Ghana’s Mid-Year Budget: Stability First, Big Reforms Later – What to Expect

Ghana’s mid-year budget review, set for Thursday, is not expected to unveil any dramatic policy shifts. Instead, the focus will remain on fiscal consolidation and steady implementation of reforms under the International Monetary Fund’s (IMF) Policy Coordination Instrument (PCI), according to Professor Godfred Bokpin, a respected economist at the University of Ghana Business School.

Professor Bokpin told the Ghana News Agency that the government has already signaled its commitment to a two-year austerity plan, spanning 2025 and 2026, before gradually easing spending from 2027. This means the review will likely update revenue and expenditure performance, not announce new policies.

Why No Major Policy Changes?

The government’s overriding priority is fiscal consolidation, a strategy aimed at stabilizing the economy after recent challenges. Professor Bokpin explained that the review, presented under Section 28 of the Public Financial Management Act, 2016 (Act 921), will provide updates on revenue collection, spending execution, and the nearly 20 reforms under the IMF’s PCI. These reforms are designed to build a stronger foundation for growth.

“The government already signaled markets and the public that it would pursue austerity for about two years, spanning 2025 and 2026, before progressively easing spending from 2027,” he said.

Inflation and Revenue: The Numbers Tell the Story

While inflation has outperformed the government’s 2025 target, authorities have kept their original projections unchanged. This suggests the fiscal consolidation framework remains intact. On revenue, Professor Bokpin urged the Finance Minister to provide an update on recent tax measures, including the harmonization of the flat Value Added Tax (VAT) rate with the standard 20% rate, alongside administrative and compliance reforms to boost tax collection.

He also highlighted first-quarter budget execution, which stood at about 70%, as a key indicator of the government’s spending outlook for the second half of the year.

From Stability to Resilience: A Long-Term Vision

Professor Bokpin emphasized that stability is just the beginning. “Stability is not an end but a foundation. From stability, the country must build resilience, and from resilience move toward structural and productivity transformation – a process that will take time.”

This vision aligns with Ghana’s Medium-Term Revenue Strategy, which targets a tax-to-GDP ratio of 18-20% by 2028. Currently, the ratio hovers around 14%, underscoring the challenge of expanding domestic revenue to reduce dependence on external support.

Unlocking Climate Financing: A Missed Opportunity?

Professor Bokpin recommended that Ghana complement the PCI by accessing the IMF’s Resilience and Sustainability Facility (RSF), a concessional financing mechanism already used by countries like Kenya. The RSF would provide dedicated funding for climate-related risks, such as coastal erosion and flooding, which he says Ghana lacks the political will to tackle alone.

“Signing on to the PCI without funding attached, simply moves the country from the emergency ward to the recovery ward of IMF support – not fully out of it. The government must secure the Board’s backing and pursue concessional climate financing without delay,” he warned.

What This Means for Ghana’s Future

For Ghana’s diaspora and business community, the mid-year budget review signals a government committed to fiscal discipline and long-term stability. While major reforms may wait, the focus on revenue mobilization, climate resilience, and IMF-backed reforms offers a roadmap for sustainable growth. As Professor Bokpin noted, delaying climate and revenue reforms will only increase the cost of addressing these challenges.

FAQ: Key Questions About the Mid-Year Budget Review

Will there be any new taxes or spending cuts announced?

No, the review is expected to focus on updating revenue and expenditure performance, not introducing new policies. The government’s austerity plan remains unchanged.

How will this affect businesses and investors?

The emphasis on fiscal consolidation and IMF reforms should provide a stable environment for businesses, though immediate growth may be modest. The government’s long-term vision targets resilience and productivity transformation.

What is the IMF’s Resilience and Sustainability Facility (RSF)?

The RSF is a concessional financing mechanism that provides funding for climate-related projects. Professor Bokpin recommends Ghana access it to address coastal erosion and flooding.

Photo: GhanaWeb