Ghana’s Institute for Fiscal Studies (IFS) has issued a stark warning to the government to avoid inflated revenue projections in its 2025 budget, set for presentation by Finance Minister Dr. Cassiel Ato Forson on March 11.
The economic think tank cautioned that repeated overestimations risk eroding fiscal credibility and derailing policy execution, citing a decade-long pattern of missed revenue targets.
Between 2013 and 2023, Ghana’s actual revenue and grants fell short of annual budget goals by an average of 7.4%, with only two years aligning within the internationally accepted deviation range of -3% to +6%, according to Public Expenditure and Accountability (PEFA) benchmarks. Dr. Said Boakye, an economist at IFS, emphasized that unrealistic forecasts—driven by “optimism bias” in macro-fiscal modeling—undermine trust in fiscal governance. “Credible budgeting anchors confidence. Persistent gaps between projections and reality weaken Ghana’s ability to fund critical programs,” he stated.
The IFS urged the Finance Ministry to overhaul its forecasting methods, prioritize data-driven assessments, and consult independent experts to curb overly aspirational targets. Dr. Boakye highlighted the failed electronic transaction levy (e-levy) as a cautionary tale: the policy generated just 8.5% of its projected revenue in 2022, exposing flaws in impact analysis. “New tax policies must be stress-tested against realistic collection capacities, not political timelines,” he added.
The call for restraint comes as Cabinet finalized the 2025 budget, which aims to streamline Ghana’s tax regime by abolishing the Betting Tax, e-levy, and COVID-19 Levy—a move officials claim will ease burdens on households and businesses. Felix Kwakye Ofosu, Minister of State for Government Communication, said the budget reflects the administration’s “economic priorities” but provided no specifics on how revenue gaps would be addressed.
Analysts note the delicate balance facing Dr. Forson: while tax cuts could spur growth, overcorrection risks exacerbating fiscal deficits if revenue streams shrink without contingency plans. Ghana’s debt-to-GDP ratio, hovering near 85%, leaves little room for error. The IFS reiterated that conservative, transparent budgeting is critical to stabilizing the economy and restoring investor confidence.
As March 11 approaches, stakeholders await details on whether the government heeds these warnings—or repeats a cycle of optimism-driven projections with diminishing returns.
