The African Development Bank (AfDB) has advised the Government of Ghana to intensify efforts to improve economic governance, a crucial step towards financing structural transformation.
The recommendation is part of the AfDB’s latest report, “Driving Ghana’s Transformation: The Reform of the Global Financial Architecture.”
The report underscores the need for Ghana to mobilize more domestic resources to address its economic challenges and recommends a series of medium to long-term policies to foster financial stability and growth.
Key among the recommendations is the need for Ghana to enhance its business environment to attract domestic and foreign investments.
The AfDB suggests accelerating structural reforms to simplify business regulations and address significant constraints, including corruption, tax system inefficiencies, high land and electricity costs, and limited access to credit.
The AfDB calls for effective measures to combat corruption, illicit financial flows, and tax evasion to improve economic governance.
The report proposes integrating the Organization for Economic Co-operation and Development (OECD) framework for Domestic Tax Base Erosion and Profit Shifting (BEPS) and strengthening the digitalization of tax administration to reduce the informal sector’s size.
The report also emphasizes the importance of better resource allocation to support sectors critical for structural transformation, such as education and energy. It advocates for increased investment in human capital development, quality infrastructure, and research and development.
In the short term, the AfDB recommends maintaining a restrictive monetary policy to control inflation and allowing the Bank of Ghana to let the Cedi adjust based on macroeconomic fundamentals.
The report advises the Bank to keep its monetary policy rate high to anchor inflation expectations and support domestic supply responses through infrastructure and human capital investments.
The report suggests continuing fiscal consolidation efforts regarding Ghana’s debt situation, which stood at GH¢742 billion (approximately US$50.9 billion) as of June 2024.
This includes broadening the tax base by introducing new taxes, improving tax administration efficiency, and rationalizing non-productive expenditures.
The AfDB also urges the completion of the external debt restructuring process while enhancing debt management capabilities.
The AfDB’s report outlines a comprehensive strategy for Ghana to enhance economic governance and drive sustainable growth through targeted reforms and effective resource mobilization.
