Despite planned reforms to broaden the tax base, the government is likely to continue to record large budget deficits and arrears, particularly in the short term, according to Fitch Solutions, the research arm of ratings agency Fitch.
The international research firm, however, stated in its Strengths, Weaknesses, Opportunities, and Threats (SWOT) analysis of the Ghanaian economy for the first quarter of this year that the country has better business operating conditions and greater stability than peer economies such as Nigeria or Cameroon.
According to the report, Ghana’s high public debt levels will continue to weigh on the country’s fiscal outlook in the coming years due to government revenue underperformance.
This could reduce the amount of funds available for the government to spend on critical infrastructure projects.
“The government is likely to continue to record wide budget deficits, particularly in the short term, despite planned reforms to broaden the tax base, while rising external debt payments will continue to weigh on Ghana’s external accounts and ensure the current account remains in deficit in the coming years.”
On the country’s weaknesses, Fitch Solutions said the large – though declining – informal sector eludes the governments’ coffers, despite recent efforts to broaden the tax net.
It warned that Ghana’s reliance on commodity exports such as cocoa and gold exposes the country to global commodity price fluctuations.
Regarding threats, Fitch Solutions noted that further delays in the country’s Covid-19 vaccine rollout would expose Ghana to new waves of infections, potentially derailing the country’s economic recovery.
It also warned that climate change will pose medium to long-term risks to the crucial cocoa industry.
On strength, Fitch Solutions, said the country has a better business operating conditions and greater stability than peer economies such as Nigeria and Cameroon, and therefore businesses will benefit from the relatively pragmatic government policy programmes implemented in recent years.
