Fiscal policy implementation poses downside risk to inflation – BoG
According to its Monetary Policy Report, the US-Iran conflict, with its impact on crude oil prices, may put pressure on the government to offer periodic reliefs, which may pose some challenges to the budget.
The Bank of Ghana has warned that the implementation of the government’s fiscal policy in 2026 could lead to a rise in inflation. In its Monetary Policy Report, the central bank highlighted the potential impact of the US-Iran conflict on oil prices, which may force the government to provide periodic cost-reliefs, creating challenges for the budget. The Bank expressed concerns over the contractors' ability to handle the increase in government spending, which could in turn affect inflation rates.
Despite these concerns, the Bank emphasized the government's commitment to controlling expenditure, boosting efficiency, and adhering to value-for-money standards. It also stated that the government aims to enhance domestic revenue mobilisation to meet debt service obligations and ensure long-term debt sustainability. However, the Bank noted that the completion of bilateral and commercial debt restructuring is expected to increase future debt service payments.
The Bank called for stronger fiscal management to control debt accumulation and the related costs of servicing the debt. It pointed out that the high proportion of short-term debt increases rollover and refinancing risks, which could limit the fiscal space for productive investments and growth-enhancing expenditures. In the long term, the Bank suggested that higher domestic savings will be needed to meet external debt repayments, potentially impacting exchange rate stability.
The Central Bank concluded that sustained real GDP growth, lower real interest rates, and stable exchange rates are necessary for improving Ghana's debt sustainability and maintaining its status as a moderate risk of debt distress.
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