Resetting the Economy: A Comprehensive Report on Ghana’s 2025 Budget Reading

The 2025 Budget, presented by Dr. Cassiel Ato Forson, Ghana’s Minister for Finance, marked a significant turning point for the nation’s economic trajectory. Under the theme “Resetting the Economy for the Ghana We Want,” the budget aims to stabilize Ghana’s financial landscape, address structural inefficiencies, and pave the way for sustainable growth.

A Nation at a Crossroads

Ghana’s economy in 2024 was characterized by mounting debt, inflationary pressures, and fiscal instability. The government inherited an economy in deep crisis, burdened with a GH¢67.5 billion central government arrears, an escalating energy sector debt, and declining cocoa production. Despite an IMF-supported program, inflation rose to 23.8% in 2024, exceeding both government and IMF targets. The primary balance deteriorated significantly, and exchange rate volatility persisted, eroding business confidence.

Key Fiscal Policy Objectives

The 2025 Budget outlines a bold fiscal framework centered on:

1. Rationalizing Expenditure – Cutting wasteful spending and eliminating inefficient programs.
2. Boosting Revenue Mobilization – Enhancing tax compliance, broadening the tax base, and increasing non-tax revenue.
3. Reducing Public Debt – Implementing prudent debt management strategies to ensure sustainability.
4. Enhancing Social Protection – Increasing allocations to key social intervention programs.

Expenditure and Revenue Measures

Expenditure Cuts and Efficiency Measures

• Reduction of ministries from 30 to 23 and a streamlined government structure.
• Strict compliance with procurement processes linked to approved budgets.
• Enhanced enforcement of the Public Financial Management Act to curb financial mismanagement.

Revenue Mobilization and Tax Reforms

• Abolition of ‘Nuisance Taxes’, including:
  • 10% withholding tax on lottery winnings.
  • 1% Electronic Transfer Levy (E-Levy).
  • Emission Levy on vehicles and industries.
  • VAT on motor vehicle insurance policy.

• Mining Sector Tax Adjustments:
  • Increase in the Growth & Sustainability Levy for mining companies from 1% to 3% to capture economic rent from rising gold prices.
  • Extension of the sunset clause for the Special Import Levy to 2028.

• Reintroduction of Road Tolls: Leveraging technology for efficient toll collection to support road infrastructure.

Sectoral Interventions and Economic Transformation

Job Creation and Economic Growth Initiatives

• The 24-Hour Economy Policy: Encouraging businesses to operate around the clock to boost employment and productivity.
• $10 Billion ‘Big Push’ Infrastructure Program: Strategic investment in roads, schools, and hospitals.
• Ghana Gold Board (GoldBod): Enhancing gold exports and foreign exchange reserves.

Social Protection and Human Capital Development

• Free Tertiary Education for Persons with Disabilities (PWDs).
• No-Academic-Fee Policy for first-year public tertiary students.
• Provision of Free Sanitary Pads for female students.
• Increased Funding for Social Programs:
  • LEAP benefits raised by 30.8%.
  • School Feeding Program budget increased by 33%.
  • NHIS funding expanded to GH¢9.93 billion.

Macroeconomic Stability and Debt Management

The government aims to restore fiscal discipline through a three-pronged approach:

1. Spending-Led Fiscal Adjustment – Cutting government expenditure to curb inflation and stabilize the currency.
2. Shock Therapy – Frontloading fiscal adjustments to restore investor confidence.
3. Enforcing Fiscal Responsibility – Strengthening oversight mechanisms and ensuring compliance with financial laws.

To manage the country’s debt:

• The government plans to reopen the domestic bond market cautiously.
• A Sinking Fund is set to be operationalized to smoothen debt repayments.
• The government seeks to engage creditors to restructure outstanding Eurobond obligations.

Energy and Cocoa Sector Reforms

Addressing Energy Sector Fiscal Risks

• Implementation of a Private Sector Participation (PSP) strategy to enhance revenue collection by ECG and NEDCo.
• IPP Contract Renegotiations to reduce capacity charges.
• Increase in the Weighted Average Cost of Gas to align with market rates.

Reviving the Cocoa Sector

• Restructuring COCOBOD’s Debt: GH¢32 billion outstanding, with a plan to settle GH¢11.92 billion in 2025.
• Increasing Cocoa Output: Addressing production inefficiencies and combating smuggling.
• Revenue Optimization: Minimizing losses from forward contracts.

A Call for National Support

The 2025 Budget is an ambitious yet necessary reset of Ghana’s economic policies. It demands sacrifices from all stakeholders—government, businesses, and citizens—to rebuild a resilient and inclusive economy. By prioritizing fiscal discipline, economic transformation, and social protection, Ghana aims to emerge from its economic turmoil and chart a sustainable path to prosperity.