This is not the time to celebrate but to remain vigilant on the economy - IFS tells government

IFS Executive Director, Dr. Said Boakye

The Institute of Fiscal Studies (IFS) has cautioned the government, warning that it is premature to celebrate any economic achievements despite some recent improvements in macroeconomic indicators.

According to the IFS, Ghana's economy remains weak, and significant challenges still lie ahead.

This comes in response to Finance Minister Mohammed Amin Adam's optimistic presentation during the 2024 mid-year budget review, where he highlighted a slowdown in inflation and a reduction in the deficit as signs of recovery.

IFS Executive Director, Dr. Said Boakye while speaking during a press conference on Ghana’s fiscal and macroeconomic performance on August 14, 2024, voiced concern that despite some stabilization in key economic indicators, they continue to perform well below historical averages.

“Given that the economy remains weak and fragile, as demonstrated in Section 4, this is not the time to celebrate, but the time to remain vigilant.

“As clearly shown, all the relevant macroeconomic indicators are still presently performing much below par relative to recent historical trends.

"The government should not, therefore, behave as if all is well. Rather, the fragile state of the economy should be made to inform its policy choices. This requires it to choose prudence over populism even as it campaigns for power in this year's elections. Thus, politicization of economic policy decisions and choices must stop,” he said.

He pointed out that while inflation had slowed to 22.8% as of June 2024, it remains high compared to the single-digit rates Ghana enjoyed between 2010 and 2012.

He emphasized that such levels are still far from ideal for economic health, especially for a country that averaged an inflation rate of 9% for 31 months during the early 2010s.

“Even though there is a slowdown in inflation and other indicators, Ghana's economy is still performing worse than its historical trends and remains unstable."

The IFS further warned that the debt reliefs resulting from the recent restructuring are only temporary.

“Debt reliefs due to the debt restructuring are temporary, as stated earlier. As such, the government should address the underlying drivers of fiscal instability and unsustainability to ensure enduring improvements.

“This calls for deliberate measures to tackle the negative fiscal fundamentals, like low revenue generation, excessive fiscal rigidities, corruption, and politically induced spending decisions, to ensure in-depth improvement in fiscal performance on a long-term basis. This will in turn help minimize,” he added.

Additionally, the institute called on the government to accelerate its promised review of flagship programs as part of the IMF program.

According to the IFS, this review is critical in helping strengthen the fiscal position.

“The government should speed up the promised review of its flagship programs to reduce expenditure. This is because despite the government's promise to review these flagship programs as part of the IMF program, the review is taking too long. Even in the 2024 mid-year budget, nothing was heard about the status of the review.

“The government should understand that given the temporary nature of the positive effects of the debt reliefs, this measure is needed to help strengthen the fiscal position. A stronger fiscal position, in turn, will facilitate a more robust macroeconomic recovery.”

AM/OGB

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