Ghana has successfully transformed a projected 2024 fiscal deficit into a 2.5% primary surplus for 2025. Finance Minister Dr. Cassiel Ato Forson announced this achievement to Parliament, highlighting a significant reduction in public spending. This fiscal correction aims to place Ghana's public debt on a downward trajectory.
The government's fiscal correction programme reset primary expenditure from 18.7% of Gross Domestic Product (GDP) in 2024 to 13.2% of GDP in 2025. This substantial 5.5 percentage point reduction was achieved without harming economic growth, according to Dr. Forson. The 2025 budget also reset expenditure to 2023 nominal levels, eliminating wasteful spending that had weakened fiscal management.
This fiscal shift is a critical component of Ghana's broader economic recovery strategy. It signals a move towards greater fiscal discipline and sustainability, which is essential for attracting investment and stabilizing the economy. The improvement in the primary balance, from a 2.9% of GDP deficit in 2024 to a 2.5% surplus in 2025, demonstrates the government's commitment to prudent financial management. This change is particularly important as Ghana navigates its International Monetary Fund (IMF) supported programme.
Dr. Forson stated that this recalibration of the IMF-supported programme emphasizes expenditure-led consolidation over revenue-led measures. He described this approach as a fairer distribution of the adjustment burden across the economy. Parliament has also amended the Public Financial Management Act, institutionalizing a binding fiscal rule. This rule requires a minimum annual primary surplus of 1.5% of GDP and sets a debt-to-GDP ceiling of 45% by 2034.
Accompanying institutional reforms further bolster this commitment to fiscal responsibility. The government established a Value for Money Office to strengthen expenditure efficiency and created a Fiscal Council for oversight and transparency. A comprehensive audit of government payables is underway, and amendments to the Public Procurement Act now require commitment authorization before procurement. These measures aim to prevent future fiscal slippages and ensure accountability.
The government also reduced its size, cutting the number of ministers from a peak of 123 to 60. The number of ministries decreased from 30 to 23. Dr. Forson emphasized that a leaner government is not only good politics but also sound fiscal policy. Non-essential spending on foreign travel, workshops, conferences, and vehicle procurement has been curtailed. Programmes like Ghana CARES top-up and U-Start were discontinued to redirect resources to other national priorities. These actions underscore a concerted effort to optimize public resources and enhance efficiency.
The implications of these fiscal adjustments are far-reaching. A sustained primary surplus and adherence to the new fiscal rules will improve Ghana's creditworthiness and investor confidence. This could lead to lower borrowing costs and increased foreign direct investment. Decision-makers and markets will closely watch the government's ability to maintain these fiscal targets. Continued discipline will be crucial for Ghana's long-term economic stability and growth. The focus on expenditure control and institutional reforms sets a new standard for public financial management in the country.