BY Daniel Bampoe
Finance Minister, Dr Cassiel Ato Forson, is today grappling with the very fiscal pressures he once cautioned against while serving as a Ranking Member of Finance in Parliament, as new data reveals Ghana borrowed GH¢17 billion in 2025 solely to pay public sector workers.
Years before assuming office, Forson had consistently warned against reckless borrowing, stressing on the floor of Parliament that governments must live within their means.
“If you do not have it, don’t overborrow,” he argued at the time, cautioning that excessive borrowing would ultimately lead to painful consequences such as financial losses for citizens.
His remarks were widely interpreted as a critique of past fiscal mismanagement and a commitment by the then-opposition National Democratic Congress (NDC) to pursue prudent economic governance.
However, now at the helm of Ghana’s finances, Dr Forson is confronted with a starkly different reality—one shaped by structural fiscal constraints, rising wage pressures, and heavy statutory obligations that continue to weigh down the national budget.
Presenting an update at the Presidency, the Finance Minister disclosed that despite Ghana recording a total non-oil tax revenue of GH¢183 billion in 2025, the bulk of this revenue was already pre-committed.
Statutory payments—including transfers to funds such as the District Assemblies Common Fund (DACF), Ghana Education Trust Fund (GETFund), and the National Health Insurance Levy (NHIL)—alongside debt servicing, consumed GH¢122.1 billion. This left the government with only GH¢61.9 billion in discretionary spending.
Yet, the public sector wage bill alone stood at GH¢78.9 billion, exceeding the available funds by GH¢17 billion. As a result, the government was compelled to borrow to bridge the gap, effectively financing salaries through debt—an approach economists warn is unsustainable.
The fiscal breakdown highlights the severity of the imbalance. About 44% of total tax revenue is spent on wages, significantly above the 35% ceiling recommended by ECOWAS. Debt servicing accounts for 26%, while statutory transfers consume 24%.
Altogether, these three expenditure lines absorb approximately 83% of government revenue, leaving very limited space for development and operational spending.
Consequently, capital expenditure receives just 6% of the budget, goods and services 3%, social benefits 1%, and other government obligations 7%.
This tight fiscal space has effectively stalled new public sector employment and constrained infrastructure investment across critical sectors such as roads, education, and healthcare.
“This structure leaves the government with virtually no fiscal space,” Dr Forson admitted, noting that borrowing is no longer limited to development projects but now extends to routine obligations like salary payments.
The implications are far-reaching. The wage-driven borrowing has cast doubt on the government’s ability to deliver on key employment promises, including plans to expand recruitment in the security services from 20,000 to 40,000 personnel over the next four years.
Analysts argue that under current fiscal conditions, such commitments may prove difficult to sustain without further deepening the country’s debt burden.
Ghana’s current situation is not entirely new but rather reflects a persistent structural challenge. Historical data over the past decade shows that public sector wages have consistently taken up a significant share of tax revenue. In 2016, wages accounted for 55% of revenue, rising to 63.6% in 2020 before fluctuating in subsequent years.
Even in 2025, despite increased revenue, wages still consumed about 44.5%, underscoring a long-standing imbalance between income and expenditure.
Economists warn that borrowing to finance consumption—such as salaries—does not generate economic returns and risks crowding out critical investments needed for growth. This, they say, could slow economic expansion and limit job creation in the long term.
The unfolding fiscal situation presents a difficult test for Dr Forson, whose earlier advocacy for discipline in public spending is now being measured against the realities of governance.
While he maintains that reforms are underway to restore fiscal balance—through expenditure rationalisation, improved revenue mobilisation, and wage control—the path to recovery remains uncertain.
