2024 budget misaligned with medium term revenue targets - IFS

Economy & Investments 2024 budget misaligned with medium term revenue targets - IFS
DEC 7, 2023 LISTEN

The Institute of Fiscal Studies (IFS), a think-tank, says Ghana's Medium-Term Revenue Target Strategy (MTRS) was likely to lose credibility because the government had failed to align the 2024 budget with the strategy.

It noted that the misalignment between MTRS and the budget’s medium-term revenue projections must be rectified to give stakeholders, particularly investors, rating agencies, and creditors, confidence in Ghana’s medium-term economic recovery plan.

“For instance, while the MTRS seeks to increase tax revenue as a proportion of non-oil Gross Domestic Product (GDP) from around the current 13 per cent to between 18 per cent–20 per cent by 2027, the 2024 budget statement forecasts tax revenue to non-oil GDP ratio to reach only 16.1% in 2027.

“Again, in contrast to the MTRS target to grow non-tax revenue as a proportion of GDP from 2.2% to 4% by 2027, the 2024 budget statement forecasts the non-tax revenue to GDP ratio to reach only 2.1% in 2027,” said Dr Said Boakye, Acting Executive Director of IFS.

Dr. Boakye was speaking at a press conference on the review of the government's 2024 Budget and Economic Policy.

The IFS indicated that the MTRS was not robust enough as it had failed to tackle Ghana's weak revenue generation from the extractive sector.

“The government should therefore reconsider the extractive sector component of the strategy and revise it to incorporate recommendations long advocated by IFS, most importantly our call for active state participation in the sector and/or the use of production sharing agreements to substantially improve revenue generation,” said Dr Boakye.

He also asked the government to include debt cancellation in its debt restructuring strategy and to speed the process in order to secure much-needed debt relief and boost fiscal recovery.

The IFS has, among other things, called for a review of flagship programmes to help reduce budgetary spending and improve efficiency, while also urging the government to avoid fiscal populism and overspending in the 2024 election year.