As Ghana’s government moves to slash taxes amid a debt crisis, renowned economist Professor Lord Mensah has urged authorities to offset potential revenue losses by tightening spending, cracking down on corruption, and fostering closer collaboration between fiscal and monetary policymakers.
The University of Ghana Business School lecturer argued that without these measures, tax reductions risk destabilizing an economy already strained by years of mismanagement.
In an interview with the High Street Journal, Prof. Mensah emphasized that simply cutting taxes without addressing systemic waste would exacerbate fiscal pressures. “The real issue isn’t just revenue—it’s how we spend,” he said, pointing to rampant graft and inefficient budget allocations over the past decade. “Plugging leakages through robust anti-corruption systems could free up billions and cushion the blow of tax reforms.”
His call comes as the new administration prepares to scrap levies like the COVID-19 recovery tax, fulfilling campaign pledges. While critics warn of revenue shortfalls, Mensah insists smarter spending—not higher taxes—is the solution. “If we rationalize expenditures, prioritize critical sectors, and eliminate ghost projects, we’ll create fiscal space without burdening citizens,” he explained.
Policy Synergy to Curb Inflation
Mensah also highlighted the need for coordinated action between finance ministries and the central bank. He warned that disjointed policies could fuel inflation, citing past examples where tax hikes led businesses to raise consumer prices, prompting aggressive interest rate hikes. “When fiscal and monetary authorities work at cross-purposes, households pay the price,” he said.
The economist praised recent signals of collaboration between the new Bank of Ghana governor and the finance ministry, noting that aligned policies could stabilize prices and lower borrowing costs. “Interest rates don’t exist in a vacuum. If taxes fall and spending is disciplined, the central bank can ease rates responsibly,” he added.
Transparency as Economic Stabilizer
Beyond balance sheets, Mensah stressed the role of public trust in economic recovery. He urged the government to communicate openly about fiscal challenges and avoid opaque decision-making. “Citizens tolerate austerity only when they see shared sacrifice,” he said. “If budgets are cut, Ghanaians must know why and how funds are redirected.”
He also acknowledged external risks, including potential U.S. policy shifts under a returning Trump administration, which could affect global markets. Yet he remained optimistic: “With prudent management, Ghana can insulate itself. The focus must be on productivity—investing in agriculture, tech, and sectors that generate real growth.”
Avoiding the Debt Trap
Mensah firmly rejected replacing lost tax revenue with increased borrowing or foreign aid. “Loans are a stopgap, not a strategy,” he said, referencing Ghana’s ongoing debt restructuring. “Sustainable recovery hinges on spending smarter, not begging more.”
His blueprint centers on three pillars: slashing wasteful expenditures, prosecuting corruption cases to recover stolen funds, and ensuring every cedi spent delivers measurable public benefit. “The path forward is clear,” he concluded. “Deliver efficiency, restore trust, and policies will gain momentum. Without that, even the best tax reforms will falter.”
As budget talks intensify, Mensah’s warnings resonate with a public weary of austerity. The government’s ability to heed such advice may determine whether tax cuts become an economic lifeline—or a new crisis catalyst.
