IMF engages government on 2025 budget as Ghana plans major tax cuts

The International Monetary Fund (IMF) is set to begin critical discussions with the Ghanaian government this week as the country finalizes its 2025 budget, scheduled for presentation in March.

These talks come at a crucial time, with the government planning to abolish several major tax policies, including the E-levy, betting tax, and COVID-19 levy. These taxes, introduced by the previous administration to boost domestic revenue, have been widely opposed by businesses and the general public.

IMF to Assess Impact of Proposed Tax Cuts

With Ghana currently under a $3 billion Extended Credit Facility (ECF) programme backed by the IMF, the fund is expected to closely examine how these tax cuts align with the country’s fiscal consolidation efforts. The IMF will be looking for assurances that removing these levies will not jeopardize revenue targets or hinder Ghana’s economic recovery.

Beyond tax reforms, the discussions will also focus on resolving Ghana’s mounting energy sector debt, which has placed significant pressure on public finances.

Energy Sector Debt Remains a Major Concern

The energy sector’s liabilities, estimated to exceed $2 billion, remain a major challenge, threatening the financial stability of power producers and the broader economy. Independent Power Producers (IPPs) have repeatedly warned that if the government does not settle outstanding arrears, it could lead to potential disruptions in electricity supply.

The worsening financial state of the energy sector has also accelerated the depreciation of the cedi, as the government requires substantial foreign exchange to meet payment obligations to power producers. The IMF is expected to push for concrete steps to address inefficiencies in the energy sector, improve cost recovery, and establish a sustainable financial model for the industry.

Government to Present a Clear Roadmap

As part of the discussions, the government is expected to outline a comprehensive plan detailing how it intends to:

Offset revenue losses from the tax cuts

Settle outstanding energy sector debts

Maintain macroeconomic stability while implementing these reforms

The outcome of these negotiations will be closely monitored by investors, businesses, and multilateral partners, as Ghana seeks to balance fiscal discipline, economic growth, and energy sector stability.

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