World Bank warns Ghana on fiscal slippages, urges urgent job creation reforms

Country Director for Ghana, Sierra Leone, and Liberia

The World Bank has cautioned that Ghana risks undermining its recent economic gains if it fails to address mounting fiscal pressures and accelerate structural reforms to create more and better jobs for its fast-growing workforce.

Launching its Ninth Ghana Economic Update in Accra on Wednesday, the Bank said that while Ghana recorded robust growth of 5.7% in 2024 and 5.3% in the first quarter of 2025 – alongside declining inflation, a stronger cedi and a 95% completion of debt restructuring and renewed fiscal challenges in 2024 had eroded earlier stabilisation gains.

“The fiscal deficit reached 7.7% of GDP, with significant arrears accumulation,” said Robert Taliercio, World Bank Division Director for Ghana, Liberia and Sierra Leone.

“Without decisive reforms, especially in the energy and cocoa sectors, these pressures could derail macro-financial stability, economic transformation and sustainable job growth.”

The report, titled “Addressing Labor Market Challenges and Opportunities in Ghana’s Economic Landscape”, highlights that the working-age population increased by 2.7 million between 2012 and 2023, yet net employment rose by only 250,000.

Many of the jobs created were low-productivity roles, with limited upward mobility and persistent barriers for women and youth.

Macroeconomic Gains and Risks

The Bank credited strong mining and construction output, improved exports of gold and crude oil, rising remittances and higher foreign direct investment for the recent growth performance. Inflation fell to 13.7% in June 2025, supported by tighter monetary policy, while reserves surpassed three months of import cover.

However, fiscal indiscipline in 2024, marked by revenue shortfalls and expenditure overruns pushed public finances back into stress.

The report warned that losses from state-owned enterprises remain a major risk, with the Electricity Company of Ghana projected to face a $2.2 billion funding gap in 2025, potentially exceeding $9 billion by 2026 if reforms stall.

The Ghana Cocoa Board (COCOBOD) also faces instability, owing suppliers significant amounts despite high global cocoa prices.

Outlook and Reform Priorities

The Bank forecasts GDP growth to slow to 3.9% in 2025 due to fiscal adjustments, high interest rates and still-elevated inflation, before rebounding to around 5% over the medium term.

This outlook, however, depends on completing debt restructuring, maintaining fiscal discipline, reducing SOE liabilities and withstanding external shocks such as commodity price volatility and climate impacts on agriculture.

The Update stresses that job creation must become a central policy priority to harness Ghana’s demographic dividend.

“Youth transitions from school to work must be strengthened, with skills aligned to a modern economy,” said Kwabena Gyan Kwakye, lead author of the report.

“Agriculture, especially through agro-processing and out-grower schemes offers in-situ productivity improvements, while manufacturing, particularly in textiles, electronics and chemicals can drive export growth and higher-value employment.”

Policy Recommendations

The report proposes three strategic pillars to boost job creation and economic transformation:

1. Build Physical and Human Capital — Invest in infrastructure such as irrigation, transportation, and energy, alongside improvements in education quality and workforce skills. Public-private partnerships should be leveraged given domestic revenue constraints.
2. Improve the Enabling Environment — Remove regulatory bottlenecks, strengthen insolvency processes, modernize land registries, and expand access to finance to allow firms to scale and integrate into value chains.
3. Mobilise Private Capital — Unlock investment in high-potential sectors through risk management instruments, support for entrepreneurship, and measures to reduce political and country risks.

Mr. Taliercio stressed that International Development Association (IDA) financing — more affordable than domestic borrowing — remains critical for projects like electricity metering, safety-net payments, irrigation, and cocoa farm rehabilitation.

“By maintaining fiscal discipline, advancing structural reforms, and targeting labor market interventions, Ghana can ensure that growth translates into more jobs, higher living standards, and a more inclusive future,” he said.

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