Declining Oil Prices Put Pressure on Ghana’s 2025 Budget Plans

Ghana’s fiscal projections for 2025 face mounting risks as falling global oil prices threaten to reduce expected revenues and widen the budget deficit

A sharp and sustained drop in global crude oil prices is casting shadows over Ghana’s 2025 fiscal projections, with potential revenue shortfalls raising fresh concerns about the country’s macroeconomic stability.

In its 2025 National Budget, the government set oil revenue expectations north of $1 billion, anchored on a benchmark crude price of $74 per barrel. However, international markets have since turned, with Brent crude trading between $61 and $65 per barrel in recent weeks, well below Ghana’s fiscal assumptions.

The price slide, driven by waning global demand and intensifying fears of a global recession, has already seen Brent crude shed nearly 15% of its value since April 2, according to market data. Further declines could severely undercut government revenue, amplify fiscal pressures, and potentially derail key budgetary plans.

A recent note from Fitch Solutions underlined the risk, stating that oil-dependent economies in Sub-Saharan Africa could face “significant fiscal headwinds” if crude prices fail to recover in the near term. The downturn has been exacerbated by OPEC+’s move to accelerate the return of previously curtailed supply, further weighing on prices.

For Ghana, the timing is particularly challenging. In addition to softer oil prices, the country is also confronting a slowdown in non-traditional export earnings following recent tariff hikes imposed by the United States, a development that threatens to narrow external inflows and widen the current account gap.

Short-Term Relief, Long-Term Risk

Despite the fiscal strain, the oil price decline offers modest benefits on the domestic front. Lower global prices are expected to translate into reduced fuel costs at the pump, offering consumers and businesses some respite after months of elevated inflation. Analysts suggest this could help ease cost pressures and support near-term currency stability, particularly for the cedi. While short-term gains in household spending power may provide a temporary boost, they are unlikely to offset the fiscal risks posed by reduced petroleum receipts. Oil remains a critical pillar of Ghana’s revenue base, and underperformance could constrain public spending, impact debt servicing, and delay fiscal consolidation efforts under ongoing IMF-backed reforms.

Policy Options Narrow

With external conditions increasingly volatile, Ghana’s policy space is tightening. Any significant revenue gap will likely force the government to consider revisions to spending plans or tap alternative financing sources, both of which carry economic and political costs.

Market watchers will be closely monitoring how the Finance Ministry responds to the shifting oil landscape, particularly as mid-year budget reviews approach. A proactive reassessment of revenue assumptions may be necessary to preserve fiscal credibility and investor confidence.

The falling prices tho offer temporary reprieve at the pump, the longer-term implications for Ghana’s fiscal health could prove far more consequential, especially if global conditions continue to deteriorate.

Last Updated on April 24, 2025 by samboad