The 2026 Budget is projected to strengthen Ghana’s fiscal improvements to sustain the current economic conditions.
According to the latest report by the Standard & Poor’s (S&P) Global Inc., the 2026 Budget should provide measures to further improve the fiscal conditions of the economy, as the current gains have been unable to solve the fiscal and balance of payments vulnerabilities.
“We forecast Ghana’s spending on debt interest payments will still average a high 20% of government revenue through 2028, although this is significantly lower than the 44% average recorded in the five years leading to default in 2022.”
S&P Global
The firm also forecast “a slight current account surplus over the next four years, supporting modest further accumulation of foreign currency reserves,” adding that “we [S&P Global] expect inflation to average 9% in 2026, returning to less than 10% for the first time since 2020, amid the cedi’s more stable exchange rate.”
Building on Current Achievements
The firm applauds the government for meeting its targets in the first half of 2025, hence is confident that the government will meet its 1.5% of GDP primary surplus target on a commitment basis.
Also, within the same first half of 2025, capital spending has been 60% lower than in the same period in 2024. This shows “increased scrutiny of project implementation, requirements for approval by the Minister of Finance for procurement, and prioritization of capital projects.”
The firm again noted that non-oil tax revenues, like corporate income tax and mineral royalties, have surged due to an improved business environment and investment fueled by low inflation and stable currency.
According to S&P Global, “reforms to the value-added tax (VAT) are also planned and the government aims to simplify the current multiple-levy regime, including the COVID-19 levy, by folding these into VAT to lower the cost of tax compliance and broaden the tax base.”
Extending from this, the firm “forecast the fiscal deficit on a cash basis (which includes the partial clearance of legacy arrears to suppliers and contractors) to average 3.8% of GDP through 2028, down from an annual average of 7.3% over the past 10 years.”
Ghana should restructure its constrained fiscal position through the recently implemented fiscal rules and the tightened enforcement of procurement oversight, the firm pointed out.
The firm also hinted that Ghana has shown cycles of weak fiscal prudence in the past years evident in the “18 IMF programs in the past, while undergoing debt relief in the mid-2000s under the Highly Indebted Poor Countries Initiative (totaling $4.3 billion in debt relief) and again in 2022 when it entered into the G20 Common Framework to restructure $17.3 billion worth of local currency debt and $28 billion worth of foreign currency debt.”
The firm mentioned that Ghana is still vulnerable to exchange rate movements and in the operations of State-Owned Entities (SOEs), even after the debt restructuring. This is mainly because half of Ghana’s public debt is denominated in foreign currency. A lot of liabilities are also seen in the SOEs, especially in the energy sector, with “arrears owed to independent power producers amount to about $1.86 billion, stemming from large commercial and technical losses from the Electricity Company of Ghana (ECG).”
Poor financial performance has limited the Ghana Cocoa Board (COCOBOD) from their mandate to purchase exclusively cocoa from farmers while constructing roads and other projects in cocoa areas. The state-owned company needs a government bailout annually due to this challenge.
The government has shown efforts in reducing vulnerabilities from these SOEs through “enforcing procurement sign-off via the Ministry of Finance as well as turnaround plans.” In the energy sector, the government has “successfully renegotiated some contracts with independent power producers, which should reduce its ongoing support to ECG, and has stopped the accumulation of new arrears, signaling a step in the right direction in lowering these risks.”
S&P Global’s Forecast for 2026
The firm noted that inflationary pressures will decline as the credibility and effectiveness of monetary policy improve. The inflation rate is expected to remain at the upper end of the Central Bank’s target of 6% – 10% until 2028.
The firm added that the “key to anchoring inflation expectations is the exchange rate, which has been volatile in recent years. The exchange rate regime operates as a managed float, and improved foreign currency flows should ensure more currency stability.”
The firm again noted that though the Central Bank has about 40% of physical gold reserves mined in holding, the “Central Bank’s sterilization costs through open market operations are sizable, resulting in significant losses for the central bank in recent years. We understand that operationally, it can maintain these costs, but the BoG will likely require recapitalization from the government, adding some pressure to public finances.”
As of March 31, 2025, the country’s nonperforming loan ratio remains high at 23.6% due to the domestic debt exchange program in 2022, the firm mentioned, adding that “13 banks required recapitalization after the domestic debt restructuring, and while most have met the recapitalization requirements, five banks, including a state-owned bank, remain undercapitalized.”
Therefore, the 2026 Budget needs to address these challenges and deficiencies while having a firm grip on the achievements in the short term.
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