The World Bank has attributed Ghana’s full-blown economic crisis in 2022 to a combination of poor fiscal discipline and costly responses to global shocks.
In its Ghana Public Finance Review, the global financial institution highlighted that fiscal mismanagement was evident in weak budgetary frameworks, significant liabilities within the financial and energy sectors, and a failure to generate sufficient revenue. It pointed out that ineffective controls on government spending exacerbated the country’s fiscal situation, leading to a cycle of increased debt and diminishing fiscal capacity. This was compounded by excessive reliance on external commercial debt and a decline in tax revenue leading up to the crisis.
Additionally, the World Bank noted the high financial cost of cleaning up the banking sector and persistent losses in the energy sector, both of which added immense pressure to Ghana’s fiscal state.
“The prolonged and costly fiscal measures taken in response to the COVID-19 pandemic, combined with worsening global economic conditions, led Ghana into a full-blown crisis and debt distress by 2022,” the report stated, underlining that Ghana’s rapid GDP growth, primarily funded by debt, left the country highly exposed to global economic fluctuations.
Despite these challenges, the World Bank acknowledged progress toward economic stabilization, but emphasized that more work is required to meet fiscal and monetary goals and ensure sustainable fiscal management in the future.
It proposed that a stronger domestic revenue mobilisation is necessary to create fiscal space for critical development priorities.
Ghana’s tax collection falls below that of comparators, although not for all taxes.
SOURCE: Joy Business
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