Ghanaian businesses, especially importers and citizens, generally, are testifying to the relatively improved economic conditions. At the ports, importers who pay import duties pegged to the dollar are paying less, thanks to the cedi appreciation.
At fuel stations and shops, prices have eased slightly. For many households, the recent appreciation of the cedi and the removal of some taxes feel like a small but welcome relief after years of economic pressure.
But all is not as rosy for the government. Behind the smiles of citizens and businesses is the strain of the state.
The state’s revenue collectors are facing a growing headache. The Ghana Revenue Authority (GRA) is struggling to meet its targets, and the reasons are becoming clearer by the day.
A stronger cedi and the scrapping of some taxes have brought relief to citizens, but they have also opened a painful hole in government finances.
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When a Stronger Cedi Weakens Revenue
Much of Ghana’s tax income, especially import duties, VAT on imports, and related charges, is pegged in dollars. As the cedi gains strength against the dollar, the same shipment now brings in less revenue when converted into cedis.
For instance, the state was raking in relatively high revenues from the ports when the cedi was around GHC 17 to the dollar. With the cedi now trading around GHC 11 to the dollar, the state is raking in less revenue from the same volume of imports.
For an economy that relies heavily on import taxes, this has become a serious problem. The Commissioner-General of the GRA, Anthony Kwasi Sarpong, has confessed that the recovery of the cedi has hit about 30% of its revenue projections.
What looks like good news for traders and consumers is quietly shrinking the state’s main revenue stream.
The Cost of Scrapped Taxes
The second blow came from tax cuts that were popular with the public. The current government, in its first official budget, scrapped the controversial E-levy. Although the levy was performing behind target, it was filling a gap.
After recording over GHC 600million in the first year of implementation, the levy was picking up as it accrued over GHC1.2 billion in 2023 and GHC2 billion in 2024. This means a whole has been created in the country’s revenue basket. Meanwhile, citizens jubilated massively after the levy was scrapped.
But that is not all, another levy; COVID-19 Health Recovery Levy, has also been scrapped. This has been welcomed by citizens as it is aimed at easing pressure on households and businesses. Many described these taxes as nuisance charges, and their removal was widely applauded.
These taxes, unpopular as they were, brought in steady revenue. Their removal has widened the gap between what the government earns and what it needs to spend on salaries, roads, schools, hospitals, and debt payments.
This is not new. In the past, whenever certain “small” taxes were abolished without clear replacement measures, revenue suffered. The pain usually showed up later in delayed projects, borrowing, or new taxes introduced under pressure.
A Dangerous Drop in Tax Effort
According to Kojo Oppong Nkrumah, Ranking Member on Parliament’s Economy and Development Committee, these combined factors have pushed Ghana’s tax-to-GDP ratio down to about 11 percent.
That figure is worrying. It means the country is collecting very little tax compared to the size of its economy. In many peer countries, the ratio is much higher, giving governments more room to invest and respond to shocks.
At 11 percent, the state is struggling to breathe.
Smiling Citizens, Bleeding Government
The difficult truth is that while citizens enjoy lower taxes and a stronger currency, government finances are weakening. And when the government bleeds, everyone eventually feels it.
The revenue shortfall is risky as it shows up in unpaid contractors, stalled road projects, crowded classrooms, limited hospital supplies, and growing debt.
In the end, the same citizens who benefited from tax relief may pay the price through poorer public services.
The Big Question: Are Ghanaians Willing to Help?
The situation raises a tough but necessary question: are Ghanaians ready to help the state make up for the shortfall?
This does not automatically mean introducing harsh new taxes. It could mean better compliance, closing loopholes, expanding the tax net to cover the informal sector more fairly, and reducing tax evasion. It could also mean honest conversations about which taxes are truly unnecessary and which ones quietly keep the country running.
Many workers already pay their taxes faithfully, while others operate entirely outside the system. Bridging this gap may be less painful than constantly adding new levies.
The Bottomline
There is no doubt that the tax relief and currency stability are good things. But they must be balanced with the reality that the government needs revenue to function. A state that cannot raise enough money cannot protect the vulnerable, build infrastructure, or sustain growth.
The challenge now is finding a middle ground where citizens are not overburdened, yet the government is not starved of funds.
