Fitch Solutions expects Ghana’s fiscal deficit to widen next year due to election spending.

This is despite the International Monetary Fund Programme.

According to the UK-based firm, the fiscal deficit will be nearly 6% of Gross Domestic Product (GDP), about from 4.0% in 2023, suggesting the economic challenges are not over yet.

In the 2024 Budget, the Ghanaian government projected a deficit of 5.9% of GDP, about ¢61.9 billion.

Fitch Solutions said most of the deficit will be financed by increased domestic borrowing, thus crowding out lending to the private sector and posing risks to macroeconomic and banking sector stability.

Orson Gard, Country Risk Analyst, Sub-Saharan Africa at Fitch Solutions said history shows that Ghana records high deficit during election years.

“In Ghana, for example, we actually expect the fiscal deficit to widen next year and this will be as a result of election-related spending. With history showing that the government tends to overrun spending targets during election years and that’s even under an IMF programme”.

“We expect that governments across the region [Africa] will continue to run a wide budget deficit in 2024 and that’s despite concerted efforts at fiscal consolidation. In most markets, the primary cause of this will be increased spending on debt servicing which is expected to remain elevated as a proportional revenue due to high global and domestic exchange rates”, he added.

Mr. Gard said interest payments to government revenue in Africa would increase to 41.3% in 2024.

“So, interest payments as proportional to government revenue, averaged 22% in sub-Saharan Africa, between 2013 and 2022. We projected that this would increase to 41.3% next year”.