Ghana faces revenue gap that could hinder economic growth, ISSER warns

Ghana’s push for faster, more robust economic growth faces a major financing constraint because its revenue generation remains below the sub-Saharan African average.

The Institute of Statistical, Social and Economic Research (ISSER) says this gap makes it harder for the Government to pay for development interventions and could lead to spending cuts. ISSER shared this warning at the launch of its State of the Ghanaian Economy Report 2025.

This warning comes as the economy gets stronger with the Government trying to build on the progress made in 2025. It raises concerns about whether local revenue can keep up with the country’s rising spending and investment needs.

While presenting the report, the Director of ISSER, Professor Robert Darko Osei, said Ghana’s tax revenue was about 30% of GDP in 2025 – below the sub-Saharan African average – pointing to a revenue gap the country must close to sustain growth.

“Our revenue effort is a bit low. In fact, tax revenue is under 30% in 2025, was about 30% of GDP, and that was significantly lower than that which pertains in sub-Saharan Africa,” Professor Osei said at the launch.

He said the way forward to closing the gap is to expand the tax base instead of putting more pressure on current taxpayers. “What it then points to is the need for bringing more into the tax net as it were, so that the revenue effort can be improved,” he said.

Professor Osei also warned that Ghana’s planned economic rebasing could lower the tax-to-GDP ratio unless revenue collection grows along with the economy. He pointed out that Ghana’s better fiscal position in 2025 was not because of much higher revenue or grants, which stayed about the same compared to GDP. Most of the improvement came from cutting spending.

He added that Ghana should rethink its spending priorities while also working to raise more money at home. He also said Ghana’s average tariff rates are higher than those in nearby countries, showing why it’s important to broaden the domestic tax base instead of relying too much on current sources.

Now, Ghana’s main challenge is moving from restoring stability to creating enough budget room to pay for the next phase of growth.

ISSER’s analysis shows that unless Ghana broadens and strengthens its tax base, stronger economic growth may not automatically mean more money for infrastructure, jobs, and economic diversification.

Radio1 Online