Ghana says no bailouts for loss-making state-owned enterprises

Ghana's President John Mahama has announced that there will be no bailouts for State-Owned Enterprises (SOEs) operating at a loss, stating that they will either be merged, privatised, or shut down. These bold steps come as the country grapples with a rising tide of fiscal challenges, including a deteriorating performance under the IMF program and a budget with significant deficits. Bright Simons, President of mPedigree, recently joined CNBC Africa to discuss the implications of Ghana's financial situation and the options available for the government moving forward. Let's delve into the key points raised during the interview. President Mahama's stance on the need for tough decisions regarding loss-making SOEs signals a shift in the government's approach to handling financial liabilities. He highlighted the risks posed by SOEs such as the Agricultural Development Bank and the National Investment Bank, which have become burdensome for the government. Instead of providing bailouts, the President emphasized the importance of privatization and tough structural reforms to address these challenges effectively. The budget presentation for 2025 has sparked mixed reactions, with a focus on the government's GDP growth target and its ability to support economic diversification. Bright Simons raised concerns about the performance of Ghana under the IMF program, noting a deviation from targets and unmet structural benchmarks. The country faces significant fiscal liabilities, including contractual obligations amounting to over $13 billion and debts in state-owned enterprises like the Cocoa Board. Despite the ambitious budget of 290 billion Ghana cedis, there are doubts about the government's capacity to fund it effectively. The limited options for financing the budget pose a challenge, particularly in light of restrictions on borrowing and a shifting global landscape marked by protectionist policies. While multilateral borrowing remains a crucial lifeline for Ghana, uncertainties around domestic bonds and IMF restrictions call for strategic financial management. The government may need to reevaluate damaging contracts and enhance budget execution to bridge the substantial gap between projected revenues and expenditures. In exploring avenues to increase domestic revenue, the focus is on rationalizing taxes to alleviate the burden on citizens without compromising fiscal sustainability. By removing poorly structured taxes and enhancing tax morale, the government aims to strike a balance between revenue generation and economic relief for the population.