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Ghana’s proposed 2026 budget could place upward pressure on interest rates and trigger potential market instability if not carefully managed, the Centre for Policy Scrutiny (CPS) said on Thursday.
In its detailed review of the budget statement and economic policy, CPS economists acknowledged government efforts to stabilize 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 CPS Executive Director Dr. Adu Owusu Sarkodie.
The CPS analysis highlighted that the budget assumes robust revenue mobilization alongside aggressive public spending. Any shortfall in expected revenues, it warned, 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 said. “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 raised concerns about market confidence, noting 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 exchange rate.
“Market stability is fragile and can be easily affected by fiscal signals. It is crucial that government communicates realistic fiscal assumptions, implements strong monitoring mechanisms, and ensures that borrowing is carefully managed to avoid triggering financial instability,” Dr. Sarkodie added.
Despite the warnings, CPS acknowledged positive aspects of the 2026 budget, highlighting government measures to reduce inflation, lower policy interest rates, and invest in infrastructure and social services as important steps toward stimulating economic growth and employment.
The center stressed that these gains could be undermined if the expansionary measures lead to higher domestic borrowing costs and urged complementary fiscal and monetary coordination. It also called for enhanced transparency in expenditure management and rigorous oversight of large-scale infrastructure projects.
“The 2026 budget has the potential to accelerate recovery, but ambition must be balanced with caution. Unchecked expansionary policies without credible revenue mobilization and prudent borrowing strategies could threaten market stability, inflate borrowing costs, and compromise the country’s economic trajectory,” Dr. Sarkodie concluded.
