The government faces mounting fiscal pressures as it prepares the 2027 Budget, with growing public sector wage obligations, infrastructure financing needs and revenue mobilisation targets competing for limited resources.
Despite overall expenditure remaining below budgeted levels in the first seven months of 2026, capital spending lagged behind its target. Meanwhile, public sector compensation continued to consume a substantial portion of domestic revenue, raising concerns about the resources available for infrastructure development and other critical investments.
Fiscal pressures are expected to increase in 2027 following an agreement between the government and organised labour to raise base pay by 8%, alongside an additional one-percentage-point adjustment in conditions of service.
Between January and July 2026, total revenue and grants reached GH¢144.57 billion, slightly below the target of GH¢144.95 billion.
Government expenditure, including net lending, amounted to GH¢147.08 billion, compared with the programmed GH¢175.93 billion, representing a 16.4% underspend.
However, the reduction in overall spending has raised questions about the pace of public investment and whether ongoing fiscal consolidation is leaving sufficient resources for infrastructure development and job creation.
Capital spending faces growing scrutiny
Capital expenditure is emerging as a major indicator of the government’s ability to balance fiscal discipline with its infrastructure and development commitments.
In the first seven months of 2026, government allocated GH¢24.23 billion to capital projects, approximately 25% below the amount programmed for the period.
Despite representing a 157.9% increase over the corresponding period in 2025, capital expenditure remained below the budgeted target, raising concerns about the pace of infrastructure development and investment in productive sectors of the economy.
The Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Robert Darko Osei, has stressed the need for government to translate macroeconomic stability into meaningful improvements in the living conditions of Ghanaians.
“But the type of growth also matters. And if you realise from some of the comments that came up, is it the type of growth that will result in jobs, right? So making the right investments in a way that ensures that the stability that we’ve observed truly translates into improvements in the daily living of individuals,” Professor Robert Darko Osei said.
His remarks highlight the need for fiscal consolidation to be pursued without undermining investments capable of creating jobs, strengthening productive capacity and improving household living standards.
Wage bill adds to fiscal pressures
Public sector compensation is another major expenditure item expected to shape the 2027 Budget.
Between January and July 2026, compensation of employees reached GH¢50.55 billion, representing 35.2% of the domestic revenue mobilised during the period.
For 2027, government has earmarked GH¢104.1 billion for employee compensation, accounting for 28.4% of total committed expenditure.
This allocation comes ahead of the implementation of the latest public sector wage agreement, which provides for an 8% increase in base pay and an additional one-percentage-point adjustment in conditions of service for 2027.
Although the agreement is expected to improve the earnings of public sector workers, it will also increase recurrent expenditure obligations, raising questions about how government intends to contain the wage bill while maintaining funding for other critical sectors.
Tax analyst Francis Timore Boi has warned that recurring labour disputes and the concessions that follow could further complicate government’s efforts to manage public expenditure.
“We’ve seen government’s swift response in terms of the labour agitation. But then if a repeat labour strike results in concession with government, it’s likely to create the impression that industrial action is the only way labour can get their means resolved. And that is likely to create more pressure for government in terms of the fiscal discipline,” Francis Timore Boi said.
Can domestic revenue meet growing expenditure demands?
Revenue mobilisation is expected to be a key issue in discussions surrounding the 2027 Budget.
As government signals plans to reduce the tax burden on businesses and households, greater emphasis is being placed on strengthening tax compliance, expanding the revenue base and plugging leakages in the system.
The critical question is whether these measures will generate sufficient revenue to finance growing recurrent expenditure while ensuring that capital projects receive adequate funding.
Mr Boi has also called on government to explore opportunities for attracting private sector investment into major infrastructure projects as a way of reducing dependence on public resources.
“Obviously, the budget needs to outline how private investments are welcomed in terms of some of the major projects. I’ve had some discussion with some people who say that, look, why can’t governments offload some of their road projects to private companies?,” Francis Timore Boi added.
Greater private-sector involvement could offer an additional financing option for infrastructure development. However, government would need to carefully assess the terms of such partnerships, their associated risks and any potential financial obligations they could create for the state.
The 2027 Budget is expected to outline how government plans to balance public sector wage commitments with infrastructure financing and stronger domestic revenue mobilisation, while sustaining the fiscal progress achieved in 2026.
