The Institute for Fiscal Studies (IFRS) has stated that the Government of Ghana has a poor track record of having credible budgets.
According to the economic think tank, the budget statements over the year have featured routine over-projected revenues, which the IFS has consistently highlighted.
For instance, it said in its expectations of the 2025 Budget that the actual total revenue and grants were below the budget target every year from 2013 to 2023, with an average deviation of -7.4%.
“Effective fiscal policy rests, among others, on credible budgets. If a budget lacks credibility, its policy intentions are less likely to be achieved. Where this is a chronic challenge, it is likely to reduce confidence in fiscal policy, undercutting its effectiveness,” it explained.
It said an essential feature of a credible budget is realistic revenue targets since revenue is the cornerstone of any budget.
With respect to the Public Expenditure and Accountability (PEFA) framework, which is a globally recognised standard for evaluating the performance of countries’ public financial management systems, the IFRS said Ghana’s annual revenue deviation was within the framework’s ideal range of -3% to +6% for only two out of the 11 years from 2013 to 2023.
“In fact, Ghana’s average revenue deviation of -7.4% is more than twice the lower limit of the range of -3%, implying under collection of revenue below the threshold.”
It urged the Ministry of Finance to improve the realism of revenue targets to underpin budget credibility.
It enumerated measures include the review of the Ministry’s macro-fiscal forecasting framework and processes with a view to addressing possible optimism bias in the projection of revenue, improving estimation of the revenue impact of new tax policies by strengthening the underlying data and analyses and involving independent experts to evaluate and advise the Ministry about its forecasts.
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