Government is likely to continue to record wide budget deficits and arrears, particularly in the short term, despite planned reforms to broaden the tax base, Fitch Solutions, research arm of ratings agency Fitch has said.

In its Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis of the Ghanaian economy for the first quarter this year, the international research firm, however, said the country has better business operating conditions and greater stability than peer economies such as Nigeria or Cameroon.

The report said the high public debt levels will continue to weigh on Ghana's fiscal outlook over the coming years due to underperformance of government revenue.

That could reduce the availability of funds for government to undertake critical infrastructure projects.

“The government is likely to continue to record wide budget deficits, particularly in the short term, despite planned reforms to broaden the tax base, while rising external debt payments will continue to weigh on Ghana's external accounts and ensure the current account remains in deficit in the coming years.”

On the country’s weaknesses, Fitch Solutions said the large - though declining - informal sector eludes the governments' coffers, despite recent efforts to broaden the tax net.

It warned that Ghana's reliance on commodity exports such as cocoa and gold exposes the country to fluctuations in global commodity prices.

Regarding threats, Fitch Solutions pointed out that further delays to the country's Covid-19 vaccine rollout would expose Ghana to further waves of infections, and potentially derail the economic recovery.

 “In the short term, however, the coronavirus pandemic will remain a risk to the economic outlook. Further waves of infections, new virus variants and a slower-than-expected vaccine rollout could all derail the recovery.”

Also, it cautioned that climate change will pose medium to long-term risks to the crucial cocoa industry.

On strength, Fitch Solutions, said the country has a better business operating conditions and greater stability than peer economies such as Nigeria and Cameroon, and therefore businesses will benefit from the relatively pragmatic government policy programmes implemented in recent years.

Economic SWOT

Strengths

• Ghana's natural resource riches are a boon in times of elevated commodity prices and there is scope to ramp up output further.

• The country features better operating conditions and greater stability than peer economies such as Nigeria or Cameroon, and businesses benefit from the relatively pragmatic government policy programmes implemented in recent years.

Weaknesses

• The large - though declining - informal sector eludes the governments' coffers despite recent efforts to broaden the tax net.

• Ghana's reliance on commodity exports (predominantly cocoa, oil and gold) exposes the country to fluctuations in global commodity prices.

• High public debt levels will continue to weigh on Ghana's fiscal outlook over the coming years. Opportunities

• Swifter progress on the implementation of a continent-wide free trade area could see Ghana emerge as a key trade hub for the West African sub-region.

• The manufacturing and technology sectors are set to expand, as indicated by recent high-profile investments by foreign firms.

• The country's tourism potential could be tapped more aggressively once the Covid-19 pandemic recedes.

• Deepening the domestic capital markets - through the issuance of longer-dated government bonds, for example - would facilitate private-sector access to credit.

Threats

• Government revenues are prone to underperformance, which may result in greater fiscal pressures in the medium term.

• Further delays to the country's Covid-19 vaccine rollout would expose Ghana to further waves of infections, and potentially derail the economic recovery in 2022.

• Climate change will pose medium- and longer-term risks to the crucial cocoa industry