Government has been urged to restore the fiscal responsibility rule that was suspended following the outbreak of the COVID-19 pandemic. This means that government will have to keep its borrowing to the barest minimum.
The World Bank’s 8th Economic Update for Ghana titled “Strengthening Domestic Revenue Systems for Sustainability” indicates that Ghana’s economic recovery as well as growth indicators have been on track in 2024.
The report further notes that the country’s economic situation has been improving due to efforts to attain debt sustainability, low levels of inflation, and strengthened financial stability.
Despite the significant efforts to rejuvenate the economy, the World Bank says there is a need to consolidate the gains by avoiding reckless borrowing and reducing the burden on the poor and the vulnerable.
In view of this, the World Bank among other recommendations is urging the government to restore the fiscal responsibility rule that has been suspended for years.
Parts of the bank’s release noted that there is “the need to focus on the quality of the fiscal adjustment to minimize the impact on growth, the poor, and the vulnerable population.”
“Recommendations include reestablishing the fiscal rule, strengthening public financial management, and accelerating revenue mobilization to restore macroeconomic stability and support long-term sustainable growth,” the release noted adding that there is also the need for “sector-specific reforms to ensure financial sustainability in agriculture and energy and rebuild capital buffers in the financial sector.”
The Fiscal Responsibility Act, 2018 (Act 982) charges the Government to ensure that the overall fiscal balance on cash basis for a particular year does not exceed a deficit of 5% of the Gross Domestic Product (GDP) for that year.
However, it was suspended in 2020, following the outbreak of the COVID-19 pandemic.
This call on the government follows an earlier one by the Director of the Institute of Social Statistical Social and Economic Research (ISSER) of the University of Ghana, Prof. Peter Quartey.
The economist in September last year urged parliament to urgently institute the Act to curb discretionary expenditure of the government.
