The IEA has strongly supported the establishment of an autonomous Fiscal Council (FC) in Ghana.
It has recommended that the government implement comprehensive measures to break the recurring pattern of fiscal mismanagement and reliance on IMF rescue packages.
In a recent statement, the IEA highlighted the pressing need for a strong fiscal framework to stabilize the economy and rebuild policy trustworthiness. Moreover, the IEA contended that such a council would prevent the government from exceeding its planned expenditure.
Ghana’s fiscal administration has long struggled with persistent shortfalls, where spending surpasses income.
The IEA noted that these shortfalls have historically been funded through substantial borrowing, both domestically and internationally, resulting in macroeconomic instability characterized by continuous inflation, currency devaluation, and a mounting debt burden.
“The cycle of borrowing to cover deficits, followed by economic crises and subsequent IMF bailouts, has become an all-too-familiar narrative for Ghana. It’s a vicious cycle that undermines long-term economic stability,” the IEA stated in their press release.
In light of these challenges, the IEA argued for the creation of an FC as a critical reform measure. An FC would serve as an independent oversight body, providing unbiased analysis and recommendations on fiscal policy, thus ensuring adherence to fiscal rules and promoting sustainable economic management.
“The establishment of a Fiscal Council is essential for providing objective and expert oversight over fiscal policy. It will ensure that fiscal decisions are based on sound analysis and long-term considerations rather than short-term political expediency,” the IEA emphasized.
Referring to effective frameworks in advanced nations, the IEA highlighted the advantages of establishing an autonomous fiscal oversight entity.
Examples such as the UK’s Office for Budget Responsibility (OBR) and Sweden’s Fiscal Policy Council (FPC) have illustrated the pivotal role independent fiscal institutions can play in fostering economic stability. These bodies assess government fiscal strategies and offer transparent, reliable projections, serving as valuable models for emulation.
“These international examples highlight how a well-functioning Fiscal Council can foster fiscal discipline and long-term sustainability, something that is critically needed in Ghana,” it noted.
The IEA’s press release outlines specific recommendations for establishing a successful FC in Ghana. These include ensuring the council’s independence by having its members appointed through a rigorous, competitive process involving Parliament and the Public Services Commission.
“The Fiscal Council must be independent and composed of professionals with proven expertise in economics, public finance, and related fields. Its funding should be secured through Parliament to avoid any undue influence from the executive,” it recommended.
The IEA emphasized that implementing these reforms would not only enable Ghana to steer clear of the recurring reliance on IMF bailouts but also foster a culture of fiscal accountability and economic durability.
“Implementing these reforms can pave the way for a more stable and self-sustaining economic future for Ghana. It is a critical step towards entrenching fiscal discipline and regaining international confidence in Ghana’s economic management,” the IEA concluded. The call for a Fiscal Council reflects a broader recognition of the need for structural reforms to address Ghana’s fiscal challenges. With the right framework in place, Ghana can achieve greater economic stability, reduce its dependency on external bailouts, and build a foundation for sustainable growth