Ghana’s fiscal economy to recover strongly; budget deficit to narrow substantially to 5.7% of GDP in 2023 – Fitch Solutions

Ghana’s fiscal economy is expected to recover significantly this year as the budget deficit would narrow substantially to 5.7% of Gross Domestic Product (GDP) in 2023/2024, down from an estimated 8.3% in 2022/2023.

According to Fitch Solutions’ Mid-Year Review of Sub-Saharan Africa, Ghana’s fiscal outlook appears promising.

The UK-based firm said the narrowing of the deficit is a result of the International Monetary Fund-directed fiscal consolidation, alongside the suspension of interest payments.

It explained that the expected improved fiscal economy is underpinned by the restructuring of Ghana’s domestic debt alongside the introduction of new taxes.

According to the Bank of Ghana’s May 2023 Monetary Policy Report, interest payments declined by 44.2% year-on-year in the first quarter of 2023. But this was due to the freeze on external debt service payments since December 2022.

Debt service payments rise

On key developments in Sub-Saharan Africa (SSA), Fitch Solutions said there had been a rise in debt service payments across key markets in the region.

“We have seen a rise in debt service payments across key markets in SSA. While global monetary tightening and risk-off sentiment prompted a sharp increase in Emerging Markets bond yields in 2022, moderating global conditions have not seen bond yields return to pre-2022 levels.”

In conclusion, it said governments across the region are locked out of the international debt market and are facing increasing costs, especially if they are turning to more costly domestic capital markets.