BoG warns of fiscal risks amid weak revenue

The Bank of Ghana (BoG) has warned that weak revenue performance, rising compensation pressures and increasing energy sector payments remain key fiscal risks that could challenge Ghana’s fiscal execution for the rest of 2025.

The caution was contained in the Central Bank’s September 2025 Monetary Policy Report, which assessed trends in fiscal performance and outlined emerging vulnerabilities within the broader macroeconomic framework.

According to the report, while Ghana’s fiscal operations have shown notable improvements in certain areas, persistent shortfalls in revenue mobilisation continue to weigh on the government’s capacity to sustain its fiscal consolidation drive.

“The weak revenue performance, pressures from compensation of employees and increasing energy sector payments are the key fiscal risks likely to plague fiscal execution for the rest of the year,” the BoG emphasised.

The Central Bank further noted that the ongoing external debt restructuring negotiations could also pose short-term external payment challenges, with potential implications for exchange rate stability and the domestic currency.

Despite these risks, fiscal policy implementation for January to July 2025 reflected significant improvement. The primary balance on a commitment basis, the government’s key fiscal anchor, recorded a surplus of 1.0 per cent of Gross Domestic Product (GDP), outperforming the targeted surplus of 0.5 per cent.

However, total revenue and grants fell short across nearly all major categories, including non-oil tax revenues, oil and gas receipts, Energy Sector Levy Account (ESLA) collections, non-oil non-tax revenues and grants.

The report noted that expenditures were tightly managed, with total spending 14.1 per cent below programmed levels, demonstrating a deliberate effort to rein in spending amid limited fiscal space.

On the positive side, interest payments declined, attributed to reduced domestic borrowing, lower domestic interest rates and the appreciation of the Ghanaian cedi, which eased the cost of external debt servicing.

Fiscal financing during the period relied primarily on domestic sources, with net domestic financing amounting to GHS14.7 billion, significantly below the target, reflecting constrained external inflows.

The public debt profile also benefitted from the earlier appreciation of the cedi. However, the report cautioned that recent depreciation pressures could erode some of these gains, potentially slowing the pace toward achieving debt sustainability.

The BoG reiterated the importance of strengthening domestic revenue mobilisation, rationalising compensation spending and maintaining expenditure discipline to safeguard Ghana’s fiscal stability in the months ahead.