President John Dramani Mahama has pledged to streamline Ghana’s tax regime and slash wasteful public spending as part of efforts to stabilize the economy under its $3 billion International Monetary Fund (IMF) bailout program.
Speaking at the Munich Security Conference on February 14, Mahama argued that excessive taxation under the previous administration backfired, stifling revenue growth and burdening businesses and households.
“We’ve reached a point where piling on more taxes led to less revenue—a self-defeating cycle,” Mahama said, criticizing his predecessors for what he called “knee-jerk” fiscal policies. His government, he revealed, is now negotiating with the IMF to rationalize taxes, aiming to simplify the system, close loopholes, and incentivize compliance. The Fund has agreed to provide technical support for the reforms, seen as critical to boosting investor confidence and easing cost-of-living pressures.
The president also emphasized austerity measures, vowing to redirect funds from “non-essential expenditures” to priority sectors like healthcare, education, and infrastructure. While he did not specify which programs face cuts, the move signals a tightening fiscal belt as Ghana grapples with over GHS 15 billion in domestic debt repayments due this year. To manage this, Mahama confirmed the revival of a “sinking fund”—a mechanism to systematically retire debts and avert default risks.
On the IMF program, set to expire in May 2026, Mahama ruled out immediate talks about an extension but left the door open. “Our focus is completing the current program, but we’ll assess additional support if needed,” he stated. The remarks come amid mixed progress: while inflation has dipped from 54% in 2022 to 23% in 2024, growth remains sluggish, and public frustration over austerity persists.
Why It Matters
Mahama’s push for tax reform taps into broader discontent over Ghana’s convoluted tax structure, which includes over 40 levies. Critics argue that excessive VAT rates, e-levy disputes, and arbitrary tariffs have fueled tax evasion and stifled SMEs. Meanwhile, the sinking fund’s reactivation offers a lifeline, but questions linger about its funding sources in a cash-strapped economy.
Analysts caution that Mahama’s balancing act—pleasing the IMF while pacifying a restive public—will define Ghana’s recovery. “Tax rationalization is urgent, but so is protecting vulnerable groups,” said Accra-based economist Nana Ama Agyemang. “Without social safeguards, austerity could backfire politically.”
As Ghana navigates its IMF tightrope, Mahama’s Munich pitch underscores a delicate truth: economic stability demands not just fiscal rigor, but a fairer bargain for ordinary Ghanaians.
