There's urgent need for major fiscal reforms - IEA

The Institute of Economic Affairs (IEA) has underscored the urgent need for major fiscal reforms to get Ghana's economy back on track.

These reforms are expected to include a combination of tax hikes and spending cuts.

At a press conference held in Accra on Wednesday, June 12, 2024, Dr. John Kwabena Kwakye, the IEA's Director of Research, voiced concerns about Ghana's policy credibility.

He warned that without significant expenditure reductions, the market's confidence in the country's economic policies might wane.

"Restoring the economy to normalcy would normally require severe fiscal adjustments, including tax increases and expenditure cuts, which would entail economic hardships," Dr. Kwakye stated.

"Lacking the boldness to take these measures, knowing that the markets may not trust our own policy credibility, we turn to the IMF for a financial bailout," Dr. Kwakye added.

Dr. Kwakye elaborated that such bailouts are usually accompanied by stringent conditions. "The bailout is normally supported by a program that is invariably conditioned on stringent and often socially costly measures, including expenditure cuts, tax increases, removal of subsidies, increases in utility tariffs, and a public sector employment freeze," he explained.