National Economic Dialogue, the 2025 Budget

Economic issues, including price inflation, the declining value of the cedi against the dollar and stubbornly high unemployment, especially among the young, contributed to the unpopularity of the last government, significantly undermining the chances of the NPP’s Dr Mahamudu Bawumia being elected as Ghana’s President. 

President Mahama’s government inherited a poor economic position from the last administration.

The African Development Bank (ADB) recently reported that Ghana’s medium-term growth outlook was positive, with gross domestic product (GDP) growth projected to grow from 3.4 per cent in 2024 to 4.3 per cent in 2025.

GDP growth would stem from industry and services on the supply side and private consumption and investment on the demand side.

Price inflation is expected to drop from 20.9 per cent in 2024 to 11.1 per cent in 2025. 

The fiscal deficit – that is, the difference between a government’s total expenditure and its total revenue in a specific period, usually a fiscal year – is projected to drop to 4.2 per cent in 2025 from 4.9 per cent in 2024, reflecting continuing fiscal consolidation efforts.

The ADB, which expects the current account deficit to widen from 1.9 per cent in 2024 to 2.3 per cent in 2025, also points to several problematic factors affecting Ghana’s economy, including: ‘the impact of fiscal consolidation under the Post-Covid Programme for economic Growth’, continuing effects of Russia’s invasion of Ukraine, limited access to finance and foreign exchange, and global macroeconomic shocks.

The ADB advises that ‘prudent macroeconomic management policies could mitigate the risks’.

Fiscal discipline

This was the backdrop for Ghana’s 2025 budget which unsurprisingly attracted significant discussion, including its alignment with the recommendations of the seven-member National Economic Dialogue (NED) Planning Committee, appointed by President Mahama at the end of January.

The NED included gathered key stakeholders, invited by President Mahama to propose strategies to address Ghana's pressing economic challenges.

An examination of the government's response to the NED’s recommendations reveals both strengths and shortcomings.

A central NED recommendation was the crucial importance of fiscal discipline, as well as improved coordination between fiscal and monetary policies and comprehensive tax reforms to enhance revenue generation.

In response, the government introduced several measures designed to strengthen the nation's fiscal health.

These included enhanced and expanded tax reforms, including stronger enforcement of property taxes and adjustments to the value-added tax (VAT) rate.

Stricter expenditure controls were also announced, in order to improve public financial management, alongside plans to restructure state-owned enterprises (SOEs) in the energy and cocoa sectors to mitigate against fiscal risks.

Finally, new guidelines on debt management were established to ensure limited excessive borrowing while prioritising concessional financing.

Despite these commendable efforts, notable shortcomings remain.

These include the need for a clearer, more explicit road map to reduce Ghana’s debt burden, as well as a clearly defined target to achieve fiscal sustainability and enhanced incentives to strengthen tax compliance.

The concern is that without these additional elements, the budget’s potential impact will be limited, which in turn will deleteriously affect the chances of economic recovery.

The NED also underscored the significance of private sector growth as a critical driver of economic advancement.

In response, the government's initiatives included enhanced efforts to simplify business registration processes and to redirect a portion of banks’ cash reserves towards financing small and medium-sized enterprises (SMEs).

Participation in the African Continental Free Trade Area was another NED focus, with resources allocated to strengthen Ghanaian businesses’ engagement in regional trade.

Additional measures could further enhance private sector support, including tax relief for small businesses, lower borrowing costs, and greater incentives for innovation and technological advancement.

Reforms

Finally, governance and anti-corruption reforms were high on NED’s agenda.

In response, the government promised increased funding for anticorruption agencies in the 2025 budget, as well as reforms to link public sector wages to productivity gains.

As ever, however, enforcement of such initiatives is crucial, and the ability of the government to push through reforms remains a challenge.

Robust and workable digital solutions for transparency, increased protection for whistle-blowers and stricter penalties for serious corruption at both state levels and in the private sector are essential to ensure the effectiveness of these reforms.

Conclusion

In conclusion, the 2025 budget takes significant steps towards addressing the NED recommendations.

But there are also gaps, indicating several areas for improvement.

These include a serious commitment to debt reduction, increased incentives for the private sector, and rigorous and sustained anticorruption enforcement efforts; all are essential for the 2025 budget to serve as a genuine catalyst, to kick-start Ghana’s sustained economic recovery.

The new government has four years to make its mark on the economy; the 2025 budget is an important starting point but the overall success of the Mahama administration will be judged at the ballot box in December 2028.

Ultimately, the success of the 2025 budget and its successors will be measured by its tangible impact on the lives of ordinary Ghanaians, businesses and investors.

The writers are an Emeritus Professor of Politics, London Metropolitan University, UK and a Political Scientist