Ghana’s 2025 Budget Deficit to Drop to 4.2% as Fiscal Tightening Impacts Growth

Fitch Solutions forecasts Ghana’s budget deficit to narrow to 4.2% of GDP in 2025, driven by fiscal tightening, slowing economic growth to 4.4%

Fitch Solutions, a subsidiary of Fitch Ratings, has projected a significant reduction in Ghana’s budget deficit for 2025, forecasting it to drop to 4.2% of Gross Domestic Product (GDP) from 5.9% in 2024, a 1.7 percentage point improvement year-over-year.

This anticipated reduction stems from tighter fiscal policies, which are also expected to slow economic growth. Fitch Solutions predicts real GDP growth will decelerate to 4.4% in 2025, down from 5.5% in 2024, as the new administration enforces stringent fiscal measures.

In its statement, Fitch noted, “We maintain all our macroeconomic forecasts for Ghana: we continue to project that real economic growth will decelerate from 5.5% in 2024 to 4.4% in 2025, as the new government pursues fiscal tightening. Accordingly, we project the budget deficit will narrow from 5.9% of GDP in 2024 to 4.2% in 2025.”

Furthermore, the anticipated removal of taxes such as the COVID Levy, E-Levy, 10% tax on betting winnings, and the emissions levy is expected to have minimal fiscal impact. These taxes collectively contribute only 3% to the government’s total revenue.

Fitch Solutions attributes this low impact to the incoming administration’s plans to implement alternative revenue-generating measures. These include reducing tax exemptions and revising taxes on imports and the mining sector, aligning with Ghana’s fiscal consolidation targets under its IMF program.

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The combination of fiscal tightening and strategic policy adjustments indicates the government’s commitment to managing its budget deficit while navigating economic challenges.