Accra, 3rd March 2025 – In his presentation at the National Economic Dialogue, Hon. Dr. Cassiel Ato Forson, Ghana’s Minister for Finance, highlighted the country’s poor performance in revenue mobilization, emphasizing the urgent need for comprehensive reforms to bolster the nation’s fiscal health and support sustainable development.
Dr. Forson revealed that Ghana’s domestic revenue mobilization (DRM) has stagnated over the past decade, remaining significantly below that of its peers.
In 2023, the country’s revenue collection amounted to just 13.5% of GDP, with major tax sources such as VAT continuing to underperform compared to other nations. He pointed out that complex tax systems, numerous exemptions, and administrative challenges are contributing to a substantial compliance gap, further hindering revenue growth.
A critical area of concern, according to the Minister, is the fiscal cost of tax expenditures, which requires urgent rationalization. The Tax Exemptions Act of 2022 provides clear criteria for tax exemptions, but other legislation introduces additional incentives that deviate from the intended tax benchmarks. Dr. Forson noted that VAT, Personal Income Tax (PIT), and import duties exemptions cost the economy 3.9% of GDP in lost revenue. The largest single source of revenue forgone comes from VAT exemptions on the supply of dwellings and land, which account for 33% of the overall cost.
The Minister also expressed concerns over Ghana’s underutilized extractive sector, stressing that the country has not fully capitalized on its natural wealth. While natural resource rents make up about 14% of GDP, fiscal revenues from extractive industries are just 1.5% of GDP. Dr. Forson pointed out that Ghana is not capturing the full economic rent from its natural resources, which could be used to support infrastructure development and human capital investment.
Addressing broader fiscal challenges, Dr. Forson noted that the Fiscal Responsibility Act of 2018 has failed to curb debt accumulation, citing enforcement and credibility issues, and a lack of counter-cyclical flexibility. Additionally, poorly performing state-owned enterprises (SOEs), particularly in the energy and agriculture sectors, continue to burden public finances. He called for urgent reforms to public financial management (PFM) and procurement systems to ensure long-term fiscal discipline and stability.
Dr. Forson also highlighted the significant macroeconomic challenges the country faces, including stubborn inflation rates around 23% since May 2024, compounded by climate-induced agricultural disruptions and supply chain challenges. He stressed that high inflation continues to worsen food insecurity, particularly among the most vulnerable populations. To combat this, the Minister called for a tight monetary policy stance to control inflation, reduce risk premiums, and stabilize the exchange rate, all of which are crucial for fiscal action, economic growth, and debt management.
The Minister’s remarks underscored the pressing need for institutional reforms, improved revenue generation, and a more effective use of Ghana’s natural resources to ensure sustainable economic growth and reduce fiscal risks in the future.
Source:Mybrytfmonline.com/Gumedzo Isaac Acheampong
