The Institute of Fiscal Studies (IFS) has challenged the credibility of Ghana’s 2026 Budget. This challenge stems from GHS 15.6 billion accumulated in the Sinking Fund, which was not included in the government’s original financing plans.
This unbudgeted accumulation contributed to a significant GHS 34.45 billion shortfall in domestic financing during the first half of 2026. The situation raises serious questions about the government's budget planning and execution. It suggests that funds were set aside while critical government spending was delayed or reduced.
This development fits into a broader pattern of fiscal challenges Ghana has faced, particularly regarding budget execution and revenue mobilization. The country has often struggled to meet its financial targets, leading to expenditure cuts that affect public services and economic activity. Such discrepancies between planned and actual spending can undermine investor confidence and hinder long-term development goals. Previous budgets have also faced scrutiny over their realism and implementation.
Dr. Said Boakye, Executive Director of the IFS, highlighted the core issue. He stated, “While starving the budget of domestic financing, the government was at the same time borrowing money to keep in the Sinking Fund.” This practice indicates a disconnect between the government's stated financial needs and its actual financial management.
The implications are far-reaching for Ghana’s economy. The IFS warns that continued restrictions on government spending could slow down economic growth. This is because government expenditure plays a crucial role in boosting the Gross Domestic Product (GDP). Decision-makers and financial markets will closely watch how the government addresses these budget credibility concerns and implements corrective measures.
The domestic financing target for the first half of 2026 was GHS 51.28 billion. However, actual financing fell short by 67.2 percent. The Minister of Finance confirmed that GHS 15.6 billion had accumulated in the Sinking Fund by July 22, 2026. This amount was not part of the initial 2026 Budget presented to Parliament. This raises questions about the government's assessment of its financial needs before the budget was approved.
Dr. Boakye questioned whether the government was unaware of this large Sinking Fund amount during budget preparation. He also asked if they knew but chose not to include it in the budget. Either scenario, according to the IFS, points to weaknesses in budget planning. This poor planning affects the government's ability to manage its finances effectively.
The financing shortfall directly led to lower-than-planned government expenditure. The government had planned to spend GHS 172.54 billion, including arrears payments, for the period. Actual spending, however, was GHS 35.60 billion less, representing a 20.6 percent shortfall. This significant reduction in spending impacts various sectors of the economy.
Capital expenditure, which funds infrastructure projects, was GHS 14.38 billion below target. This represents a 39.3 percent shortfall. Payments for outstanding debts, known as arrears, also fell short by GHS 8.64 billion, a 61.8 percent reduction. These cuts affect development projects and the timely payment of government obligations.
The IFS clarified that weaker revenue collection and lower foreign borrowing could not fully explain this spending gap. The combined shortfall from these two areas was GHS 8.39 billion. This is less than one-fourth of the total expenditure gap. Dr. Boakye emphasized that the large shortfall in domestic budget financing was the primary cause of reduced spending.
The Institute noted that non-oil real GDP growth was 6.3 percent in the first half of 2026. However, this rate was slower than in the previous four quarters. The IFS directly linked this slowdown to the sharp decline in government spending. They warned that continued significant cuts in government expenditure could further reduce non-oil real GDP growth.
The IFS urged the government to improve how it carries out its budget plans. They recommended aligning spending and financing decisions with the approved budget. Expenditure should be implemented as planned unless genuine revenue or financing problems make it impossible. The Institute stressed that major differences between budget targets and actual execution can harm budget credibility. This ultimately affects Ghana's economic growth and development.