Ghana has no real fiscal space despite economic gains - IERPP warns

The Institute of Economic Research and Public Policy (IERPP) has questioned whether Ghana truly has enough fiscal space to support increased government spending, arguing that recent economic improvements may be masking deeper vulnerabilities.

In a statement signed by its Executive Director, Prof Isaac Boadi, the institute said Ghana’s recent debt reduction, lower inflation, declining interest rates and currency stability present a positive picture on the surface but do not necessarily reflect strong fiscal capacity.

According to IERPP, fiscal space should be measured by government’s ability to meet debt obligations and existing commitments while still having enough resources to invest in development.

The institute noted that although public debt-to-GDP ratio declined from 51.1 per cent in April 2025 to 41.5 per cent by January 2026, the reduction was largely influenced by GDP rebasing rather than a significant fall in the actual debt burden.

It argued that domestic debt continued to rise, increasing from GH¢322.3 billion in April 2025 to GH¢379.1 billion by May 2026.

Prof. Boadi further stated that Ghana’s limited capital expenditure compared to recurrent spending suggests that government has little room to finance major development projects.

“Nearly everything the state collects is absorbed by recurrent spending and debt service,” he said, adding that this reflects a lack of meaningful fiscal flexibility.

IERPP also raised concerns about increased government reliance on the banking sector and the central bank for financing, warning that continued borrowing could crowd out private sector credit and increase inflationary pressures.

The institute observed that gains from the cedi’s appreciation and falling inflation in 2025 have started reversing, with the currency weakening and inflation rising again in 2026.

It also cited declining international cocoa prices and falling foreign reserves as additional risks to Ghana’s economic outlook.

IERPP concluded that Ghana’s current situation should be viewed as “fragile stabilisation” rather than a signal that the country has regained sufficient fiscal room for major spending expansion.

The institute is therefore demanding a clearer explanation from policymakers on the true state of Ghana’s fiscal position and the sustainability of current economic gains.

GhanaWeb launches maiden Real Estate Platform



Ghanaians welcome GhanaWeb’s digital solution for real estate challenges

GhanaWeb's Real Estate Platform will benefit property sector – Rev. Dr. Nanayaa Prempeh



Do your due diligence before investing in real estate – GhanaWeb CEO David Antwi