The 2025 Budget presents a transformative economic agenda for Ghana, addressing challenges such as high public debt and fiscal risks in key sectors like energy and cocoa. It includes strategies for debt restructuring, realistic growth targets, and significant reforms in revenue generation and expenditure management. Notably, the Big Push Infrastructure Programme aims to accelerate infrastructure development and enhance agricultural transformation, setting a firm foundation for sustainable growth.
The 2025 Budget Statement outlines an ambitious economic agenda designed to reset Ghana’s economy following significant challenges from the previous administration. The nation currently faces multiple economic obstacles, including an excessive public debt burden, fiscal risks within vital sectors such as energy and cocoa, and deficiencies in public financial management. This budget aims to strategically address these issues, paving the way for sustainable and inclusive growth.
The statement acknowledges the serious economic challenges Ghana has inherited, particularly the high public debt that reached concerning levels in 2022. This situation was worsened when the country lost access to international capital markets, necessitating a debt exchange program and liquidity support from the IMF. Ghana’s predicament, while shared by other developing countries with unsustainable debts, is particularly urgent, with projected debt servicing obligations reaching GHS150.3 billion and US$8.7 billion for the upcoming years.
In response to these challenges, the government has proposed several critical measures. Initiatives include the operationalization of the sinking fund, debt restructuring, and a cautious reopening of the domestic bond market, all vital for alleviating liquidity pressures exacerbated by short-term treasury bill obligations amounting to GH¢111.1 billion for 2025.
The budget also identifies substantial fiscal risks in the energy and cocoa sectors, crucial to Ghana’s economy. The energy sector faces a legacy debt of approximately US$1.73 billion to Independent Power Producers, alongside a projected financing gap of GH¢35 billion for 2025. The cocoa sector has experienced a near 50% production decline over the last three years, compounding fiscal pressures.
To mitigate these challenges, the government aims to renegotiate contracts with IPPs to lower capacity charges and enhance revenue collection via private sector engagement. Furthermore, adjustments in cocoa farmgate prices are planned to combat smuggling, thereby reducing the fiscal strain imposed by these sectors.
A salient aspect of the 2025 Budget is the setting of realistic growth targets. Following a 5.7% GDP growth in 2024, heavily influenced by increased gold production tied to illegal mining, the government has prudently adopted a more conservative approach for 2025. The projected GDP growth now stands at 4.00%, with non-oil GDP growth estimated at 4.80%, reflecting an adaptation to Ghana’s structural challenges.
Revenue mobilization emerges as a focal point of the 2025 Budget, with several tax reforms planned, such as streamlining VAT and abolishing the COVID-19 levy. The government will also increase the Growth & Sustainability Levy from 1% to 3%. On the expenditure front, a rationalization strategy aims to eliminate programs like Ghana CARES, saving over GH¢1.8 billion, thereby redirecting funds to crucial growth areas.
Moreover, the decision to uncap statutory funds will yield over GH¢20 billion for priority initiatives, particularly the Big Push Infrastructure Programme and the Agriculture for Economic Transformation (AETA) program, aimed at fostering infrastructure development and agricultural transformation.
The Big Push Infrastructure Programme is a transformative initiative in the 2025 Budget that seeks to accelerate Ghana’s infrastructure development through strategic investments in transport, energy, and technology. Drawing parallels with the UK’s Levelling Up initiative, the Big Push intends to address infrastructure challenges hindering economic productivity and growth while simultaneously supporting agricultural modernization.
In conclusion, the 2025 Budget represents a strategic and realistic approach to addressing Ghana’s economic difficulties. By recalibrating growth targets, prioritizing fiscal discipline, and implementing strategic revenue and expenditure reforms, the government demonstrates a nuanced understanding of the current economic environment. The Big Push Infrastructure Programme stands out as a visionary commitment to nurturing the nation’s future prosperity and growth, offering a comprehensive framework for Ghana’s transformative economic plan. Overall, this budget provides a clear roadmap for fiscal credibility and inclusive development that aims to enhance the nation’s economic resilience and growth potential.
The 2025 Budget serves as a comprehensive and strategic response to the economic challenges confronting Ghana. By adopting realistic growth projections and emphasizing fiscal responsibility, the government exhibits a keen awareness of the underlying economic conditions. The introduction of the Big Push Infrastructure Programme is particularly noteworthy and positions Ghana for a significant transformation in its infrastructure and agricultural sectors. Ultimately, this budget acts as a crucial blueprint for restoring fiscal stability, promoting inclusive growth, and ensuring a prosperous future for Ghanaian citizens.
Original Source: www.ghanaweb.com
