The government must prioritise capital expenditure and focus on projects that can generate better financial returns for debt repayment beginning 2026, the Emerging Market Advisors Limited (EMAL), has said.
In its analysis of the Mid-year budget statement, the think tank said the government must urgently resource the Sinking Fund to build strong financial buffers for debt repayment beginning 2026.
“With Ghana’s debt obligations looming, investments should focus on high-impact, revenue-generating initiatives, including infrastructure that boosts agricultural productivity or export capacity, ensuring that borrowed funds contribute to sustainable growth rather than future fiscal strain,” the EMAL stated.
According to EMAL, while six months into President Mahama’s second term the economy has recorded what appears to be a “near-perfect turnaround,” including a 10.1 percentage point drop in inflation, a 42.6 per cent appreciation of the cedi against the dollar, and 5.3 per cent Gross Domestic Product (GDP) growth in the first quarter, the sustainability of those gains were not guaranteed.
The report cautioned that the impressive disinflation and currency recovery had been driven by temporary factors such as gold price rallies, International Monetary Fund (IMF) disbursements, rising remittances and central bank interventions.
“The real test,” it said, “is what happens when gold prices normalise, the IMF programme ends, or debt service pressures intensify,” EMAL stated.
The think tank acknowledged the government’s fiscal discipline, noting that a primary surplus of 1.1 per cent of GDP and expenditure 14.3 per cent below budget were commendable.
However, it cautioned that customs revenue fell short by GH¢1.6 billion, the wage bill overran by GH¢1.3 billion, and payroll irregularities persisted.
On tax policy, EMAL welcomed the proposed abolition of the COVID-19 levy, the reduction of the effective VAT rate, the elimination of cascading levies, and the raising of the registration threshold for small businesses.
It said those measures “aim to reduce tax burdens, simplify compliance, enhance equity, and ultimately boost revenue,” but stressed that success would depend on effective nationwide rollout of e-invoicing, integration of fiscal devices, and targeted incentives for vulnerable sectors.
The report also questioned the credibility of the GH¢67 billion in arrears said to have been inherited in December 2024, pointing out that audits had already rejected GH¢3.6 billion for errors and non-compliance, with a further GH¢27.3 billion still under validation.
“Such uncertainty undermines fiscal transparency and complicates efforts to rebuild credibility,” it stated.
In the financial sector, EMAL noted the GH¢2.45 billion recapitalisation of the National Investment Bank, which restored its capital adequacy ratio and safeguarded deposits and jobs was commendable.
However, EMAL cautioned that systemic risks persisted and urged the Bank of Ghana to strengthen oversight to prevent a relapse into pre-cleanup weaknesses.
Looking ahead, EMAL urged government to prepare for adverse scenarios such as commodity price declines, currency weakening, and climate shocks to agriculture.
“The current budget assumes everything goes right, but experience tells us that will not always be the case,” it said.
The think tank noted that while fiscal consolidation had stabilised the economy, “Ghanaians deserve more than better-managed crises, they deserve a credible, sustainable path to prosperity. Whether this government can deliver remains to be seen, but the signs are there that they are certainly on the right track.”
