Dr. Nii Moi Thompson, a renowned economist, has warned that Ghana’s revenue shortfall is likely to deteriorate further as the country implements the International Monetary Fund’s (IMF) programme, painting a bleak outlook for the nation’s fiscal health.
Ghana is expected to get approval for its third tranche of $360m when the IMF Executive Board meet in June, having reached a staff-level agreement on the second review of the loan-support programme.
During an interview with Bernard Avle on Channel One TV, Dr Thompson lambasted the government for overburdening its revenue sources.
He noted that the government’s failure to provide adequate credit to businesses has led to increased tariffs and a higher cost of doing business, stifling economic growth and development
The former Director-General of the National Development Planning Commission (NDPC) warned that Ghana has overshot its wage bill by a staggering 9%, while simultaneously experiencing a revenue shortfall of approximately 4%.
He cautioned that this mismatch may lead to a precarious situation where the government may struggle to pay the salaries of public sector workers, potentially jeopardising the livelihoods of many Ghanaians
He noted that the wage bill is under immense strain, criticising the government for its inability to generate sufficient revenue and invest in the economy, thereby exacerbating the pressure on the wage bill and hindering the country’s economic progress.
“[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 just about 9% close to 10%, on average. Since 2008, every single year, we have exceeded our wage bill by almost 10%.
“And over that same period on average, we have had revenue shortfalls of around 4%. You see the contradiction emerging, your revenues are falling short in terms of budget, so actual and budget, It’s falling short by an average of 4%. But you’re exceeding your wage bill by almost 10%, then the third element is a shortfall in capital expenditure, which is also around 4%, so it’s like a perfect storm. You’re not investing enough in your economy, and as a result, you are not collecting enough revenue.
He emphasised, “I see a slight decline in the wage bill for the estimated figures for last year [2022], we don’t have the final. But the others remain the same, revenues continue to fall short. And it will actually get worse as the IMF programme is implemented. Because sources of revenues are business activity growth, and here you are strangulating them. By not giving them credit, raising the cost of doing businesses, tariffs, electricity tariffs and so forth, so we can expect this to get very difficult as we go on.”
He reiterated his stance that the IMF programme will perpetuate the economic downturn, exacerbating the existing challenges and hindering Ghana’s economic recovery
“The [IMF] programme as it is now, can never solve our problems, it will only make it worse,” he said.