The John Dramani Mahama-led administration has recorded a primary fiscal surplus and delivered below-target budget deficits in first-half 2025, offering additional signs of economic stabilisation.
Minister for Finance Dr. Cassiel Ato Forson, presenting government’s 2025 Mid-Year Budget Review to parliament, announced that the country achieved a primary surplus 1.1 percent of GDP on a commitment basis, outperforming the target of 0.4 percent set at start of the year.
On the overall fiscal front, government posted a Gross Domestic Product (GDP) deficit of 0.7 percent – better than the budgeted 1.8 percent – while on a cash basis the deficit was 1.1 percent, well below the projected 2.4 percent.
These outcomes, the minister said, result from tighter expenditure control, reduced interest costs and improved tax revenue performance.
“This is a story of sound leadership, better economic management and a restoration of hope to a nation once in despair,” Dr. Forson said, attributing the gains to “discipline, deliberate policies and a strong commitment to structural reforms”.
Surplus anchored on expenditure restraint
The fiscal consolidation has been driven more by containment of public spending than a surge in revenue. Total government expenditure for first half of the year was GH¢109.7billion, or 7.8 percent of GDP – 14.3 percent below the programmed target of GH¢128billion.
Primary expenditure (excluding interest payments) came in at GH¢84.3billion against a target of GH¢97.5billion, representing a cut of GH¢13.3billion. The fiscal restraint was also evident in government’s borrowing strategy with net domestic financing at GH¢13.1billion, significantly lower than the programmed GH¢18.7billion.
“There was no build-up in arrears payable during the period,” the Finance Minister stated, noting this as a signal of improved commitment controls and adherence to spending ceilings.
Interest savings reinforce gains
The national interest burden, long a source of budgetary strain, also declined significantly in first-half 2025. Interest payments stood at GH¢25.4billion (1.8 percent of GDP), below the budgeted GH¢30.5billion (2.2 percent of GDP).
Domestic interest payments accounted for GH¢21.6billion, down from the targetted GH¢26.5billion and allowing a saving of GH¢4.9billion. This was attributed largely to falling Treasury bill rates and reduced domestic borrowings.
T-bill rates across tenors have plummeted: the 91-day rate fell from 27.7 percent in December 2024 to 14.7 percent by June 2025, while 182-day and 364-day bills followed similar downward trends. The Ghana Reference Rate also declined from 29.3 percent to 24 percent over the same period.
According to the minister, these interest savings provided room to protect essential social investments without compromising the fiscal consolidation agenda.
Revenue
On the revenue side, performance was mixed. Non-oil tax revenue exceeded targets by GH¢787million, buoyed by strong corporate income tax collections and higher-than-expected mineral royalties. Corporate tax collections beat targets by GH¢555million while mineral royalties outperformed by GH¢143million.
However, import duties fell short by GH¢1.6 billion – due to what the Finance Ministry described as systemic leakages at Customs points and smuggling across land borders. The shortfall has prompted government to introduce a suite of technological and enforcement measures including adoption of AI-based risk assessment tools, deploying Advanced Cargo Information systems and restructuring the Customs Division.
“We are determined to seal revenue leakages and reduce reliance on borrowing,” Dr. Forson said.
He noted that Customs inefficiencies posed one of the main risks to the 2025 fiscal framework.
IMF support, market signals
The mid-year fiscal performance has also received a boost from international endorsement as the International Monetary Fund (IMF) approved the fourth review of the country’s Extended Credit Facility programme in early July, triggering a US$367million disbursement.
In its post-review statement, the IMF acknowledged government’s “bold corrective actions” to maintain the programme trajectory after substantial slippages in 2024. The nation has now received US$2.3 billion under the programme since its inception.
The improved fiscal outlook has also translated into more favourable market sentiment. Fitch Ratings in June upgraded Ghana’s Long-Term Foreign-Currency Issuer Default Rating to ‘B-’ with a stable outlook from ‘Restricted Default’, citing exchange rate gains, nominal GDP growth and debt moderation.
Cedi recovery buoys confidence
The cedi’s performance has added momentum to the narrative of fiscal consolidation and macroeconomic stabilisation. The local unit appreciated by 42.6 percent against the US dollar, 30.3 percent against the British pound and 25.6 percent against the euro in first-half 2025.
As of July 23, the cedi was trading at GH¢10.4 to the dollar from GH¢17 just months earlier. The Bank of Ghana’s international reserves have risen to US$11.12billion, covering 4.8 months of imports – up from US$8.98billion at end-2024.
Government attributed this recovery not only to external factors but also to its fiscal efforts, including establishment of the Ghana Gold Board, which has boosted gold exports and foreign exchange inflows.
Staying the course
Despite this optimistic tone, the Finance Minister acknowledged underlying risks to the fiscal framework. These include persistent wage and salary pressures – especially from unbudgeted public sector recruitments in late 2024 – and mounting energy sector liabilities. Others include smuggling tax-exempt marine gas oil and a growing trend of contract pricing in foreign currency.
To manage these risks, government plans to establish a Sinking Fund to manage debt service obligations falling due between 2026 and 2028; and to prohibit all new public contracts from being denominated in foreign currencies.
“No contract awarded by government, irrespective of funding source, should be denominated in foreign currency,” the minister said, in line with a new directive from President John Dramani Mahama.
Outlook
While government has retained its original macroeconomic targets for 2025 (including a real GDP growth rate of 4 percent, inflation at 11.9 percent and a primary surplus of 1.5 percent of GDP), it is pursuing targetted revisions to revenue and expenditure.
Revenue is projected rising to GH¢229.9billion while expenditure on commitment basis has been revised marginally downward. The annual borrowing requirement is now expected to decline by GH¢4.3billion.
“These early successes only encourage us to stay the course, stay disciplined and continue to do more for the people of Ghana,” Dr. Forson added.
Source:https://thebftonline.com/
