Ghana’s 2023 revenue target unrealistic, says Fitch Solutions
Fitch Solutions has recently released its 2023 February Africa Monitor Report, in which it highlights that Ghana’s revenue target for 2023 may be unrealistic. The government aims to collect total revenue and grants of ¢143,956 million, which amounts to roughly 18.0% of the Gross Domestic Product (GDP). However, this figure represents a 43.2% increase from the 2022 target, and Fitch Solutions believes that it may be overly ambitious given the current economic conditions in the country.
The report indicates that higher taxes will boost fiscal intakes in 2023, but the weakening economic activity due to still-elevated inflation and tighter monetary policy will cap revenue growth. Fitch Solutions predicts that Ghana’s economy will expand by a weak 2.9% in 2023, which is far below the country’s 10-year pre-pandemic average of 6.8%. Additionally, global oil prices are expected to ease in 2023, which will put downward pressure on receipts from the oil sector.
Furthermore, Fitch Solutions warns that the Ghanaian government has a history of overestimating intakes. The report notes that the government’s revenue target for 2022 was not achieved, and the trend may continue into 2023. Taking these factors into account, Fitch Solutions believes that total revenues will rise to ¢134.4 billion in 2023 (compared to the target of ¢144.0 billion), or 18.0% of GDP, from 15.0% of GDP in 2022.
The report has significant implications for investors and stakeholders in Ghana, who will be closely monitoring the country’s revenue collection efforts in the near term. The challenging market conditions that are expected to persist will put significant pressure on the government to meet its revenue targets, but the country’s economic growth may not be sufficient to achieve these goals. The report also highlights the need for the government to explore alternative revenue streams and implement more effective tax policies to support the country’s economic growth.
Fitch Solutions report raises important questions about Ghana’s economic prospects in 2023. While higher taxes will contribute to increased fiscal intakes, the country’s economic growth may not be sufficient to meet the ambitious revenue targets set by the government. Investors and stakeholders in Ghana must carefully monitor the situation and prepare for the challenges that lie ahead, including the need for more effective tax policies and diversified revenue streams to support the country’s long-term growth prospects.
