Overview of the 2025 Budget
The 2025 Budget, themed “Resetting The Economy For The Ghana We Want,” seeks to stabilize and transform Ghana’s economy. It targets real GDP growth of 4.0%, inflation reduction to 11.9%, and a primary surplus of 1.5% of GDP to restore fiscal discipline. Key initiatives include fiscal consolidation, governance reforms, and social interventions in education and healthcare.
Ghana’s fiscal trends (2017–2024) reveal persistent revenue shortfalls and high deficits, with public debt rising from 65.7% of GDP in 2019 to 80.4% in 2020. The 2025 Budget aims to cut the deficit to 3.1% of GDP, signaling a decisive break from loose fiscal balances and a move toward debt sustainability.
STRENGTHS OF THE BUDGET
1. SOCIAL INTERVENTIONS :
No-Academic-Fee Policy: GH¢499.8 million to eliminate academic fees for first-year public tertiary students.
Free Sanitary Pads for Schoolgirls: GH¢292 million to improve menstrual hygiene and girls’ education.
Free SHS & Free Textbooks: GH¢3.5 billion and GH¢564.6 million allocated to sustain these programs.
School Feeding Expansion: GH¢1.79 billion (a 33% increase) to enhance pupil nutrition.
Healthcare Investments: GH¢9.93 billion for NHIS and “MahamaCare” Free Primary Healthcare, targeting poor and uninsured citizens.
Restoration of Nursing & Teacher Trainee Allowances: GH¢480 million and GH¢203 million, respectively.
2. INFRASTRUCTURE AND JOB CREATION :
“Big Push” Infrastructure Agenda: GH¢13.85 billion for roads, schools, hospitals, and water systems.
Agriculture for Economic Transformation Agenda (AETA): GH¢1.5 billion to modernize farming and create rural jobs.
National Apprenticeship Programme & “Adwumawura” Programme: GH¢300 million and GH¢100 million for vocational training and entrepreneurship.
Women’s Development Bank: GH¢51 million to support women entrepreneurs.
National Coders Programme: GH¢100 million to enhance digital skills.
24-Hour Economy Initiative: Aims to introduce three-shift factory operations to boost employment.
3. MACROECONOMIC STABILITY MEASURES:
Fiscal Deficit Reduction: 7.9% in 2024 → 3.1% in 2025.
Expenditure Cuts: Primary expenditures to reduce from 19.8% of GDP (2024) to 14.6% (2025).
Efficiency Measures: Discontinuation of ineffective programs (e.g., YouStart, One-District-One-Factory) to streamline spending.
Debt Management: Ongoing restructuring expected to lower debt-to-GDP to 61.8% by end-2024.
Institutional Reforms: Plans to establish a Fiscal Responsibility Council and a new debt limit law to prevent future debt crises.
4. Tax Policy Adjustments:
Abolition of “Nuisance Taxes”: 1% E-Levy, 10% Betting Tax, and Road Toll suspension.
Mining Tax Increase: Growth & Sustainability Levy on mining firms raised from 1% to 3% to capture windfall profits.
SHORTCOMINGS AND AREAS FOR IMPROVEMENT
1. Revenue Generation Uncertainty:
The budget assumes a modest revenue increase (15.7% of GDP in 2024 → 15.9% in 2025), despite tax cuts.
Challenges: Digital tax filing and VAT reforms may take time to yield results.
Risk: Revenue shortfalls could widen the fiscal gap and hinder deficit reduction.
2. AMBITIOUS EXPENDITURE CUTS :
Reduction of primary expenditure by 5.2 percentage points of GDP in one year is extremely aggressive.
Public sector wage restraint could be challenging, with inflation still above 10%.
Implementation Risks: Large-scale social programs (e.g., free sanitary pads, free tertiary education) need robust monitoring to prevent inefficiencies.
3. DEBT VULNERABILITIES :
Despite restructuring, public debt (~62% of GDP) remains high.
Interest payments (4.6% of GDP in 2025) will consume nearly 29% of total revenue.
The budget assumes stable exchange rates and continued foreign investor confidence, which could be affected by external shocks.
4. SECTORAL GAPS :
Agriculture: GH¢1.5 billion may not be sufficient for full modernization. Additional support for fertilizer subsidies, irrigation, and post-harvest management is needed.
Education Infrastructure: Free education is increasing enrollment, but overcrowded schools and inadequate facilities need urgent attention.
Healthcare: Free primary healthcare could overwhelm existing facilities without additional doctors, nurses, and clinics.
Private Sector Growth: While government-led initiatives dominate, policies for regulatory reforms and ease of doing business should be expanded.
5. GOVERNANCE AND TRANSPARENCY CONCERNS:
Public Financial Management (PFM) reforms require strong enforcement to prevent mismanagement.
Procurement inefficiencies and corruption risks could undermine fiscal consolidation efforts.
Accountability measures, such as real-time audits of major projects, need to be fully implemented.
POLICY RECOMMENDATIONS
1. Enhance Revenue Collection:
Accelerate tax digitization and taxpayer education to improve compliance.
Expand the tax base by formalizing more informal businesses and enforcing property tax collection.
Ensure fair taxation in the mining, oil, and telecom sectors to capture more national revenue.
2. Prioritize Expenditure Efficiency:
Mid-year reviews of social programs to reallocate funds to high-impact areas if necessary.
School Feeding: Implement electronic payment for caterers to reduce leakages.
Merge and reduce government agencies to cut administrative costs.
3. Debt Sustainability and Fiscal Credibility:
Complete debt restructuring promptly and introduce a debt ceiling law.
Extend domestic debt maturities to reduce short-term rollover risk.
Attract concessional financing and grants to support key social programs.
4. Strengthen Critical Sectors:
Agriculture: Establish an emergency input fund for farmers and expand irrigation programs.
Education: Increase investment in classroom infrastructure and teacher recruitment.
Healthcare: Recruit more health personnel and improve supply chain management for medicines.
5. Improve Transparency and Accountability:
Launch a Citizens’ Budget Portal to publish quarterly expenditure reports.
Enforce procurement transparency to prevent inflated contracts and misallocations.
Empower anti-corruption bodies to audit major projects in real time.
CONCLUSION:
Ghana’s 2025 Budget is a bold step towards economic recovery and social development, balancing fiscal consolidation with human capital investment. While its ambitious deficit reduction and social interventions are commendable, revenue mobilization, expenditure efficiency, and debt sustainability remain key risks. Successful implementation requires rigorous monitoring, adaptability, and strong governance. If well-executed, this budget can lay the foundation for sustainable growth and a more inclusive economy.
