Ghana's economic managers have spent the past three years achieving stability, with inflation decreasing to 5.2% and public debt at 45% of GDP. The focus now shifts to converting this stability into job creation, investment, and higher production. An analysis by MyJoyOnline emphasizes that the 2027 budget is crucial in addressing this challenge, particularly with significant debt repayments looming. The budget must demonstrate how stability will be transformed into tangible economic benefits for Ghanaians.
Ghana's economic recovery appears solid on paper, with the economy growing to GH₵1.4 trillion and inflation easing to 5.4%. However, many Ghanaians still face scarce job opportunities. The Ghana Statistical Service reported this disparity, highlighting the need for the budget to address the gap between macroeconomic numbers and everyday employment. The analysis stresses that the budget must prioritize job creation and provide clear plans for achieving this goal.
The International Monetary Fund (IMF) completed its final review of Ghana's US$3 billion Extended Credit Facility in July, and Ghana has since transitioned to a Policy Coordination Instrument (PCI) with the Fund. This arrangement allows for continued IMF monitoring but provides no new financing. As a result, the government must demonstrate fiscal discipline without the cushion of fresh IMF disbursements while funding an ambitious new spending program.
The government's Fiscal Strategy Document outlines plans to invest 1.5% of GDP annually for four years, approximately US$10 billion, in a new growth agenda. The document identifies two financing sources: an additional 0.5% of GDP in revenue and fiscal room created by lowering the primary surplus target. The analysis argues that the budget must now specify which projects are ready to start, who will implement them, and how much private investment is being counted on.
The government proposes cutting the primary surplus target from 1.5% to 0.5% of GDP from 2027, giving more room to spend but reducing the contribution to shrinking the debt stock. Analysts say productive projects can justify this trade-off, but the government needs to explain how the lower target fits existing fiscal rules and provide safeguards. Independent scrutiny by the Fiscal Council could help build confidence in these decisions.
Ghana faces significant debt repayments, with GH¢58 billion in Domestic Debt Exchange Programme (DDEP) bond maturities due in 2027 and GH¢53 billion due in 2028. The government has accumulated GH¢15.6 billion in a Sinking Fund as of July 22. However, the Institute for Fiscal Studies has questioned how the fund is treated in the approved budget. The analysis emphasizes the need for transparency in the fund's management and repayment plans.
The analysis also highlights the importance of delivering on current budget commitments, particularly capital projects, which are running behind schedule. The Ministry of Finance reported a first-half primary surplus of 0.9% of GDP, but capital spending was 39.3% below plan, and net arrears clearance reached only 38.2% of the programmed amount. The government must provide explanations for these shortfalls and outline plans to complete unfinished projects and pay overdue bills.
Key points
- The 2027 budget must demonstrate how Ghana's economic stability will be converted into job creation, investment, and higher production.
- The budget faces challenges, including significant debt repayments and the need for fiscal discipline without IMF financing.
- The government's Fiscal Strategy Document outlines plans to invest US$10 billion in a new growth agenda, but specifics on project implementation and financing are needed.
