Key Observations, Analysis & Recommendations - 2025 Budget Statement

Dr. Jabil SayibuUS-Based Financial Economist & Policy Analyst

I have reviewed the 2025 Budget Speech delivered by Dr. Cassiel Ato Forson, Ghana’s Minister for Finance. Here are my key observations, analysis, and recommendations:

1. Economic Context & Challenges
The budget acknowledges a distressed economy with high debt, arrears, fiscal imbalances, and economic stagnation. Inflation increased to 23.8% in 2024, missing IMF and government targets. Debt service obligations are heavy, with significant domestic and external repayments due in 2027-2028. Energy sector inefficiencies continue to drain public finances, with GH¢20.8 billion in support in 2024 alone.

2. Fiscal Measures & Expenditure Rationalization

The government aims to reduce expenditures, streamline procurement, and enforce strict compliance with the Public Financial Management Act.

Reductions in ministerial positions and removal of several taxes (E-Levy, Betting Tax, VAT on insurance, etc.) are highlighted as relief measures. A new focus on import substitution through the 24-Hour Economy and Ghana Gold Board (GOLDBOD) aims to strengthen forex reserves.

3. Revenue Mobilization & Debt Strategy

The government seeks to reduce the fiscal deficit primarily through expenditure cuts rather than tax hikes. The Growth & Sustainability Levy on mining will increase from 1% to 3% to capture more revenue from gold price increases. Reintroduction of road tolls and VAT reforms are planned for better revenue efficiency. The domestic bond market will be cautiously reopened to extend the debt maturity profile.

4. Social Protection & Economic Transformation Initiatives

Increased funding for Free SHS, Free Primary Healthcare, social protection programs (LEAP, school feeding, free tertiary for PWDs). A shift toward local production with a “Made in Ghana” procurement policy. Infrastructure spending under the "Big Push" initiative. Plans to formalize labor export for remittances and foreign exchange inflows.

Recommendations
1. Debt & Fiscal Discipline
Implement a transparent arrears clearance strategy to avoid accumulating unpaid obligations.Strengthen debt servicing buffers, particularly for 2027-2028, to prevent future fiscal shocks. Establish an independent Public Debt Management Office to oversee borrowing strategies.

2. Revenue Mobilization
Expand tax compliance enforcement, especially in the informal sector and digital economy. Consider targeted consumption taxes instead of broad-based reductions (e.g., luxury tax adjustments). Ensure effective collection of royalties from extractive industries beyond the increase in the Growth & Sustainability Levy.

3. Structural Reforms
Implement strong monitoring mechanisms for government procurement reforms and the revised fiscal responsibility framework. Expedite the energy sector reforms, including IPP renegotiations and ECG efficiency measures, to reduce fiscal risks. Promote private-sector participation in public infrastructure projects to alleviate budgetary pressure.

4. Growth & Investment Strategies
Fast-track the operationalization of GOLDBOD and ensure its effectiveness in stabilizing forex reserves. Strengthen investment in the agriculture sector to support the 24-Hour Economy vision and reduce reliance on imports. Incentivize industries to expand operations under the 24-Hour Economy framework to generate employment and productivity gains.

Conclusion
The 2025 Budget outlines a strong commitment to fiscal responsibility, economic restructuring, and social investment. However, its success hinges on strict implementation, debt sustainability measures, and revenue mobilization efficiency. The government must ensure fiscal credibility to maintain investor confidence and create a foundation for sustainable growth.