By Eugene Davis
Ghana’s 4.8 per cent real GDP growth target for 2026 is unrealistic and should have been revised upwards in light of stronger-than-expected economic performance, the Institute for Fiscal Studies (IFS) has said.
The government maintained the 4.8 per cent target in its 2026 Mid-Year Fiscal Policy Review presented to Parliament in July, despite real GDP growth reaching 6.4 per cent year-on-year in the first quarter.
Speaking at a post-mid-year budget engagement in Accra, IFS Acting Executive Director Dr Said Boakye said the government had missed an opportunity to update its growth forecast based on new evidence.
“The government has kept [the growth target] at 4.8 per cent in the mid-year review. This, indeed, is unrealistic,” he said.
Dr Boakye said two developments should have prompted an upward revision. First, Ghana’s economy grew by 6.0 per cent in 2025, significantly above the government’s 4.8 per cent forecast. Second, first-quarter growth in 2026 reached 6.4 per cent, also well above the full-year target.
He said the decision to leave the target unchanged undermined the credibility of the government’s projections, particularly because mid-year budget reviews are intended to incorporate significant changes in the economic outlook.
Stronger macroeconomic conditions
The IFS acknowledged that the government had performed well in maintaining relative macroeconomic stability during the first half of the year, despite external pressures, including the impact of the war in the Middle East on global energy prices.
Inflation, although rising from 3.2 per cent in March to 5.3 per cent in June, remained low by historical standards. Interest rates also declined sharply.
The 91-day Treasury bill rate fell from 28 per cent in December 2024 to 11.1 per cent in December 2025 and further to 5.7 per cent in June 2026. The average lending rate also declined from 30.3 per cent in December 2024 to 24.5 per cent in December 2025 and 15.6 per cent in June 2026.
The IFS said the decline in borrowing costs was particularly positive for the private sector, which has long been constrained by expensive credit.
The think tank also welcomed the Finance Ministry’s decision to extend its new commitment authorisation system to state-owned enterprises (SOEs), arguing that tighter expenditure controls could help address persistent financial problems in the sector.
Dr Boakye said the government was right to recognise the contribution of poorly performing SOEs to Ghana’s debt challenges and supported efforts to strengthen their financial discipline.
However, he identified four major weaknesses in the mid-year budget review: poor budget execution, unrealistic fiscal and economic projections, inconsistencies in fiscal data, and the absence of a clear strategy for mobilising revenue from small-scale gold mining.
Spending falls sharply below budget.
The IFS said the biggest concern was the government’s failure to execute planned expenditure.
Total expenditure, including arrears payments, amounted to GH¢136.94bn in the first half of 2026, compared with a budgeted GH¢172.54bn. This represented a shortfall of GH¢35.6bn, or 20.6 per cent.
Capital expenditure was particularly weak, falling short of its target by GH¢14.38bn, or 39.3 per cent. Arrears clearance was even further behind, with only GH¢5.3bn spent against a target of GH¢13.98bn — an execution rate of just 38.2 per cent.
Dr Boakye said the underspending could have implications for economic growth because government expenditure is a significant component of GDP.
“Arrears payment, for instance, oils economic activities by providing liquidity to government contractors and suppliers and the businesses that depend on them,” he said.
He warned that continued restrictions on government expenditure could weaken the momentum of non-oil GDP growth, which stood at 6.3 per cent in the first quarter but had slowed compared with the previous four quarters.
The IFS said the expenditure shortfall could not be explained solely by weaker revenue and external financing.
The combined shortfall in total revenue and grants and foreign borrowing was about GH¢8.39bn, less than one-quarter of the GH¢35.6bn expenditure gap. Domestic budget financing, however, fell short by GH¢34.45bn, or 67.2 per cent of the target.
The IFS questioned why the government had been unable to meet its domestic financing target while simultaneously accumulating resources in the Sinking Fund.
According to the Finance Minister, GH¢15.6bn had been accumulated in the Sinking Fund by July 22, 2026, although the amount had not been provided for in the original budget.
Dr Boakye said diverting resources towards the fund had constrained spending on capital projects, arrears and other priorities.
He argued that whether the government had failed to anticipate the financing requirement or had deliberately left it out of the original budget, the development pointed to weaknesses in budget planning and undermined the credibility of the 2026 budget.
Revenue and GDP forecasts remain unrealistic.
The IFS also maintained that the government’s 16.8 per cent total revenue and grants-to-GDP target was unrealistic.
Dr Boakye said Ghana had repeatedly overestimated its revenue-to-GDP ratio. Since 2015, actual total revenue and grants have generally remained below 16 per cent of GDP, yet successive budgets have continued to set substantially higher targets.
He said there was little justification for maintaining the 16.8 per cent target in the mid-year review, particularly in the absence of significant new revenue measures.
The IFS also argued that the unchanged GDP projections had contributed to an inflated revenue-to-GDP ratio.
Because nominal GDP is the denominator used to calculate the revenue-to-GDP ratio, an underestimation of nominal GDP can make the revenue ratio appear stronger than it actually is.
The institute therefore said the 7.8 per cent total revenue and grants-to-GDP outturn recorded in the first half of 2026 was also likely overstated relative to a more realistic GDP base.
Fiscal data inconsistencies
The IFS identified several inconsistencies in the government’s fiscal data.
For example, the mid-year budget documents state a first-half total revenue and grants target of GH¢126.14bn. However, the individual revenue components listed in the relevant appendices add up to about GH¢125.4bn, leaving an unexplained difference of roughly GH¢740m.
The discrepancy affects the reported revenue shortfall. Using the sum of the individual components would produce a shortfall of about GH¢656m rather than the GH¢1.37bn reported by the government.
The IFS also noted that social contributions, a traditional revenue line, was missing from two appendices even though it appeared elsewhere in the revised budget.
It further questioned discrepancies in the treatment of tax refunds, noting that one figure in the budget was substantially lower than another figure presented in the same document. The institute said the inconsistencies should be resolved to improve confidence in the government’s fiscal data.
Small-scale gold mining presents missed revenue opportunity
The IFS said the government had failed to present a credible strategy for raising revenue from Ghana’s rapidly expanding small-scale gold mining sector.
The institute said recent developments, including the establishment of the Ghana Gold Board (GoldBod) and the domestic gold purchase programme, had highlighted the sector’s much larger contribution to gold production and exports than previously recognised.
Ghana’s gold exports increased by 103.3 per cent in 2025, from $10.31bn to $20.98bn. Small-scale mining accounted for about $10.8bn, or 51.5 per cent, of exports.
Yet mineral royalties increased by only about 21 per cent, from roughly $364m in 2024 to $441m in 2025.
The IFS said information from the Minerals Income Investment Fund indicated that the royalties collected in 2025 came from the large-scale mining sector, despite the small-scale sector accounting for more than half of gold exports.
The institute said other major mining revenue instruments, including corporate income tax, also generated little or no revenue from the small-scale sector.
Dr Boakye said the situation was unsustainable and called for a deliberate strategy to ensure that the state receives a fair share of the value generated from Ghana’s mineral resources.
First-half fiscal performance
Presenting the fiscal performance for the first half of 2026, IFS research fellow Dr Samuel Addo said total revenue and grants amounted to GH¢124.79bn, GH¢1.37bn, or 1.1 per cent, below the GH¢126.14bn target.
Tax revenue stood at GH¢103.77bn, against a target of GH¢105.26bn, while non-tax revenue reached GH¢12.27bn, GH¢2.63bn below target.
The main driver of the non-tax revenue shortfall was weaker-than-expected dividends, interest and profit from oil, which fell GH¢1.43bn below target.
By contrast, other revenue outperformed its target by GH¢3.49bn.
On expenditure, the GH¢136.94bn outturn was 20.6 per cent below the first-half target. Interest payments, grants to other government units and compensation of employees also fell below their respective targets.
The sharp underspending resulted in a much smaller-than-programmed fiscal deficit. The overall fiscal deficit on a commitment basis stood at GH¢6.82bn, or 0.8 per cent of GDP, compared with a programmed GH¢32.41bn, or 2 per cent of GDP.
The primary balance recorded a surplus of GH¢14.68bn on a commitment basis, compared with a programmed deficit of GH¢3.97bn.
Limited changes in revised budget
Despite the substantial underspending in the first half of the year, the IFS said the revised 2026 budget made relatively few changes to the original revenue and expenditure assumptions.
Most revenue projections remained unchanged. On expenditure, capital expenditure was reduced by GH¢5bn, from GH¢57.53bn to GH¢52.53bn, while the allocation under “other expenditure” was increased by the same amount.
The additional GH¢5bn was allocated to GoldBod to enable it to take full responsibility for the domestic gold purchase programme, relieving the Bank of Ghana of that role.
As a result, the main fiscal balance projections and their ratios to GDP remained unchanged from the original 2026 budget.
IFS recommendations
The IFS has urged the government to take four key steps.
**First, improve budget execution.** The government should implement approved expenditure as planned, except where genuine revenue or financing constraints make this impossible. Financing decisions should also remain consistent with the approved budget.
**Second, make economic and fiscal forecasting more evidence-based.** The IFS said GDP growth, nominal GDP and revenue-to-GDP projections should be updated when new data materially change the economic outlook. It also recommended independent review of key budget forecasts before they are incorporated into the budget.
**Third, develop a strategy to mobilise revenue from small-scale gold mining.** The government should ensure that the rapid expansion of gold production and exports translates into a corresponding increase in public revenue.
**Fourth, strengthen the reliability of fiscal data.** The Ministry of Finance should introduce stronger validation and verification procedures to eliminate inconsistencies before fiscal figures are incorporated into budget documents.
The IFS said addressing these weaknesses would improve budget credibility, strengthen fiscal planning and ensure that economic growth translates into broader development gains.
