2025 Budget: A Comprehensive Strategy for Economic Reset and Sustainable Growth in Ghana

The 2025 Budget for Ghana aims to reset the economy by tackling significant challenges including high public debt, fiscal risks in key sectors, and weaknesses in financial management. Key measures include setting realistic growth targets, implementing tax reforms, and the introduction of the Big Push Infrastructure Programme to enhance development. The budget strives for a sustainable and inclusive growth trajectory, underscoring fiscal discipline and strategic initiatives.

The 2025 Budget Statement outlines an ambitious economic strategy designed to reset Ghana’s economy after enduring significant challenges from the previous administration. Ghana faces numerous economic hurdles, including a high public debt burden, fiscal risks in vital sectors such as energy and cocoa, and deficiencies in public financial management. This budget aims to address these concerns through strategic reforms to promote sustainable and inclusive growth.

Acknowledging the economic realities inherited from prior governance, the 2025 Budget highlights the peak of public debt in 2022, worsened by Ghana’s inability to access international capital markets. Subsequently, the government had to engage in a debt exchange program and acquire liquidity support from the IMF. Ghana’s economic challenges, while not unique, are particularly severe, with projected debt servicing obligations of GHS150.3 billion in domestic debt and US$8.7 billion in external debt from 2025 to 2028. To counter these issues, the government plans to operationalize a sinking fund, restructure debt, and cautiously reopen the domestic bond market.

The budget further indicates significant fiscal risks within the energy and cocoa sectors, both critical to Ghana’s economy. The energy sector carries an approximate legacy debt of US$1.73 billion owed to Independent Power Producers (IPPs), alongside a projected financing gap of GH¢35 billion for 2025. At the same time, the cocoa sector is witnessing a nearly 50% decrease in production over the past three years, compounded by contractual defaults and production challenges. The government intends to renegotiate IPP contracts, enhance revenue collection with private sector involvement, and adjust cocoa farmgate prices to mitigate smuggling while reducing the fiscal pressures on the national budget.

The emphasis of the 2025 Budget on realistic growth targets is noteworthy. Following a 5.7% GDP growth in 2024 largely attributable to increased gold production—some of it linked to illegal mining—Ghana is targeting a more measured real GDP growth of 4.00% and non-oil GDP growth of 4.80% for 2025. These figures have been prudently adjusted to reflect the country’s structural challenges and the necessity for a sustainable economic framework, aligning with global economic trends where both developing and advanced economies are reassessing growth expectations amid persistent inflation.

Revenue mobilization is positioned as a core element of the government’s fiscal strategy. Planned tax reforms include streamlining the VAT system, abolishing the COVID-19 levy, and raising the Growth & Sustainability Levy from 1% to 3%. Concurrently, the government aims to rationalize expenditures by eliminating several programs, which is expected to save approximately GH¢1.8 billion. This focus on reducing wasteful spending will improve fiscal discipline and redirect funds to areas that promote long-term growth.

Notably, the uncapping of statutory funds will create over GH¢20 billion in fiscal space for priority programs such as the Big Push Infrastructure Programme and the Agriculture for Economic Transformation (AETA) initiative. This approach targets the long-underfunded infrastructure development and agricultural transformation, crucial sectors for the nation’s economic advancement.

Central to the 2025 Budget is the introduction of the Big Push Infrastructure Programme, which is projected to significantly enhance infrastructure development. Drawing parallels with the UK’s Levelling Up initiative, this programme is structured to address infrastructural bottlenecks that impede economic productivity. Positioning itself as a transformative initiative, the Big Push aims to stimulate sustainable economic growth, create jobs, and elevate living standards. Moreover, it will synergize with the government’s agricultural focus through the AETA program to foster modernization, job creation, and export diversification, thereby enhancing the economy’s resilience and diversification.

In conclusion, the 2025 Budget serves as an assertive and pragmatic response to Ghana’s economic challenges. It is rooted in acknowledgment of current realities while laying the groundwork for recovery and sustainable growth. By establishing conservative growth targets, prioritizing fiscal discipline, and implementing strategic revenue reforms, the government demonstrates a comprehensive understanding of the economic landscape. The ambitious Big Push Infrastructure Programme signifies Ghana’s commitment to infrastructure as a focal point for economic transformation. This budget transcends mere financial allocations, representing a strategic roadmap to reinstate fiscal credibility, support vulnerable sectors, and facilitate inclusive growth, ultimately charting a path towards a prosperous future for all citizens.

The 2025 Budget is a comprehensive strategy aimed at addressing Ghana’s pressing economic challenges while facilitating a path toward sustainable growth. Its focus on realistic growth targets, fiscal discipline, and strategic reforms illustrates a mature acknowledgment of the economic landscape. Initiatives like the Big Push Infrastructure Programme illustrate a commitment to infrastructural transformation essential for job creation and economic development, leading Ghana towards a more resilient and diversified economic future. This budget embodies a clear vision to restore fiscal credibility and foster growth that benefits all citizens.

Original Source: www.ghanaweb.com