To recover and build a resilient economy, Ghana must do things differently by addressing the structural weaknesses that have led to its fiscal challenges.
According to the World Bank Group’s latest Public Finance Review report, the country must pair its ongoing fiscal consolidation efforts with transformative reforms to ensure sustainable economic growth and stability.
“Ghana needs to persist in its ambitious fiscal consolidation efforts, ensuring that adjustments are both fair and sustainable,” said Robert Taliercio, World Bank Country Director for Ghana, Liberia, and Sierra Leone. He underscored the importance of protecting pro-poor and pro-growth investments while tackling increasing fiscal liabilities from the energy and cocoa sectors.
The report highlights key actions Ghana must take, including strengthening fiscal discipline through effective spending controls, establishing a fiscal rule to ensure debt sustainability, and improving oversight of contingent liabilities. Additionally, leveraging technology to enhance accountability and transparency will be critical to ensuring fiscal reforms are successful.
To mobilize domestic revenue sustainably, Ghana must broaden its tax base, strengthen tax administration, and develop coherent policies for non-concessional external borrowing. “Ghana must carefully manage its financing mix, ensuring financial costs align with the return on investment,” said David Elmaleh, Senior Economist and lead author of the report.
Investment spending should be prioritized to support economic transformation and climate resilience. The report calls for targeted investments in human development, infrastructure, and technological innovation, while addressing inefficiencies in public spending. These measures, according to Tamoya Christie, Senior Economist and co-author, will lay the foundation for fiscal stability and sustainable development.
Ghana’s struggle with debt distress has been a significant economic challenge in recent years. The country’s debt crisis reached a critical point in 2022, when it defaulted on its external debt payments for the first time in its history, prompting the government to seek a $3 billion bailout from the International Monetary Fund (IMF). The crisis was triggered by a combination of unsustainable borrowing, weak revenue collection, and the global economic fallout from the COVID-19 pandemic and the Russia-Ukraine war, which heightened fiscal vulnerabilities.
Central to the recovery plan was the implementation of the Domestic Debt Exchange Programme (DDEP), launched in December 2022, which aimed to restructure the country’s unsustainable debt levels by swapping existing bonds for new ones with lower interest rates and extended maturities.
While the DDEP helped Ghana avert immediate fiscal collapse, its implementation came at a significant cost. The program faced resistance from institutional investors, pension funds, and individual bondholders, who argued it eroded their financial security. The restructuring also strained local financial institutions, reducing liquidity and creating new vulnerabilities in the banking sector.
