Ghana Faces Fiscal Tightrope Amidst Less Ambitious 2025 Growth Targets – ISSER Warns
Ghana’s economic growth is projected to slow to 4% in 2025, raising concerns about worsening poverty levels. The ISSER highlighted a fiscal deficit of 7.9% against targets and warned of the effects of government borrowing on the private sector. Additionally, ambitious revenue targets may further burden households, calling for disciplined fiscal policies and regular evaluations.
The Institute of Statistical, Social and Economic Research (ISSER) has raised alarm about the potential worsening of poverty levels in Ghana if economic growth remains stagnant. Projections indicate that while the GDP growth for 2024 is expected to rebound at 5.7%, it will decline to 4% in 2025, falling short of the Sub-Saharan Africa average due to reduced capital expenditure and implementation delays of economic initiatives.
Professor Peter Quartey, the ISSER Director, highlighted that the sluggish growth in 2025 is linked to lowered capital investment, which stands at only 2.5% of GDP, and slow progress on the proposed 24-hour economy initiative. He articulated concerns regarding the fiscal situation, noting that Ghana failed to meet its revenue and deficit targets for 2024, resulting in a fiscal deficit of 7.9% compared to the 4.2% target.
Despite a reduction in the debt-to-GDP ratio to 61.8% due to restructuring, Professor Quartey suggested that complacency in managing debt could jeopardize progress. The reliance on domestic borrowing to cover the deficit poses risks, such as increasing interest rates and hindering private sector access to credit. He further warned about potential negative implications on credit access and household incomes from government borrowing practices.
On the topic of revenue generation, Professor Quartey critiqued the government’s goal of enhancing income and property tax revenue by 45.4% in 2025 as excessively ambitious without clear supportive measures in place. He emphasized the necessity for research-driven policies and regular evaluations to avoid revenue shortfalls and the need for mid-year tax adjustments.
Concerns about economic growth extend to critical sectors such as agriculture and industry, both of which are exhibiting signs of decline. As agriculture is expected to grow marginally from 2.8% to 3.1%, and industrial growth projected to drop significantly, the economic outlook poses challenges for households, particularly in managing living costs amidst increased tax burdens planned by the government.
In conclusion, Professor Quartey called for strict adherence to fiscal responsibility laws and continuous assessment of fiscal performance to avert budgeting consequences. He emphasized the importance of basing policies on robust data to achieve macroeconomic stability and prevent the recurrence of ineffective measures.
In summary, Ghana faces significant fiscal challenges as economic growth projections decline for 2025. The ISSER has highlighted critical issues such as reduced capital investment, high fiscal deficits, and ambitious revenue targets that may further strain households. Experts urge careful management of debt and borrowing practices, alongside data-driven policies for effective revenue mobilization, to ensure sustainable economic stability.
Original Source: www.myjoyonline.com
