By Leo Nelson
Ghana’s fiscal outturn for 2025, as detailed in the March 2026 Monetary Policy Report by the Bank of Ghana, paints a mixed picture of modest revenue underperformance alongside notable expenditure restraint.
While total revenue and grants fell slightly below target, a significant reduction in government spending helped cushion the impact, resulting in a lower-than-expected fiscal deficit.
According to the report, Total Revenue and Grants for 2025 stood at GH¢224.883 billion, representing 16.1 percent of Gross Domestic Product. This fell short of the programmed target of GH¢229.949 billion, equivalent to 16.4 percent of GDP.
Domestic revenue, which formed the bulk of collections, amounted to GH¢223.059 billion or 15.9 percent of GDP. This was also below the expected GH¢227.275 billion target. The shortfall reflects weaknesses across several key revenue streams, including tax revenue, oil and gas receipts, and grants.
Tax revenue, a critical pillar of Ghana’s fiscal framework, recorded GH¢183.987 billion, representing 13.1 percent of GDP. This was lower than the targeted GH¢189.964 billion, indicating a negative deviation of 3.1 percent. The underperformance highlights persistent challenges such as inefficiencies in tax collection and potential leakages within the system.
Weak Oil and Gas Receipts Drag Performance
A major contributor to the revenue shortfall was the sharp decline in oil and gas receipts. These revenues amounted to GH¢8.711 billion, significantly below the target of GH¢16.514 billion. This represents a shortfall of 47.3 percent and a steep year-on-year decline of 56.1 percent.
The drop underscores Ghana’s vulnerability to fluctuations in the energy sector, which remains a vital but volatile source of government revenue. Lower global prices, production challenges, or policy inefficiencies may have contributed to this outcome.
Non-Tax and Other Revenues Offer Some Relief
Despite the challenges in tax and oil revenues, non-tax revenue provided a modest boost. Collections reached GH¢27.870 billion, exceeding the target of GH¢26.548 billion by 5.0 percent. This reflects a marginal year-on-year growth of 0.5 percent.
However, this growth was tempered by lower-than-expected dividends, interest, and profits from oil-related investments, as well as reduced yields from the capping policy.
Other revenue sources performed strongly, reaching GH¢10.335 billion, surpassing the target of GH¢9.568 billion by 8.0 percent. This represents a remarkable 109.7 percent increase compared to the GH¢4.928 billion recorded in 2024, suggesting improved efficiency in alternative revenue mobilization channels.
Grants Show Mixed Trends
Grants received during the year totaled GH¢1.824 billion, falling short of the programmed GH¢2.674 billion target by 31.8 percent. Despite the shortfall, this figure represents a 6.3 percent increase compared to 2024, indicating some improvement in external inflows.
The lower-than-expected grants highlight the unpredictability of donor funding, which often depends on external economic and geopolitical factors.
On the expenditure side, the government demonstrated notable fiscal discipline. Total expenditure and net lending for 2025 amounted to GH¢233.778 billion, well below the target of GH¢269.496 billion.
This reduction reflects deliberate efforts to control spending and maintain fiscal stability. The government’s approach appears to have prioritized essential expenditures while limiting discretionary outlays.
Rising Wage Bill Raises Concerns
Compensation of employees reached GH¢78.970 billion, exceeding the target of GH¢76.203 billion. This represents a 17.5 percent increase compared to 2024 and accounts for 35.4 percent of domestic revenue.
The rising wage bill continues to pose a challenge to fiscal flexibility, as it consumes a significant portion of government resources. Managing public sector wages remains a key issue for long-term fiscal sustainability.
Expenditure on goods and services declined sharply to GH¢6.089 billion, below the target of GH¢6.671 billion by 8.7 percent. This also marks a substantial 47.1 percent drop from the GH¢11.509 billion recorded in 2024.
This contraction suggests a conscious effort by the government to cut back on non-essential spending, reinforcing its commitment to fiscal consolidation.
Interest Payments Exceed Target
Interest payments for 2025 totaled GH¢49.891 billion, surpassing the target of GH¢46.792 billion. This represents a 6.6 percent increase compared to the previous year.
Despite the increase, the report notes that lower domestic interest payments and currency appreciation helped moderate the overall burden. However, debt servicing remains a significant pressure on public finances.
Improved Fiscal Balance Despite Challenges
Despite the revenue shortfalls, Ghana’s overall fiscal performance showed improvement. The fiscal deficit for 2025 was recorded at 1.0 percent of GDP, significantly lower than the target of 2.8 percent.
Additionally, the primary balance posted a surplus of 2.6 percent of GDP, exceeding the target of 1.5 percent. This indicates stronger underlying fiscal health, excluding interest payments.
The government attributed this outcome to improved revenue buoyancy and strict expenditure controls. It emphasized that spending cuts effectively offset the impact of lower revenue collections.
Outlook and Policy Implications
The 2025 fiscal data highlights a delicate balancing act between revenue mobilization and expenditure control. While the government demonstrated discipline in managing spending, persistent revenue challenges underscore the need for structural reforms.
Strengthening tax administration, improving compliance, and diversifying revenue sources will be critical in addressing systemic leakages. At the same time, maintaining expenditure discipline without compromising essential services will be key to sustaining fiscal stability.
As Ghana navigates its economic recovery path, the insights from the Bank of Ghana report provide a clear roadmap for policymakers aiming to achieve sustainable growth and fiscal resilience.