Effects of digital technology on fiscal deficit in Ghana

Abstract

This study investigates the relationship between digital technology adoption and fiscal deficit in Ghana from 2003 to 2021. Employing time series data analysis, the study utilizes the Structural Vector Autoregressive Regression (SVAR) approach to estimate the long-run and short-run dynamics between digital technology variables and fiscal deficit. Unit root tests, such as the Zivot–Andrew and Phillips-Perron (PP) tests, were conducted to ensure the stationarity of the variables. The findings suggest a significant relationship between digital technology adoption and fiscal deficit in both the short run and long run. Specifically, an increase in digital technology adoption, as indicated by metrices such as internet penetration rates and e-government initiatives, is associated with a reduction in fiscal deficit. This underscores the potential of digital governance strategies to enhance government efficiency, transparency, and revenue generation in Ghana. Based on the analysis, the study concludes that leveraging digital technology can be an effective means of addressing fiscal deficit challenges in Ghana. Policy recommendations include the continued investment in digital infrastructure, the expansion of e-government services, and the promotion of digital literacy and inclusion initiatives. These measures can contribute to improved fiscal management, enhanced public service delivery, and sustainable economic development in Ghana.