Ghana’s proposed US$10 billion New Economy programme could mark a major shift in the country’s industrialisation strategy but policy analyst Sitsofe Mensah believes the government’s decision to lower its primary fiscal surplus target a serious gamble with the country’s hard-won fiscal credibility.
According to the government, the decision to create adequate fiscal room to fund the ambitious programme between 2027 and 2030, with commercial agriculture, oil palm, pharmaceuticals and textiles among its seven priority pillars.
Under the proposed arrangement, Finance Minister Dr Cassiel Ato Forson is expected to reduce the statutory primary fiscal surplus target under the Public Financial Management Act, 2016 (Act 921), as amended, from 1.5 per cent of GDP to 0.5 per cent.
However, Mensah argues that loosening the fiscal target, even in pursuit of productive investment, carries significant risks if the additional fiscal space is not managed differently from previous government-led industrialisation initiatives.
A Risky Trade-off Between Fiscal Discipline and Industrial Ambition
The primary balance measures the difference between government revenue and non-interest expenditure. Maintaining a surplus helps government demonstrate its ability to finance spending without relying excessively on additional borrowing.
Reducing the target from 1.5 per cent to 0.5 per cent would therefore give government more room to spend on its development priorities. But it would also reduce the fiscal buffer available to support debt sustainability and protect the economy against unexpected shocks.
For the policy analyst, the concern is not necessarily that government wants to invest in productive sectors. Rather, it is whether the country can ensure that the additional spending generates sufficient economic returns to justify relaxing the fiscal rule.
He describes the decision as a serious bet with Ghana’s hard-won fiscal credibility, warning that the country cannot afford to return to the spending practices that contributed to previous economic difficulties.
“Loosening a nineteen-month-old fiscal rule is a serious bet with our hard-won fiscal credibility,” he remarked.
Avoiding the Mistakes of Previous Industrialisation Programmes
The policy analyst with IMANI Africa is particularly concerned that the New Economy programme could repeat the weaknesses of earlier government initiatives if funding is channelled through traditional administrative structures.
He warns that distributing seedlings, tractors and contracts through ministry committees without addressing deeper structural constraints could result in substantial public resources being spent without creating sustainable industries.
This fear is reinforced by Ghana’s manufacturing credit trend. Over the past 25 years, manufacturing’s share of commercial bank credit has reportedly declined by more than half, from 25 per cent in 1999 to just 10.5 per cent.
The implication is that decades of industrialisation promises have not translated into stronger financing for productive businesses.
The Bottomline
The success of the New Economy programme, Sitsofe Mensah, believes will depend not simply on how much government spends, but on whether the investment creates competitive businesses, expands production, attracts private capital and generates sustainable jobs.
He notes that Ghana’s fiscal gamble will only pay off if the additional spending produces lasting economic transformation rather than another cycle of expensive industrial promises.
