Omanghana
The Institute for Fiscal Studies has warned that the government’s restrictive execution of the 2026 budget could undermine Ghana’s economic growth despite improvements in several key macroeconomic indicators.
In its Policy Brief No. 26, the institute assessed the 2026 Mid-Year Budget Review and the government’s fiscal performance during the first half of the year. It raised concerns about limited capital expenditure, delayed arrears payments, financing decisions and weaknesses in revenue collection from small-scale gold mining.
IFS Fiscal Policy Researcher Dr. Said Boakye said the government recorded substantial underspending during the period. Ghana’s overall fiscal deficit on a commitment basis stood at GH¢6.82 billion, compared with the budgeted GH¢32.41 billion.
According to the institute, the unusually low deficit did not necessarily reflect stronger fiscal management. It was partly the result of restrictions on spending for capital projects and the non-payment of outstanding obligations.
The IFS warned that suppressing capital expenditure could directly affect economic activity because infrastructure investments contribute to production, employment and gross domestic product growth.
Delayed arrears payments also deprive contractors, suppliers and businesses connected to government projects of essential liquidity. The resulting cash-flow problems can affect workers, subcontractors and other companies across the economy.
Non-oil real GDP growth slowed to 6.3% during the first quarter of 2026. The institute partly linked the decline to the sharp reduction in government expenditure and warned that continued spending restrictions could cause growth to weaken further.
The IFS also questioned the government’s financing priorities, particularly its decision to limit domestic financing for the budget while directing resources toward building the Sinking Fund.
Dr. Boakye asked whether the government underestimated its financing needs while preparing the 2026 budget or deliberately excluded some requirements from the financial plan submitted to Parliament.
Another major concern involved the state’s ability to generate revenue from Ghana’s expanding small-scale gold sector.
The country’s gold exports reportedly increased from $10.31 billion to nearly $20.98 billion in 2025, with artisanal and small-scale mining contributing significantly to the growth. However, the surge in export value did not produce a comparable increase in government tax revenue.
The institute called for a clear strategy to ensure that the state captures an appropriate share of revenue from the rapidly growing sector. It said stronger tax administration and monitoring would be necessary to translate higher gold exports into sustainable public income.
The IFS further questioned the government’s decision to maintain its 2026 real GDP growth forecast at 4.8%.
Ghana’s economy expanded by 6% in 2025 and recorded growth of 6.4% during the first quarter of 2026. Based on those figures, the institute argued that the Mid-Year Budget Review should have included an upward revision of the annual growth target.
Concerns were also raised about inconsistencies in the fiscal data presented in the budget document. The IFS said two conflicting figures were provided for tax refunds, warning that such discrepancies could weaken public trust and investor confidence in the credibility of Ghana’s financial reporting.
Despite its criticism, the institute acknowledged signs of macroeconomic stabilization during the first half of 2026.
It highlighted the decline in interest rates as a particularly encouraging development for businesses. The yield on the 91-day Treasury bill fell to 5.7%, while the average lending rate declined to 15.6% by June.
The IFS said lower borrowing costs could support private-sector investment and expansion. However, it cautioned that those gains could be weakened if poor budget execution continues to restrict public investment and withhold funds owed to businesses.
Source: Omanghana
