Budget responds to business community’s concerns — PwC Ghana Senior Country Partner

The 2025 budget represents a critical pivot for Ghana's economic future, as it aligns with the business community’s concerns and highlights key reforms aimed at stabilising the macroeconomic environment.

The Senior Country Partner of PwC Ghana, Vish Ashiagbor, in a wide-ranging assessment of the budget, said: "The budget speaks to the concerns that the business community has in terms of stabilising the macroeconomic environment and creating an enabling environment for the private sector to thrive."

In a post-budget interview with the Daily Graphic, he said beyond immediate economic stabilisation, the economic policy document also highlighted broader structural reforms, including reviews of the Labour Act, 2003 (Act 651) and the Ghana Investment Promotion Centre Act, 2013 (Act 865), for which he expressed the belief that it would tackle productivity issues and enhance both foreign and local investment opportunities.

The elimination of certain taxes raised questions about potential fiscal impacts, but Mr Ashiagbor expressed confidence in the government's multi-pronged approach to offset revenue losses.

"The government said three things in the budget: Cutting expenditure, plugging the loopholes by tightening commitment and expenditure procedures, and releasing some funds from the tax refund account,” he observed.

The PwC Senior Country Partner added that those measures collectively should maintain reasonable deficit parameters, despite the tax cuts, with projections showing approximately 3.1 per cent on a commitment basis and 4.1 per cent on a cash basis.

Return to the bond market

Mr Ashiagbor said the government's announced return to the domestic bond market was a good initiative.

"We would always have to go back to the bond market at some point, and this is as good a time as any," he stated.

Reflecting on the past fiscal performance, he acknowledged that while Ghana did not significantly miss cash-based deficit targets last year, the commitment-based metrics revealed deeper structural problems.

"On a commitment basis, we were way off, and that is where the issue of commitment control and the problem of arrears comes in," he said.

“This pattern of commitment-based fiscal slippage represents a recurring challenge for Ghana, particularly during election cycles”.

"This is a situation that we faced year-on-year, election-after-election year in that we commit and then we are not able to pay, and then we have arrears,” Mr Ashiagbor stated.

"If you don't have the budget for something, do not commit because once you commit, it becomes a liability on us or the country," he stressed.

Revenue mobilisation

The budget's approach to revenue mobilisation received cautious optimism from the Senior Country Partner, who described it as an encouraging start.

He particularly welcomed initiatives to bring small and medium enterprises (SMEs) and the informal sector into the tax net through education campaigns about civic responsibilities towards tax payment.

Specific measures such as the increase in fiscal stabilisation levy for mining companies were rationalised as appropriate, given current high commodity prices.

"It's designed to be a windfall tax, because the reference was to the fact that prices are high at the moment and, therefore, they should contribute a bit more to the fiscals," Mr Ashiagbor explained.

The Institute of Economic Affairs (IEA) and a professor of Finance at the University of Ghana Business School, Prof. Godfred Bokpin, also posited this point before the budget presentation.

Despite tax cuts in some areas, Mr Ashiagbor stated that overall revenue estimates remained higher than the 2024 figures, suggesting confidence in the government's ability to enhance collection efficiency.

"Even though some of the revenues have been scrapped, and we've been told that the Value Added Tax (VAT) system will be reorganised in due course, the revenue estimate is higher than what we did in 2024," he said.

Missed targets

The admission that Ghana missed some targets under its International Monetary Fund (IMF) programme raised questions about potential renegotiations and market confidence.

Mr Ashiagbor said while he was not aware of categorical statements about renegotiating with the IMF, ongoing dialogue with the fund continued.

"I know that there's been consistent dialogue with the fund," he stated.

However, he acknowledged that missed targets could delay access to IMF funds since the drawdown of the IMF was linked to the attainment of targets.

Shock therapy

The Senior Country Partner referenced the Finance Minister's mention of applying "shock therapy" to the economy, which he supports.

"We need to shake ourselves to get on track. There isn't any time to slack," he stated, suggesting urgent action was needed to address fundamental economic challenges.

He expressed optimism that goodwill from both the market and the IMF would help navigate current challenges, adding "I'm sure there will be a way out.”