Oforikrom MP Tackles Budget Statement

The Budget Statement and Economic Policy of the Government of Ghana for the 2025 Financial Year, as presented by the Finance Minister, hinges on several optimistic assumptions that warrant closer scrutiny.

I have seen the likes of Franklin Cudjoe counting the chickens before they are hatched. I honestly do not want to go into the compensation amounts for the office of government machinery and other departments. I also do not want to go into the freeze of employment because of so called surplus labour.

I will also not go into the possible adjustments in utilities. They say the devil is in the detail and the sweetnesss of the pudding is in the eating.

Firstly, while the government has abolished certain taxes, it anticipates increased revenues from natural resources and VAT reforms.

A key component of this strategy is the increase in the Growth & Sustainability Levy on gold from 1% to 3%. However, this assumption may be precarious if gold production declines or if global gold prices fall.

What contingency plans does the government have in place to address potential declines in gold prices, given the heavy reliance on this sector for revenue?

Moreover, the increased levy could deter investment in the mining sector, potentially leading to reduced production, job losses, and ultimately, lower-than-expected revenue from natural resources.

How does the government plan to mitigate these risks and ensure that the anticipated revenue targets are met?

The budget also proposes a reduction in the tax refund account allocation to compensate for potential shortfalls in tax revenues.

This approach seems speculative, as it largely depends on the Ghana Revenue Authority (GRA) meeting its revenue targets. What measures are in place if the GRA fails to achieve these targets, especially if revenues do not surpass or even match those of 2024?

Historically, approximately 46% of the funds in the tax refund account have been used for tax refunds, with the remainder allocated to government projects. Redirecting some percentage of these funds back into the consolidated fund may not effectively address revenue shortfalls, as these funds were already being utilized for government expenditures.

How does this reallocation genuinely enhance revenue collection or address budgetary gaps?

Additionally, the budget’s analysis of the government’s financial relationship with the Bank of Ghana (BOG) raises questions. The BOG’s current position is largely due to the economic impacts of COVID-19, which necessitated its role as the lender of last resort when international capital markets were inaccessible. Like many central banks during the pandemic ( Argentina, Chile, Brazil, Singapore, Philipine’s, Turkey and UK), the BOG came in to stabilize the economy, even taking a haircut on both principal and interest. If the government repays its debt to the BOG, recapitalization may not be necessary. How can the government justify framing this as a bailout when the BOG acted in response to the government’s financial needs?

The politicization of financial policy discussions is concerning, and it is crucial to maintain transparency and accountability in addressing these complex fiscal challenges.