Tougher times for economy in 2023 – Fitch Solutions predicts

Research and investment advisory firm, Fitch Solutions, is projecting tougher times for the Ghanaian economy in 2023.

According to the UK based firm, the government would have to significantly cut capital expenditure or impose new taxes to boost revenue in order to address the financial challenges in the economy.

This, it believed would help narrow the financial gap and create fiscal space going forward.

“Expenditure has risen and this is driven by interest expenditure. Ghana took a lot of expensive debt and continued to borrow during the pandemic and this means interest payments are very elevated now,” third quarter sub-saharan macroeconiomic update released last week.

“They account for about 55 per cent of total government fiscal intake, keeping expenditure elevated. Given the rigid nature of Ghana’s expenditure profile, the government cannot easily reform spending resulting in those wide fiscal deficit”, it stressed

Fitch Solutions further explained that “the government really has two options at the moment to improve fiscal position; either capital expenditure or significantly increasing the countries tax base”

It mentioned that both actions will inflict some economic pains, adding “so they are no easy choices for the government.”

The government is presently negotiating with the International Monetary Fund for an economic programme.

“As part of an IMF deal, however, we expect that the government will have to implement fiscal consolidation measures in 2023 including the widening of the tax base. We expect that the commitment to fiscal consolidation will lead gradually to the improvement in public finances,” it said.

“And we also expect the government to be quiet eager to meet the IMF target as the authorities will aim to restore investor sentiments and so regain access to international capital markets”, it said.

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