As government prepares to present its first Budget and Economic Policy Statement to Parliament on March 11, 2025, economic policy think tank, the Institute for Fiscal Studies (IFS) is urging authorities to implement strong fiscal consolidation measures and significantly reduce monetary growth to restore macroeconomic stability.
Dr. Said Boakye, a Senior Economist at the IFS, said Ghana’s persistent economic instability is primarily driven by large fiscal deficits that have resulted in sharp debt buildups and excessive debt servicing costs.
“Macroeconomic instability has a powerful negative effect on economic growth. If the current instability is not forcefully addressed, Ghana’s slowing economic growth could persist, leading to worsening unemployment,” Dr. Boakye warned.
Ghana’s economy has been grappling with challenges, including rising inflation, exchange rate volatility, and high debt levels. The country has undergone domestic and external debt restructuring under the IMF-backed economic recovery program, but analysts believe more reforms are needed to sustain long-term stability.
The IFS recommends a rigorous fiscal consolidation strategy aimed at keeping the fiscal deficit at minimal levels, even as Ghana prepares to resume suspended debt service payments. The call for fiscal prudence comes amid concerns that without decisive policy action, economic growth could remain subdued, impacting job creation and investor confidence.
The Institute observed that the implementation of the 2023-2026 Extended Credit Facility-supported Program with the International Monetary Fund (IMF) had helped to reduce the excessive instability the Ghanaian economy went through as part of the 2022 fiscal and macroeconomic crisis.
In spite of that success story, “the Ghanaian economy remains very unstable, as inflation rate, the cedi depreciation rate, and the other macroeconomic stability indicators remain stubbornly very high.”
Economists argue that beyond fiscal consolidation, the Bank of Ghana must also adopt monetary measures to control inflation and stabilize the cedi. The central bank has relied heavily on interest rate hikes to curb inflation, but experts suggest a broader policy mix, including foreign exchange interventions, liquidity management, and structural reforms.
With Ghana’s 2025 budget preparations underway, stakeholders will be keenly watching whether the government prioritizes expenditure cuts, revenue mobilization, and structural reforms to drive long-term economic recovery.
