Ghana faces revenue deficit woes amid IMF programme implementation, warns Economist
Economist Dr. Nii Moi Thompson has issued a stark warning that Ghana’s revenue deficit is set to worsen as the nation implements the International Monetary Fund’s (IMF) programme, painting a grim picture for the country’s fiscal health.
Ghana anticipates approval for its third tranche of $360 million at the upcoming IMF Executive Board meeting in June, following a staff-level agreement on the second review of its loan-support programme.
However, in an interview with Channel One TV, Dr. Thompson criticized the government for overtaxing its revenue sources and failing to extend adequate credit to businesses, thereby increasing tariffs and the cost of doing business and stifling economic growth.
The former Director-General of the National Development Planning Commission (NDPC) highlighted the government’s severe fiscal imbalance, noting that Ghana has exceeded its wage bill by 9% while experiencing a revenue shortfall of approximately 4%.
This fiscal mismatch, he cautioned, could lead to a critical situation where the government struggles to pay public sector salaries, putting many livelihoods at risk.
“Employee compensations and interest payments are some of the biggest structural impediments to fiscal rectitude in Ghana. Historically, that has been the case. On average, we exceed our wage bill by just about 9%, close to 10%. Since 2008, every single year, we have exceeded our wage bill by almost 10%,” Dr. Thompson said.
He underscored that persistent revenue shortfalls and insufficient investment in the economy are exacerbating the pressure on the wage bill, impeding economic progress.
“Over that same period, on average, we have had revenue shortfalls of around 4%. Your revenues are falling short in terms of budget, falling short by an average of 4%. But you’re exceeding your wage bill by almost 10%, and the shortfall in capital expenditure is also around 4%, so it’s like a perfect storm. You’re not investing enough in your economy, and as a result, you are not collecting enough revenue,” he explained.
Dr. Thompson predicted that the IMF programme’s implementation would further aggravate these issues.
“I see a slight decline in the wage bill for the estimated figures for last year [2022], but the others remain the same. Revenues continue to fall short, and they will actually get worse as the IMF programme is implemented. Because sources of revenues are business activity growth, and here you are strangulating them by not giving them credit, raising the cost of doing business, tariffs, electricity tariffs, and so forth. So we can expect this to get very difficult as we go on.”
He concluded by reiterating that the current IMF programme would exacerbate Ghana’s economic challenges and impede recovery.
“The IMF programme as it is now can never solve our problems; it will only make it worse,” Dr. Thompson asserted.
