Senior Research Fellow at the Institute of Economic Research and Public Policy (IERPP), Dr. Frank Bannor, has warned that although the government’s recently announced tax cuts may offer welcome relief to households and businesses, they carry serious risks to Ghana’s fiscal stability in the medium term.
Speaking on Asaase Radio during a discussion on the 2026 Budget Statement, Dr. Bannor pointed to critical data hidden in the appendices of the budget, noting that Appendix 3A clearly shows that interest payments remain the second-highest item on government expenditure. In the 2025 fiscal year alone, he said, government has allocated GH¢57.7 billion for interest servicing — and an alarming GH¢50 billion of that will go toward domestic debt.
“This is shocking. It reflects the sheer volume of borrowing undertaken by the current administration in its first year, the debt legacy it inherited, and the government’s projected borrowing going forward,” he said. The remaining GH¢7.6 billion is earmarked for external debt servicing, a figure that appears modest only because external payments are currently suspended. These external obligations, he cautioned, are expected to return with heavy repayment pressures from 2027 onward.
According to him, this situation presents a direct threat to the fiscal discipline Ghanaians expect from the government. “It will test the government’s ability to control its appetite for borrowing — an issue policy experts have raised repeatedly. Citizens want a government that borrows less and invests more productively,” he added.
Turning to the government’s decision to abolish taxes such as the COVID-19 levy, Dr. Bannor argued that while such measures are politically popular, they create significant holes in the revenue framework. The COVID-19 levy alone was projected to contribute GH¢3.21 billion to the government’s GH¢229 billion targeted revenue for 2025. Eliminating this levy, he said, means government must now address a sizable revenue shortfall without having reduced expenditure.
“Total planned expenditure under the revised budget remains unchanged at GH¢269 billion. So while revenues are being cut due to political promises that please the public, the spending side is untouched. The Finance Minister must explain how he plans to plug that gap,” he stressed.
Dr. Bannor noted that Ghana’s domestic revenue performance remains structurally weak. Even with grants included, the revenue target represents just 16.4% of GDP. Without grants, domestic revenue stands at about GH¢222 billion — placing Ghana’s tax-to-GDP ratio around 15%, far below South Africa’s 24.8%.
“This clearly shows that Ghana performs poorly in tax collection — even for taxes we have already identified. Yet a large share of the population still depends on government for public goods and essential services. So yes, tax cuts may be popular, but given the weak state of our revenue system, they raise serious concerns about fiscal sustainability,” he added.
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