The World Bank has identified Ghana’s 2022 economic crisis as a direct result of weak fiscal discipline and an overly expensive response to global shocks. In its Ghana Public Finance Review report, the Bretton Woods institution provided a detailed analysis of the structural weaknesses and policy missteps that plunged the nation into a severe financial crisis.
The report highlighted the combined effects of weak budgetary institutions, mounting fiscal liabilities from the financial and energy sectors, and insufficient revenue mobilization as the primary drivers of the crisis. According to the World Bank, poor expenditure controls created a dangerous feedback loop of limited fiscal flexibility and unsustainable debt accumulation. This situation was exacerbated by Ghana’s heavy reliance on external commercial borrowing, which coincided with a significant decline in tax revenue collection.
The challenges were further compounded by an expensive clean-up of the financial sector and persistent losses in the energy sector. These additional fiscal burdens strained government finances and deepened economic vulnerabilities.
“With already precarious fiscal conditions, Ghana’s prolonged and costly fiscal response to COVID-19, coupled with deteriorating global conditions, escalated the crisis into full-blown debt distress by 2022,” the report stated. Titled Building the Foundations for a Resilient and Equitable Fiscal Policy, the review underscored that Ghana’s debt-driven rapid GDP growth in prior years left the economy acutely exposed to external shocks.
While acknowledging Ghana’s progress toward economic stabilization, the World Bank stressed that substantial efforts are still required to meet monetary and fiscal targets. Achieving long-term fiscal sustainability, the report noted, hinges on implementing stronger domestic revenue mobilization strategies to create fiscal space for critical development priorities.
The findings serve as a cautionary tale for policymakers and emphasize the urgent need for structural reforms to build a more resilient and equitable fiscal framework.
Story by: Mercy Addai Turkson #ahotoronline.com
