Ghana’s Government Spending Falls 14% Below Target in 2025 – Signals Stronger Fiscal Discipline

Ghana Spends 14% Less Than Budgeted in First Seven Months of 2025 – BoG Report

Government spending in Ghana for the first seven months of 2025 was 14.1 percent below the projected target, indicating tighter fiscal control and stronger adherence to budgetary discipline, according to the Bank of Ghana’s (BoG) latest Monetary Policy Report released in September.

Total expenditure for the period reached GH¢131.1 billion, or 9.4% of GDP, compared to the budgeted target of GH¢152.6 billion (10.9% of GDP). While this shows a marked shortfall in spending, it also represents a 9.3 percent increase over the same period in 2024, reflecting moderate growth in absolute expenditure year-on-year.

One of the largest contributors to the spending shortfall was a significant drop in interest payments. The government spent GH¢28.9 billion on interest, nearly 19.5% lower than the projected GH¢36 billion. This was attributed to declining domestic interest rates and a stronger Ghanaian cedi, which reduced the cost of servicing debt, particularly on domestic borrowings.

In contrast, compensation for public sector workers slightly exceeded expectations, coming in at GH¢44.9 billion. This category was the only one to surpass its target, reflecting Ghana’s ongoing wage commitments and possible adjustments following public service negotiations.

Capital investment saw the steepest decline. Spending on infrastructure and development projects dropped to GH¢10 billion, falling almost 63% below the target of GH¢22.4 billion. Of this amount, GH¢6.6 billion was funded domestically under the Big Push Initiative, while GH¢3.4 billion came from foreign-financed capital projects.

The government also reduced its arrears clearance commitments, with GH¢4.8 billion paid by the end of July, compared to a planned GH¢8.1 billion. Notably, no new arrears were accumulated, indicating improved expenditure management and a deliberate push toward fiscal consolidation.

This restrained spending approach matters for Ghana’s macroeconomic recovery efforts, especially in the wake of high public debt, inflation pressures, and recent IMF-backed fiscal reforms. The significant underspending signals the government’s effort to meet fiscal consolidation targets and rebuild market confidence.

Ghana has been undergoing structural adjustments and reforms under a $3 billion Extended Credit Facility (ECF) from the International Monetary Fund. A key condition of the agreement is improved fiscal discipline, reduced deficit, and efficient public spending. The BoG report suggests that the government is making tangible progress in meeting these expectations.

Ghana entered 2025 with a challenging fiscal environment, having experienced ballooning debt, a depreciating cedi, and record inflation in previous years. The government has since implemented a series of reforms aimed at stabilizing the economy, including new tax policies, reduced subsidies, and public sector reforms.

The latest BoG data comes amid ongoing negotiations for external debt restructuring and reviews by credit rating agencies monitoring Ghana’s fiscal health. The ability to keep expenditures under control without a spike in arrears reflects positively on the government’s fiscal management strategy.

The drop in interest payments corresponds with the declining yields on government bonds and Treasury bills. As of mid-2025, 91-day T-bill rates had fallen from over 35% in 2023 to just under 25%, helping reduce the cost of domestic borrowing.

However, the reduced capital expenditure may raise concerns about delays in critical infrastructure projects. For instance, planned road upgrades under the Big Push initiative in the Northern and Eastern regions have reportedly faced slow disbursements, affecting timelines and job creation.

Despite the spending cutbacks, the rising public wage bill continues to place pressure on government finances. Civil service unions have called for reviews of salary structures, citing cost-of-living increases, even as government tries to limit recurrent expenditure.

Ghana’s effort to reduce overspending without creating new arrears is commendable, especially in the context of an IMF program. However, the sharp decline in capital investment could hamper medium-term growth if not addressed carefully.

Economists warn that while fiscal tightening is necessary, it must not come at the cost of long-term development goals. Investment in infrastructure, health, and education remains crucial to Ghana’s inclusive growth agenda.

Moving forward, the challenge will be striking the right balance between fiscal prudence and development financing ensuring that gains in macroeconomic stability are matched with real improvements in public services and livelihoods.

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