Can Ghana’s 2025 budget support growth targets?

Ghana's Minister of Finance is set to present the 2025 budget proposal to parliament today after receiving approval from the cabinet. The country is on the brink of a crucial turning point, with the budget expected to play a pivotal role in supporting Ghana's growth targets amidst challenging economic conditions. Rhode Luemba, Head of Flow Sales in Global Markets at Standard Bank, recently joined CNBC Africa to delve into expectations surrounding the budget presentation, the country's GDP trajectory, and what lies ahead in the Eurobond market. The budget deficit, budget expenditure, and revenue are crucial aspects that will be closely scrutinized in this year's proposal. In 2024, expenditure stood at 226.7 billion, exceeding revenue which came in at 176.4 billion, resulting in a budget deficit of 5.9% of GDP. While projections for this year's budget remain undisclosed, it is anticipated to address key policy directions and economic strategies to stabilize the economy, foster growth, and tackle fiscal challenges. One contentious issue expected to be addressed is the introduction of controversial taxes such as the electronic transfer levy (e-levy), the COVID-19 health levy, and betting taxes, which have burdened the population. External borrowing poses another challenge for Ghana, with the IMF capping extended external borrowing at $250 million to maintain debt sustainability. Despite these constraints, Ghana has made strides in restructuring debt and negotiating bonds to reduce debt-to-GDP ratio, aiming for a ratio below 55% and a further decrease to 18% by 2028. The government's focus on fiscal prudence and consolidation aligns with its promises of job creation, business growth, and increased credit to the economy. However, balancing fiscal burdens with job creation and inflation control remains a delicate task. In 2024, Ghana recorded a commendable growth of 5.7%, despite challenges like high inflation, indicating positive economic prospects. To sustain this growth and address unemployment and inflation, a harmonious interplay between fiscal and monetary authorities is essential. Plans to bring inflation down to single digits and facilitate credit flow are strategies to kickstart economic revitalization. Attention must also be directed towards infrastructure development and social interventions to fulfill campaign promises and bolster economic stability.