Tax cuts, budget cuts, and overhauls in taxation and energy policies—John Mahama’s government is on a mission to restore financial stability in a heavily indebted country relying on IMF support, grappling with slowing growth and soaring inflation.

Elected in December 2024 on a promise to fix Ghana’s struggling economy, President John Mahama is taking drastic measures to get the country’s finances back on track. With a massive $8.7 billion debt due by 2028—equal to 10.9% of GDP—and an economy still under IMF oversight, Finance Minister Cassiel Ato Forson has unveiled a tough budget packed with spending cuts, tax eliminations, and structural reforms.

“The state of our economy does not reflect recovery but deep distress, weighed down by unsustainable debt, poor management, and a lack of accountability,” Forson told Parliament on March 11 while presenting the 2025 budget. His words marked a clear break from the previous administration and justified what he himself called a “shock therapy” approach to economic adjustment.

Slashing Taxes, Tightening Fiscal Policy

One of the biggest moves in the new budget is the elimination of several controversial taxes. The government has scrapped the E-Levy (a tax on electronic transactions), the betting tax, and the COVID-19 tax. But this isn’t just about easing the burden on businesses and households—these tax cuts come with strict compensatory measures.

To offset the lost revenue, the government is lowering the cap on tax refunds from 6% to 4% of total revenue. This change alone is expected to save 3.8 billion cedis ($245 million), more than enough to cover the 1.9 billion cedis lost from the E-Levy repeal and the 180 million cedis from the betting tax.

Another key strategy is revamping Ghana’s tax administration. The government plans to reform the Revenue Administration Act to improve tax collection efficiency and boost net revenue by 2%. A new law will also be introduced to better manage income from public services and state assets. Poperty tax collection will also be streamlined to provide stronger financial support for local governments. The VAT system will also be simplified to eliminate inefficiencies and enhance compliance.

The number of ministries will be reduced from 30 to 23, and the number of ministers will drop from 88 to 60. The goal is to curb government expenses and cut operational costs.

Several expensive government programs—such as YouStart, One District One Factory, and GhanaCARES—will also be discontinued, as they are deemed non-essential in the current fiscal climate.

Forson emphasized the need for stricter oversight of public finances. Moving forward, all government debts and financial commitments will undergo audits and validation before payments are made. This is particularly crucial given Ghana’s outstanding obligations, which include $1.73 billion owed to independent power producers, 68 billion cedis ($4.4 billion) to the national electricity company, and 32 billion cedis to the cocoa regulator Cocobod.

Energy Sector Overhaul

Ghana’s energy sector is also in for major changes. The Electricity Company of Ghana (ECG) and the Northern Electricity Distribution Company (NEDCo) will be required to implement new revenue collection strategies.

Meanwhile, the government plans to renegotiate contracts with independent power producers (IPPs) to cut capacity charges and operating costs. It also intends to revise the Energy Sector Levies Act (ESLA) to merge multiple energy taxes into one, directing the revenue exclusively toward paying off energy sector debts.

The government aims to bring inflation down to 11.9% by the end of 2025 and sustain GDP growth of at least 4%. But economic conditions remain fragile.

Growth slowed in the fourth quarter of 2024, with annual expansion at 5.7%, according to Ghana’s national statistics agency. While inflation has been easing, it still stood at 23.1% in February—down slightly from 23.5% in January but far above the central bank’s target of 8%.

Concerns over Ghana’s fiscal health also rattled investors. News of a higher-than-expected budget deficit in 2024 triggered a 1.5-cent drop in Ghanaian bonds on international markets.

With $8.7 billion in debt repayments looming, Ghana faces mounting pressure to reassure investors and finalize its debt restructuring plan. Yet, Forson remains confident. “For those asking how we’ll make up for the lost tax revenue, the answer is simple: we have stopped the bleeding,” he told Parliament.

The question now is whether this economic shock therapy will steer Ghana toward recovery—or push the country into deeper financial and social turmoil.