How Government’s Economic Policy is influencing cost structure of business

Generally, businesses in the country operate in a highly dynamic cost environment largely influenced by macroeconomic, structural and regulatory factors. That said, the outlook of the economy has shown stability with renewed investor confidence. In light of that, the 2026 Budget statement seeks to consolidate gains that will sustain economic growth. Based on the need to operate efficiently, it is expected that businesses align their forecasts and operations with government’s economic policy objectives.

It is a fact that government’s policies have implications for cost of doing business, pricing, operating margins and investment decisions. Thus, the policies have implications for businesses’ financial planning, budgeting cycles and tax planning strategy.

The budget highlights the application of digital tools to deliver services in real-time. At the ports, Government is deploying Artificial Intelligence (AI)-driven pre-arrival inspections for all cross-border shipments. The technology detects under-valuation, flag high-risk goods, and strengthen Customs’ capacity to combat smuggling and improve safety. The importer expects the digital system to reduce clearance delays and logistic hold-ups and then lower carrying costs for imported inputs. In effect, the artificial intelligence system streamlines supply chain and ensures tighter cost control.

Influencers of Cost Structure

The budget statement made significant resource allocations for various initiatives and sectors. Those financial allocations invariably influenced cost structures (revenue/expenses) of contractors, service providers who have executed government’s contracts or have existing contract with government agencies. Indeed, contractors might have received payments or raised certificates and awaiting payments.

With fiscal discipline a central theme of the budget, businesses have to rationalise their operating expenses in line with revenue expectations from contract proceeds. The first quarter of the year is ending in 3st March, 2026, and prudence requires businesses to analyse variances by identifying reasons for deviations from their revenue shortfalls, expenses and adjust their forecasts based on Q1 performance. In doing so, executives must also avert their minds to these key economic indicators:

1. Macroeconomic Stability & Inflation Expectations

20. a) Exchange Rate: The exchange rate is one of the most powerful cost drivers because the economy relies heavily on imports. In the context of the budget, the Government through the Central Bank is maintaining a flexible exchange rate regime and prudent monetary policy stand to preserve price stability. Higher export earnings from gold and remittances/FDI inflows) help to maintain exchange rate stability even when foreign investors repatriate their profit. The country’s $20.9 billion in gold export earnings in 2025 was the single largest share of export receipts. In the mix of major export earnings, cocoa is experiencing significant fall in global market prices. The economy registered total import of $14.0 billion in (2023), $15.3 billion in (2024) and $17.4 billion in 2025 respectively. Rising import dependency (raw materials for manufacturing, retail, and pharmaceuticals) has direct implications for inflation, exchange rate pressure and business cost structures.

Government has spent approximately $3.0 billion annually to cover energy sector shortfalls and IPP payments. This continuous drain acted as a “leaky bucket” for foreign exchange, and has compelled the Bank of Ghana to divert liquid reserves to meet fuel and power obligations. In a period of global uncertainty, government’s gold-backed reserve policy provides credibility for macroeconomic and exchange rate management. With prices far exceeding their long-term historical averages, gold has emerged as the most reliable and immediate instrument for accelerating reserve accumulation without increasing public debt or introducing distortions into domestic markets. Gold reserves provide a natural hedge against external shocks and reduce vulnerability to exchange rate volatility.

5. b) Sustained Low Inflation Environment: Inflation affects almost every cost component in the economy. Inflation recorded a single-digit (4% in December 2025, 3.8% in January and 3.3% in February, 2026). The Ghana Statistical Service projected inflation to remain stable, with a target of 8.0 % by the end of year, 2026. Indeed, planning in a low-inflation environment means more predictable operating costs and profit margins but the recent geopolitical tensions in the Gulf (Middle East) have heightened a possible spike in inflation from imports. To note, the Strait of Hormuz, which lies between Iran, Oman and the UAE, is a major oil transit corridor in the world with about 20 million barrels passing through it per day. As a result, further tensions could escalate global oil prices and intensify inflationary pressures. Based on the oil market dynamics, businesses would need to consider Dynamic Pricing Models with indexed pricing tied to inflation and related variables to protect revenue and maintain profit margins.
6. c) Currency and Interest Rate Impacts: An improved reserve accumulation provided buffers for the local currency. The cedi strengthened against the major trading currencies in 2025 and has remained relatively stable since the beginning the year, 2026. The currency’s strong performance reflected favourable global conditions, prudent monetary policy, effective liquidity management and significant reserve buildup. A stable Ghanaian cedi and lower interest rates (stemming from tighter fiscal policy) contribute to reducing financing costs and ensure predictable foreign exchange exposures. The easing of the monetary policy rate to 50% will stimulate economic activity through a relatively cheaper credit cost to households and businesses.
7. Energy and Utility Cost Dynamics

The objective of Government is to deliver a reliable, affordable and clean power for industry to create jobs. Indeed, Government has made significant allocations to the energy sector with GH¢15.2 billion for the sector shortfalls and $1.470 billion to clear legacy IPP debts. Government is making further investments in energy generation and transmission to stabilise power supply. Businesses and households face utility cost pressures (9.86% for electricity and 15.92% for water) in line with the Multi-Year Tarrif Review Order (MYTO). Nonetheless, the downward adjustments ((4.81% for electricity and 3.06% for water) with effect from 1 April, 2026 will bring some relief to businesses and households. That said, crude oil market volatility due to the evolving tensions in the Middle East could dip gains government has made so far in the energy sector. Indeed, industries with high power consumption (mining, manufacturing, ICT infrastructure, cold storage) could face higher operational risks (thermal plants exposed to higher fuel costs) despite government’s power strategy under the 24-Hour Economy Policy.

3. Labour and Wage Pressures

There are wage pressures amid economic recovery. The budget provides for Compensation of Employees which include wages, salaries, pensions, gratuities, and social security contributions projected at GH¢90.8 billion (5.7% of GDP). It considered the 9% negotiated increase in base pay for public servants under the Single Spine Salary Structure (SSSS). The Middle East Tensions could spike inflation and drive a demand for Cost of Living Allowance (COLA) if it further escalates with such implications for the wage bill. The private employers also face upwards wage pressure as labour negotiates for real income gains with the effect on operating costs. Employers, especially the private sector would have integrated labour cost inflation forecasts into budget models, and considered HR strategies that balance wage competitiveness with productivity improvements (e.g., training, automation and process digitisation).

4. 4. Fiscal Policy &Tax Reform

Government’s fiscal policy strategy has implications for businesses’ cost structures. The modernised VAT system aims at broadening the tax base and improving compliance with such embedded incentives. Businesses should look at how these tax reforms have affected their operating costs, cash flow and tax planning strategy and filing:

• COVID-19 Health Recovery Levy abolished.
• The reform abolished the decoupling of the GETFund and NHIL levies from the VAT tax base to allow both levies to be subject to input tax deductions. The rationale is to reduce the cost of doing business by about 5%.
• Reduction of effective VAT rate (21.9% to 20%). It has implications for capital accumulation and re-investment.
• Increase in VAT registration threshold from GH¢200,000 to GH¢750,000.

5. Logistics & Office Infrastructure

Investments in infrastructure may create capital expenditure timing choices. Businesses would have to balance these with working capital needs, particularly in managing payables and inventory in a predictable inflation regime. Infrastructure improvements should be reflected in medium/long-term cost projections, especially for companies with extensive logistics exposure by potentially lowering inventory lead times and warehousing costs.

Office space (leases) is also one of the most significant fixed costs for businesses. Even when inflation and exchange rates begin to stabilise, free market or unregulated rate or charges for office space (market stall) is significantly impacting operating costs, cashflow and profit margins of businesses especially SMEs. This structural weakness exposes government’s policy initiatives to stimulate the economy and create more jobs.

Conclusion

Government’s economic policy direction reflects a deliberate effort to consolidate macroeconomic stability. For businesses, the policy initiatives moderate the cost environment while structural inefficiencies continue to exert pressure on operational expenses. In the end, the extent to which businesses will reap the benefits depend largely on their ability to respond strategically to both policy reforms and emerging global economic realities.

Further Reading:

1. Bank of Ghana (Summary of Economic and Financial Data; External Sector Developments (January 2024, 2025 & 2026)
2. Ghana Accelerated National Reserve Accumulation Policy (GANRAP) 2026-2028-pg9-11
3. The Budget Statement and Economic Policy of the Government of Ghana for the 2026 Financial Year (VAT Reforms pg105-106)
4. Public Utility Regulatory Commission (PURC) Multi-Year Tariff Review Order, December, 2025

BERNARD BEMPONG 

Bernard is a Chartered Accountant with over 18 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.

Our Office is located at Lagos Avenue, East Legon, Accra.

Contact: 233 302 528 977

                 233 244 566 092

 Website: www.jsmorlu.com.gh

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