The government’s commitment to budget restructuring is anticipated to continue strong in the wake of Ghana’s successful restructuring of 90% of its external and domestic debt and plans to reintroduce the fiscal responsibility law, which caps the fiscal deficit below 5% of GDP.
Databank Research is nevertheless hopeful that spending pressures will level off by 2025, predicting a drop from its estimation of 5.0% ± 50 basis points in 2024 to 4.7% ± 25 basis points in 2025.
To meet the program’s critical requirements under the International Monetary Fund, the government plans to reduce the fiscal deficit by 1.8% and achieve a primary surplus of 0.5% by 2025.
“If all else is equal, we think important initiatives like the Medium-Term Revenue Strategy and a recently integrated property tax system may help accomplish the aforementioned aim. However, pressure to lift some tax measures would call for more aggressive efforts to raise money, which could result in a renegotiation and extension of Ghana’s US$3.0 billion IMF bailout program, according to Databank Research.
“We anticipate few systemic shocks in 2025 as global tensions subside, enabling Ghana’s fiscal operations to stay within budgetary targets,” the statement continued.
Expected to be a positive external balance despite tight foreign exchange reserves
According to the external sector, increased crude oil export earnings, improved cocoa production, and expected tariff reductions will keep Ghana’s balance of payments positive and stabilize between 1.5% and 2% of GDP.
“We anticipate that foreign direct investment and private consumption will rebound, and the capital account balance will leave the negative range. It clarified that scheduled coupon payments on the restructured debt could put a short-term strain on financial buffers, even while net transfers might improve the current account balance.
However, it anticipates that investor confidence will increase when inflation declines to about 12.4%, opening the door for a more robust external environment.
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