Public sector compensation consume 56% of tax revenue, according to President Akufo-Addo.

In recent years, Ghana's public finances have been severely strained due to a high public sector wage bill that exceeds the ECOWAS threshold of 35%. According to President Akufo-Addo, the expenditure on employee compensation, which includes wages, salaries, allowances, pensions, gratuities, and social security contributions, accounts for a staggering 56.01 percent of tax revenue.

According to him, this has created a severe fiscal crowding-out effect, as spending on public sector wages has crowded out spending on other vital areas of public expenditure, causing concerns about the sustainability of the nation's public finances.

To address this pressing issue, the President stated that Ghana must aggressively increase revenue collection via the Ghana Revenue Authority and urgently increase public sector productivity. Additionally, the government must reduce public expenditures, including the wage bill for the public sector, to sustainable levels. This would entail managing the wage bill in a manner that is sustainable over the long term, as opposed to continuing to enable it to grow at a faster rate than revenue.

It is crucial for safeguarding incomes and pensions that the wage bill of the public sector be managed in a sustainable manner, as this helps contain inflation. It is also essential for fiscal sustainability, as the country's high wage bill poses a significant threat to its public finances. Therefore, the government must take decisive action to resolve this issue, as failure to do so could have severe consequences for the economic stability and future prospects of the nation.

Reforming the public sector wage system by instituting performance-based pay and tying salaries to productivity is one potential solution to this issue. This would incentivize public sector employees to be more efficient and productive, thereby contributing to a reduction in the total wage expenditure over time. Another option would be to increase the efficiency of public services, which would reduce the need for additional personnel and help contain wage bill growth.

In addition to these measures, the government must improve tax collection to increase revenue. This would entail clamping down on tax evasion and increasing tax compliance, as well as expanding the tax base to encompass additional economic sectors. The Ghana Revenue Authority must play a crucial role in this initiative, and the government must provide it with the resources and support it needs to be successful.

Overall, Ghana's public finances confront significant challenges that require immediate action. By adopting measures to manage public spending in a sustainable manner, the government can help protect incomes and pensions while ensuring that resources are available for other crucial areas of public spending. Failure to act could have severe repercussions for the economic stability and future prosperity of the nation.