- but concerns over growth, revenue, CAPEX persist
By Joshua Worlasi AMLANU and Ebenezer Chike Adjei NJOKU
The 2025 budget has been praised for introducing a number of initiatives, including tax relief measures, aimed at easing financial pressures on businesses and individuals.
However, concerns persist over the feasibility of its ambitious revenue targets, modest economic growth projections, limited capital expenditure and the prevailing tax framework.
During a review organised by the Institute of Statistical, Social and Economic Research (ISSER), Director Professor Peter Quartey highlighted the mixed outlook presented by the fiscal plan.
While tax measures could provide a boost to economic activity, he noted that government’s projected Gross Domestic Product (GDP) growth of 4 percent falls below the sub-Saharan Africa (SSA) average of 4.2 percent – raising doubts about the economy’s recovery prospects.
“Although the budget inspires hope, particularly with the tax reliefs, we cannot overlook the fact that Ghana’s projected GDP growth remains below the regional average,” Prof. Quartey said.
“This is largely due to high interest payments and low capital investment, both of which limit the economy’s capacity to expand. Investments in recent years have also been less efficient, reducing their impact on productivity and job creation,” he added.
Government aims to increase total revenue collections by 20.5 percent in 2025.
However, ISSER analysts remain sceptical – citing historical trends. In 2024 government missed both revenue and expenditure targets, collecting only 15.9 percent of GDP in revenue instead of the projected 17.4 percent while expenditure reached 23.7 percent of GDP, surpassing the target of 21.5 percent.
“From experience, achieving such an ambitious revenue increase is unlikely. In 2024, both revenue and expenditure projections were missed and unless significant structural improvements are made, we may see a repeat in 2025,” Prof. Quartey explained.
Reforms
On a similar tangent, tax experts at PricewaterhouseCooper’s (PwC) Ghana urged government to ensure efforts aimed at simplifying the Value Added Tax (VAT) system and review tax exemptions are followed through, arguing that current complexities contribute to revenue shortfalls and compliance challenges.
Speaking at the PwC 2025 Budget Digest, Abeku Gyan-Quansah, Tax Partner at PwC, underscored the need for clarity and efficiency in tax policies to enhance compliance and revenue mobilisation.
Mr. Gyan-Quansah expressed concern over the current VAT system’s complexity, noting that multiple tax layers create confusion for businesses.
“We have about ten different VAT-related rates,” he explained, breaking them down into standard VAT (15 percent), additional VAT rates (10 percent and 5 percent) and sector-specific VAT structures.
“Each of these has zero-rated categories, making compliance difficult. When you add upfront VAT on certain imports, the system becomes even more complicated,” he remarked.
He argued that such complexity often leads to unintentional non-compliance.
“Many businesses may fail to comply with VAT regulations not out of tax evasion but due to confusion about when and how different rates apply,” he said.
The PwC partner welcomed government’s plans to reform VAT, stating that simplification would enhance compliance and reduce administrative inefficiencies.
Beyond VAT, PwC raised concerns about inconsistencies in the tax exemptions regime.
Mr. Gyan-Quansah highlighted disparities in how exemptions are granted, particularly in the energy sector where some companies receive full tax waivers while others pay the full tax burden.
“In the energy sector, some entities are exempt from tax entirely and are not even required to file tax returns,” he noted, warning that such inconsistencies distort competition and create an uneven playing field.
Tax exemptions cost the economy an estimated GH¢4billion annually, according to government reports.
The Tax Exemptions Act, 2022 (Act 1083) was introduced to bring more oversight to the process, requiring annual reporting to parliament.
However, Mr. Gyan-Quansah questioned whether this requirement is being enforced.
“Has there been a report to parliament on exemptions granted so far?” he asked.
This comes as broader fiscal challenges persist. The current tax-to-GDP ratio remains below the African average and the 2025 budget hopes to bring it within the continental benchmark of 16 percent.
PwC further argued that a clearer and more structured tax policy is essential for long-term improvements.
Seth Terkper, Presidential Advisor on the Economy, echoed these concerns – stating the need for regular VAT threshold adjustments to prevent inflation from increasing the tax burden on consumers and businesses.
“When VAT thresholds are not adjusted in line with inflation, taxpayers end up paying more in real terms,” he said.
The former finance minister also defended VAT’s original purpose, stating that it was introduced in 1998 as a broad-based consumption tax to replace inefficient levies.
However, he acknowledged that Ghana’s tax system has become increasingly fragmented.
“The VAT system was meant to streamline taxation, but over time numerous levies have been added… complicating compliance and administration,” he remarked.
In its commentary, Deloitte underscored the urgency for this reform to be initiated and completed within the 2025 calendar year; hence ensuring businesses can benefit from these changes sooner rather than later.
“The expected VAT reform would be much welcomed by the business community, and we look forward to this being initiated and completed in this calendar year. The business community is also looking forward to ‘realignment’ of import duties, especially on production inputs, to enable it grow and provide the necessary jobs in the economy,” Daniel Kwadwo Owusu, its Country Managing Partner said.
Prof. Godfred Bokpin, an economist and professor of finance at the University of Ghana Business School (UGBS), has described the 2025 budget as positive, particularly government’s resolve to remove taxes such as the E-levy and COVID levy, as well as the decoupling of value-added tax (VAT).
He said this removal will ease the burden on already struggling individuals and businesses.
He however noted that the decoupling of VAT should result in a rate not above 18 percent, a threshold that he said is necessary for business sustainability and profitability.
Prof. Bokpin, who spoke in Accra at an event organised by the Ghana National Chamber of Commerce and Industry (GNCCI), dubbed ‘2025 Budget Review: The Chamber National Dialogue Series’, also called for urgent reforms to encourage local production.
He lamented that the economy’s current structure and fiscal regime makes it “actually cheaper to import and put your logo on a product than to produce locally”.
“This is simply because there is high production cost,” he said, adding that the way forward is to derisk the macroeconomic environment… making it conducive for businesses to operate.
“In my opinion, this is what the 2025 budget seeks to achieve, but we are waiting to see how the implementation goes,” he noted.
Meanwhile, to fill the gap that removing these tax handles will create, Prof. Bokpin said government must as a matter of urgency create a taxable economy robust enough to support its revenue aspirations.
“We must be deliberate in creating a taxable economy capable of supporting our revenue targets. Without this we will end up overtaxing a few, which is not right,” he further stated.
Another key area crucial for sustainable growth, he said, is the ease with which people and goods move from one place to another.
“Any economy that does not make it easy for the movement of goods and people will have low productivity,” he said, noting that the country could create a conducive environment that encourages private participation in the delivery of critical public infrastructure like roads and rail lines.
Fiscal, sectoral concerns
The fiscal deficit remains a significant challenge, with the country recording a 7.9 percent deficit in 2024.
Government also posted a primary balance of -3.9 percent of GDP, indicating continued reliance on borrowing. With interest payments projected to rise by 37 percent in 2025 – consuming 28.54 percent of total revenue – ISSER has called for better debt management and strengthening the Sinking Fund to mitigate default risks.
Beyond fiscal concerns, the performance of key economic sectors also came under scrutiny. Despite tax reliefs and measures to promote exchange rate stability, industry growth is expected to slow from 7.1 percent in 2024 to 3.8 percent in 2025. ISSER analysts questioned why these incentives had not translated into stronger growth prospects.
“Despite various tax reliefs and policies aimed at supporting industrial growth, the sector is projected to slow down. This raises concerns about the effectiveness of our policy interventions,” Prof. Quartey remarked.
ISSER emphasised the need for stronger fiscal discipline, advocating an independent fiscal responsibility council to enhance transparency and prevent fiscal slippages. “There is an urgent need to reset our mindset through civic education, reduce corruption and promote value for money,” Prof. Quartey said.
“Without fiscal discipline, many of these projections will remain unrealistic,” he added.
Low capital spending
Concerns have also been expressed over low capital expenditure (CAPEX) despite an expansion of social intervention programmes.
Government projects total expenditure as a percentage of GDP to decline from 23.7 percent in 2024 to 19.2 percent in 2025, as it aims to keep its commitment to fiscal consolidation.
However, Capital Expenditure (CAPEX) remains low at 2.4 percent of GDP; only marginally down from 2.5 percent the previous year.
The Institute of Economic Affairs (IEA) has repeatedly warned that underinvestment in infrastructure and productive sectors could hinder long-term growth.
“The inadequacy of CAPEX in our budgets continues to be a drag on growth,” the IEA stated in comments about the budget.
It also noted that the 2025 growth projection of 4.0 percent, down from 5.7 percent in 2024, falls below the country’s potential
The budget’s expenditure pattern is driven largely by social intervention programmes including Free Senior High School (SHS), trainee allowances and the Livelihood Empowerment Against Poverty (LEAP) programme.
Additionally, the 2025 budget introduces new initiatives such as free first-year university fees, free primary healthcare and free sanitary pads for schoolgirls.
While acknowledging the benefits of these programmes, the IEA cautioned that they come at the expense of much-needed investments in infrastructure and industrial expansion.
“Because the budget is dominated by compensation of employees and free benefits, investment spending is severely constrained, limiting economic growth,” the institute observed.
A breakdown of the budget reveals that while GH¢28.4billion is allocated to education and GH¢12.7billion to health, the majority – GH¢27.1billion and GH¢12.2billion respectively – will go toward salaries and allowances.
In contrast, CAPEX allocations for these sectors remain low, with education receiving only GH¢120million and health GH¢310million.
