The World Bank Public Finance Review Report reveals a troubling trend in Ghana’s fiscal management, marked by a significant lack of budget discipline since 2010. The nation’s public spending has outpaced economic growth, leading to a volatile situation characterized by ballooning interest payments and increasing rigidities in the budget.
Between 2010 and 2022, government expenditure grew at a faster rate than the Gross Domestic Product (GDP), squeezing fiscal space due to substantial non-discretionary spending.
This overspending has been attributed to several factors, including excessive expenditure during election years, unforeseen expenses in the financial and energy sectors, and the necessary response to the COVID-19 pandemic.
A particularly concerning statistic highlights that from 2010 to 2023, a staggering 70 percent of total expenditure; averaging 15.8 percent of GDP and nearly 100 percent of revenue was allocated to just three areas: public sector wages, interest payments, and earmarked transfers to statutory funds.
This heavy allocation has placed a significant burden on the nation’s finances.
As the cost of borrowing has risen, interest payments have ballooned, further straining resources and crowding out crucial capital expenditure. This dynamic threatens to hinder long-term economic development and sustainable growth.
The current fiscal trajectory poses a significant risk to Ghana’s economic stability and future prosperity.
“Government expenditure grew faster than GDP between 2010 and 2022 while non-discretionary spending severely limited the fiscal space.”
“Overspending during election years, contingent expenses in the financial and energy sectors, and efforts to address the COVID-19 pandemic all contributed.”
“From 2010 to 2023, 70 percent of total expenditure (15.8 percent of GDP on average, nearly 100 percent of revenue) was dedicated to three spending items: public sector wages, interest payments, and earmarked transfers to statutory funds.”
Source: Ghana/Starrfm.com.gh/103.5FM/Deborah Amuzu
