Expert Recommendations for Stabilizing Ghana’s Economy at NED 2025

A group of economists at the National Economic Dialogue 2025 proposed measures to stabilize Ghana’s economy, identifying factors like weak revenue generation and excessive borrowing as key issues. Their recommendations include fiscal discipline, tax reforms, exchange rate stabilization, and improved public sector efficiency to address ongoing challenges and prevent future crises.

A panel of economists has proposed actionable measures aimed at stabilizing Ghana’s economy. They identified weak revenue generation, poor public expenditure management, and excessive borrowing as the principal factors contributing to the nation’s persistent economic issues. During the National Economic Dialogue (NED) 2025 held on March 4 at the Accra International Conference Centre, economist Leslie Bright Mensah presented the interim report from the Macroeconomic Stability Group, outlining recommendations to address long-standing challenges.

Among the proposed solutions are the instatement of fiscal discipline, comprehensive tax reforms, stabilization of the exchange rate, and enhancing public sector efficiency to avert future crises. Mr. Mensah emphasized the importance of macroeconomic stability in Ghana’s development and highlighted unsustainable fiscal policies as a major cause of the recent economic crisis, particularly the excessive budget deficits and rising debt service costs.

He pointed out alarming statistics, noting that over the five years preceding the 2022 economic crisis, Ghana’s budget deficit averaged 9 percent of GDP, with debt servicing consuming nearly 70 percent of public revenue in 2021. Additionally, Ghana has grappled with prolonged high inflation above 20 percent for 34 consecutive months, emphasizing a significant deterioration compared to the six months recorded over the previous 18 years. The cedi’s depreciation, losing 19.2 percent of its value in 2024 alone, further complicates matters.

To fortify the economy, experts advocated for simplification of the tax system and consistency in tax policies. Mr. Mensah stated, “The government must adopt a medium-term approach to tax policies to give businesses certainty and encourage compliance.” Furthermore, he proposed a review of the Value Added Tax (VAT) system to address the current compliance gap exceeding 50 percent. Lowering VAT rates is suggested as a means to enhance collection, particularly in light of the under-collection of property taxes by the Accra Metropolitan Assembly, which exceeds 60 percent.

Enhancing public financial management is another critical area, with Mr. Mensah calling for stricter enforcement of financial laws, especially the Public Financial Management (PFM) Act, which mandates regular reporting on expenditures. He remarked, “Many of these reporting requirements have not been followed. If the Finance Minister ensures compliance with the PFM Act, it will help strengthen fiscal discipline.” Additionally, the revision of the Fiscal Responsibility Act is recommended to control excessive government spending.

For exchange rate stability, Mr. Mensah emphasized the necessity of robust regulation of foreign exchange bureaus, alongside the eradication of illegal forex markets. Coordination between the Ministry of Finance and the Bank of Ghana is crucial, as is the incorporation of fintech liquidity into the formal banking sector. He also suggested reviewing foreign exchange retention policies within key industries like mining to alleviate pressure on the local currency.

The banking sector also requires attention; the group advocates for recapitalizing the Bank of Ghana to enhance its monetary policy management capabilities. Additionally, conducting a feasibility study on non-interest banking could provide alternative financing channels and promote financial inclusion.

Mr. Mensah concluded that the implementation of these measures would be instrumental in restoring investor confidence, stabilizing the exchange rate, and fostering a predictable business environment. The 2025 National Economic Dialogue served as a crucial platform for economic experts, policymakers, and government officials to collaboratively explore strategies to bolster Ghana’s economy and prevent future crises.

In summary, the proposed measures aim to stabilize Ghana’s economy through fiscal discipline, tax reforms, and improved public financial management. By addressing critical issues such as excessive borrowing, inflation, and the depreciation of the cedi, the recommendations outlined by economists at the NED 2025 hold the potential to restore investor confidence and create a more resilient economic framework. Implementing these strategies will be vital for ensuring the long-term stability and growth of Ghana’s economy.

Original Source: www.graphic.com.gh