The Institute for Fiscal Studies (IFS) has cautioned government against rushing back to the international bond market as a quick fix to the country’s current fiscal challenges.
In its assessment of government’s 2025 Mid-Year Fiscal Policy Review released on Wednesday, August 20, IFS noted that the fiscal deficit outturns for the first half of the year appeared unbelievably lower than expected.
According to the Institute, one of the reasons that helped drive interest rates down is reduction in government borrowing during the period, and resuming external borrowing at this stage would sharply worsen Ghana’s already high debt levels.
“Resuming international borrowing will cause the already high debt level to sharply worsen, causing debt service costs to increase rapidly, as happened in the past,” IFS warned.
The institute further advised that “the government should instead, prioritize improving revenue mobilization, switching to active state participation or production sharing agreements in the extractive sector”.
This it said will, “lead to greater foreign exchange inflows and in turn strengthen the cedi on a more sustainable basis”.
It also emphasized that the GoldBod does not address the fiscal revenue issue, because the company merely buys and sells produced gold, disregarding the concept of public endowment of the gold resources.
The think tank stressed that this revenue gap has significantly constrained government financing and delayed key capital projects under the 2025 budget, including the flagship Big Push development agenda.
Ghana’s economic performance for the first half of 2025 shows improved signs of recovery and stabilization, relative to the persistently high rates in 2024.
Key macroeconomic indicators such as economic growth, inflation, interest rates, external balance and exchange rate all point to an economy regaining traction.
By Esinu Adza, 3BUSINESS
