January 9, 2019

Enhancing Revenue Mobilization in Ghana through Tax Compliances

Fiscal Alert 16: Enhancing Revenue Mobilization in Ghana through Tax Compliance.

Ghana’s tax/GDP (rebased) ratio currently sits below 13%. Not only is the country’s tax revenue as a share of GDP low in absolute terms, but it is also very low as a share of GDP relative to those of its African peers, pointing to the need to significantly increase tax revenue.

Developing mechanisms to improve tax revenue has, however, become challenging on at least two fronts: (i) lack of good data on tax compliance; and (ii) difficulty in finding effective instruments for improving compliance, given the institutional constraints.

One way to raise more tax revenue, therefore, is to improve the effectiveness of the tax administration system. Another important way is to improve tax compliance. This means strengthening the capacity and resources needed for better taxpayers’ services and enforcement, reviewing tax structures, and investing in skills and management systems needed to establish a productive tax system.

This fiscal alert makes recommendations on how to improve revenue mobilization in Ghana through tax compliance.
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November 19, 2018

The 2018 Fiscal Policy Objectives and Targets: What has changed?

Fiscal Alert 15: The 2018 Fiscal Policy Objectives and Targets: What has changed?

Ghana has been facing fiscal difficulties since 2012 and the effects were at the forefront of the fiscal challenges that confronted the NPP government that came into office in 2017. For most of the past six years, large persistent fiscal deficits and a rising debt burden have posed an increasingly serious policy challenge for the country. The implementation of the single spine salary structure for the public sector in 2010, coupled with a sharp rise in energy-subsidy costs and fiscal transfers, rapidly increased public spending. Consequently, the fiscal deficit rose from 4% of GDP in 2011 to 11.6% in 2012, coupled with a rapid accumulation of government payment arrears. The emergence of a large fiscal deficit and external imbalances led to a slowdown in growth, putting the country’s medium-term prospects at risk. Government’s efforts to achieve fiscal consolidation since mid-2013 were undermined by policy slippages, external shocks, and rising interest cost. As a result, the fiscal deficit remained far elevated and above its target levels, reaching 10.7% of GDP in 2013 and 10.1% in 2014 (World Bank, 2017).
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October 16, 2018

An Assessment of the Proposed US$50 Billion Century Bond for Ghana

Fiscal Alert 14: An Assessment of the Proposed US$50 Billion Century Bond for Ghana

The Minister of Finance has disclosed that the 2019 Budget will announce the issuing of a US$50 billion century bond that will provide resources to help address major challenges confronting the country, including the cedi depreciation, infrastructural deficit, and low industrial development. A successful century bond will make everybody comfortable about the future of the country’s needs for both infrastructure and foreign exchange so that we have a lot more stability. According to the Minister, the bond will be raised in bits through a shelf offering, which will allow issuers to register a security without selling the entire issue at once.

The Minister’s disclosure followed an announcement made by the President last month in China. With the country exiting the IMF program by the end of the year, the President stressed that Ghana is determined never to return to the Fund-support program. In order to do so, the government is looking seriously at how it can secure sources of long-term finance that will allow it to deal with the country’s infrastructure development and also realize the vision of a “Ghana beyond Aid”. To this end, the Ministry of Finance is considering floating an ultra-long-term-bond

This paper reviews the government’s plan to issue a US$50 billion century bond to finance infrastructure and other development projects and offer some suggestions for that initiative.

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August 5, 2018

Mid-Year Review of the 2018 Budget Statement & Economic Policy

FiscalAlert 13: Mid-Year Review of the 2018 Budget Statement & Economic Policy

On July 19, 2018, the Minister of Finance presented to Parliament the Government’s Mid-Year Fiscal Policy Review of the 2018 Budget Statement and Economic Policy. According to the Minister of Finance, the overarching goal of government’s macro-fiscal policy is to deepen macroeconomic stability, grow the productive sectors of the economy, create jobs and ultimately move the economy beyond aid. Consequently, the government’s fiscal policy has been designed to reduce the fiscal deficit to ensure debt sustainability without compromising growth. It has also been designed to be growth-friendly, reformative and flexible to enable a quick adaptation to an evolving economy.

The Institute for Fiscal Studies (IFS) has reviewed the Government’s Mid-Year Review of the 2018 Budget and Economic Policy. The review presented below focuses on four thematic issues: an overview of recent macroeconomic performance; fiscal performance and adjustments to the fiscal framework; observations and comments; and conclusions.

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May 8, 2018

Ghana’s Economic Development: Past, Present and the Future.

Fiscal Alert 12: Ghana's Economic Development: Past, Present and the Future.

After a successful implementation of an unprecedented program of economic recovery over a decade, perceived by the international community as an example of adjustment with growth and a model for the rest of Africa, Ghana held its first multi-party elections in 1992, taking a decisive step to return to multi-party democratic rule.

This paper focuses on Ghana’s economic development since the return to multi-party democracy in 1993. It starts with a review of economic management during the transition period (1992) to provide the context for the move to multi-party democracy. This is followed by a discussion of the challenges of the economic policy reforms and development since then, the main achievements and failures. Finally, the paper looks at the critical issues to address in rethinking the country’s development going forward.

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March 12, 2018

Ghana’s Growing Public Debt and Its Implications for the Economy

Fiscal Alert 11: Ghana's Growing Public Debt and Its Implications for the Economy

Rising public expenditures in the context of persistently weak revenue performance have undermined Ghana’s fiscal and debt sustainability in recent years. As the coun- try’s fiscal risks remained high, credible fiscal consolidation was required to reverse the unfavorable debt dynamics and reduce domestic refinancing risks.

The fiscal management strategy of the new government that came into office in January 2017 aims at restoring fiscal discipline, reversing the fiscal deterioration it inherited and putting the public debt on a downward and sustainable path. Unfortunately, it does not appear that the government is winning the debt stability war, as total public debt continues to grow with serious implications for the economy.

This paper looks at the profile of Ghana’s public debt and debt servicing costs in the past decade, their implications for the economy and policy recommendations to address the debt albatross in order to support economic growth. Read full paper here