The International Monetary Fund (IMF) has attributed Ghana’s economic challenges to weak domestic revenue mobilization efforts.
The IMF says tax policy design suffers from widespread tax expenditures, especially in VAT, and underexploited taxes such as property tax and excise.
The Bretton Woods institution says weaknesses in revenue administration continue to be reflected in limited compliance and recoveries.
The IMF says there would be an enforcement of sanctions under the Public Financial Management Act, including penalties for covered entities spending above their allotments and allocations.
The IMF, in its report on Ghana’s request for a $3 billion extended credit facility, has proposed the removal of VAT exemptions, tax holidays, and exemptions, and the automatic adjustment of fuel levies by exchange rate movement or inflation, as part of its conditions aimed at achieving revenue mobilization objectives.
According to the IMF, key policies under the authorities’ program include large and frontloaded fiscal consolidation to bring public finances back on a sustainable path, complemented by efforts to protect the vulnerable.
The adjustment effort will be supported by ambitious structural reforms in the areas of tax policy, revenue administration, and public financial management, as well as steps to address weaknesses in the energy and cocoa sectors. Appropriately tight monetary and flexible exchange rate policies will help bring inflation back to single digits and rebuild international reserves. The program also has a strong focus on preserving financial stability and encouraging private investment and growth.
The program will help Ghana overcome immediate policy and financing challenges, including through its catalytic effect in mobilizing external financing from development partners and providing a framework for the successful completion of the ongoing debt restructuring.