It is refreshing to note that Ghana’s economy has witnessed some level of improvement in the first half of the year, based on the macroeconomic indicators outlined by the Finance Minister, Dr. Cassiel Ato Forson. Similar data, shown by multilaterals such as the International Monetary Fund and other institutions such as Barclays PLC, Standard Bank and Goldman Sachs, have demonstrated that the performance of the economy is on track
The Institute of Public Policy and Accountability (IPPA) applauds the current government for showing commitment to further revitalise the economy. But the previous regime deserves to be commended too for helping to stabilise the economy after two consecutive years of struggle. According to the Ghana Statistical Service, the economy grew strongly in the first quarter of 2025 to 5.3% in quarter one 2025, as against 4.9% during the same period in 2024; inflation also tumbled to 13.7% in June 2025, from 23.8% in December 2024; whilst the Ghana Cedi witnessed its best run in several decades as one of the top currencies in the world so far this year with a year-to-date gain of about 30%. Interest rates have also declined by a substantial 1300 basis points to 14.7% in June 2025. All these show signs of economic recovery, which have culminated in the upgrade of Ghana’s credit rating by Fitch. Moody’s and S&P are expected to follow in that order.
Nonetheless, the monetary economy has more time to become resilient. The policy rate is still high, though the Bank of Ghana is expected to cut the rate by about 200 basis points in its next meeting this week. Non-Performing Loans are still high at an average of 21% and the cost of credit is still expensive. These add to the cost of operating a business in the country despite an improvement in some macroeconomic indices. IPPA is thus urging the finance minister to work closely with the Bank of Ghana Governor to achieve a robust banking sector that is cost-effective and boost investor confidence.
We also agree with the finance minister’s assertion that there is still a long road ahead of us. We are saying so because the debt levels are high (GH¢613 billion as at end-June 2025) despite falling significantly, whilst the debt restructuring has not been fully completed. IPPA wants to see a smooth completion of the programme with the bilateral creditors and also the Eurobond holders. This is essential because of future debt transactions. We shouldn’t forget that the World Bank still classifies Ghana as a country with a high debt distress level. Similarly, we have huge bullet payments of both domestic and external debts to be paid in 2026, 2027 and 2028 respectively (Domestic debt: GH¢20billion in 2026, GH¢50.3billion in 2027 and GH¢45.75billion in 2028) (Foreign domestic: US$1.42 billion in 2026, US$1.17 billion in 2027, and US$1.14 billion in 2028).
Building Investor Confidence
The significant strides toward rebuilding international reserves and taking steps to bring inflation down are commendable, and the previous authorities must also be applauded. This has increased investor confidence. We have seen immense growth in the Ghana Stock Exchange so far in 2025. 19 out of 36 stocks have recorded gains, as against one loss. The GSE-CI has also recorded a gain of 31.67%. The bond market has also rebounded with some impressive trading activities. This is great for investors. We at IPPA believe the improved economic fundamentals must be sustained to stimulate the capital market, local and foreign investments. We also want the government to implement a cap on borrowing from both the domestic and international markets. We are worried that the government is still borrowing heavily on the domestic market despite promising to reduce its appetite for that market.
Fiscal Performance
The fiscal performance has been on track. Debt obligations are being honoured, but our concern is the heavy borrowing on the domestic market. Although yields have decreased by more than 13 percentage points, there are still some downside risks. The debt market is gradually picking up, but turnover is not up to the levels of pre-debt exchange. We are therefore advising the government not to rush and open the bond market but to fully conclude the debt restructuring programme.
Revenue performance has also not been the best in the first half of 2025, despite the overall fiscal balance on a cash basis improving from a deficit of 4.1% of GDP to 3.8% of GDP. This underperformance was attributed to systemic revenue leakages at key customs collection points, notably the Tema Port, and the smuggling of goods across our land borders. Though we welcome the deployment of Artificial Intelligence at the ports to tackle smuggling and fraud, we should remember that humans will operate the system. Punitive and severe actions must be taken against perpetrators of this act. We must also digitize all payment systems to reduce cash payments to curb corruption. On expenditure, the issue of wages and salaries exceeded the budget by GH¢1.3 billion for the first six months of 2025 is a major issue. Addressing ghost names immediately will go a long way toward reducing the pressure on government spending and creating space for investments in some capital projects.
Social Programmes
On the construction of new roads and rehabilitation of existing ones and priority projects, this is ambitious based on the current financial situation of the country. However, we welcome the decision to undertake these projects. IPPA will thus urge the finance minister to prioritise the projects. We believe the government should, as a matter of urgency, complete the road construction started by the erstwhile administration before starting new projects.
Macroeconomic Targets
We believe that macroeconomic targets (Overall Real GDP growth of at least 4.0%; Non-Oil Real GDP growth of at least 4.8%; End-year inflation rate of 11.9%; Primary balance on commitment basis at a surplus of 1.5% of GDP and a Gross International Reserves covering not less than three months of imports are achievable based on the current trajectory and if there are no severe exogenous shocks. Let’s remember that Ghana has not been able to stand the test of time, when there are external shocks; examples are the impact of the subprime mortgage crisis in the USA in 2007 and the recent Covid-19 crisis and the ongoing Russian/Ukraine war. These shocks caused elevated inflation, increased interest rates currency depreciation and impacted emerging economist severely.
Conclusion
As we previously mentioned, the Mid-Year Budget appears promising, but it does not outline adequate strategies to address external shocks. It is welcoming to establish two separate sinking fund accounts to help Ghana repay both domestic and external debts falling due between 2026 and 2028, without putting fresh pressure on the national budget. However, have we considered any turmoil more severe than COVID-19 or the Russian/Ukraine war? Going forward, the country must diversify its export earnings and not rely only on gold, cocoa and crude oil. It must be a conscious effort to increase export commodities of the country to include shea nut, oil palm, other extractives, etc. This will not only boost exports but also widen the trade surplus of the country. Adequate international reserves will be built to limit or slow down exchange rate depreciation in times of global headwinds.
The Bank of Ghana should also enhance its gold purchasing programme. This programme has helped increase the central banks’ gold reserves to withstand shocks in times of turbulence. The recent aggressive cedi appreciation was largely due to BoG’s aggressive intervention in the FX market because it has adequate FX. However, part of the cedi’s strength was due to the weak dollar in the first half of the year due to some aggressive policies such as the trade war or tariff imposition by US President Donald Trump. The dollar index, which measures the currency’s strength against a basket of six others, including the pound, euro and yen, fell 10.8 percent in the first half of 2025. We believe the central bank should allow market forces to dictate the pricing of the USD/ Cedi.
Secondly, we must reduce our appetite for borrowing, both domestically and internationally. The government must go full digitalization in the collection of both direct and indirect taxes. The same should be done for property tax to reduce irregularities and corruption. We should borrow for investment projects that will generate jobs. IPPA therefore welcomes the government initiative to establish the University of Environment and Sustainable Development at Bunso and nine State-of-the-Art Technical and Vocational Education Training Centres.
Finally, and not least, we as a country should deliberately create indigenous giant entrepreneurs to compete on the African continent and even globally. This will stimulate employment creation. Let’s take a cue from Nigeria, which has created many billionaires. These billionaires have established institutions in banking (UBA, Zenith, GT Bank), telecom (Glo), and cement (Dangote). These institutions have expanded their footprint on the African continent and Ghana must replicate that policy. We must be deliberate and avoid politics with this policy.
By Paul Twum-Barimah
Executive Director
Institute of Public Policy and Accountability
