05.01.2024 Feature Article

Five economic reasons to show Ghana`s problem is Expenditure but not Revenue

Five economic reasons to show Ghanas problem is Expenditure but not Revenue
05.01.2024 LISTEN

In 2025 there is no reason why Africa should not be totally lit up with the power it needs to industrialize, because, no economy develops unless you have the base load power to drive industries and to be competitive

------------Akinwumi Adesina, president – African Development Bank

There are several economic reasons to support the argument that Ghana's problem is more about expenditure rather than revenue. Here are five key points to consider:

  1. Revenue Generation Capacity:

Ghana has experienced growth in its revenue generation capacity over the years, with notable improvements in tax administration and broadening of the tax base. The government has also seen increased revenues from natural resources such as gold, cocoa, and oil. Despite these improvements, the challenge lies in ensuring that the revenue collection is efficient and leakages are minimized. Therefore, the focus should be on improving revenue collection mechanisms rather than solely increasing tax rates, as excessive taxation can have adverse effects on economic activities and investments.

  1. Expenditure Management:

Ghana has faced challenges in effectively managing its expenditures, leading to budget deficits and unsustainable levels of public debt. The government's spending has been characterized by recurrent budget overruns, inefficient allocation of funds, and a high wage bill. Improving expenditure management through measures such as fiscal discipline, prioritizing productive investment, and reducing wasteful expenditure is crucial to addressing the imbalance between revenue and expenditure. Ghana needs to implement effective budgetary controls and enhance transparency to ensure that public funds are utilized efficiently.

  1. Investment in Productive Sectors:

Redirecting resources towards productive sectors of the economy is essential for sustainable economic growth. Ghana should prioritize investment in infrastructure, agriculture, education, and healthcare to enhance productivity and create a conducive environment for private sector development. Increased public investment in these areas can stimulate economic activity, boost employment, and contribute to revenue generation through enhanced productivity and business expansion. By focusing on productive investment, Ghana can improve its revenue-generating capacity in the long run.

  1. Debt Sustainability:

Ghana's escalating public debt poses a significant challenge to its fiscal sustainability. The growing debt burden has been driven by persistent budget deficits and reliance on borrowing to finance expenditures. Addressing the debt challenge requires a comprehensive approach that emphasizes prudent fiscal management, debt restructuring, and the adoption of measures to enhance debt sustainability. Rather than solely relying on borrowing to finance expenditures, Ghana needs to focus on managing its debt levels while seeking to improve the efficiency of public expenditure.

  1. Economic Growth and Competitiveness:

Enhancing Ghana's economic growth potential and global competitiveness is critical for generating sustainable revenue streams. The government should prioritize policies and reforms aimed at promoting a conducive business environment, attracting investment, and diversifying the economy. By fostering a competitive economy, Ghana can expand its revenue base through increased trade, foreign direct investment, and job creation. This approach requires a focus on structural reforms, institutional strengthening, and targeted policies to enhance productivity and competitiveness across various sectors.

In conclusion, while revenue generation remains an important aspect of fiscal management, Ghana's primary challenge lies in addressing its expenditure dynamics. By improving expenditure management, prioritizing productive investment, addressing debt sustainability, and fostering economic growth, Ghana can effectively tackle its fiscal imbalances and achieve sustainable revenue generation. It is essential for Ghana to adopt a holistic approach that combines revenue enhancement with prudent expenditure policies to ensure long-term fiscal sustainability and economic prosperity.

Ebenezer Asumang
[Writer & Author]
[email protected]