The Institute for Fiscal Studies (IFS) has called on the government to focus on optimizing revenue from natural resources as a crucial approach to tackling the nation’s current economic difficulties.
This advice comes in response to concerns about missed revenue targets and economic instability.
In a recent policy brief, the IFS stressed the importance of harnessing the country’s natural resource wealth more effectively, given the ongoing challenges in revenue mobilization.
The brief notes that, despite the nation’s significant resources such as gold and oil, these assets have not been fully leveraged for revenue generation.
Dr. Said Boakye, Senior Research Fellow at IFS, stressed the importance of this approach. “Like gold and oil, it is imperative that we enjoy significant benefits from them as others do. This means that maximising revenue generation from natural resources should be central in the country’s quest and strategy to significantly increase government revenue mobilisation,” he stated.
The IFS report follows the 2024 Mid-Year Fiscal Policy Review presented to parliament by Finance Minister Dr. Amin Adam. The review highlighted that total revenue and grants were GH¢1.4 billion short of the target, emphasizing the pressing need for improved revenue generation strategies.
The total revenue and grants fell short of the target range of GH¢76.1 billion to GH¢74.7 billion, with domestic revenue and foreign grants missing their goals by GH¢221 million and GH¢1.2 billion, respectively.
Dr. Boakye outlined specific recommendations for enhancing revenue from the natural resource sector. “Government should increase its ownership interests in the natural resource sector or adopt superior contractual arrangements like production-sharing agreements,” he advised.
These measures, according to Dr. Boakye, have proven successful in other countries; helping them capture a larger share of earnings from their natural resource sectors.
The policy brief also touched on the broader economic context, noting that the revised 2024 total revenue and grants target of 17.4 percent of GDP appears “out of sync with reality and is thus not achievable”.
This assessment underscores the importance of exploring alternative revenue sources, with natural resources presenting a significant opportunity.
Dr. Boakye emphasised that maximising natural resource revenue is not just about immediate financial gains, but also about long-term economic stability.
“By optimising our approach to natural resource management and revenue collection, we can create a more robust fiscal foundation for Ghana’s future,” he explained.
The IFS recommendations go beyond just focusing on natural resources; they also advocate for a thorough review of tax exemptions and advise against the politicization of economic policy decisions, particularly with the 2024 elections approaching.
Nevertheless, the emphasis on leveraging natural resources is highlighted as a crucial strategy for enhancing Ghana’s fiscal health.
“Government must recognise that our natural resources are a national treasure that, if properly managed, can significantly contribute to our economic recovery and growth,” Dr. Boakye added.
He urged swift action in implementing these recommendations, noting that the temporary nature of recent debt relief measures makes it crucial to establish more sustainable revenue sources.