With Finance Minister Dr Cassiel Ato Forson set to present the government’s first budget on March 11, 2025, the Institute for Fiscal Studies (IFS) has cautioned against unrealistic revenue projections, warning that persistent overestimation could undermine fiscal credibility and weaken policy implementation.
According to the economic policy think tank, “credible budgeting is crucial for effective fiscal policy, as it fosters confidence and enhances the likelihood of meeting expenditure and development goals. However, Ghana has a poor track record in this regard, with actual revenue consistently falling short of projections.”
Economist with the Institute, Dr Said Boakye contends that between 2013 and 2023, actual total revenue and grants were below budgeted targets every year, with an average deviation of -7.4%.
Under the Public Expenditure and Accountability (PEFA) framework, which assesses public financial management, Ghana’s annual revenue deviation met the ideal range of -3% to +6% in only two out of the 11 years within the same period.
As the government prepares to unveil its economic plans for 2025, the IFS has urged the Finance Ministry to ensure that revenue projections are based on realistic assessments of the country’s economic conditions rather than overly optimistic targets.
Measures for Improvement
To enhance budget credibility, the IFS recommends that the Ministry of Finance review its macro-fiscal forecasting framework to eliminate optimism bias in revenue projections, strengthen data collection and analysis to improve revenue impact estimates for new tax policies.
“The failure of the e-levy, which generated only 8.5% of its projected revenue in 2022, highlights the need for more accurate forecasting,” Dr Boakye noted.
He called on the Ministry of Finance to engage independent experts to assess and provide guidance on revenue projections and also adopt a conservative approach to revenue targets, focusing on realistic revenue collection capacity rather than aspirational figures.
Meanwhile Minister of State in charge of Government Communication, Felix Kwakye Ofosu, has announced that Cabinet has officially approved the 2025 Budget, paving the way for its presentation to Parliament on March 11, 2025. Kwakye Ofosu disclosed at a press briefing that the budget aligns with government’s economic priorities.
The budget is expected to detail plans to streamline Ghana’s tax structure, including reviewing the Value Added Tax (VAT) and eliminating some levies. The government has confirmed its commitment to scrapping the Betting Tax, e-Levy, and COVID-19 Levy, a move expected to provide relief to businesses and consumers.
