Ghana faces fiscal imbalance, a decade of overspending and debt

Ghana’s debt keeps increasing

The World Bank Public Finance Review Report reveals a troubling trend in Ghana’s fiscal management, marked by a significant lack of budget discipline since 2010. The nation’s public spending has outpaced economic growth, creating a volatile situation characterized by ballooning interest payments and increasing budget rigidities.

Between 2010 and 2022, government expenditure grew at a faster rate than Gross Domestic Product (GDP), squeezing fiscal space due to substantial non-discretionary spending.

This overspending has been attributed to several factors, including excessive expenditure during election years, unforeseen expenses in the financial and energy sectors, and necessary responses to the COVID-19 pandemic.

A particularly concerning statistic highlights that from 2010 to 2023, a staggering 70 percent of total expenditure—averaging 15.8 percent of GDP and nearly 100 percent of revenue—was allocated to just three areas: public sector wages, interest payments, and earmarked transfers to statutory funds.

This heavy allocation has placed a significant burden on the nation’s finances.

As borrowing costs have risen, interest payments have ballooned, further straining resources and crowding out crucial capital expenditures. This trend threatens to hinder long-term economic development and sustainable growth.

The current fiscal trajectory poses a significant risk to Ghana’s economic stability and future prosperity.

“Government expenditure grew faster than GDP between 2010 and 2022, while non-discretionary spending severely limited fiscal space.”

“Overspending during election years, contingent expenses in the financial and energy sectors, and efforts to address the COVID-19 pandemic all contributed.”

“From 2010 to 2023, 70 percent of total expenditure, averaging 15.8 percent of GDP and nearly 100 percent of revenue—was dedicated to three spending items: public sector wages, interest payments, and earmarked transfers to statutory funds.”

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