Government expenditure in 2025 came in sharply below expectations, reinforcing signs of a firm fiscal consolidation drive.
According to the latest report published by the Bank of Ghana, total outlays for the year amounted to GH¢194.36 billion, representing a 24% shortfall relative to the programmed estimate of GH¢250.311 billion.
The lower than expected spending reflects intensified expenditure controls across key budget lines, as authorities sought to rein in costs while navigating rigid statutory and wage obligations.
Total Spending Falls Short of Target
According to the report, the GH¢194.36 billion in total expenditure highlights a significant moderation in fiscal operations. The 24% gap between actual spending and the programmed figure underscores deliberate efforts to compress non essential and capital outlays.
This outcome aligns with broader macroeconomic stabilisation efforts aimed at reducing fiscal pressures and restoring confidence in the public finances. While expenditure containment has been evident, certain structural components of the budget continued to exert pressure.
Wage Bill Remains Elevated
Expenditure on Compensation of Employees, which covers salaries and wages, pensions and gratuities, as well as other wage related costs, reached GH¢71.274 billion. This slightly exceeded the budgeted GH¢70.037 billion.
The performance was 1.8% above target and marked a 16% increase compared to the previous year. In terms of revenue allocation, compensation consumed 38.2% of domestic revenue generated during the period, highlighting ongoing structural pressures within the expenditure framework.
The persistent weight of the wage bill indicates that while discretionary spending can be curtailed, mandatory obligations such as public sector pay remain difficult to compress in the short term. This continues to limit fiscal flexibility.
Sharp Contraction in Goods and Services
Spending on Goods and Services amounted to GH¢5.271 billion, falling 16.8% short of the projected GH¢6.335 billion. The lower outturn suggests tighter controls on discretionary operational expenses.
It was also markedly below the GH¢38.438 billion recorded over the same period in 2024, reflecting a sharp year on year contraction of 86.3%.
The steep reduction points to significant cutbacks in routine government operations and procurement. Analysts say this level of compression, while supportive of fiscal targets, may have implications for service delivery if sustained over a prolonged period.
Interest Costs Moderate but Remain High
Interest costs totalled GH¢46.211 billion, below the programmed GH¢57.869 billion for the review period. This moderation relative to target provided some relief to the overall fiscal balance.
Nonetheless, the figure was 5.8% higher than the GH¢43.682 billion recorded in the corresponding period of 2024. The moderation relative to target was largely attributed to declining domestic interest rates and the strengthening of the cedi, which reduced the local currency burden of external debt servicing.
Although interest payments came in below projections, they remain a substantial component of government expenditure. The slight year on year increase underscores the lingering impact of accumulated public debt.
Transfers Edge Above Budget
Transfers to Other Government Units comprising allocations to the National Health Fund, GETFund, Road Fund, Energy Fund, District Assemblies Common Fund, retention of Internally Generated Funds, transfers to GNPC, the Ghana Infrastructure Fund and other earmarked accounts amounted to GH¢50.805 billion.
This was 3.7% above the budgeted GH¢48.978 billion and represented a year on year growth of 24.2%.
The increase reflects statutory obligations and earmarked allocations that are less flexible within the expenditure framework. Such transfers are often protected by law, limiting the scope for downward adjustments even during periods of consolidation.
Capital Spending Takes a Major Hit
Capital spending for the period stood at GH¢12.978 billion, equivalent to 0.9% of GDP, significantly below the programmed GH¢31.401 billion, which represented 2.2% of GDP.
The outcome was 58.7% under target and reflected a 50.6% decline compared to the 2024 outturn, pointing to subdued public investment activity during the year.
The sharp contraction in capital expenditure suggests that infrastructure and development projects bore the brunt of expenditure containment measures. While this strategy can help stabilise public finances in the short term, economists caution that prolonged underinvestment may weigh on medium term growth prospects.
Other expenditure over the eleven month period totalled GH¢14.499 billion, undershooting the target of GH¢35.689 billion by 59.4%. This compares with GH¢24.766 billion recorded in the same period in 2024.
The significant underperformance in this category further illustrates the breadth of spending restraint implemented during the year.
Consolidation Through Containment
Taken together, the fiscal outturn underscores a consolidation drive centred on expenditure containment, with significant reductions in capital and non essential spending helping to offset rigid wage and statutory obligations.
The GH¢194.36 billion outlay reflects a government prioritising macroeconomic stability over expansionary fiscal measures. By compressing discretionary and investment spending while maintaining essential transfers and wages, authorities signalled a firm commitment to restoring fiscal discipline.
In the interim, the challenge will be to balance consolidation with the need to sustain economic growth and protect critical public services.
READ ALSO: Embassies, Not DVLA Staff, to Handle Overseas Licensing – DVLA
