The World Bank has disclosed that a lack of fiscal discipline and expensive fiscal response to global shocks plunged Ghana into a full-fledged crisis in 2022.
In its key findings in the Ghana Public Finance Review, the Bretton Woods institution said the lack of fiscal discipline was marked by weak budgetary institutions, high fiscal liabilities from the financial and energy sectors, and insufficient revenue collection.
Similarly, it said the fiscal system’s weak expenditure controls enabled a vicious circle leading to reduced fiscal space and unsustainable debt accumulation particularly overreliance on external commercial debt, made worse by declining tax revenue in the years preceding the crisis.
Again, a costly clean-up of the financial sector and ongoing losses in the energy sector increased fiscal pressures.
“With precarious fiscal conditions, the prolonged and expensive fiscal response to the COVID-19 and the subsequent deterioration of global conditions plunged Ghana into a full-fledged crisis – and into debt distress – in 2022”, it said in the report titled “Building the Foundations for a Resilient and Equitable Fiscal Policy”.
It stressed that Ghana’s fast Gross Domestic Product (GDP) growth, fueled by debt, left it highly vulnerable to global shocks.
The report however said that Ghana has made progress toward economic stabilisation but more needs to be done to meet monetary and fiscal targets and create lasting fiscal space.
It proposed that a stronger domestic revenue mobilisation is necessary to create fiscal space for critical development priorities.
Ghana’s tax collection falls below that of comparators, although not for all taxes.
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