The former Minister of Finance, Seth Terkper, has cautioned that the country’s continued reliance on borrowing to finance its recurrent expenditure could plunge the country deeper into a debt crisis unless urgent reforms are undertaken to broaden the domestic revenue base and strengthen fiscal discipline.
Speaking during the 2025 edition of the Daily Graphic/Ecobank Economic Forum in Accra, Mr Terkper indicated that Ghana must move away from short-term borrowing to fund routine government expenses such as salaries, interest payments and administrative costs.
He said borrowing should be restricted to capital projects with identifiable repayment streams.
“We need to generate more revenue to take care of recurrent expenditure and borrow only for capital, adding that such a strategy must also ensure that capital projects repay the debt incurred, rather than relying on the taxpayer.
Tax to GDP
He expressed concern over the country’s tax-to-gross domestic product (GDP) ratio, which remains below the threshold recommended for a sustainable economy.
“For us to really manage our economy well, we must be doing tax-to-GDP ratios around 18 to 20 per cent. And I mean tax-to-GDP ratio, not revenue-to-GDP ratio,” he said.
He observed that although Ghana is classified as a lower-middle-income country, the government continued to benchmark its performance against low-income African economies, a trend he criticised as ‘self-defeating’.
“Africa is split equally between middle-income countries, especially the lower-middle-income countries of which Ghana is one, and the low-income countries. The averages being quoted are for low-income countries, but we are no longer one,” he said.
Mr Terkper emphasised that continuing to compare Ghana’s tax performance with poorer countries prevents policymakers from adopting bold, forward-looking policies.
“If we want to be in the upper-middle-income category, we must stop treating ourselves like a low-income country. Otherwise, we will continue to lose concessional financing and grants, forcing us back into expensive debt markets,” he added.
Unsustainable debt
Mr Terkper gave a sobering reminder of Ghana’s recent debt troubles, particularly the consequences of excessive borrowing on non-productive expenditure.
He pointed out that by the mid-2010s, Ghana had become overly reliant on short-term instruments such as Treasury Bills (T-bills), sovereign bonds and domestic bonds. Many of which were structured to pay only interest without reducing
the principal.
"You were paying only the interest, whether it was interest only Treasury Bills, sovereign bonds, or domestic bonds, while continually rolling over the principal," he said.
He cited 2014 as a turning point when Ghana faced a looming obligation to repay $750 million in sovereign bond debt.
The government’s failure to establish a permanent debt repayment mechanism meant this sum had to be raised within a short period, exacerbating the country’s fiscal crisis.
“This is the rationale for going back to the Constitution and establishing a debt repayment mechanism. But we stopped, the consequence default, haircuts and everything else,” he said.
Outdated policies
He also challenged the popular perception of Ghana as an agrarian economy, arguing that services had long overtaken agriculture as the main driver of GDP.
Yet, economic policies still seem to focus on agriculture as though the structure of the economy has not changed.
Mr Terkper stated that future economic policy must reflect the new realities of Ghana’s economic structure, focusing on sectors with the greatest potential to generate revenue and create sustainable jobs.
“We are a services economy. If we add value to agriculture, it will serve our purpose. But we must acknowledge where we are and stop acting like we are still stuck in the past,” he said.
Tax exemptions act
Also addressing the forum was a Tax Partner at PwC, Mr Abeku Gyan-Quansah, who decried the poor implementation of the Exemptions Act, 2022 (Act 1083).
He explained that although the law provided a clear framework for tax waivers, including a provision for the state to take equity in beneficiary companies, some tax exemptions were still being granted in contravention of the law.
“If you say you cannot carry out a particular activity and you need the state to be part of the game, then the state is also saying if your business is valued at X, give it a portion of X. And whenever you think you no longer need it, come and buy it back,” he said.
He called on Ghanaians to demand transparency from Members of Parliament (MP) and government officials whenever new tax exemptions were brought before Parliament.
“If we have reached a point as a people where we feel we no longer need that provision, we can repeal it. But until then, let’s monitor our parliamentarians, call them, and find out why they’re departing from the law they themselves passed,” he said.
Tax integrity
On the issue of tax compliance, Mr Gyan-Quansah revealed the importance of professionalism, explaining that only trained and certified tax experts should be allowed to practise.
He criticised the Ghana Revenue Authority (GRA) for working with individuals who lacked proper certification, despite existing laws mandating professional qualifications in tax advisory and compliance.
“There are already laws requiring that only certified professionals handle tax matters just as only lawyers can represent clients in court. But we’re not enforcing them,” he said.
To curb corruption, he proposed that professional misconduct be reported to regulatory bodies such as the Institute of Chartered Accountants and the Chartered Institute of Taxation, which could act faster than the criminal justice system.
“You may not be able to prove corruption beyond reasonable doubt in court, but you can use professional disciplinary channels, which have a lower threshold and faster enforcement,” he said.