The FY 2025 Budget

The Fiscal Year (FY) 2025 budget was presented to parliament on March 11, 2025.

A three-day post budget workshop was scheduled for March 15 through 17, after which parliamentary debate would commence.

The immediate post budget debate has been characterised by some of the usual partisan rhetoric. For some, whether one views what was presented either as “good” or “bad’; “hopeful” or “not hopeful” appears to depend on where one stands politically. 

Regardless, the budget and economic policy statement is important as it sets out not just how government plans to finance its operations (the budget part), but also the priorities it proposes to implement (the economic policy statement part).

Essentially, the budget is both about what the government plans to do and how it intends to pay for it.

As I perused the budget, these are key areas for reflection.

What does the FY 2025 budget tell us?

First, the projected improvement in the budget deficit is quite instructive.

As per Appendix 3A, the FY 2025 shows an overall balance of GH¢56.9 billion.

The budget projects reduction over the next three fiscal years, ending at GH¢14.5 billion in FY 2028. This is a significant reduction of roughly 74 per cent.

This is under the condition that the government repeal key revenue sources such as the E-Levy.

If the assumptions underpinning this projection hold, the government would have succeeded in greatly improving the country’s fiscal picture.

In addition, it potentially reduces the burden on how to finance the deficit.

The future is always unpredictable, which means for the government to stay on this path, it must regularly adjust in the event of changing internal and external factors.

Second, the macroeconomic targets set by the government do not vary much in comparison to the targets set in the FY 2024 budget presented to Parliament on November 15, 2023.

For example, as per that budget, overall GDP growth was projected as follows: FY 2025 (4.4 per cent); FY 2026 (4.9 per cent); and FY 2027 (5.0 per cent).

These targets were set by the previous New Patriotic Party (NPP) government.  

In FY 2025, overall growth targets are set as follows: FY 2025 (Four per cent); FY 2026 (5.1 per cent); and FY 2027 (Five per cent).

This is not to suggest that a growth rate of five per cent is abysmal, but this is an economy that grew by an average seven per cent between 2017 and 2019. 

The cautious approach is well understood. It may be driven by two realities – a) overall GDP growth by an average three per cent between 2022 and 2024; and b) a recognition of the fact that the economic recovery since the IMF Bailout in 2022 may take time to fully materialise.

Third, the structure of the budget, although unchanged in terms of how much government expenditure is consumed by, for example, compensation of employees and interest payments, the government’s projection shows potentially some interesting developments.

Between FY 2025 and FY 2028, wages and compensation, as an expenditure item, are projected to grow from 29 per cent to 33 per cent. 

Over the same period, interest payment as a share of total expenditure is projected to decrease from 24 per cent to 8 per cent.

This means these two combined expenditure items’ share of the government’s budget will decrease from 52 per cent (FY 2025) to 42 per cent in FY 2028. 

The analysis is based on information contained in “Appendix 3A: Summary of Central Government Operations – 2025.”

The assumptions and fiscal policy choices of the government over the next three years will go a long way to determine the extent to which these projected developments will again materialise.

Fourth is the question of when the abolished E-Levy and Covid-19 health levy would go into effect. The budget shows that both sources of revenue are budgeted for in FY 2025 (See Appendix 3A: Summary of Central Government Operations – 2025) but set to zero in FY 2026, 2027 and 2028.

It may just be an art of how budgets are put together, but it struck me as odd to see GH¢517,700,000 (E-Levy) and GH¢3,856,430,000(COVID-19 health levy) budgeted for this fiscal year.

The finance minister promised to bring legislation before the house to give effect to the abolishment of these and other taxes. I suspect clarity will be provided for lay budget readers like me.

What Next?

The government has laid out its priorities for this fiscal year. It has also provided Ghanaians with some indication of how it sees the economy and the country’s fiscal picture developing over the next four years. Finally, the government has provided Ghanaians with its policy and programme priorities too.

Every budget, including projections, is informed by current realities and future assumptions (both internal and external). The key to successful implementation is the ability to respond positively to changing internal and external factors.

More importantly, the promise of fiscal responsibility must be reflected in the daily choices the government makes. 

The writer is the Project Director, Democracy Project