… but structural gaps must still be confronted
By Prince OWUSU-ANSAH & Frederick Amoako AWUAH
The Government’s 2026 Budget, themed “Resetting for Growth, Jobs and Economic Transformation,” starts with a tale of macroeconomic resurgence and national revival. It contends that Ghana has recovered out of a period of severe fiscal stress, regained macro stability and repositioned the economy?for growth, jobs and transformation.
There is real progress in several dimensions of the Budget and Government should be complimented for maintaining the?balance on broad economic indicators in adverse situation. Yet for all these achievements, significant structural frailties continue to?fester below the surface. In order to achieve truly inclusive and sustainable progress, Ghana needs to accelerate the pace of reforms and further consolidate institutions that will ensure that macro gains are translated into an improved welfare for households and?employment creation.
Commendable Actions: Where the government deserves credit
Restoration of Macro Stability under tight constraints
Ghana’s economy has been under severe pressure for years. Against this backdrop, the Government has achieved measurable gains. For much of the past decade, economic uncertainty shaped the daily experience of households and firms. Inflation rose sharply, the cedi lost ground, and public finances drifted into dangerous territory.
Inflation eased, and with it being one of the biggest pressures on household budgets. The currency,?which has seen years of tumultuous swings in value, has stabilized. The fiscal deficit, around 2.8 percent of GDP, reflects some read-through to greater discipline in public borrowing. Crucially, the Bank of Ghana has ended the controversial mode of financing the budget directly, a move that?buttresses monetary policy credibility. In addition,?reserves have strengthened, providing the country with greater insulation to external shocks.
These are not small feats. Many developing economies facing similar shocks have struggled to rein in inflation or deficits. Ghana’s progress here is credible, difficult, and worthy of recognition.
Meeting 5 out of 6 ECOWAS Convergence Criteria
For the first time in years being able to meet five out of the six ECOWAS convergence criteria is symbolic and practical weight. It shows things are falling in line with regional standards as far as fiscal and monetary policies are concerned. Not only does this success increase investors and lenders confidence but also repositions Ghana as a more reliable player within the Economic Bloc of West Africa.
Renewed focus on productivity, jobs, and social protection
A?good change in the 2026 Budget is its focus on real sectors which can employ labour and boost productivity. There is fresh attention on:
- Support for SMEs
- Youth employment policies
- Plans for industrial upgrading
- Reinvestment in critical social sectors such as health and education
These efforts are tackling deep structural challenges of high unemployment, large informal economy,?and low productivity in key sectors. Even if implementation remains a challenge, the policies intention and framing represent the right direction for a country where unemployment, informality, and low productivity remain major constraints.
A shift toward institutional reforms and fiscal rule enforcement
The Budget also openly admits, more than in?past years, the need to fix systems that ultimately affect quality of public spending. The emphasis on reducing leakages, reinforcing procurement systems, value-for-money audits and improving the governance of state-owned?enterprises suggests a change in mindset.
Ghana cannot rely on revenue mobilisation alone. The management, discipline, and integrity of public institutions matter just as much. These signals of reform, although early, are encouraging.
Critical Gaps: Where the fiscal discipline narrative falls short
While the macro gains are real, the structure and sustainability of this progress remain uncertain.
Fiscal discipline built on a narrow and fragile base
A closer look at the numbers also raises questions about whether that progress?is built of solid ground. Much of the consolidation appears to rely on:
- Higher taxes on an already narrow formal sector
- Expenditure compression in key public services
- Delayed payments and arrears in some sectors
- Cuts that may undermine social programmes or local government funding
If the deficit?reduction is dominated by painful short?term cuts, as opposed to structural improvements in revenue efficiency or enhanced productivity of the public sector, the stability may not hold.
Limited translation of macro gains into micro-level relief
Despite the improvements on paper, many families are still contending with high food prices, soaring transportation expenses, low earnings and few job prospects. This disconnect between?macro stability and household well-being is still large. As long as Ghanaians are not feeling the recovery in their pockets, the stability chorus will sound tinny to many?households.
Overreliance on convergence criteria as proof of structural progress
There is a long history that for a year or two, Ghana hits the fiscal targets?only to reverse course when political cycles turn. A more fundamental challenge is how to build capacity in the institutions that enforce fiscal discipline including public financial management systems, state owned enterprises and regulatory?agencies. Lacking stout systems, the convergence of criteria is a passing success?not a change in shape. Ghana has achieved convergence in the past but ended?up reversing the gains in political cycles.
Political Economy Risks
The story of the “daunting inheritance” and eight years of hardship politically makes sense, but it threatens to portray fiscal responsibility as partisan rather?than institutional. Politically that might make sense, but it?could also undermine the notion that fiscal rules and discipline should be above partisan cycles. A fiscal structure that bubbled and boiled with the turn of party would?not have provided stability.
Recommendations: How to build a more durable and inclusive transformation
Protect Productive and Social Spending Even During Consolidation
Fiscal consolidation should not rubbish spending on sectors that would drive long-term development,?such as basic education, primary health care system, agric modernisation, rural electrification, clean cooking initiative, feeder roads and local infrastructure. Yes, cutting spending on these sectors may balance the books now, but slows progress later.
There are?real lessons to learn from other countries. Rwanda, even during its leanest years when it was strapped for money, refused to cut health or education spending. The outcome?was a spectacular increase in schooling and among the fastest reductions in mortality anywhere on the continent of Africa. Vietnam followed a similar strategy when it preserved rural electrification and feeder road projects during their reform period. Maintaining those investments, it turned itself from a low-income country into one of the?world’s most competitive manufacturing centers. And?Ghana can learn from these examples. Protecting the right sectors during consolidation is economic strategy, not charity..
Strengthen revenue mobilisation without hurting the poor
Instead of squeezing the same taxpayers more, Ghana should concentrate on cutting large-scale exemptions, ensuring big firms pay?what they owe, digitalising tax collection and closing loopholes exploited by high-income groups. SMEs require an incentive to formalise, not disincentives that keep them further away.
Several countries offer workable models. Mauritius increased its revenue dramatically without raising taxes at all, just by getting rid of exemptions, digitising?the revenue authority and making large companies comply better. Georgia famously exploited full digitalisation to rebuild its tax system, eliminating ancient corruption?and lifting compliance from around 30% to over 90% in a decade.
These examples illustrate that Ghana does not?have to tax compliant firms and workers further. It requires a system that is wide, fair, digital and efficient.
Give fiscal rules legal and institutional teeth
Sustainable progress requires a stronger legal and institutional framework. Ghana requires a new Fiscal Responsibility Act, an independent fiscal council, transparent quarterly reporting on arrears and projects?and imposed sanctions for fiscal indiscipline.
Chile’s fiscal policy framework is one of the most well??known applications of this approach. Its independent fiscal council and binding fiscal rule enabled the country to save in good times and to stabilize when recessions struck. New Zealand went down a similar line in?the 1990s with its Fiscal Responsibility Act, which revolutionised the way that public finances were managed through increased transparency and predictability. South Africa’s focus on transparency in its quarterly budget and expenditure reports has instilled confidence amongst investors and fostered?a culture of fiscal openness.
Ghana requires similar institutional underpinning: a beefed-up Fiscal Responsibility Act, a?robust fiscal council with bite, sanctions for errant behavior and timely reporting of arrears status and project performance. Fiscal credibility should be anchored in institutions, not political?cycles.
Link Macro Stability to Job Creation and Household Welfare
Macroeconomic stability should deliver real-life improvements?in living standards. Government must guarantee clear job creation targets, transparent information on SME financing support, quantifiable progress made in?reducing poverty and inequality and empower local government to improve service delivery.
A?valuable lesson comes from countries that related macro stability with real social progress. Brazil in the 2000s mixed stabilisation with targeted?programmes such as Bolsa Família. As a result, more than 27 million were taken out of poverty in?just a decade. Indonesia channeled its stability gains into SMEs and rural development, where the informal?sector moved up to higher productivity activities and created millions of jobs. Malaysia built up local governments, so that stability meant better roads, water and schools in communities.
Stability has to move from the national accounts into the wallets and daily lives of Ghanaians. It means targets-to-sectored job compacts, transparency around SME support, empowered local government and visible changes in public services.
Build Buffers to Prevent Future Crises
Ghana must begin to rebuild contingency reserves, stabilisation funds, and climate resilience frameworks. These cushions are vital?to shielding the economy from shocks which happen more often, and arrive with less predictability.
Some other countries have demonstrated what disciplined buffer-building can accomplish. Botswana established a stabilisation fund (though Ghana has some in place, it is mostly used for other purposes than its intended use) from diamond earnings and drew on it in difficult times, avoiding the?risk of ruin to the public purse. Singapore, which boasts a conservative fiscal?culture and will never beggar its reserves by borrowing heavily or crashing the economy, keeps substantial reserves so it can respond to crises such as COVID-19 without going cap-in-hand for funds.
Ghana requires similar buffers: contingency reserves, stabilisation funds and?frameworks for climate resilience. These?are not indulgences; they are vital shields for an economy that has to function out there in an unpredictable world.
Conclusion: A Welcome Reset, but Not Yet a Transformation
The 2026 Budget is one of the most optimistic and stabilisation-driven budgets Ghana has had in recent years. The Government deserves credit for cutting the country’s deficits, taming inflations, stabilising?the cedi and meeting core regional indicators. It?has also made an important move toward resetting Ghana’s development direction.
But stability is only the opening of this book. A country needs strong institutions, deep reforms, job-rich growth and social investments that people can feel in their ordinary lives if change is to truly take hold. The next task is?to ensure that the promise of this budget becomes a platform, not just one more transient road-of-progress-construction.
Ghana has taken an important step forward. Whether this becomes a sustained journey toward shared prosperity depends on how the Government addresses the structural gaps still standing between stability and transformation.
The authors are the founders of the African Policy Foundation, a think tank dedicated to advancing sound fiscal, monetary, and public policy solutions across the African continent.
The post The 2026 Budget: A promising reset appeared first on The Business & Financial Times.
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