The Centre for Policy Scrutiny (CPS) has warned that Ghana’s proposed 2026 budget could place upward pressure on interest rates and trigger potential market instability if not carefully managed.
In its detailed review of the budget statement and economic policy on Thursday, November 20, 2025, CPS economists acknowledged the government’s efforts to stabilise inflation and support growth but cautioned that ambitious spending plans and elevated fiscal commitments carry risks for the financial sector and broader economy.
“The 2026 budget is expansionary in nature, with significant increases in both recurrent and capital expenditure. While these measures are intended to stimulate economic activity and create jobs, they could exert pressure on interest rates and financial markets if revenue targets are not achieved,” said Executive Director Dr Adu Owusu Sarkodie.
The CPS analysis highlighted that the budget assumes robust revenue mobilisation alongside aggressive public spending. However, the centre warned that any shortfall in expected revenues could force the government to borrow more from domestic markets, potentially crowding out private sector credit and raising borrowing costs.
“An expansionary fiscal stance can be a powerful tool for growth, but without careful execution, it may backfire,” Dr Sarkodie stated. “Higher borrowing requirements can lead to upward adjustments in interest rates, which could negatively affect businesses, investors, and consumers alike, potentially slowing down the recovery the budget seeks to promote.”
The review also underscored concerns regarding market confidence. CPS noted that overly ambitious spending, coupled with uncertain revenue projections, could unsettle investors, both domestic and foreign, creating volatility in Ghana’s capital markets and putting pressure on the cedi’s exchange rate.
“Market stability is fragile and can be easily affected by fiscal signals. It is crucial that the government communicates realistic fiscal assumptions, implements strong monitoring mechanisms, and ensures that borrowing is carefully managed to avoid triggering financial instability.”
Despite these warnings, CPS recognised positive aspects of the 2026 budget. The government’s focus on disinflation, lower policy interest rates, and targeted investments in infrastructure and social services was described as an essential step toward stimulating economic growth and employment.
However, the Centre stressed that these gains could be undermined if the expansionary measures led to higher domestic borrowing costs. It called for complementary monetary and fiscal coordination to ensure that the intended growth stimulus does not translate into higher inflation or interest rates, which could erode private sector confidence.
CPS also urged the government to enhance transparency in expenditure management and maintain rigorous oversight of large-scale infrastructure projects. By prioritising efficiency and accountability, the Centre believes the government can mitigate the risks associated with an expansionary budget while maximising its developmental impact.
“The 2026 budget has the potential to accelerate recovery, but ambition must be balanced with caution. Unchecked expansionary policies without credible revenue mobilisation and prudent borrowing strategies could threaten market stability, inflate borrowing costs, and compromise the country’s economic trajectory,” Dr Sarkodie concluded.
