Prof. Asuming Identifies Three Key Dimensions to Ghana’s Economic Challenges
Professor of Economics and Development at the University of Ghana Business School, Professor Patrick Asuming, has identified three key dimensions to Ghana’s economic challenges.
Speaking on the NorvanReports and Economic Governance Platform (EGP) X Space discussion on the topic, “Ghana’s Economic Recovery: Reality or Debt-Fueled Illusion,” Prof. Asuming outlined the structural fiscal problem, the scale of unsustainable debt, and excessive discretionary powers for political actors in granting tax exemptions as the main issues plaguing the country’s economy.
Structural Fiscal Problem
According to him, Ghana’s economy is predominantly informal, posing a significant challenge to tax collection. He noted that the country has historically relied on indirect taxes, as income and corporate tax revenues remain relatively low.
“The way our economy is structured is predominantly informal, making it difficult to properly collect the taxes we need. The tax base has always been small, and income tax and corporate taxes, which should be a major source of revenue, remain low. We have largely relied on indirect taxes, which is problematic,” he stated.
He further explained that the agricultural sector, which once dominated the economy, has been difficult to tax effectively due to its largely small-scale, peasant-based nature with minimal value addition.
Unsustainable Debt Burden
Addressing the debt situation, Prof. Asuming highlighted that Ghana’s current debt crisis differs significantly from past financial challenges.
“This time, our debt is mostly commercial with extremely high interest rates compared to previous crises. In the past, Ghana had the option of debt relief programs such as HIPC (Heavily Indebted Poor Countries Initiative) in 2001, but that option is not available now,” he explained.
He stressed that the scale of the debt problem has escalated due to the country’s growing reliance on commercial borrowing at exorbitant rates, making debt sustainability a major issue.
Excessive Discretionary Powers in Tax Exemptions
The third dimension, according to Prof. Asuming, is the significant discretionary power political actors wield in granting tax exemptions. He argued that this has contributed to the fiscal imbalance, as many entities that should be paying taxes are instead benefiting from exemptions.
“There is too much discretionary power for political actors to grant exemptions, sometimes without proper parliamentary scrutiny. This has worsened the revenue shortfall and weakened the fiscal framework,” he remarked.
The Need for Fundamental Reforms
Prof. Asuming emphasized that previous economic recovery programs only addressed surface-level issues, allowing underlying problems to persist. However, the severity of the current crisis demands urgent and comprehensive structural reforms.
“In past IMF programs, we only scratched the surface and abandoned deeper reforms once some improvement was seen. This time, given the level of hardship and economic difficulty, we must address the fundamental issues to prevent another crisis in the near future,” he asserted.
He therefore called for broadening the tax base, improving tax efficiency, strengthening governance, and reducing political interference in economic management as key steps toward a sustainable recovery.
