Paragraph 1: Introduction and Mandate
Dr. Cassiel Ato Forson, Minister for Finance, presented the 2025 Budget Statement and Economic Policy to the Parliament of Ghana. This budget, the first under the newly elected President John Dramani Mahama, carries the theme "Resetting the Economy for the Ghana we Want." The budget presentation included statutory reports on petroleum funds, energy sector levies, and the African Union Import Levy. The Minister also proposed reviews of key legislation, including the Public Financial Management Act, the Petroleum Revenue Management Act, and the Ghana Infrastructure Investment Fund Act, amongst others, to align with the government’s economic stabilization and growth agenda. Central to the government’s agenda is the 24-Hour Economy policy, aiming to create a more integrated, export-driven industrial economy. A bill for the establishment of a Ghana Gold Board, aimed at stabilizing the cedi through gold reserve accumulation, was also announced.
Paragraph 2: State of the Ghanaian Economy in 2024 – Fiscal Challenges
The Minister painted a picture of a distressed economy inherited from the previous administration. Key performance indicators under the existing IMF-supported program were likely missed, including targets for primary balance, inflation, and social protection spending. Inflation remained stubbornly high, and a substantial primary balance deficit was recorded. A significant burden of arrears/payables, amounting to GH¢67.5 billion, was revealed, excluding substantial debts in the energy and cocoa sectors, as well as central bank bailout requests. Contract awards in excess of budgetary provisions were also identified, highlighting a disregard for fiscal discipline. The government’s financing options were limited primarily to the treasury bill market due to the debt restructuring program, and substantial debt service obligations, both domestic and external, loomed large, particularly in 2027 and 2028. These “debt humps” were characterized as a major threat to fiscal sustainability.
Paragraph 3: State of the Ghanaian Economy in 2024 – Sectoral Risks and Debt Restructuring
The 2024 economic landscape was further complicated by sectoral risks. The bilateral creditor debt restructuring stalled 55 projects, leaving billions of dollars in undisbursed loans and outstanding payments, potentially leading to significant cost overruns. The energy sector faced escalating financing shortfalls, with projections reaching GH¢140 billion for the 2023-2026 period. The cocoa sector, traditionally a pillar of the Ghanaian economy, experienced declining output and unsustainable debt. Losses were incurred due to forward sales contracts locked in at lower prices than prevailing market rates. Financial sector risks persisted despite significant spending on a clean-up exercise. The 2024 fiscal performance showed improved revenue collection but was overshadowed by significant expenditure overruns and accumulated arrears. While the debt-to-GDP ratio decreased due to the Eurobond debt haircut, the overall debt stock remained high. The debt restructuring program, though nearly complete, left outstanding debt to commercial creditors. Real GDP growth was driven by the mining sector, particularly gold.
Paragraph 4: 2025 Policy Objectives and Fiscal Measures
The government’s immediate focus is on restoring good governance, alleviating economic hardship, and setting the stage for economic transformation. This will be achieved through restoring public trust, supporting vulnerable populations, and stimulating demand for domestically produced goods. The government’s fiscal policy objectives include rationalizing expenditure, optimizing revenue mobilization, increasing capital expenditure, reducing public debt, and restoring economic confidence. A three-pronged approach is adopted: recalibrating fiscal adjustment through spending cuts, delivering a "shock therapy" to the economy through significant short-term spending reductions, and restoring fiscal responsibility through enhanced public financial management. Macroeconomic targets for 2025 include real GDP growth of at least 4%, end-period inflation of 11.9%, and a primary balance surplus.
Paragraph 5: Addressing Inflation and Exchange Rate, Sectoral Measures, and Revenue
To address inflation and exchange rate pressures, the government will establish a Gold Board to boost foreign exchange reserves, continue with forward auctions by the Bank of Ghana (BoG), pursue fiscal consolidation, and promote import substitution through the 24-Hour Economy policy. Inflation will be tackled through targeted interventions in agriculture, transportation, and utilities, combined with fiscal consolidation and exchange rate stabilization. Expenditure measures for 2025 include auditing arrears/payables, enforcing stricter adherence to procurement processes, eliminating wasteful programs, and reallocating resources. Key energy sector measures focus on improving collection efficiency, implementing a fuel-to-gas swap, and renegotiating IPP contracts. Despite a commitment to increased non-oil tax revenue, several “nuisance taxes” will be abolished, including the E-Levy, betting tax, and emission levy. A reduction in the tax refund ceiling is expected to offset revenue losses from these tax cuts.
Paragraph 6: VAT Reforms, Resource Allocation, and Policy Initiatives
Comprehensive VAT reforms will be undertaken, including abolishing the COVID-19 levy, reviewing the structure of the VAT, and improving compliance. Resource allocation for 2025 includes significant investments in the Big Push Program, social interventions like the No-Academic-Fee policy for tertiary students and free sanitary pads for schoolgirls, as well as support for disaster relief. The GETFund and NHIL will be uncapped to ensure adequate funding for education and healthcare. The Road Fund will also be uncapped to address road maintenance needs. The budget prioritizes decentralization by allocating a greater proportion of the District Assembly Common Fund directly to the districts. Key policy initiatives include the 24-Hour Economy policy, the establishment of the Ghana Gold Board, the Big Push Program, and an economic transformation agenda focused on agriculture and value addition. The government also emphasized a commitment to a "Made-in-Ghana" agenda, using public procurement to boost domestic production. A Ghana Labour Export Program was announced to formalize and regulate overseas employment opportunities for Ghanaians. The budget concludes with a call for national unity and support for the outlined reforms to build a more resilient and equitable Ghana.
