"Overspending, weak domestic revenue mobilisation characterised Ghana’s fiscal policy, IMF says"

" Overspending, weak domestic revenue mobilisation characterised Ghana's fiscal policy , IMF says \r\n\r\nGhana\u2019s fiscal policy has been characterised by recurrent periods of overspending, the International Monetary Fund (IMF) has stated in a statement after approving the $3 billion bailout package for Ghana to revive its economy.\r\n\r\nAccording to the Fund, past budgets have been marked by overly optimistic forecasts despite the existence of a fiscal council.\r\n\r\nIt explained that the fiscal rules adopted in 2019 lack a debt target and feature an overly complex double operational rules system, with poorly defined escape clauses and no effective enforcement mechanisms.\r\n\r\nIt said \u201cGhana\u2019s fiscal framework is also weakened by persistent challenges in public financial management. Large revenue earmarking to statutory funds and retention of internally generated funds are creating significant budget rigidities.\u201d\r\n\r\nAgain it mentioned that \u201cstatutory funds have independent governance structures and are responsible for a large share of capital expenditures (estimated at 70% of their spending). Spending by most statutory funds and IGF-reliant institutions is not integrated with the budget planning system (Hyperion) and the expenditure accounting and control system (GIFMIS), contributing to severe deficiencies in expenditure controls\u201d.\r\n\r\nHowever, the Fund said the government is committed to addressing these Public Financial Management weaknesses and to strengthen the fiscal framework and institutions under the programme.\r\n\r\n\u201cAll central government expenditure will be integrated into the budget planning and accounting systems To this end, several important statutory funds (GETFund, Road Fund, and District Assemblies Common Fund) have started reporting their spending budgets in Hyperion at a disaggregated level to use all functionalities of GIFMIS (prior action)\u201d, it disclosed.\r\n\r\n\u201cStatutory funds will be reformed and rationalized. The authorities are in the process of hiring an external consultant to undertake a comprehensive review of all the statutory funds. The objective is to (i) evaluate their spending and assess efficiency, value for money and relevance, as well as alignment of the earmarking formulae with spending needs\u201d, it added.\r\n\r\nThe Fund also said Ghana\u2019s fiscal problems are rooted in structurally weak domestic revenue mobilisation.\r\n\r\n\u201cGhana\u2019s tax-to-GDP ratio has been low compared to peers, with non-oil revenues stagnating in recent years. Tax policy design suffers from widespread tax expenditures (estimated around 4% of GDP), especially in VAT, and underexploited taxes (property tax, excises). Weaknesses in revenue administration continue to be reflected in limited compliance and recoveries\u201d.\r\n\r\nTo address these challenges and achieve the programme\u2019s revenue mobilisation objectives, the Fund said the government are preparing a Medium-Term Revenue Strategy (MTRS). This strategy will focus on tax policy and revenue administration measures necessary to reach the authorities\u2019 programme revenue objectives over the 2023-26 period.\r\n\r\nThe reforms will also aim at further strengthening revenue administration.\r\n\r\nWith technical support from the IMF, the government is expected to accelerate the procurement of the Integrated Tax Administration System (ITAS) and fully operationalise the system by end-2023 (structural benchmark)."

"Overspending, weak domestic revenue mobilisation characterised Ghana’s fiscal policy, IMF says"

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