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The Institute of Economic Affairs (IEA) has underscored the need for substantial fiscal adjustments to bring Ghana’s economy back to normalcy. These adjustments are expected to involve both tax increases and spending cuts.
At a press conference in Accra on Wednesday, June 12, 2024, Dr. John Kwabena Kwakye, the Director of Research at the IEA, expressed concern that without these critical expenditure reduction measures, the market might question Ghana’s policy credibility.
“Restoring the economy to normalcy would normally require severe fiscal adjustments requiring tax increases and expenditure cuts, which would entail economic hardships,” Dr. Kwakye stated.
He explained that due to a lack of boldness in implementing these measures and the market’s potential distrust of Ghana’s policy credibility, the country often turns to the International Monetary Fund (IMF) for financial assistance.
“Lacking the boldness to take these measures knowing that the markets may not trust our own policy credibility, we turn to the IMF for financial bailout,” Dr. Kwakye noted.
He further elaborated on the conditions typically attached to IMF bailouts, stating, “The bailout is normally supported by a programme that is invariably conditioned on stringent and often socially costly measures, including expenditure cuts, tax increases, removal of subsidies, increases in utility tariffs, and public sector employment freeze.”
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