Strengthening Ghana’s Fiscal Resilience and Economic Sustainability: A Path to Equitable Growth

To support fiscal consolidation, the report calls for strengthening fiscal institutions and improving public financial management and procurement systems.

The World Bank Group’s latest Public Finance Review report, titled “Building the Foundations for a Resilient and Equitable Fiscal Policy,” highlights Ghana’s impressive economic growth trajectory between 2008 and 2019, during which GDP expanded at an annual average of 6.8%. However, this growth was primarily driven by oil production and increasing debt levels, exposing the nation to significant vulnerabilities from global economic shocks.

The report underscores that Ghana’s recent debt crisis resulted from weak expenditure controls, inefficient public spending, underperforming revenue collection, and expensive borrowing practices. While the government has taken bold steps since 2022 to stabilize the economy, the World Bank emphasizes the need for sustained fiscal consolidation complemented by structural reforms to address the underlying causes of fiscal instability.

Ensuring Fiscal Stability and Sustainable Development

“Ghana needs to persist in its ambitious fiscal consolidation efforts, ensuring that adjustments are both fair and sustainable,” stated Robert Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. “It is crucial to protect pro-poor and pro-growth investments while enhancing domestic revenue mobilization. Additionally, Ghana must address the increasing fiscal liabilities stemming from the energy and cocoa sectors.”

Ghana’s fiscal deficit averaged around 4% of GDP from 2008 to 2019, double that of the preceding period from 2000 to 2007. Total expenditures during this time also surged, averaging 19% of GDP—6 percentage points higher than in the earlier period.

To support fiscal consolidation, the report calls for strengthening fiscal institutions and improving public financial management and procurement systems. David Elmaleh, Senior Economist and author of the report, stressed the importance of implementing a fiscal rule to ensure debt sustainability, increasing transparency through timely fiscal data disclosure, and reinforcing the independence of the Fiscal Council.

Key Policy Priorities for a Robust Fiscal System

The report outlines four high-level policy priorities necessary for Ghana to build a resilient fiscal system and support long-term economic transformation:

1. Fiscal Discipline and Oversight:

   • Establish a fiscal rule to enforce budget discipline and sustainable debt management.
   • Enhance spending controls and improve oversight of contingent liabilities.
   • Leverage technology to increase transparency and accountability in financial management.

2. Domestic Revenue Mobilization:

   • Strengthen tax administration and broaden the tax base to sustainably enhance revenue collection.
   • Ensure that revenue mobilization efforts align with Ghana’s long-term development goals.

3. Financing Mix Management:

   • Develop a coherent policy on non-concessional external borrowing with clearly defined expected amounts and intended uses.
   • Optimize the financing mix to align financial costs with expected returns on investment.

4. Investment Spending:

   • Prioritize public investment in human development while addressing inefficiencies in capital spending.
   • Direct investment towards infrastructure development, technological innovation, and climate resilience to support economic transformation.

“The report’s recommendations are critical to ensuring Ghana’s fiscal stability and fostering sustainable economic development,” noted Tamoya Christie, Senior Economist and co-author. “The World Bank Group remains committed to supporting Ghana in implementing these strategies to achieve long-term prosperity and resilience.”