‘Stability Built on a Fragile Foundation’: CDD-Ghana’s Warning on Mahama’s First-Year Financial Evaluation

The Centre for Democratic Development Ghana (CDD-Ghana), a prominent civil society think tank, has issued a stark and nuanced assessment of Ghana’s economic trajectory one year into President John Dramani Mahama’s administration. Their February 2026 report, titled a first-year financial evaluation, presents a dual narrative: acknowledging tangible short-term improvements in the cost of living while urgently warning that these gains are underpinned by significant fiscal and structural vulnerabilities. The core conclusion—that macroeconomic stability is “built on a fragile foundation”—frames a critical debate about the sustainability of Ghana’s recent economic turnaround and the profound reforms needed to secure long-term resilience.

Key Points: The Paradox of Progress and Peril

CDD-Ghana’s analysis identifies a clear paradox. On one hand, measurable improvements in inflation, currency value, and fuel prices have provided visible relief to many Ghanaians. On the other, these surface-level gains mask deep-seated issues in revenue generation, job quality, debt management, and program sustainability that could undermine future progress.

Reported Macroeconomic Achievements

• Debt Reduction: The debt-to-GDP ratio declined significantly from 61.8% to 45%.
• Falling Interest Rates: Treasury bill rates dropped dramatically from 30% to 11%.
• Fiscal Consolidation: The budget deficit narrowed from 7.9% of GDP to 3.1%.
• Successful Debt Restructuring: Completion of external debt restructuring boosted investor confidence.
• Improved Credit Ratings: Fitch Ratings and Moody’s upgraded Ghana’s sovereign rating to B-.
• Cost of Living Relief: Notable declines in food inflation (from 28.3% to 4.9%) and transport fares.

Highlighted Structural Vulnerabilities

• Fragile Stability Basis: Cedi appreciation largely driven by gold reserve sales, not export diversification.
• Severe Revenue Gap: Tax revenue at 16.1% of GDP lags behind regional peers like Senegal and Côte d’Ivoire.
• Weak Labour Market: Most new jobs are informal; youth unemployment/non-education remains high (~33%).
• Costly Unfunded Mandates: Major programs like the GH₵13.85 billion “Big Push” infrastructure agenda and the MahamaCares health initiative lack sustainable financing.
• Significant Debt repayments: Large looming repayments (~GH₵20 billion in 2026, GH₵50.3 billion in 2027) pressure the budget.
• Regional Disparities: Benefits of lower prices are uneven, with northern regions lagging due to logistics challenges.
• Governance Risks: The successful Ghana Gold Board (GoldBod) initiative raises concerns about encouraging illegal mining and environmental degradation.

Background: From Crisis to the “Reset Agenda”

To understand CDD’s evaluation, one must recall the severe economic crisis Ghana faced before 2025. Characterized by soaring inflation (over 50% at its peak), a rapidly depreciating cedi, unsustainable debt servicing (over 60% of revenue), and a significant budget deficit, the country entered a stringent IMF Extended Credit Facility program in early 2025. President Mahama’s administration coined its economic recovery plan the “Reset Agenda,” focusing on fiscal discipline, debt restructuring, and macroeconomic stabilization. The first year’s data shows the initial fruits of this painful adjustment: inflation has trended down, the currency has stabilized, and debt ratios have improved on paper. CDD-Ghana’s report assesses whether this constitutes a robust recovery or a precarious calm.

Analysis: Deconstructing the “Fragile Foundation”

CDD-Ghana’s warning is not a dismissal of progress but a forensic dissection of its quality and sustainability. The “fragile foundation” metaphor is built on several interconnected pillars of risk.

The Illusion of a Strong Cedi

The report is explicit: the cedi’s recent strength is not a sign of competitive export growth. Instead, it is largely a portfolio effect from the government’s aggressive monetization of gold reserves. While the March 2025 establishment of the Ghana Gold Board (GoldBod) yielded impressive short-term export numbers (103 tonnes worth US$10.8 billion from small-scale miners), this is a one-time liquidity boost and asset swap, not a permanent increase in productive capacity or diversified export earnings. A currency supported by reserve sales is vulnerable to reversal once those sales normalize or if global gold prices fluctuate. True strength requires a persistent trade surplus from manufacturing and value-added exports, which remains elusive.

The Persistent Tax Revenue Chasm

This is arguably the report’s most critical long-term concern. A tax-to-GDP ratio of 16.1% is insufficient for a lower-middle-income country and significantly trails regional comparators (Senegal ~18%, Côte d’Ivoire ~20%). This “revenue lag” is the primary reason the government remains dependent on borrowing, even after fiscal consolidation. It creates a vicious cycle: low revenue forces cuts in productive public investment or accumulation of new arrears, hindering economic growth, which in turn shrinks the future tax base. CDD warns that without addressing this through broad-based tax administration reforms, broadening the tax net, and formalizing the large informal sector, the fiscal gains of 2025 will be temporary.

The High Cost of Unfunded Ambition

The administration has launched two signature, high-cost programs: the GH₵13.85 billion “Big Push” infrastructure initiative and the MahamaCares universal health coverage program. While their social and economic objectives may be laudable, CDD flags them as major fiscal risks. In a context of tight primary balances and a narrow revenue base, financing these massive expenditures risks:

• Re-accumulating Debt: Borrowing to fund them could reverse the positive debt-to-GDP trend.
• Crowding Out: Diverting resources from other critical sectors like education or maintenance of existing assets.
• Creating New Arrears: If funding falls short, payments to contractors and suppliers could stall, rebuilding the dangerous arrears problem the “Reset Agenda” sought to solve.

The report’s central warning is that these programs, if not matched with concrete, immediate revenue mobilization, could “break the budget.”

The Jobs Crisis: Quantity and Quality

Visible price reductions do not address the fundamental labour market crisis. CDD notes most new jobs are in the informal sector, which typically lacks social protection, job security, and decent wages. With approximately one-third of youth neither employed nor in education (NEET), the social stability risk is high. Economic recovery must translate into formal, productive employment, especially for young people. This requires targeted investments in skills training aligned with market needs and policies that incentivize formal sector job creation by SMEs.

The Uneven Geography of Relief

The report prudently avoids painting a uniformly positive picture. It acknowledges that the benefits of falling inflation and transport fares are not evenly distributed. Regions in the north, with poorer road networks and greater logistical challenges, have not experienced the same price relief. This geographic inequality in the distribution of economic gains is a potential flashpoint for social tension and underscores that national averages can mask severe local deprivations.

The GoldBod Conundrum

CDD credits GoldBod with a major short-term export success. However, it raises two “governance red flags”:

1. Environmental: A massive surge in small-scale mining activity, if not meticulously regulated, risks exacerbating Ghana’s severe problem of illegal mining (“galamsey”), leading to deforestation, water pollution (from mercury), and land degradation.
2. Illegal Mining Incentive: The structure of the initiative, while boosting formalized output, may inadvertently create perverse incentives or fail to fully distinguish between legal small-scale mining and destructive illegal operations.

Practical Advice: Pathways to a Resilient Foundation

CDD-Ghana’s evaluation is not merely diagnostic; it is prescriptive. For the Mahama administration and future policymakers, the report outlines a roadmap to transform fragile stability into durable prosperity.

1. Prioritize Revenue Mobilization as the Core Mission

This is the non-negotiable first step. The government must treat closing the tax gap as its primary economic objective. This involves:

• Digitizing Tax Administration: Leveraging technology (like the Ghana Revenue Authority’s integrated systems) to reduce evasion and broaden the net, especially in the informal sector and among high-net-worth individuals.
• Reviewing Tax Expenditures: Scrutinizing all tax exemptions and holidays to ensure they deliver commensurate economic benefits.
• Formalizing the Informal Sector: Creating incentives and simplified regimes for small businesses to register and pay taxes.

2. Institute a Rigorous “Program Affordability” Test

Before launching any new large-scale expenditure program (like the Big Push or MahamaCares), a rigorous, independent cost-benefit analysis and full 5-year financing plan must be published. This should answer: Where will the recurring costs come from? How will it impact the debt trajectory? What are the offsetting revenue measures or efficiency savings? This prevents the creation of unfunded mandates that become future fiscal anchors.

3. Link Stabilization to Structural Transformation

Macroeconomic stability (low inflation, stable exchange rate) is a necessary condition but not a sufficient one for development. Policy must actively channel the stability dividend into:

• Export Promotion: Moving beyond gold to support agro-processing, light manufacturing, and services (like ICT and tourism) through targeted incentives, access to finance, and trade facilitation.
• Job-Rich Growth: Designing public investment (in infrastructure, agriculture, health) to maximize formal employment creation, with specific targets for youth and women.
• Regional Equity: Directing specific infrastructure and investment incentives to the northern and rural zones to address the geographic disparity in price relief and opportunity.

4. Fortify Governance and Environmental Safeguards

The success of initiatives like GoldBod must be decoupled from environmental destruction and illicit activity. This requires:

• Strengthening Regulatory Oversight: Empowering the Minerals Commission and Environmental Protection Agency with resources and political backing to monitor and enforce regulations on all small-scale mining, formal or not.
• Community Benefit Sharing: Ensuring a transparent and significant portion of GoldBod revenues is legally earmarked for mining community development and land restoration.
• Full Transparency: Publishing all contracts, production data, and revenue flows from GoldBod and the Big Push projects for public scrutiny.

5. Build Fiscal Buffers for Debt Management

With looming repayments, the government must:

• Aggressively Build Fiscal Space: Every percentage point of GDP raised in revenue is a buffer against debt stress.
• Manage Maturity Profile: Engaging creditors to explore possible extensions or swaps for the 2026-2027 bullet payments.
• Establish a Sinking Fund: Creating a dedicated, rule-based savings vehicle now to meet known future liabilities, demonstrating commitment to sustainability.

FAQ: Understanding CDD-Ghana’s Evaluation

Who is CDD-Ghana and why is their report significant?

The Centre for Democratic Development, Ghana (CDD-Ghana) is a leading independent, non-partisan think tank and civil society organization focused on governance, economic development, and public policy in Ghana. Their reports are widely cited by policymakers, international financial institutions, and the media because of their rigorous, evidence-based analysis free from political affiliation. This evaluation carries weight as an impartial, citizen-focused audit of government performance.

What exactly does “fragile foundation” mean?

It means the current economic stability is not self-sustaining. It relies heavily on temporary factors (one-off gold sales, low global oil prices) and lacks the deep, structural changes—like a broad-based tax system, competitive export sector, and high-quality job creation—that would make recovery resilient to future shocks (e.g., a commodity price slump, another global crisis, or domestic political pressure to spend). It is stable for now but vulnerable to reversal.

Is CDD-Ghana saying the economic recovery is fake?

No. The report explicitly acknowledges real, measurable improvements: falling inflation, a stronger cedi, lower interest rates, and debt reduction. The criticism is about the *quality* and *sustainability* of that recovery. They argue the benefits are narrow, unevenly distributed, and resting on shaky pillars that could collapse without urgent corrective action.

What is the timeline of the data in the report?

The evaluation covers the period from the start of the Mahama administration (presumably January 2025) through December