Minister of Finance Ken Ofori-Atta has emphasised the crucial need for reforms to be accompanied by a sense of urgency, in line with the US$3billion 3-year International Monetary Fund (IMF) Extended Credit Facility.
The reforms focus on expenditure controls, non-arrears accumulation, revenue growth, improved revenue collection by the Electricity Company of Ghana and energy sector reforms, Mr. Ofori-Atta said, urging Ghanaians to brace for necessary changes on the back of the IMF deal. The programme aims to support implementation of the Post-COVID-19 Programme for Economic Growth (PC-PEG).
In an update on the IMF programme and the country’s economic growth agenda, Ofori-Atta acknowledged that securing the IMF programme is not an end of the challenges but rather a stepping-stone toward implementing a comprehensive and well-thought-out reform programme: “The real work of adjustments, re-alignments and a return to the path of steady economic growth has just begun”.
The reform programme, known as the Post-COVID-19 Programme for Economic Growth, is built on clear targets and strong policy and structural measures.
One of the primary goals of the PC-PEG programme is to achieve credible fiscal consolidation by mobilising domestic revenue and ensuring high spending efficiency. Government aims to achieve a primary surplus of 1.5 percent of GDP on a commitment basis by 2025 through 2028.
Mr. Ofori-Atta further stressed that: “We are determined to restore public debt to sustainable levels by observing the binding constraints of a Public Debt to GDP ratio of 55 percent or less, and an External Debt Service to Revenue ratio of 18 percent or less by 2028”.
In addition to fiscal consolidation, the programme seeks to enhance economic competitiveness, safeguard social protection and minimise fiscal risks, particularly those arising from state-owned enterprises (SOEs).
He highlighted the importance of better governance standards for these institutions, stating: “About 25 percent of our assessed debt burden emanates from non-central government operations, mainly from SOEs such as COCOBOD and those in the energy sector. Our ability to institute better governance standards for these institutions will be significantly improved, especially in this period of collective reform”.
The energy sector, burdened by a legacy debt of approximately US$2billion as of May 2023, is a priority under the comprehensive reforms.
Mr. Ofori-Atta expects these reforms to reduce the sector’s shortfall by at least US$2.95billion from 2023 to 2025. An updated Energy Sector Recovery Plan (ESRP), to be approved by Cabinet by end of June 2023, will outline the specific reforms – including frameworks for energy sector subsidies, inter-utility debt settlement, and enforcement of guidelines for the Cash Waterfall Mechanism and natural gas clearinghouse.
Similar reforms are envisioned for the cocoa sector, where focus will be on revitalising the industry and reducing or eliminating the annual losses – particularly Cocobod’s indebtedness.
To ensure fiscal discipline and transparency, additional structural reforms will focus on revenue administration, tax policy enhancement, improved spending controls and the prevention of arrears build-up. Government is also transitioning from central reporting to general reporting, and from cash to accrual reporting.
Ofori-Atta further underscored the commitment required from all stakeholders to implement these wide-ranging and strong structural reforms, saying: “This collective reform effort will pave the way for sustainable economic growth and development in Ghana”.
The finance minister’s call for reforms lends credence to government’s determination to address structural weaknesses and build resilience in key areas, setting the stage for Ghana’s economic growth and stability in the years to come.