In brief
- A fiscal reset anchored on spending control. Ghana’s 2025 mid-year budget review signalled a strong fiscal performance in 1H2025, marked by a satisfactory revenue outturn, improved spending discipline, and plausible risk mitigation efforts, boosting confidence in the attainment of full-year macro-fiscal targets. Despite no revisions to the end-year targets, the better-than-expected outturns in key indicators such as inflation, exchange rate, real GDP growth, and forex reserves have eased our earlier concerns and suggest a likely outperformance across macroeconomic targets for FY2025.
- Total revenue surged despite disappointing customs and non-tax revenue collections while ESLA shine brightens the 2H2025 prospect. Despite falling slightly short of target, Ghana’s 1H2025 revenue grew by 33.1% y/y and surpassed our expectations by 8.3%, driven by robust domestic tax performance and compliance gains, although non-tax and customs revenues lagged due to structural inefficiencies. While medium-term reforms offer promise, near-term risks persist. Nonetheless, strong direct tax, VAT, and ESLA inflows, alongside modest expectations from the new fuel levy, have prompted a raise to our FY2025 revenue forecast to GHS 227.7bn (+4.3%), just below the government’s revised target (GHS 229.95bn).
- Fall in domestic yields suppress interest payment while discretionary spending took a hit but payroll pressure persists. Total expenditure in 1H2025 was well-contained (+8.3% y/y), undershooting the budget ceiling by 14.4% as spending controls tightened across nearly all items except payroll, which saw a modest overshoot due to a 3.9% rise in wages & salaries. This fiscal restraint reflects improved expenditure management, supported by the integration of 549 MDAs and MMDAs onto the automated GIFMIS platform. While this trend strengthens fiscal discipline and reduces off-budget risks, we believe the wage bill poses a potential upside risk, with looming pressures from labour demands that could intensify in the next budget cycle.
- The strong Cedi appreciation suppresses debt-to-GDP ratio temporarily below the new ceiling ahead of the 2034 target. Ghana’s debt profile improved significantly in 1H2025 as a stronger Cedi and primary fiscal surplus drove debt stock down by GHS 113.7bn, lowering the debt-to-GDP ratio to 43.8% — seemingly beating the 2034 target debt ceiling of 45.0% ahead of schedule. While this FX-driven gain offers near-term relief, we expect the ratio to rise above 45.0% by year-end due to deficit financing on a projected FY2025 nominal GDP base. However, we believe the shift to a primary surplus and trimmed financing needs reflects meaningful progress toward debt sustainability, contingent on continued currency stability and fiscal prudence.
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