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Dr. Nii Moi Thompson, a prominent economist, has issued a stark warning about the potential worsening of Ghana’s revenue deficit as the country implements the International Monetary Fund’s (IMF) programme. This prediction casts a grim shadow over Ghana’s fiscal future.
Ghana is poised to receive approval for its third tranche of $360 million following a staff-level agreement on the second review of the IMF loan-support programme. The IMF Executive Board is scheduled to meet in June to finalize this approval.
In an interview with Bernard Avle on Channel One TV, Dr. Thompson criticized the government for excessively straining its revenue sources. He highlighted that the government’s failure to provide sufficient credit to businesses has resulted in higher tariffs and an increased cost of doing business, thereby stifling economic growth and development.
As the former Director-General of the National Development Planning Commission (NDPC), Dr. Thompson revealed that Ghana has exceeded its wage bill by 9%, while facing a revenue shortfall of around 4%. He warned that this fiscal imbalance could lead to a scenario where the government might struggle to pay public sector salaries, putting the livelihoods of many Ghanaians at risk.
He emphasized the immense strain on the wage bill, blaming the government’s inability to generate adequate revenue and invest in the economy. This failure has exacerbated pressure on the wage bill and hindered 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%,” Dr. Thompson explained.
“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 noted a slight decline in the wage bill for the estimated figures for last year [2022], though the final numbers are not yet available. However, the other issues persist: “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.”
Dr. Thompson reiterated his belief that the IMF programme will only exacerbate Ghana’s economic challenges and hinder recovery efforts. “The [IMF] programme as it is now, can never solve our problems, it will only make it worse,” he asserted.
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