After the IMF exit, Ghana must not repeat old mistakes

The successful completion of Ghana’s 17th programme with the International Monetary Fund under the Extended Credit Facility (ECF) represents more than the conclusion of a financial arrangement.

 It is a defining moment in Ghana’s contemporary economic history; one that offers both relief and responsibility. After years of economic turbulence marked by spiralling inflation, a sharply depreciating cedi, mounting public debt, rising unemployment, and weakened investor confidence, the IMF programme helped restore a degree of macroeconomic stability and renewed confidence in the country’s economic trajectory.

Yet the celebration surrounding the programme’s conclusion must be guided. Ghana has been here before. Over the decades, successive governments have entered IMF-supported programmes with promises of reform, only for fiscal discipline and structural transformation efforts to weaken once economic pressures eased.

The country’s repeated return to the IMF has therefore created a lingering question: has Ghana truly learned the lessons of economic crisis, or are the current gains only temporary?

The answer will depend not on the completion of the programme itself, but on what government does after it.

At the heart of Ghana’s recent economic difficulties was the issue of fiscal indiscipline. Years of excessive public spending, large budget deficits, weak expenditure controls, and politically motivated spending commitments gradually pushed the economy into unsustainable territory.

The situation became particularly severe during election cycles, where fiscal restraint often gave way to short-term political considerations.

The consequence was predictable, rising debt levels, loss of market confidence, and increased dependence on external support.

If Ghana is serious about consolidating the gains made under the IMF programme, then fiscal discipline cannot remain a temporary exercise enforced only under external supervision.

It must become a national economic culture. Government spending should be guided by long-term national priorities rather than political expediency. Public sector wage commitments, energy sector liabilities, and inefficient subsidy regimes must all be managed with greater prudence.

 Equally important is the strict enforcement of the Fiscal Responsibility Act and stronger parliamentary oversight over public expenditure.

However, expenditure control alone will not solve Ghana’s fiscal challenges. The country must also confront a long-standing weakness in domestic revenue mobilization.

Ghana continues to generate relatively low tax revenue compared to many economies with similar development aspirations. The burden of taxation has often fallen disproportionately on the formal sector, while large portions of the informal economy remain outside the tax net.

This is where innovation and digitization become critical. The increasing use of digital payment systems, mobile money platforms, and national identification infrastructure presents government with an opportunity to improve tax compliance without necessarily imposing excessive new taxes.

 Property tax administration, which remains underdeveloped in many parts of the country, could also become a significant source of local revenue if properly digitized and enforced.

Strengthening the operational efficiency of the Ghana Revenue Authority (GRA) will therefore be essential in reducing dependence on borrowing to finance development.

Another area requiring sustained vigilance is debt management. Ghana’s recent debt restructuring process exposed the dangers of accumulating debt without corresponding growth in productive capacity.

Borrowing itself is not inherently harmful; indeed, developing economies often require debt financing for infrastructure and industrial development.

 The problem arises when borrowed funds are consumed rather than invested, or when projects financed through debt fail to generate meaningful economic returns.

Going forward, Ghana must adopt a more disciplined borrowing strategy anchored on productivity and value creation. Every major loan agreement should be subjected to transparent cost-benefit analysis and rigorous public scrutiny. Borrowed funds should prioritize sectors capable of expanding exports, generating employment, and improving long-term competitiveness. Without such discipline, debt accumulation could once again become a source of economic instability.

Beyond fiscal and debt reforms lies a deeper structural challenge: the need to transform the productive base of the Ghanaian economy. For decades, Ghana has remained heavily dependent on raw commodity exports such as gold, cocoa, and crude oil.

While these sectors generate foreign exchange, they also expose the economy to global price volatility and external shocks beyond the country’s control. A decline in commodity prices or disruptions in global demand can quickly destabilize government revenues and weaken the cedi.

This is why industrialization and economic diversification must move beyond political slogans and become deliberate national priorities. Ghana cannot continue exporting raw cocoa while importing finished chocolate products at higher prices. Nor can the country sustainably rely on imports for goods that can reasonably be produced locally.

 Expanding agro-processing, light manufacturing, pharmaceuticals, textiles, and technology-driven industries could significantly strengthen economic resilience.

Equally important is the role of the Bank of Ghana (BoG) in safeguarding monetary stability.

Before the IMF intervention, inflation severely eroded household incomes and weakened business confidence, while exchange-rate instability increased the cost of living and disrupted investment planning. Although inflationary pressures have moderated, the risk of future instability remains.

The central bank must therefore continue pursuing credible and independent monetary policy. Excessive central bank financing of government deficits, a practice that contributed to macroeconomic instability in the past, must be firmly avoided.

Building foreign exchange reserves, strengthening financial sector supervision, and maintaining confidence in the cedi will remain essential pillars of long-term stability.

Still, macroeconomic stability alone cannot guarantee national prosperity. Economic reforms that fail to improve living conditions eventually lose public support. Ghana must therefore ensure that post-IMF recovery reflects in tangible improvements in the lives of ordinary citizens.

This requires sustained investment in education, healthcare, agriculture, digital infrastructure, transportation, and technical skills development.

The country’s youthful population can either become its greatest economic asset or a source of future instability if employment opportunities remain limited. Investing in entrepreneurship, innovation, and vocational training will therefore be critical in building a productive and globally competitive workforce.

Perhaps most importantly, Ghana must strengthen governance and institutional credibility. Corruption, policy inconsistency, weak public accountability, and political interference in state institutions have historically undermined economic progress. Investors, both domestic and foreign, are more likely to commit long-term capital in environments where institutions are transparent, predictable, and trustworthy.

Strengthening anti-corruption agencies, improving the governance of state-owned enterprises (SoEs), enforcing procurement laws, and enhancing transparency in the management of natural resource revenues are not merely governance issues; they are economic imperatives.

Eventually, the completion of the IMF programme should not be viewed as the end of economic reform, but rather as a narrow window of opportunity to redefine Ghana’s development path.

 The country now faces a crucial choice: return to the familiar cycle of fiscal excess and economic vulnerability, or institutionalize the discipline and reforms necessary for sustainable growth.

The IMF may no longer be at the centre of Ghana’s economic management, but the pressures that led the country there have not entirely disappeared. What happens next will depend on the political courage of leaders, the strength of national institutions, and the willingness of the country to prioritize long-term economic stability over short-term political convenience.

For Ghana, the real test does not lie in exiting an IMF programme. The real test lies in ensuring that another one is never needed again.

BY DAUDA IDDRISU

______

The writer is a tutor of Economics at Wa Senior High School

Follow our WhatsApp Channel now! https://whatsapp.com/channel/0029VbAjG7g3gvWajUAEX12Q