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FULLTEXT Finance Minister Dr Ato Forsondelivers 2025 Mid- Year Budget Review

Comprehensive Summary of Ghana's 2025 Mid-Year Budget Review Presented by Finance Minister Dr. Cassiel Ato Forson

In a detailed address to Parliament, Finance Minister Dr. Cassiel Ato Forson outlined the government's mid-year fiscal and economic policy review for 2025, providing a comprehensive update on Ghana's economic performance, fiscal adjustments, and strategic priorities amid global and domestic challenges. The presentation, which served as a pivotal moment to assess progress against the initial budget targets set earlier in the year, emphasized resilience, recovery, and sustainable growth. Dr. Forson highlighted the government's commitment to macroeconomic stability, debt sustainability, and inclusive development, while addressing headwinds such as inflation, currency fluctuations, and external shocks.

Economic Performance and Growth Projections

The Finance Minister began by reviewing Ghana's overall economic performance in the first half of 2025. He reported that real GDP growth had reached 4.8% year-on-year, surpassing the initial projection of 4.2%. This growth was driven primarily by robust performances in the agriculture and services sectors, with agriculture expanding by 5.6% due to favorable weather conditions and increased investments in mechanization and irrigation under the Planting for Food and Jobs initiative. The services sector, including tourism and financial services, grew by 5.2%, benefiting from digital economy advancements and a rebound in international travel.

However, the industrial sector faced challenges, growing at a modest 3.1%, hampered by energy supply issues and rising input costs. Dr. Forson attributed these setbacks to global commodity price volatility, particularly in oil and minerals, which affected mining output. Despite these hurdles, the Minister expressed optimism, revising the full-year GDP growth forecast upward to 5.0%, contingent on continued fiscal discipline and external support. He noted that this growth trajectory aligns with the government's medium-term target of achieving 6% annual growth by 2027, as outlined in the Post-COVID-19 Programme for Economic Growth (PC-PEG).

On the inflation front, Dr. Forson reported a significant decline, with headline inflation dropping to 18.5% in June 2025 from 23.1% at the end of 2024. This moderation was credited to prudent monetary policies by the Bank of Ghana, including interest rate adjustments and enhanced foreign exchange management. Food inflation, a key driver, eased to 20.2%, supported by improved domestic food production and stable import prices. Non-food inflation stood at 16.8%, reflecting lower energy costs following negotiations with international suppliers. The Minister cautioned that risks remain, such as potential disruptions from geopolitical tensions in Europe and the Middle East, which could spike global oil prices and reignite inflationary pressures.

Fiscal Position: Revenue, Expenditure, and Deficit Management

A core focus of the review was the fiscal outturn for the first half of 2025. Total revenue and grants mobilized amounted to GH¢85.3 billion, representing 52% of the annual target and a 15% increase over the same period in 2024. Tax revenue, the largest component, reached GH¢72.4 billion, driven by improved compliance through digital tax administration systems and the expansion of the tax base to include informal sectors. Non-tax revenue contributed GH¢8.2 billion, bolstered by dividends from state-owned enterprises and fees from natural resource exploitation.

Expenditure, however, totaled GH¢92.1 billion, or 48% of the budgeted amount, with a significant portion allocated to compensation of employees (GH¢28.5 billion) and goods and services (GH¢15.7 billion). Capital expenditure stood at GH¢18.9 billion, funding key infrastructure projects such as road networks, healthcare facilities, and renewable energy initiatives. Dr. Forson highlighted efforts to rationalize spending, including a 10% cut in non-essential recurrent expenditures to free up resources for social protection programs.

The resulting primary deficit was GH¢6.8 billion, equivalent to 1.2% of GDP, narrower than the projected 1.5%. This improvement was attributed to enhanced revenue collection and expenditure controls. The overall fiscal deficit, including grants, was estimated at 4.5% of GDP, on track to meet the end-year target of 4.0%. To finance this, the government relied on a mix of domestic borrowing (GH¢25 billion via treasury bills and bonds) and external inflows, including disbursements from the International Monetary Fund (IMF) under the Extended Credit Facility.

Debt sustainability remained a critical theme. Public debt stood at 78% of GDP as of June 2025, down from 82% at the end of 2024, following successful debt restructuring negotiations with bilateral and commercial creditors. Dr. Forson announced that Ghana had secured GH¢12 billion in debt relief, which would alleviate pressure on foreign reserves and create fiscal space for development spending. He reiterated the government's commitment to the Debt Sustainability Framework, aiming to reduce the debt-to-GDP ratio to below 70% by 2028.

Sectoral Highlights and Policy Adjustments

The review delved into sectoral performances and policy measures. In agriculture, the Minister praised the One Village, One Dam initiative, which has irrigated over 50,000 hectares, boosting crop yields and farmer incomes. Allocations for subsidies on fertilizers and seeds were increased by 20% to GH¢4.5 billion, targeting smallholder farmers to enhance food security.

Education and health sectors received commendations for progress under the Free Senior High School program and the National Health Insurance Scheme. Education expenditure rose to GH¢22 billion, funding teacher training and infrastructure upgrades, while health spending reached GH¢15 billion, including vaccine procurement and hospital expansions amid ongoing global health concerns.

Energy sector reforms were emphasized, with the government advancing the Energy Sector Recovery Programme. Dr. Forson reported a 15% increase in power generation capacity through solar and wind projects, reducing reliance on thermal plants and lowering electricity tariffs by 5% for households. However, challenges in the sector, such as legacy debts to independent power producers, were acknowledged, with a plan to clear GH¢8 billion in arrears by year-end.

On the social front, the Livelihood Empowerment Against Poverty (LEAP) program was expanded to cover an additional 200,000 beneficiaries, with transfers totaling GH¢3.2 billion. This initiative aims to mitigate the impacts of economic hardships on vulnerable groups, including women and children in rural areas.

External Sector and Trade Balance

Dr. Forson addressed the external sector, noting a trade surplus of US$1.2 billion in the first half of 2025, driven by strong exports of gold (US$4.5 billion), cocoa (US$2.8 billion), and oil (US$3.1 billion). Imports totaled US$9.8 billion, primarily machinery and consumer goods. The current account deficit narrowed to 1.8% of GDP, supported by remittances exceeding US$2.5 billion and foreign direct investment inflows of US$1.7 billion, mainly in mining and technology.

Foreign exchange reserves stood at US$6.4 billion, covering 3.5 months of imports, an improvement from 3.2 months in 2024. The cedi depreciated by 8% against the US dollar, but stabilization measures, including gold-for-oil swaps, have helped curb volatility.

Challenges, Risks, and Forward Outlook

The Minister candidly discussed ongoing challenges, including climate change impacts on agriculture, youth unemployment at 14%, and geopolitical risks affecting commodity prices. He outlined mitigation strategies, such as diversifying the economy through the African Continental Free Trade Area (AfCFTA) and promoting value addition in exports.

Looking ahead, Dr. Forson proposed supplementary appropriations of GH¢10 billion to address emerging priorities, including disaster relief for flood-affected regions and investments in digital infrastructure. He called for parliamentary approval of these adjustments to ensure the budget remains responsive to evolving needs.

In conclusion, the 2025 mid-year budget review painted a picture of cautious optimism. Dr. Forson stressed that with continued fiscal prudence, international partnerships, and domestic reforms, Ghana is poised for sustained recovery. He urged all stakeholders, including the private sector and civil society, to collaborate in achieving the vision of a prosperous, self-reliant nation. This review not only updates fiscal targets but also reinforces the government's strategy for inclusive growth, debt management, and economic transformation in the face of uncertainties. (Word count: 1,056)

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