Senior Research Fellow at IERPP, Dr Frank Bannor
Senior Research Fellow at the Institute of Economic Research and Public Policy (IERPP), Dr Frank Bannor, has raised fresh concerns over the sustainability of Ghana’s fiscal framework, warning that the 2025 Budget reveals a worrying surge in domestic debt servicing alongside significant revenue losses arising from recently announced tax cuts.
Speaking on Asaase Radio during an analysis of the 2026 Budget Statement, Dr Bannor urged Ghanaians to pay close attention to the appendices of the budget, which he described as the “real details behind the summary the Finance Minister presents on the floor of Parliament.”
“If you refer to Appendix 3A of the budget statement… you will notice something striking. In the 2025 budget, interest servicing remains the second-highest item on government expenditure,” he said.
According to him, the numbers show a dramatic concentration of pressure on the domestic side of public debt.
“Out of the GH¢57.7 billion allocated for interest payments, about GH¢50 billion will go solely toward servicing domestic debt. That is shocking,” he stressed.
Dr Bannor explained that this reflects not only the volume of borrowing undertaken by the current administration in its first year, but also the debt legacy inherited from the previous government and the projected borrowing trajectory going forward.
He noted that interest payments on external debt are comparatively lower, estimated at GH¢7.6 billion, largely because Ghana’s external debt service remains suspended. However, he cautioned that this temporary relief will soon end.
“Most of these external obligations will return from late 2026, with heavy repayment schedules expected in 2027, 2028, 2029, and beyond. This is worrying because it poses a significant threat to the fiscal discipline we all expect,” he said, warning that the government’s long-criticised appetite for borrowing will be severely tested.
Turning to the Finance Minister’s decision to abolish certain taxes, including the COVID-19 levy, Dr Bannor said the removal of the levy creates a clear revenue gap that government has not fully accounted for.
The budget projects total revenue of GH¢229 billion for 2025, with the COVID-19 levy alone expected to contribute GH¢3.21 billion.
“Abolishing this levy creates a significant hole in the government’s revenue projections,” he explained.
While acknowledging that the removal of such taxes provides relief for households, he cautioned that it comes at a cost.
“What is money back into citizens’ pockets becomes a big revenue loss for the government,” he said.
Dr Bannor also pointed out that government expenditure, projected at GH¢269 billion, remains unchanged despite these revenue cuts.
“This raises an important question: How will these revenue shortfalls be addressed within the government’s fiscal framework?”
“We need the Finance Minister to explain clearly how he intends to plug the gap created by removing the COVID-19 levy,” he added.
Dr Bannor warned that Ghana’s weak domestic revenue performance makes the political decision to scrap taxes even more risky. From the revised budget, the GH¢229 billion revenue projection represents about 16.4% of GDP, including grants. When grants are excluded, domestic revenue is around GH¢222 billion, placing Ghana’s tax-to-GDP ratio “somewhere around 15 percent.”
“That is woefully inadequate,” he said, comparing Ghana’s figure to South Africa’s tax-to-GDP ratio of 24.8 percent. “We fall short by almost 10 percentage points.”
He argued that this structural weakness in domestic revenue mobilisation means popular tax cuts may undermine fiscal discipline unless government outlines credible compensatory measures.
“Ghana performs poorly in tax collection, even for the taxes we have properly identified,” he said. “Meanwhile, a significant portion of the population still depends on government for public goods and essential services.”
Dr Bannor added that while abolishing taxes may be politically appealing, the underlying numbers raise “serious concerns about fiscal sustainability” as the country steps into another demanding budget year.
