The IFS has urged the Ghanaian government to set realistic budget targets to enhance fiscal credibility, highlighting the historical issue of overestimated revenue projections. The institute cautioned against excessive borrowing and recommended exploring alternative economic strategies, underscoring the importance of maintaining low fiscal deficits for sustainable economic stability.
The Institute for Fiscal Studies (IFS) has urged the government to establish realistic budget targets to enhance fiscal credibility. The IFS emphasized that a credible budget is vital for effective financial management and economic stability. It indicated that accurate financial projections must be a priority to foster public confidence in fiscal policy decisions.
The IFS highlighted Ghana’s recurring issue with overestimating revenue projections, which has led to consistent failure in meeting budget targets. Between 2013 and 2023, the actual revenue and grants have fallen short of expectations each year, resulting in an average shortfall of 7.4%. This trend, according to the institute, diminishes trust in the nation’s financial strategies.
Furthermore, the IFS cautioned the government against hastily borrowing from international markets. Ghana has confronted two significant debt crises: the first in 2001, which necessitated debt relief through the Heavily Indebted Poor Countries (HIPC) initiative, and the second in 2022, caused by excessive borrowing and loss of access to international bond markets.
To avert future crises, the IFS advised the government to limit fiscal deficits and consider alternative economic enhancement strategies. It pointed to the success of the central bank’s Gold Purchase Programme as an effective model for increasing financial reserves without incurring additional debt obligations.
The institute reiterated that minimizing excessive borrowing, particularly from foreign sources, is essential for sustaining long-term economic stability and fostering a reliable fiscal environment.
In conclusion, the Institute for Fiscal Studies stresses the importance of realistic budget targets and prudent borrowing practices for Ghana’s economic health. By focusing on credible financial management and exploring alternative growth avenues, Ghana can strive for fiscal credibility and long-term stability, ultimately restoring confidence among stakeholders.
Original Source: www.gbcghanaonline.com
