…gov’t eyes fiscal stability with GH¢223.8bn revenue target, IMF support
The government has set a target of 4.4 percent inflation-adjusted gross domestic product (GDP) growth for 2025 as it intensifies efforts to stabilise the economy, restore fiscal discipline and drive long-term economic expansion.
The Minister of Finance, Dr. Cassiel Ato Forson, unveiled the projections while presenting the 2025 Budget, stressing a renewed focus on expenditure-led fiscal consolidation and structural reforms.
The government’s macroeconomic targets include a 5.3 percent non-oil GDP growth rate, an end-period inflation rate of 11.9 percent, a primary balance surplus of 1.5 percent of GDP, and gross international reserves covering at least three months of imports, from 2.9 months import cover at the end of 2024.
The announcement comes amid signs of economic recovery, despite a slowdown in the last quarter of 2024.
According to the Ghana Statistical Services (GSS), GDP expanded by 3.6 percent in Q4 2024, lower than the 5.1 percent recorded in the same period of 2023. However, the economy maintained an upward trajectory for the full year, with an estimated GDP growth of 5.7 percent in 2024, up from 3.1 percent in 2023.
The oil and gas sector played a key role in the expansion, while non-oil GDP posted a robust six percent growth.
This comes as the government remains upbeat about maintaining fiscal discipline in 2025, projecting higher revenue while cutting expenditures as it wades through the post-pandemic economic recovery and ongoing International Monetary Fund (IMF) support.
Dr. Forson outlined measures designed to consolidate ongoing economic gains while ensuring sustainable debt levels.
“Our revenue enhancement measures, coupled with stringent expenditure controls, will place the country on a solid footing to sustain its recovery and deliver inclusive development,” he said.
Total revenue and grants for 2025 are expected to reach GH¢223.8billion, or 17.2 percent of GDP, up from GH¢186.5billion in 2024.
The increase is primarily driven by non-oil revenue measures, which the government estimates will generate an additional 0.5 percent of GDP.
At the same time, total expenditures are set to decline modestly, with the government programming spending at GH¢269.1billion (20.7 percent of GDP), down from GH¢279.2billion (26 percent of GDP) in the previous year.
Primary expenditures—excluding interest payments—will also see a sharp reduction, falling from GH¢232.4billion (21.7 percent of GDP) in 2024 to GH¢204.7billion (15.8 percent of GDP) in 2025.
Consequently, the total appropriation for 2025 stands at GH¢290.97billion.
Tax cuts, deficit reduction, financing strategy
The government also announced the removal of several taxes, including the controversial Electronic Transfer Levy (E-Levy) and the 10 percent withholding tax on bet winnings, which were key election promises.
Analysts had projected that the state could lose between GH¢6.4 and GH¢7.7billion this year alone.
However, the Finance Minister said the move is expected to create a revenue shortfall of GH¢3.8billion, with the removal of the COVID-19 Levy pending VAT reforms.
Dr. Forson confirmed the abolition of the 1 percent E-Levy, the betting tax, the VAT on motor vehicle insurance policies, the Emission Levy on industries and vehicles, and the 1.5 percent withholding tax on unprocessed gold for small-scale miners.
To offset the revenue loss, the government is reducing the tax refund ceiling from 6 percent to 4 percent, which is expected to generate savings equivalent to the shortfall.
A government study revealed that over the past eight years, GH¢16.6billion—57 percent of funds in the tax refund account—had been misapplied.
Dr. Forson assured that the shortfall would be covered, stating: “Mr. Speaker, already we have saved GH¢3.8billion for 2025 alone from only one source and this is enough to close the gap from the taxes that we have removed”.
In addition, the government plans to amend the Revenue Administration Act to enhance tax compliance and improve net tax revenue by 2 percent.
A review of the Energy Sector Levies Act is also expected to streamline energy sector financing without increasing levies.
The budget deficit is projected to narrow in 2025. The overall balance on a commitment basis—which factors in planned expenditures—is forecast at GH¢43.8billion, or 3.1 percent of GDP, while the primary balance will post a surplus of GH¢20.3billion, or 1.5 percent of GDP.
On a cash basis, which considers actual disbursements, the overall deficit is expected to reach GH¢56.9billion, or 4.1 percent of GDP. The corresponding primary surplus is estimated at GH¢7.3billion, or 0.5 percent of GDP.
To finance the GH¢56.9billion cash deficit, the government plans to tap into both foreign and domestic sources. Foreign net financing is expected to contribute GH¢21.4billion (1.5 percent of GDP), including disbursements from the IMF’s Extended Credit Facility (ECF), which will inject US$720million; and the World Bank’s Development Policy Operation (DPO), expected to provide US$600million.
The remaining GH¢36.9billion (2.6 percent of GDP) will be raised through net domestic financing, representing 65 percent of total financing needs. This will largely come from short-term domestic debt issuances, signalling the government’s reliance on the local market to bridge funding gaps.
Fiscal consolidation
The Finance Minister stressed that the government remains committed to fiscal consolidation, with an emphasis on controlling expenditure, enhancing revenue mobilisation and maintaining macroeconomic stability.
“We recognise the importance of maintaining a sustainable fiscal path while ensuring that growth is not compromised,” Dr. Forson said.
“Our focus remains on improving domestic revenue generation, optimising public spending and reducing reliance on external borrowing,” he added.
He noted that despite fiscal challenges, Ghana is seeing improvements in key macroeconomic indicators.
“The stability we are beginning to experience in the economy is a direct result of bold policy interventions, and we must continue on this trajectory,” he further stated.
IMF, World Bank support
Ghana’s financing plan is heavily tied to continued disbursements from the IMF and World Bank, reflecting the country’s dependence on external support as it seeks to stabilise its economy. The US$720million from the IMF’s ECF programme forms part of the three-year bail-out package agreed upon in 2023 to restore macroeconomic stability and boost investor confidence.
Similarly, the US$600million from the World Bank’s DPO will help finance critical projects and provide budgetary support. These funds are crucial for maintaining Ghana’s reserves, sustaining economic reforms and cushioning external vulnerabilities.
While these financing arrangements provide much-needed relief, analysts have raised concerns over the long-term debt sustainability. The country’s public debt stock, though improving, remains high, necessitating careful fiscal management to avoid excessive debt accumulation.
SOURCE: thebftonline.com
