Renowned economist Dr. Nii Moi Thompson has issued a stark warning that Ghana’s revenue deficit is likely to worsen as the country implements the International Monetary Fund’s (IMF) program, casting a bleak outlook on the nation’s fiscal health.
Ghana is anticipated to receive approval for its third tranche of $360 million when the IMF Executive Board meets in June, following a staff-level agreement on the second review of the loan-support program. However, Dr. Thompson criticized the government for overextending its revenue sources during an interview with Bernard Avle on Accra-based Channel One TV.
Dr. Thompson highlighted the government’s failure to provide adequate credit to businesses, leading to increased tariffs and a higher cost of doing business, which in turn stifles economic growth and development.
The former Director-General of the National Development Planning Commission (NDPC) pointed out that Ghana has overshot its wage bill by a staggering 9%, while also experiencing a revenue shortfall of approximately 4%. This mismatch, he warned, could lead to a precarious situation where the government might struggle to pay public sector salaries, potentially jeopardizing the livelihoods of many Ghanaians.
“The wage bill is under immense strain,” Dr. Thompson stated, criticizing the government for its inability to generate sufficient revenue and invest in the economy. This failure exacerbates the pressure on the wage bill and hinders the country’s economic progress.
He explained, “[employee compensations, interest payments] it’s one of the biggest structural impediments to fiscal rectitude in Ghana. Historically, that has been the case. On average, we exceed our wage bill by about 9% close to 10%. Since 2008, every single year, we have exceeded our wage bill by almost 10%. And over that same period, we have had revenue shortfalls of around 4%. This creates a perfect storm where not enough is being invested in the economy, resulting in insufficient revenue collection.”
Dr. Thompson further elaborated, “I see a slight decline in the wage bill for the estimated figures for last year [2022], but revenues continue to fall short. It will actually get worse as the IMF program is implemented because sources of revenues are business activity growth. By not providing credit and raising the cost of doing business through tariffs and electricity tariffs, we can expect these difficulties to intensify.”
Dr Nii Moi Thompson reiterated his stance that the IMF program would perpetuate the economic downturn, exacerbating existing challenges and hindering Ghana’s economic recovery. “The [IMF] program as it is now can never solve our problems; it will only make them worse,” he concluded.
