Ghana's finance minister must find a surprise in a bare budget cupboard

Ghana’s finance minister has a challenge on his hands.

Ken Ofori-Atta must present a national budget for 2024 during a debt restructuring, under the fiscal restrictions of an International Monetary Fund program while being locked out of global capital markets.

And then there’s the election coming up that he will want to help his New Patriotic Party win — Vice President Mahamudu Bawumia is expected to be up against former leader John Mahama next year.

The government needs to restore investor confidence and credibility after allowing the West African nation to slide into a debt trap, by showing a commitment to lift revenue and curb spending. The minister, who raised levies last year, may flag more on Wednesday.

Some signs so far have been positive.

“Following a strong performance in the year to date, we expect the 2024 budget to sustain the expansion in government revenue through fiscal reforms,” according to Yvonne Mhango of Bloomberg Economics.

Ofori-Atta may announce a swing to a small primary budget surplus for next year, meaning its liabilities won’t get worse. That will help shore up the administration’s credentials with the creditors it’s trying to persuade to accept losses, and secure the next $600 million of an IMF loan.

This month, Fitch upgraded Ghana’s local-currency credit score from restricted default after the government completed a domestic restructuring that resulted in “sizable” debt-servicing savings.

That’s where the good news ends.

There’s no scope for the usual election-year spending boost with total public debt having swelled to around 100% of gross domestic product before the overhaul (that’s got to shrink to 55% of GDP by 2028). A weaker currency has driven up prices, sparking protests in the capital.

With food inflation still above 40% and interest rates at a record, Ofori-Atta has much to do to convince a weary electorate that the nation’s fiscal crisis is a blip.