2027 Budget: Will wage commitments squeeze infrastructure spending?

Government faces difficult fiscal choices as it prepares the 2027 Budget, with rising public sector wage commitments, infrastructure financing needs and revenue mobilisation pressures competing for limited resources.

Although government expenditure remained below programmed levels during the first seven months of 2026, capital investment fell short of its target, while compensation of public sector employees continued to account for a significant share of domestic revenue.

The spending pressures are expected to increase in 2027 following an agreement between government and organised labour for an 8% increase in base pay, alongside an additional one percentage point adjustment for conditions of service.

The challenge for government will be to accommodate the higher wage commitments while protecting investment in infrastructure, supporting job creation and sustaining the fiscal consolidation gains recorded in 2026.

Data for January to July 2026 show that total revenue and grants amounted to GH¢144.57 billion, slightly below the programmed GH¢144.95 billion.

Government expenditure, including net lending, stood at GH¢147.08 billion, compared with a target of GH¢175.93 billion. This represents a 16.4% shortfall against the programmed spending level.

While the lower expenditure reflects restraint in public spending, it has also raised questions about the pace of public investment and whether fiscal consolidation is leaving sufficient room for infrastructure development and employment-generating projects.

Capital expenditure remains a key measure of how government intends to balance fiscal discipline with its development priorities.

Government spent GH¢24.23 billion on capital projects between January and July 2026, approximately 25% below the programmed target.

Despite the shortfall, the amount represented a 157.9% increase compared with capital expenditure over the same period in 2025.

The gap between actual spending and the budget target has renewed attention on the pace of infrastructure delivery and investment in productive sectors of the economy.

The Director of the Institute of Statistical, Social and Economic Research (ISSER), Professor Robert Darko Osei, says government must ensure that macroeconomic stability translates into tangible improvements in people's living conditions.

“But the type of growth also matters. And if you realise from some of the comments that came up, is it the type of growth that will result in jobs, right? So making the right investments in a way that ensures that the stability that we’ve observed truly translates into improvements in the daily living of individuals,” he said.

His comments highlight the importance of directing public resources towards investments that can generate employment, strengthen productive capacity and improve household welfare.

The public sector wage bill is another major consideration for the 2027 Budget.

Compensation of employees amounted to GH¢50.55 billion between January and July 2026, equivalent to 35.2% of domestic revenue mobilised during the period.

For 2027, government has allocated GH¢104.1 billion to compensation of employees, representing 28.4% of total commitment expenditure.

The allocation comes ahead of the implementation of the latest public sector wage agreement, which provides for an 8% increase in base pay and an additional one percentage point adjustment for conditions of service.

Although the agreement is expected to improve the earnings of public sector workers, it will also increase recurrent expenditure and intensify pressure on government to manage the wage bill without crowding out other development priorities.

Tax analyst Francis Timore Boi cautioned that repeated labour agitations resulting in concessions from government could make expenditure management more difficult.

“We’ve seen government’s swift response in terms of the labour agitation. But then if a repeat labour strike results in concession with government, it’s likely to create the impression that industrial action is the only way labour can get their means resolved. And that is likely to create more pressure for government in terms of the fiscal discipline,” he said.

Revenue mobilisation will also be central to the 2027 Budget debate.

With government signalling its intention to ease the tax burden on businesses and households, attention is shifting towards improving tax compliance, widening the tax base and addressing revenue leakages.

The key question is whether these measures can generate sufficient resources to meet growing recurrent expenditure while preserving funding for capital projects.

Mr. Boi has also urged government to explore ways of attracting private-sector investment into major infrastructure projects to reduce reliance on public financing.

“Obviously, the budget needs to outline how private investments are welcomed in terms of some of the major projects. I’ve had some discussion with some people who say that, look, why can’t governments offload some of their road projects to private companies?” he added.

Private-sector participation could provide an alternative source of financing for infrastructure development. However, the structure of such arrangements, including their financial risks, contractual terms and potential long-term obligations for the state, would require careful consideration.

The 2027 Budget is expected to provide a clearer indication of how government intends to manage rising public sector compensation, finance critical infrastructure and strengthen domestic revenue mobilisation.

With wage commitments increasing and capital investment competing for limited fiscal resources, the budget will test government's ability to maintain fiscal discipline while ensuring that economic stability supports productive investment, job creation and improved living standards.

The balance between recurrent spending and development expenditure is likely to remain one of the central issues in Ghana's fiscal policy debate in 2027.