IEA Urges Comprehensive Energy Debt Plan and Fiscal Prudence in 2025 Budget
The Institute of Economic Affairs (IEA) has called for the inclusion of a detailed strategy in Ghana’s 2025 budget to address the energy sector’s mounting legacy debt while restoring its financial sustainability. The think tank also emphasised the need for stable and competitively priced power to support economic growth and improve the country’s investment climate.
In its bi-monthly Economic Outlook, the IEA highlighted the fiscal constraints facing the government, noting the limited room to fund development initiatives. It suggested that Ghana’s natural resource sector could provide a lifeline for revenue generation, but this would require significant reforms to increase domestic ownership and benefits.
“Tapping this potential will require changes to the natural resource fiscal regimes, along with prioritising local value addition to these resources to increase receipts,” the report said.
Fiscal Targets in Focus
The IEA noted that the 2025 budget is expected to align with the International Monetary Fund’s (IMF) Economic Credit Facility (ECF) programme. Key targets include reducing the overall fiscal deficit to 2.7% of GDP from 3.5% in 2024 and increasing the primary surplus to 1.5% of GDP.
The think tank commended the government’s commitment to fiscal consolidation, stating that it is critical to sustaining macroeconomic stability, ensuring debt sustainability, and avoiding another restructuring.
“The tight fiscal stance is in line with the debt sustainability trajectory envisaged under the programme, which is crucial for fostering investor confidence in the economy,” the IEA said.
Scrapping Taxes to Ease Burden
The 2025 budget is also expected to deliver on the government’s pre-election promise to abolish certain taxes, including the E-levy, Covid tax, Emissions tax, and Betting tax. The IEA believes the removal of these taxes could ease the financial burden on households and businesses, providing a modest boost to economic activity.
To compensate for revenue losses, the government will need to reinforce tax administration, close loopholes, and broaden the tax net. These efforts, the IEA suggested, could offset the fiscal impact while supporting a fairer distribution of the tax burden.
