The government’s decision to accumulate billions in a “Sinking Fund” to address the country’s maturing debt has come under serious scrutiny.
The Institute of Fiscal Studies (IFS) cannot fathom why the state will decide to accumulate billions of cedis in the sinking fund while other critical sectors of the economy crumble. For the Institute, the decision is a recipe for a credibility crisis of the 2026 budget.
The IFS’s analysis of the 2026 Mid-Year Budget Review noted that the government has successfully stashed away GH¢15.6 billion in a Sinking Fund, a specialized pot of money typically used to manage and retire debt, yet it claims it doesn’t have enough cash to fund the very budget Parliament approved just months ago.
The Unplanned Accumulation
The most stinging part of the IFS critique isn’t just the amount of money, but the fact that it seemed to appear out of thin air. IFS claims that this GH¢15.6 billion accumulation was never announced in the initial 2026 budget.
This leads to a pair of uncomfortable questions from the IFS: Did the government truly not know it would be raising this massive sum when it set its targets? Or did it know and simply choose to keep Parliament in the dark?
Either way, the IFS believes this is poor planning, and it has greatly affected the credibility of the 2026 budget.
“Whatever the case may be, it shows poor planning on the part of the government. This has greatly affected the credibility of the 2026 budget,” the IFS report added.
The Borrowing Paradox: Saving While Starving
IFS recounts that while the government was busy filling the Sinking Fund vault, the rest of the economy was put on a forced diet. Domestic budget financing fell short by a massive GH¢34.45 billion, nearly 68% of its target.
Capital expenditure in the form of infrastructural development paid the price, and contractors also suffered.
The IFS points out the absurdity of the situation: the government was actively borrowing money to keep in the Sinking Fund at the exact same time it was starving the budget of the financing needed to keep the economy moving.
To put it practically, it is like a homeowner taking out a high-interest loan to put money in a savings account while the roof is leaking and the grocery bill is unpaid.
Why the Sinking Fund?
The government’s rationale for the Sinking Fund is rooted in long-term debt management, intended to ensure the state can meet its future obligations to international and domestic lenders.
However, the IFS argues that a budget is not a casual document to be wilfully deviated from. By prioritizing this fund over the execution of the actual budget plan, the government has created large deviations that directly stifle growth.
“The government should understand that a budget is not something to treat casually, such that the Minister of Finance can set targets that he wilfully deviates from. This is because large deviations in budget execution have implications for growth,” the document further stated.
A Call for Buoyancy
The IFS is therefore recommending that the government must stop treating the budget like a rough draft. For the 2026 budget to regain its credibility, financing decisions must actually align with the spending plan.
It says the government cannot claim “fiscal discipline” when it is hoarding cash in one pocket while the other pocket, the one meant to pay for the nation’s development, is empty.
For the IFS, if the government continues to sink resources into unplanned funds while starving public projects, it is the economy’s future that may ultimately go under.
