Ghana's Mid-Year Budget Review Highlights Economic Recovery and Fiscal Strategy

Minister of Finance Presents 2025 Mid-Year Budget Review: Key Highlights on Ghana's Economic Recovery and Fiscal Strategy

In a highly anticipated session in Parliament, Ghana's Minister of Finance, Dr. Mohammed Amin Adam, delivered the 2025 Mid-Year Budget Review, providing a comprehensive update on the nation's fiscal performance for the first half of the year and outlining projections and adjustments for the remainder of 2024 and into 2025. The presentation, streamed live and attended by parliamentarians, economic experts, and stakeholders, underscored the government's commitment to economic stability amid global uncertainties, including inflationary pressures and geopolitical tensions. Dr. Adam emphasized that the review aligns with Section 28 of the Public Financial Management Act, 2016 (Act 921), which mandates periodic fiscal updates to ensure transparency and accountability in public finance management.

The Minister began by painting a picture of Ghana's macroeconomic environment, highlighting both achievements and challenges. He noted that the economy has shown resilience, with provisional GDP growth for the first quarter of 2024 estimated at 4.7%, surpassing the initial projection of 3.1%. This growth is attributed to robust performances in the agriculture, industry, and services sectors. Agriculture, a cornerstone of Ghana's economy, grew by 4.1%, driven by improved cocoa production and government interventions like the Planting for Food and Jobs program. The industrial sector expanded by 6.8%, fueled by mining activities and manufacturing, while services grew by 3.3%, supported by tourism recovery and digital economy initiatives.

On inflation, Dr. Adam reported a downward trend, with the headline inflation rate dropping to 23.1% in June 2024 from 42.2% in June 2023. This decline is credited to prudent monetary policies by the Bank of Ghana, including interest rate adjustments and foreign exchange interventions. However, he cautioned that food inflation remains elevated at 24.4%, influenced by seasonal factors and global commodity price fluctuations. The Minister projected that inflation would continue to ease, targeting a single-digit rate by the end of 2025, contingent on sustained fiscal discipline and external stability.

Fiscal performance was a central theme of the review. The Minister disclosed that total revenue and grants for the first half of 2024 amounted to GH¢74.5 billion, representing 49.5% of the annual target. This figure includes tax revenues of GH¢59.8 billion, non-tax revenues of GH¢12.3 billion, and grants of GH¢2.4 billion. He highlighted improvements in tax administration, such as the implementation of the Electronic VAT system and enhanced compliance measures, which have boosted domestic revenue mobilization. On the expenditure side, total expenditures and arrears clearance stood at GH¢82.3 billion, or 47.2% of the budgeted amount. Key spending areas included compensation of employees (GH¢24.6 billion), goods and services (GH¢8.9 billion), and interest payments (GH¢22.1 billion).

Dr. Adam addressed the fiscal deficit, noting that it narrowed to 4.2% of GDP on a cash basis in the first half of 2024, compared to 5.8% in the same period last year. This improvement reflects the government's adherence to the IMF-supported Post-COVID-19 Programme for Economic Growth (PC-PEG), which has facilitated debt restructuring and external financing. Speaking on debt sustainability, the Minister revealed that Ghana's public debt stock as of June 2024 was GH¢611.2 billion, equivalent to 76.9% of GDP, down from 88.1% at the end of 2023. He attributed this to successful negotiations with official creditors and bondholders, including the recent agreement with the Official Creditor Committee to restructure $5.4 billion in bilateral debt. The Minister assured Parliament that ongoing talks with Eurobond holders aim to achieve comparable treatment, paving the way for debt relief and renewed access to international capital markets.

Sectoral allocations and policy adjustments formed a significant portion of the presentation. In education, the Minister announced an additional GH¢1.5 billion for the Free Senior High School program to cover infrastructure upgrades and teacher training, emphasizing the government's goal of achieving universal access to quality education. Health sector funding was bolstered by GH¢2.2 billion, directed towards completing Agenda 111 hospital projects and enhancing vaccine procurement amid global health risks. Agriculture received a boost with GH¢800 million allocated for irrigation schemes and fertilizer subsidies, aiming to mitigate climate change impacts and ensure food security.

Infrastructure development was highlighted as a driver of long-term growth. Dr. Adam outlined investments in road networks, with GH¢3.4 billion earmarked for ongoing projects like the Accra-Kumasi dual carriageway and rural road improvements. The energy sector saw provisions for GH¢1.8 billion to address power generation challenges, including renewable energy initiatives to reduce reliance on thermal plants. The Minister also touched on digital transformation, allocating GH¢500 million for the expansion of the Ghana Digital Economy Project, which includes broadband infrastructure and e-governance platforms to foster innovation and job creation.

Social protection programs were not overlooked. The Livelihood Empowerment Against Poverty (LEAP) program will receive an additional GH¢300 million to support vulnerable households, while the National Health Insurance Scheme (NHIS) gets GH¢1.2 billion to expand coverage and reduce out-of-pocket expenses. Dr. Adam stressed the importance of these interventions in cushioning the impact of economic reforms on low-income groups, aligning with the government's inclusive growth agenda.

Looking ahead to 2025, the Minister projected a GDP growth rate of 5.0%, driven by continued recovery in key sectors and external support. Revenue is expected to reach GH¢198.7 billion, with expenditures capped at GH¢219.4 billion, resulting in a fiscal deficit of 3.5% of GDP. He outlined tax policy measures, including the introduction of a green tax on high-emission vehicles to promote environmental sustainability and generate revenue. Additionally, the government plans to rationalize exemptions in the extractive sector to enhance resource mobilization.

On external factors, Dr. Adam discussed the global economic outlook, noting risks from the Russia-Ukraine conflict and Middle East tensions that could affect oil prices and remittances. He reaffirmed Ghana's commitment to the IMF program, which has unlocked $1.2 billion in disbursements so far, with another tranche expected upon successful review. The Minister called for bipartisan support in Parliament to pass enabling legislation, such as amendments to the Income Tax Act, to implement these fiscal strategies effectively.

In his concluding remarks, Dr. Adam expressed optimism about Ghana's economic trajectory, stating that the nation is on the path to sustainable growth and debt sustainability. He urged all Ghanaians to contribute to national development through tax compliance and productive engagement. The presentation sparked lively debates in Parliament, with opposition members questioning the realism of growth projections and calling for more transparency in debt negotiations. Government MPs, however, praised the review as a testament to prudent management under challenging circumstances.

This mid-year budget review not only provides a snapshot of Ghana's fiscal health but also sets the stage for policy continuity into 2025. As the country navigates post-pandemic recovery and prepares for elections, the outlined measures aim to balance economic stability with social welfare, ensuring that growth benefits all segments of society. Stakeholders will be watching closely as implementation unfolds in the coming months.

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