According to the April 2023 Africa Pulse Report from the World Bank, Ghana’s fiscal deficit is expected to remain high throughout 2023-2025. The large deficit is due to severe financing constraints caused by the country’s limited ability to issue long-term domestic debt and a lack of access to international capital markets. The report states that successful agreement and implementation of an International Monetary Fund (IMF)-supported program would help contain the deficit and provide the necessary financing, including ongoing debt restructuring negotiations.
Ghana’s fiscal deficit stood at over 9% of Gross Domestic Product in 2022. The report also highlights that the fiscal deficit in Sub-Saharan Africa is expected to widen from 4.8% in 2021 to 5.2% in 2022, with projections to narrow to 4.3% in 2024 and to an average of 3.0% in 2024-2025.
The widening of the fiscal deficit in 2022 was mainly driven by the deterioration in fiscal outcomes among mineral and metal exporters in the region. The World Bank added that government intervention is required to address the challenges faced by countries in the region, such as increasing revenue generation, prioritizing spending, and improving the efficiency of public expenditures.
This report highlights the need for Ghana to focus on generating more revenue to reduce the fiscal deficit. The government should consider implementing policies that will enhance the country’s ability to access international capital markets and issue long-term domestic debt. Additionally, measures should be taken to improve the efficiency of public expenditures to reduce wastage and enhance value for money. These steps will help reduce the fiscal deficit and provide the necessary financing for critical development projects.