New Minister of Finance lays out new policies in budget speech in Parliament

Edward Akati Salia
Accra, Ghana March 22, 2025

G hana's new minister of finance, Cassier Ato Forson, presented the country’s 2025 budget to the parliament on March 11th, 2025. In a solemn and at times emotional speech, he laid out the economic vision of the new government and how it plans to ‟reset the economy”. Recovery will require audacious decisions and ‟difficult choices must be made”, he told the august house of parliament. His budget speech contained a comprehensive review of the state of the Ghanaian economy for the 2024 fiscal year. He presented macroeconomic projections and targets for 2025 and beyond. The minister concluded his address with announcements, including new policy initiatives, structural reforms, tax reforms, spending cuts, and revenues mobilization measures.

An economy in distress

Minister Forson was candid about the state of the economy and the devastating impact on the lives of millions of Ghanaians. He talked about the elusive economic prosperity for young Ghanaians, who face hopelessness, unemployment, and an uncertain future. The ‟economy remains in distress despite gains made under the IMF program and debt restructuring”, he reminded the audience. Four areas are stalling the recovery process. They include debt, continued fiscal imbalance, stubborn high inflation, and a vicious cycle of currency depreciation. These entangled disequilibria have ramifications in and ripple throughout the economy. The Minister highlighted the agriculture, utilities (electricity) and banking sectors, once the drivers of growth, but today riddled with debt and scarce financing.

Debt is holding back recovery

Despite the relief of the 2023 debt restructuring process, Ghana carries external debt service obligations over the next four years, totaling US$8.7 billion. These debt obligations will represent 10.9 percent of the national gross domestic product (GDP) when they mature. Data from the minister show that 55 percent of the total external debt service (US$8.7 billion) has to be serviced in 2027 (US$2.5 billion) and 2028 (US$2.4 billion).

Besides, over the next four years, the country will pay about US$10 billion (GH¢150.3 billion) in domestic debt service obligation. This will represent 11.6 percent of GDP. In 2027, Ghana will repay 73.3 percent, representing US$3.84 billion (GH¢57.6 billion) and US$3.5 billion (GH¢52.5 billion) in 2028. Other liabilities on the domestic front include US$4.5 billion (GH¢67.5 billion) in arrears and payables owed to government contractors and suppliers. The government must also honor MDAs commitments through contract awards over the past years. These contracts have ballooned to US$12.9 billion (GH¢194 billion) or 16.5 percent of GDP.

In the future, the government plans to rebuild the debt service reserve dollar account (Sinking Fund) to manage debt. This fund has fallen to its lowest level in eight years, according to data from Minister Forson.

Deficit, inflation, and Cedi depreciation

Minister Forson said that Ghana has missed its own fiscal targets and benchmarks. Specifically, primary balance on commitment basis target for 2024 was a surplus of 0.5 percent of GDP. Instead, the country recorded a deficit of 3.9 percent of GDP, which represents a slippage of a whopping 4.4 percentage points.

This widening deficit is occurring amidst continued high inflation which has continued to fall but remained at 23.2 percent in 2023 and 23.8 percent in 2024. The country has missed the Bank of Ghana inflation target of 8 percent, the 2024 budget target of 15 percent and the IMF central target of 18 percent.

The national currency, the Cedi, has also come under intensive pressure against major trading currencies in 2024. Minister Forson plans to establish the Ghana Gold Board to stabilize the Cedi. Its primary goal will be to garner foreign exchange inflows and gold reserve accumulation. The government will submit a bill to parliament detailing how the GOLDBOD will work. In a nutshell, the new institution will regulate, oversee, and undertake other related activities concerning the gold resources of Ghana.

Economic sectors in crisis

At the micro-economic level, three sectors are exacerbating Ghana’s domestic debt problems.

Agriculture: The Cocoa sector

1. In agriculture, cocoa, which is the third import item, has declined to historic level. Cocoa has become a source of liability at the domestic level and a source of contractual risks vis-à-vis external buyers.

   The sub-sector faces declining output and financing challenges characterized by unsustainable debt, rollover contracts and quasi-fiscal expenditures, including cocoa roads, a non-core function. Cocoa production has dropped by 50 percent over the past three years. In the 2023/2024 crop season, COCOBOD failed to supply 330,000 tons of cocoa to meet its full contractual obligation.

   These 2023/24 forward sales contracts locked-in at lower prices than current market rates. The transaction resulted in revenue losses of US$840 million for both COCOBOD and impoverished the Ghanaian farmer. the rolled-over contracts caused additional losses of US$495 million in 2025.

   The minister also highlighted risks stemming from market price differentials and smuggling. He said that the enormous gap between market prices and farmer payments encourages smuggling and threatens long-term sustainability of the industry. Finally, COCOBOD’s outstanding debt amounts to US$2.1 billion (GH¢32 billion), of which US$794 million (GH¢11.92 billion) is due to be paid in 2025.

Banking and Finance

1. Two years after the pandemic, the banking sector continues to reel from the devastating consequences of the COVID-19. According to the Minister, the sector requires US$696 million (GH¢10.45 billion) to address the remaining financial sector legacy issues and emerging risks. In addition, an amount of US$146.6 million (GH¢2.2 billion) is required to capitalize two domestic banks: the National Investment Bank and the Agricultural Development Bank. The Minister also told Parliament that the Bank of Ghana is also asking for a bailout of about US$3.5 billion (GH¢53 billion) to address their negative equity position.

Utilities (Electricity - The ECG)

1. The electricity sub-sector suffers from debt, inefficiencies, and climate-induced production fall. These parameters have plunged the sub-sector into debt despite several huge injections of capital. The increasing energy sector financing shortfall has become a source of macroeconomic fiscal risks. The shortfall for the period 2023-2026 was US$9.3 billion (GH¢140 billion). Besides, the electricity sub-sector has large unpaid arrears to independent power producers (IPPs), which reached US$1.73 billion at the end of 2024.

New Fiscal initiatives

Spending cuts

1. The new government wants to control over spending. A renewed emphasis, the Minister says, ‟will lessen government’s reliance on borrowing”. For 2025, Minister Forson will target real GDP growth of at least 4.0 percent, non-oil GDP growth of at least 4.8 percent and inflation rate of 11.9 percent. He also wants to achieve a surplus primary balance (commitment basis) of 1.5 percent of GDP and a three months cover of imports.

Revenue mobilization

1. The government will abolish five taxes. The first is the 10 percent withholding tax on winnings from lottery, otherwise known as the ‟Betting Tax”. Second, is the Electronic Transfer Levy (E-Levy) of 1 percent introduced in 2022. Besides, the government will end the Emission Levy on industries and vehicles, the VAT on motor vehicle insurance policy. It will also abolish the 1.5 percent withholding tax on winning of unprocessed gold by small-scale miners.

   Another key tax reform is the reduction of the current tax refund ceiling by two percentage points from 6 percent to 4 percent. By reducing the ceiling on the tax refund, Mr Forson projects that the country will save US$253 million (GH¢3.8 billion). This amount, he concluded, is enough to close the revenue shortfall after the removal of the E-Levy. The shortfalls amount to US$126.6 million (GH¢1.9 billion) for the E-levy and US$12 million (GH¢180 million) for the Betting Tax.

   The government plans to merge other taxes. This is the case for example, for the Energy Debt Recovery Levy, Sector Recovery Levy (Delta Fund), and Sanitation & Pollution Levy. The three taxes will merge into one levy and their proceeds will reduce energy sector shortfalls and also service the inherited energy debt service obligation. The rest of the energy sector levies, which includes: Road Fund Levy, Energy Fund Levy, Price Stabilization & Recovery Levy, Public Lighting Levy and National Electrification Levy, will remain in place.

   The 2025 budget expects new revenues from an imminent introduction of a technology-driven road tollgate in 2025. Other revenues will stem from the increase of the Growth & Sustainability Levy which increases from one percent on the gross production of mining companies to three percent.

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