal planning and realistic budgeting to foster an environment of financial credibility and resilience.
The IFS urges the government to adopt more realistic budgeting strategies to improve fiscal credibility, noting the dangers of overestimating revenue and rushing into borrowing. By citing historical fiscal trends and advocating for alternative economic strategies, the institute emphasizes the importance of maintaining low fiscal deficits and avoiding excessive foreign debt.
Original Source: www.gbcghanaonline.com
