Ghana’s macroeconomic story in 2025 was, by many measures, a success. Inflation collapsed from 23.8% to 3.8%, the cedi appreciated 40.7% against the dollar, and the economy grew 6.0%, its strongest performance in six years.
Yet beneath these headline achievements, the Bank of Ghana’s May 2026 Summary of Economic and Financial Data quietly tell a more uncomfortable story: the government is spending faster than it is collecting revenue, and the gap is wide enough to make new taxes in the mid-year budget not merely likely, but inevitable.
By the end of March 2026, cumulative total revenue and grants had reached only 3.6% of GDP. Tax revenue alone stood at just 3.0% of GDP.
Over the same period, total government expenditure had already climbed to 3.9% of GDP, meaning that in the very first quarter of the year, before the budget has gathered any real momentum, the government was spending more than it was collecting.
The overall fiscal balance for Q1 2026 came in barely positive, and that fragile number masked sharper monthly volatility. January 2026 produced a slim surplus of 0.3% of GDP, only for the overall balance to swing back to a deficit of -1.0% in February.
The structural picture is clear: Ghana’s revenue base is not generating enough income fast enough to cover the state’s obligations.
What makes this especially striking is that the economy is not stagnant. Real GDP growth reached 5.8% in Q4 2025, and non-oil GDP grew 7.1%.
The Composite Index of Economic Activity registered a real annual growth rate of 12.6% in March 2026. Business confidence and consumer confidence indices both remain well above 100. By conventional logic, a growing economy should produce growing tax receipts.
Yet Ghana’s tax revenue, at 3.0% of GDP after three months, is running at an annualised pace of roughly 12% of GDP, below the full-year 2025 outturn of 13.1% of GDP. Economic activity is expanding, but the tax system is not capturing it at the same rate.
This points to structural weaknesses that growth alone cannot fix. A large informal sector, estimated to account for more than half of economic activity, sits largely outside the tax net. Generous exemptions erode the VAT and corporate tax base.
Compliance gaps persist across income taxes and import duties. The benefits of a stronger cedi and falling interest rates are accruing to businesses and households, but not proportionally to the Treasury.
It might be tempting to argue that the government should simply spend less. But that option is largely exhausted. Capital expenditure, the spending that builds roads, schools, clinics, and the productive infrastructure Ghana needs, reached only 1.4% of GDP for the entire year 2025, and a mere 0.5% of GDP in Q1 2026.
These are already near-floor levels. Further compression would put the government in breach of its development obligations, jeopardise World Bank and AfDB project disbursements, and likely trigger public unrest.
Recurrent expenditure, wages, debt service, health subsidies, is equally rigid. Ghana’s NHIS arrears remain unresolved. Public sector wage bills cannot be arbitrarily frozen. And debt service consumes a formidable share of every cedi collected.
Ghana’s Extended Credit Facility programme with the IMF, which has disbursed approximately $2.8 billion and remains firmly on track, requires the government to maintain a primary surplus trajectory and meet agreed revenue benchmarks.
If mid-year data shows revenue mobilisation falling materially behind target, the sixth ECF review, due in late 2026, could flag a deviation. That would threaten disbursements, damage the hard-won credit rating upgrades from S&P (B-) and Moody’s (positive outlook), and rattle the fragile return of investor confidence.
The IMF’s fiscal framework, in short, forecloses the option of borrowing the gap away or letting the deficit drift. The only remaining lever is revenue.
Taken together, these data points form a straightforward fiscal logic. Ghana is growing. But it is growing in sectors, services, informal trade, digital commerce, that its existing tax architecture was not designed to capture efficiently.
The tax-to-GDP ratio has been structurally low for years, and the current pace suggests 2026 will not decisively break that pattern without deliberate intervention.
A mid-year budget that introduces new or expanded revenue measures is therefore not a surprise. It is arithmetic. Whether the government opts for a digital financial services levy, an expanded VAT base, higher excise duties on alcohol and tobacco, a financial sector tax, or some combination, the direction is set by the numbers.
The economy can bear new taxes, inflation is low, interest rates are falling, and growth is positive. What it cannot bear, without jeopardising the IMF programme and the hard-won macroeconomic stability of 2025, is a government that continues to spend ahead of what it collects.
The mid-year budget will not be a choice between taxing and not taxing. It will be a choice about who gets taxed, and how.
By Prof. Isaac Boadi Dean, Faculty of Accounting and Finance, UPSA
