The Institute for Fiscal Studies (IFS) has issued a stark warning: poor execution of Ghana’s 2026 budget could significantly hurt economic growth. This risk is particularly high if the government continues to restrict spending on crucial capital projects and arrears payments. The IFS highlighted these concerns in its Policy Brief No. 26, which analyzed the implementation of the 2026 budget during the first half of the year.
The IFS report, presented by Research Fellow Dr. Samuel Addo, revealed that total revenue and grants for the first half of 2026 reached GHS 124.78 billion. This figure fell short of the budgeted GHS 126.14 billion by GHS 1.37 billion, representing a 1.1 percent deficit. Tax revenue amounted to GHS 103.77 billion against a target of GHS 105.26 billion, while non-tax revenue stood at GHS 12.27 billion compared to a GHS 14.90 billion target.
This underperformance in revenue collection, coupled with significant expenditure shortfalls, paints a challenging picture for Ghana's economic stability. The government's fiscal strategy has been under scrutiny, with concerns about its ability to meet financial commitments and stimulate growth. This situation adds to ongoing discussions about fiscal discipline and the effectiveness of public spending in the broader Ghanaian economic context.
Dr. Addo explained that the shortfall in non-tax revenue was largely due to lower-than-expected dividends, interest, and profits from oil, which missed its target by GHS 1.43 billion, or 37.1 percent. Foreign grants also underperformed, recording GHS 1.05 billion against a target of GHS 1.07 billion. Conversely, other revenue sources, including ESLA proceeds, exceeded expectations, reaching GHS 7.69 billion against a target of GHS 4.21 billion.
On the expenditure side, total government spending, including arrears payments and discrepancies, amounted to GHS 136.94 billion. This was GHS 35.60 billion, or 20.6 percent, below the budgeted GHS 172.54 billion. Dr. Addo identified arrears clearance and capital expenditure as the areas with the most significant shortfalls. Actual arrears clearance stood at GHS 5.34 billion against a budget target of GHS 13.98 billion, an execution rate of only 38.2 percent. Capital expenditure also reached GHS 22.18 billion against a target of GHS 36.56 billion, a shortfall of GHS 14.38 billion or 39.3 percent.
IFS Fiscal Policy Researcher and microeconomist, Dr. Said Boakye, described poor budget execution as a major challenge identified in the mid-year review. He argued that the government’s failure to spend as planned has serious implications for economic growth. Capital expenditure and arrears payments are vital for economic activity. Arrears payments provide liquidity to government contractors, suppliers, and businesses, while capital expenditure is a key component of Gross Domestic Product (GDP).
Restricting such spending directly affects economic growth. Non-oil real GDP growth recorded 6.3 percent in the first quarter of 2026, a noticeable decline from previous quarters. Dr. Boakye attributed this decline partly to the sharp reduction in government spending. He cautioned that continued expenditure restrictions could cause non-oil real GDP growth to decline further. This trend could undermine efforts to achieve broader economic stability and prosperity.
Dr. Boakye also noted that the GHS 35.60 billion expenditure gap cannot be fully explained by shortfalls in revenue mobilization and foreign borrowing. The combined shortfall from these sources amounted to GHS 8.39 billion, less than one-fourth of the total expenditure gap. He identified domestic budget financing as the primary reason for the expenditure shortfall, which fell short by GHS 34.45 billion, representing 67.2 percent of the budgeted GHS 51.28 billion.
The IFS also questioned why the government accumulated GHS 15.6 billion in the Sinking Fund by July 22, 2026, an amount not provided for in the original budget. Dr. Boakye argued that while the budget was starved of domestic financing, the government was borrowing to build up the Sinking Fund. This practice affects funding for critical areas like capital expenditure and arrears payments. This situation raises concerns about the government's financial planning and transparency.
The implications are clear: continued poor budget execution could lead to a slowdown in economic activity and hinder Ghana's development goals. Decision-makers must address the underlying issues of revenue shortfalls and expenditure management. Markets and investors will closely watch how the government responds to these warnings and implements corrective measures in the coming months. The focus will be on improving fiscal discipline and ensuring that budgeted funds are utilized effectively to support economic growth.