The IFS advises the Ghanaian government to set realistic budget targets to enhance fiscal credibility. The historical shortfall in revenue forecasts undermines confidence in financial policies. The institute warns against excessive borrowing, advocating for sustainable economic strategies and cautioning against reliance on international markets in light of past debt crises.
The Institute for Fiscal Studies (IFS) has issued a recommendation for the government to establish realistic budget targets to enhance fiscal credibility. The institute asserts that a financially credible budget is vital for sound financial management and overall economic stability in Ghana. Furthermore, it highlights the necessity of having achievable financial projections to uphold the confidence of both national and international stakeholders.
Historically, Ghana has struggled with overestimating revenue projections, resulting in repeated failures to meet budget targets. From 2013 to 2023, the nation’s actual revenues and grants fell short of what was budgeted every year, averaging a shortfall of 7.4%. This consistent pattern has diminished trust in the government’s financial policies, highlighting the urgent need for more accurate budgeting practices.
The IFS also cautions the government against hasty borrowing from foreign markets. In the past, Ghana has encountered severe debt crises, such as in 2001, when the country required debt relief through the Highly Indebted Poor Countries (HIPC) initiative, and again in 2022 due to reckless borrowing and subsequent loss of access to international bonds. These historical precedents emphasize the risks associated with excessive borrowing.
To avert a repeat of such crises, the IFS advocates for the government to keep fiscal deficits low and to seek alternative economic enhancement strategies, including the utilization of natural resources. For instance, the successful Gold Purchase Programme implemented by the central bank serves as a precedent for how Ghana can bolster its financial reserves without incurring additional debt.
The institute strongly advises against engaging in unnecessary borrowing from international sources, identifying it as a crucial factor for sustaining long-term economic stability. The emphasis must be placed on prudent financial management to preserve the country’s economic health.
In summary, the Institute for Fiscal Studies emphasizes the critical need for the Ghanaian government to adopt realistic budget targets and avoid excessive foreign borrowing to ensure fiscal credibility. By learning from past financial missteps and implementing sound economic practices, the government can lay the groundwork for sustained economic stability and growth.
Original Source: www.gbcghanaonline.com
