Ghana 2026 Budget: Professor Peprah Warns of Hidden Fiscal Problems Despite Optimism

In this in-depth guide, discover US-based Associate Professor Williams Peprah’s expert critique of Ghana’s 2026 Budget. Learn how underlying fiscal deficits, surging interest payments, and heavy domestic borrowing could trigger a crowding-out effect in Ghana’s economy, even as the budget promises stability and growth through key investments.

Introduction

Ghana’s fiscal landscape for 2026 presents a mix of optimism and caution. Associate Professor Williams Peprah, a US-based finance expert at Andrews University, delivered a compelling presentation titled “Ghana’s 2026 Budget: Stability Gains, Fiscal Gaps, and the Rising Risk of Crowding-Out Effect.” His analysis spotlights deeper fiscal problems in Ghana’s market system, challenging the budget’s optimistic tone.

At its core, the discussion revolves around Ghana’s fiscal deficit, which expands significantly when accounting for debt interest payments. This guide breaks down these issues pedagogically, explaining key economic concepts like primary surplus, commitment basis deficits, cash basis deficits, and the crowding-out effect. Optimized for clarity, it equips readers—policymakers, investors, and students—with verifiable insights into Ghana’s 2026 fiscal challenges and borrowing strategies.

Analysis

Professor Peprah’s examination reveals structural weaknesses in Ghana’s public finances. The budget achieves a primary surplus, reflecting improved revenue discipline and expenditure control. However, this positive note fades when interest obligations on existing debt are factored in.

Understanding Fiscal Deficit Metrics

To grasp the severity, consider these precise figures from the presentation:

• Commitment basis fiscal deficit: -2.2% of GDP.
• Cash basis fiscal deficit: -4.0% of GDP.

The gap between the primary surplus and overall deficit stands at approximately 3.7% of GDP. This “balancing gap” highlights the dominant burden of interest payments, which consume a large share of fiscal resources. Pedagogically, a primary surplus means revenues exceed non-interest expenditures, but the overall fiscal deficit emerges because debt servicing drains funds.

Financing Needs and Budget Priorities

Despite efficiency gains, the government must borrow more to cover this gap and fund priority programs. The 2026 Budget allocates resources to:

• Big Push Infrastructure Programme.
• Expanded agricultural support.
• Increased spending on education and health.

These investments drive inclusive growth but heighten financing demands, pushing reliance on domestic and external borrowing. Professor Peprah notes that without closing the fiscal gap, sustained borrowing becomes inevitable.

Domestic Borrowing Projections

Domestic financing is projected at GH¢71.9 billion, or 4.4% of GDP. Breakdown includes:

• GH¢38.3 billion from commercial banks.
• GH¢33.4 billion from non-bank sources.

This will be mobilized mainly through long-term and short-term government securities, amplifying the government’s presence in credit markets.

Summary

Professor Peprah’s critique underscores that Ghana’s 2026 Budget balances fiscal discipline with ambitious investments, yet persistent fiscal gaps and interest burdens signal deeper problems. A projected domestic borrowing surge risks a crowding-out effect, where government needs squeeze private sector credit access, potentially stifling economic growth.

Key Points

Practical Advice

For stakeholders navigating Ghana’s 2026 fiscal environment, Professor Peprah’s insights offer actionable steps. Policymakers should prioritize revenue mobilization through tax reforms and non-tax sources to shrink the balancing gap. Businesses can hedge against rising interest rates by diversifying funding—exploring equity markets or international loans early.

Strategies for Private Sector Resilience

To counter crowding-out:

• Build cash reserves now to reduce short-term borrowing dependence.
• Advocate for credit allocation policies favoring SMEs via bank partnerships.
• Monitor Treasury bill auctions for early signals of rate hikes.

Investors might shift toward government securities for safety amid volatility, while long-term players focus on export-oriented sectors less sensitive to domestic credit squeezes. Students and analysts can use these metrics to model fiscal sustainability with tools like debt-to-GDP ratios.

Points of Caution

Professor Peprah issues a stark warning: A surge in domestic borrowing for 2026 could unleash a severe crowding-out effect. Banks may redirect portfolios to “safe” government securities, driving up interest rates as credit demand competes. Private firms would then face higher costs for expansion, industry, and production, hampering job creation and GDP growth.

Defining the Crowding-Out Effect

Pedagogically, the crowding-out effect occurs when public borrowing absorbs available funds, leaving less for private investment. In Ghana’s context, with GH¢71.9 billion in needs, this risk is tangible—government as the dominant domestic borrower shifts market dynamics unfavorably.

Comparison

Comparing fiscal metrics illuminates risks:

Primary vs. overall deficits show interest as the key differentiator. Cash basis reveals real-time pressures compared to commitment accounting, which accrues future liabilities.

Legal Implications

No direct legal implications arise from Professor Peprah’s fiscal analysis, as it focuses on economic projections rather than regulatory breaches. Ghana’s Fiscal Responsibility Act governs deficits and borrowing, but the presentation does not allege violations. Stakeholders should consult official budget documents for compliance details.

Conclusion

Ghana’s 2026 Budget radiates optimism through fiscal stability and growth-oriented investments, yet Professor Williams Peprah exposes deeper fiscal problems: expanding deficits driven by interest payments and a looming crowding-out effect from GH¢71.9 billion in domestic borrowing. Success hinges on prudent management—boosting revenues, curbing borrowing dependency, and safeguarding private sector credit. This balanced approach can transform risks into opportunities for sustainable development. Stay informed on Ghana’s fiscal deficit trends and crowding-out dynamics to make savvy decisions.

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