The Institute of Economic Affairs (IEA) has called for a prudent approach in the 2025 budget to address energy sector debt.
The think tank also urged the inclusion of a detailed strategy in the budget for restoring its financial sustainability and emphasized the need for stable and competitively priced power to support economic growth and improve the country’s investment climate.
In its bi-monthly Economic Outlook, the IEA highlighted the fiscal constraints facing the government, noting the limited room to fund development initiatives.
It suggested that Ghana’s natural resource sector could provide a lifeline for revenue generation, but this would require significant reforms to increase domestic ownership and benefits.
“Tapping this potential will require changes to the natural resource fiscal regimes, along with prioritizing local value addition to these resources to increase receipts,” the report said.
The IEA noted that the 2025 budget is expected to align with the International Monetary Fund’s (IMF) Economic Credit Facility (ECF) programme, of which key targets include reducing the overall fiscal deficit to 2.7% of GDP from 3.5% in 2024 and increasing the primary surplus to 1.5% of GDP.
However, the 2025 budget is also expected to deliver on the government’s pre-election promise to abolish certain taxes, including the E-levy, Covid tax, Emissions tax, and Betting tax.
The IEA believes the removal of these taxes could ease the financial burden on households and businesses, providing a modest boost to economic activity.
To compensate for revenue losses, the government will need to reinforce tax administration, close loopholes, and broaden the tax net. These efforts, the IEA suggested, could offset the fiscal impact while supporting a fairer distribution of the tax burden.
Nonetheless, it commended the government’s commitment to fiscal consolidation, stating that it is critical to sustaining macroeconomic stability, ensuring debt sustainability, and avoiding another debt restructuring.
