The Institute for Fiscal Studies (IFS), a leading economic think tank, has warned of a deepening of Ghana’s economic woes if the government continues to rely heavily on domestic financing for its budget.
The IFS has stressed that the government’s inability to tap into the Eurobond market has escalated competition with the private sector for loans to finance the budget. This situation could potentially result in a scarcity of funds available for investment by private enterprises.
At a press conference on Ghana’s current fiscal and macroeconomic performance, Dr. Said Boakye, the Acting Executive Director of IFS, emphasized the urgency for strong measures to stimulate economic growth.
“The increased reliance on domestic financing for the national budget, primarily due to the country’s inability to access the Eurobond market amid the debt crisis, is worrisome,” he stated.
Dr. Boakye explained that this situation has led the government to compete more aggressively with the domestic private sector for loanable funds. “This is likely to result in a shortage of investible funds for the private sector, thereby sustaining high interest rates. Both these factors could prolong the current period of low economic growth and high unemployment rates,” he added.
He further emphasized the need for deliberate strategies to address negative fiscal fundamentals such as low revenue generation, excessive fiscal rigidities, corruption, and politically motivated decisions. “These challenges require urgent attention to stimulate economic growth and reduce unemployment,” Dr. Boakye reiterated.
