2025 Budget: Politically convenient but economically risky

The 2025 Budget, presented under the theme “Resetting the Economy for the Ghana We Want,” paints a picture of fiscal discipline and economic transformation. At first glance, it appears to respond to the concerns of ordinary Ghanaians by removing unpopular taxes, increasing social spending, and promising economic growth.

However, a deeper look reveals that this budget is politically convenient but economically risky. It prioritises short-term electoral gains over long-term fiscal sustainability, introducing policies that sound good but lack the necessary financial backing. If these gaps are not addressed, Ghana could find itself in a deeper economic crisis, forced into future tax hikes or unsustainable borrowing.

The Illusion of Fiscal Discipline

The government claims to be reducing the budget deficit, presenting a projected deficit of 3.1% of GDP on a commitment basis, down from 7.9% in 2024. On the surface, this suggests tighter spending controls and improved fiscal health.

However, the reality is different. Total government expenditure has actually increased from GH¢226.7 billion in 2024 to GH¢269.1 billion in 2025, a GH¢42.4 billion rise. The only reason the deficit appears smaller is that GDP projections have increased, not because the government is actually spending less.

This raises a key question: If expenditure is rising, but key revenue sources like E-Levy and the Betting Tax are being removed, how will the fiscal gap be filled?

The Unexplained Revenue Shortfall

The government has abolished five major taxes, including the E-Levy, Betting Tax, and Emission Levy, which were unpopular among the public. While this might score political points, it removes important revenue streams without introducing clear alternatives.

To make up for the shortfall, the budget proposes stricter tax compliance measures and VAT reforms, but these are highly uncertain revenue sources. Compliance measures take time to yield results, and without a clear enforcement strategy, the government’s revenue projections may fall short.

Additionally, the reintroduction of road tolls and an increase in the mining levy are expected to compensate for lost revenue, but these will not generate enough funds to cover increased spending.

The reality is simple: Ghana is spending more while cutting revenue sources, hoping that increased tax compliance will magically fill the gap. This is a high-stakes gamble.

Tax Refund Cuts: A Hidden Tax Increase

One of the most overlooked but significant policies in the 2025 Budget is the reduction of tax refunds from 6% to 4%. The Finance Minister justified this by claiming that only 43% of tax refunds were actually being paid, with the remaining 57% being reallocated elsewhere.

But what does this mean in real economic terms?

• Businesses that rely on tax refunds to improve cash flow will suffer.
• It indirectly increases the tax burden on businesses, forcing them to operate with less liquidity.
• This discourages reinvestment and job creation, potentially slowing down private sector growth.

The government is effectively saying, “We will take your tax money, but we won’t return what we owe you on time.” Instead of fixing the inefficiencies in tax refunds, it is shrinking the refunds altogether, a policy that will hit businesses hard.

Uncapping GETFund: A Fiscal Risk Without a Backup Plan

On the positive side, the budget uncaps GETFund, ensuring that all revenue collected from the Education Trust Fund Levy goes directly into education. This is a good move for financing Free SHS and other educational needs.

However, this decision removes the flexibility that the government previously had to redirect some of these funds elsewhere. Since GETFund was previously capped, the government used part of the funds to fill fiscal gaps in other sectors.

With this cap now removed, where will the government find replacement funds to fill the fiscal hole in other areas? The budget does not answer this question, leaving an unaddressed funding gap that could force new borrowing or cuts in other essential sectors.

The “24-Hour Economy” Gimmick

The budget promotes the 24-Hour Economy as a major policy to drive economic growth and job creation. However, the details are alarmingly vague:

• The budget says the Labour Act and Investment Promotion Act will be reviewed, but it does not explain how night-shift workers will be compensated or protected.
• It does not offer direct incentives for businesses to transition to a 24-hour operational model.
• There are no employment targets tied to this policy.

Without these important details, this sounds more like a political slogan than an actionable economic strategy.

The Energy Sector’s Unresolved Debt Crisis

The government acknowledges a GH¢35 billion energy sector shortfall, yet the budget fails to present a clear strategy to address it.

Key risks include:

• Electricity Company of Ghana (ECG) debt rising to GH¢68 billion, threatening power sector stability.
• Independent Power Producers (IPPs) owed $1.73 billion, raising the risk of power cuts.
• Energy sector levies being consolidated, but without enough revenue to close the deficit.

This sector remains a ticking time bomb, and the budget does not provide a long-term fix to prevent another energy crisis.

Gold Board Solution – A Sham?

The government proposes using Ghana’s gold reserves to stabilise the cedi, but there is no detailed explanation of how this policy will succeed where they think the Gold-for-Oil programme failed.

• The budget says the Ghana Gold Board (GOLDBOD) will manage this, but it does not explain how it will avoid previous policy failures.
• If Gold-for-Oil failed to stop cedi depreciation as they claimed, why should we believe this new strategy will work?
• Without transparency and clear implementation, this looks more like a gimmick than a serious economic policy.

Conclusion: A Budget of Contradictions

The 2025 Budget tries to sell the illusion of economic recovery, but in reality, it is built on risky assumptions and hidden fiscal holes.

1. It removes taxes without replacing them, hoping tax compliance will increase.
2. It increases spending without clear revenue sources, creating new fiscal risks.
3. It cuts tax refunds, indirectly burdening businesses while claiming to be pro-business.
4. It uncaps GETFund but does not explain how it will cover the fiscal gap this creates.
5. It promotes the 24-Hour Economy but provides no real plan for implementation.

If revenue projections fail to materialise, Ghana will have no choice but to either increase taxes in the future or borrow more, contradicting the budget’s claim of fiscal discipline.

This is a budget designed for political convenience, not economic sustainability. While it makes short-term promises to appease voters, it creates long-term risks that could destabilise the economy further.

The government must revise its revenue strategy, clarify funding sources, and provide realistic implementation plans, otherwise, this budget could set the stage for future economic instability rather than the reset it promises.