Ghana’s 2025 Budget: A Bold Reset or a Debt Trap?

Ghana’s 2025 Budget: A Bold Reset or a Debt Trap?

A day that the whole nation stood still and you could feel the pulse of Ghana standing at a crossroads. The unveiling of the 2025 Budget by Finance Minister Dr. Cassiel Ato Forson rather signaled a bold attempt by the Mahama-led government to reset the economy.

A statement that had been their slogan during the elections and has been the theme running through all of the President’s speeches since he took office “Resetting the Economy for the Ghana We Want,”.

The budget sets out a vision to revive economic growth, manage the country’s suffocating debt burden, and restore investor confidence.

But beyond the numbers, speeches, and policy proposals lies a stark reality: Ghana is still under an IMF-supported Extended Credit Facility (ECF) programme, and its fiscal space remains severely constrained.

With over GH¢726.7 billion in debt, a crippling energy sector deficit of GH¢35 billion, and stalled projects amounting to US$3 billion, the question remains: Is this budget a genuine lifeline or another well-intentioned but unsustainable policy framework?

A Nation in Fiscal Turmoil

To understand the significance of this budget, one must first appreciate the state of the Ghanaian economy. The Mahama administration inherited an economy that was, in the words of the finance minister, “in deep crisis.” The 2024 economic performance painted a grim picture:

• Inflation worsened from 23.2% in 2023 to 23.8% in 2024, far exceeding the IMF’s target.
• The primary balance deficit expanded to 3.9% of GDP, rather than the expected 0.5% surplus.
• The exchange rate volatility remained a major concern, depreciating by 19.2% against the US dollar in 2024.
• Over GH¢67.5 billion in arrears/payables were uncovered, with GH¢21 billion in unpaid road sector contracts alone.

The government argues that these problems are the result of reckless public spending, poor fiscal discipline, and mismanagement by the previous administration. However, the real issue is deeper than partisan politics—it is structural. Ghana’s fiscal policy over the years has been driven more by short-term fixes than long-term sustainability. This budget aims to change that, but can it?

Key Takeaways: Bold Reforms or Political Promises?

The 2025 budget introduces several high-impact reforms that could reshape Ghana’s economic landscape if implemented effectively. But will these measures lead to sustainable recovery, or are they politically driven stop-gap solutions?

1. A Fiscal Reset Through Expenditure Cuts

One of the most significant departures from past budgets is the shift towards a spending-led fiscal adjustment rather than heavy taxation. The government has opted to:

• Reduce the number of ministries from 30 to 23 and ministers from 88 to 60—a politically strategic move to show commitment to lean governance.
• Eliminate inefficient programs such as YouStart and One District, One Factory (1D1F) to cut wasteful expenditure.
• Audit and validate all arrears/payables before payment, to curb corruption and ensure accountability.

While these moves may appeal to fiscal conservatives and the IMF, the success of expenditure-led fiscal consolidation depends on strict enforcement—a challenge Ghana has historically struggled with. The real question is: Will these cuts hold over the long term, or will political pressures force the government to reverse them ahead of the 2028 elections?

2. Revenue Mobilization: A Delicate Balancing Act

The government is betting on tax compliance and economic efficiency rather than imposing new levies to increase revenue. Among the most notable revenue measures:

Abolition of the “nuisance taxes,” including:

• 1% Electronic Transfer Levy (E-Levy)
• 10% Betting Tax
• Emission Levy on vehicles
• 1.5% Withholding Tax on unprocessed gold by small-scale miners

1. Reintroduction of road tolls with a new technology-driven collection system.
2. Increase in the Growth & Sustainability Levy for mining companies from 1% to 3% to capture windfall profits from rising gold prices.
3. VAT Reforms: The government plans to restructure VAT to reduce distortions and make it more business-friendly.

While these revenue measures may help ease the tax burden on individuals, eliminating key tax streams without a robust alternative revenue source could lead to a fiscal shortfall. Will Ghana’s revenue authorities be able to bridge the gap through tax compliance alone? The IMF will certainly scrutinize this approach in its upcoming reviews.

3. Managing Ghana’s $8.7 Billion External Debt Service

Perhaps the most daunting challenge facing the economy is debt servicing. Ghana’s IMF programme imposed strict limits on external borrowing, making it difficult for the government to finance its deficits. The budget outlines a strategy to:

• Reopen the domestic bond market cautiously to extend the maturity profile and prevent default.
• Build sufficient cash buffers in the Sinking Fund for better debt management.
• Renegotiate Independent Power Producer (IPP) contracts to cut high electricity costs.
• Address the 2027-2028 “debt repayment hump” through careful liability management.

However, without substantial external financial assistance, Ghana’s ability to meet its debt obligations will remain in question. The IMF’s next review in April 2025 will be critical—if Ghana fails to meet its fiscal targets, the programme could face delays, affecting investor confidence and credit ratings.

The IMF Factor: Can Ghana Stay on Course?

The IMF-supported Extended Credit Facility (ECF) has been a double-edged sword for Ghana. While it provides credibility and much-needed financial relief, the programme’s strict conditions limit the government’s ability to maneuver politically.

• Key Performance Indicators (KPIs) at Risk: The budget admits that Ghana is likely to miss several key IMF targets, including inflation control, primary balance, and debt sustainability benchmarks.
• Structural Reforms Delayed: Many of the public financial management and procurement reforms required under the IMF programme have not been fully implemented.
• Debt Restructuring Incomplete: While 93% of Ghana’s debt restructuring is done, US$2.7 billion in commercial debt remains unresolved.

IMF staff will undoubtedly push for more aggressive fiscal consolidation, including potential spending cuts in social programs. The challenge for the Mahama administration is whether it can balance IMF conditions with domestic political and economic realities.

Can This Budget Deliver Growth?

The 2025 budget targets a GDP growth rate of 4.0%, with non-oil GDP expected to grow at 4.8%. While this is modest, achieving even this level of growth will require:

1. A stable exchange rate—which hinges on the effectiveness of the Gold-for-Forex strategy and other forex measures.
2. A vibrant private sector—which depends on lowering lending rates and business costs.
3. Successful implementation of the 24-Hour Economy policy, which remains untested in Ghana’s economic model.

While these strategies offer a blueprint for recovery, the risk of policy slippages remains high. The government’s ability to execute, enforce, and sustain reforms over the medium-term will determine whether Ghana turns the economic corner or falls deeper into a cycle of crisis.

Conclusion: A Defining Moment for Ghana

The 2025 budget is ambitious. It seeks to reset Ghana’s economy through fiscal discipline, debt management, and structural reforms. But ambition alone is not enough execution is everything.

Ghana’s economy has been in survival mode for years, and this budget is the government’s first real attempt to shift the trajectory towards sustainable growth. The IMF, investors, and the Ghanaian people will all be watching closely.

Will this budget be the beginning of a genuine recovery, or just another well-intended but ultimately unsustainable intervention?

Only time will tell. But one thing is certain Ghana cannot afford another misstep.