The Institute of Fiscal Studies (IFS) says government must be prepared for honest dealings and full disclosures to help build political consensus needed for the development of a good fiscal consolidation strategy.
The Institute noted that the success of fiscal consolidation measures that would inure to long term benefit of the country would require the buy-in of all stakeholders who must be made aware of the true fundamental causes and enormity of the fiscal challenges in the country.
“The political leaders, both in power and opposition, should recognise that failure to put a halt to the worsening macro-economic environment will lead to enormous economic pains for all,” Dr Saeed Boakye, a Senior Fellow at the Institute stated at a press conference.
He said a good fiscal consolidation strategy entailed taking bold decisions that required stakeholders and socioeconomic constituencies to contribute their quota through sacrifices to the consolidation process.
Speaking on the country’s fiscal situation, Dr Boakye said the country was in a very poor state compared to its peers on the continent and middle-income bracket due to excessive debt servicing cost from sharp debt build-ups in the past decade and very high employee compensation due to the power of public sector trade unions.
The government, he said, had a challenge of controlling compensation of employees for the purpose of fiscal consolidation by reducing compensation bill as a ratio of total revenue and grants to match the average for the country’s peers.
“This can be done by ensuring that growth rate in the compensation bill falls below growth rate in total revenue and grants over a period, which will naturally lead to a gradual reduction in the ratio of the compensation bill to total revenue and grants,” he explained.
In addressing the debt servicing challenge, the Macroeconomist said government must intensify its fight against corruption and waste and renegotiate with its creditors for debt restructuring.
“If successful, this may help minimise the debt service expenditure, at least in the short term, and grant the government some breathing space while it pursues long-term policies to improve the fiscal position,” he said.