Former Finance Minister, Seth Terkper, says poor fiscal performance is main drain and threat to the economy but the opportunity is still there to transition well into a credible Lower-Middle Income (L-MIC) status based on streamlined petroleum production and revenue management.
Mr. Terkper also disclosed that remedies to the country’s economic challenges does not lie with a short-term or a fast-track programme rather sound fiscal measures, proper accounting systems.
Total public debt and its rate of accumulation continue to worsen -no external market access; downgrades, domestic auction failures and high costs, depletion of sinking funds remains the headwinds the country is grappling with.
Speaking virtually at a Review and Compliance of the Public Financial Management Laws in Ghana workshop under the auspices of the Natural Resource Governance Institute in Accra, he said “Ghana cannot contain debt without reducing expenditure, accounting properly for arrears and improving revenues.”
He also noted that the Mid-Year Review showed that the central bank’s intervention to the economy is worsening as it has to limit further support to stay within its legal lending threshold, stressing that a lot of levies should have been scrapped by now but rather been increased to ten years and this causes inflation because we do not get credit for them.
The former finance minister also bemoaned a stagnant revenue supporting expansionary expenditure and arrears spending programmes, as well as compromised, non-disclosure and non-transparent fiscal accounting (offsets, arrears and bailout, energy debt and amortization as some of the drawbacks.
“These and others have implications on our stagnated tax revenue and so we need to strengthen domestic tax administration.”
For Mr. Terkper, despite the expansion in the economy over the last six years, the country has not expanded revenue commensurably. The highest is 16.6percent in 2016, the target 20percent over the medium term to 2024 is not realistic.”
“All countries are managing the ongoing crisis; past lesson on “crystal balls” was to create buffers from oil revenues.
What the state are doing
The Finance Ministry has vowed to return state finances to a sustainable path, cutting spending and reducing the projected budget deficit for 2022.
The Bank of Ghana raised its key lending rate by 850 basis points between November 2021 and August 2022 to support the currency and help tame inflation.