Financial Institutions and Private Equity Investors Seek Expectations from Ministry of Finance's Mid-Year Budget Planning Session
Ghana's 2025 mid-year budget review, announced on July 24th, focuses on maintaining macroeconomic stability, improving fiscal discipline, and driving economic growth through industrialization, job creation, and expanding the tax base.
Macroeconomic stability and fiscal management
The government has reaffirmed its commitment to taming inflation (targeting 11.9% by year-end), maintaining exchange rate stability, and reducing public debt significantly. The public debt dropped by GH¢113.7 billion, lowering debt-to-GDP from 61.8% to 43.8%, without requesting additional funding beyond the approved budget.
Attracting foreign investment and industrialization
The government highlighted ongoing efforts to stabilize the cedi and enhance foreign exchange generation, notably through the establishment of the GoldBod institution, aimed at accumulating foreign currency to support the exchange rate. These measures are intended to create a conducive environment for investment and industrial growth.
Driving job creation
While specific new job creation programs were not detailed in the mid-year speech, the broader economic agenda emphasizes achieving real GDP growth of at least 4% and non-oil GDP growth of 4.8%, supporting job creation through private sector expansion and critical infrastructure projects completion.
Expanding the tax base and improving revenue mobilization
The budget includes several measures aimed at expanding the tax base and improving revenue mobilization. VAT reforms were announced, including a new VAT bill to be presented by October 2025, which will repeal the COVID levy, remove cascading VAT effects, increase VAT registration thresholds, and lower the effective VAT rate.
In addition, withdrawal of tax exemptions on marine gas oil for non-artisanal fishermen, reinforcement and simplification of the Modified Taxation System (MTS), a comprehensive tax education strategy, customs revenue enhancements, and a focus on AI-based import assessments, Advance Cargo Information systems, anti-smuggling efforts, and institutional reforms targeting transparency and efficiency were outlined.
Regulatory reforms for domestic capital allocation and promoting investment
Emphasis was placed on improving government expenditure management, sustaining fiscal discipline, and ensuring efficient resource allocation, creating a stable policy environment that encourages domestic capital investment and private sector participation. The continuation of reforms under Ghana’s program with the IMF ensures confidence in macroeconomic policies and their effectiveness.
Promoting private sector investments
The National Pensions Regulatory Authority (NPRA) has reaffirmed guidelines and reporting requirements for pension funds to allocate at least 5% of their assets to alternative investments like private equity and venture capital by 2026. This move is expected to unlock over GH¢5 billion, shifting pension funds from primarily passive, short-term government debt instruments to long-term, growth-oriented private sector investments.
The Limited Partnerships (LP) Act is a focus area, with investors wanting clear legislative timelines and details on operationalizing the act to align Ghana with international best practices. Increased investment in sectors like manufacturing and agribusiness will diversify the tax base away from reliance on traditional revenue streams.
Investors' expectations
The Ghana Venture Capital and Private Equity Association (GVCA) has stated that private equity capital investors and institutional investor trustees are eagerly awaiting the mid-year budget review on July 24th, 2023. Investors seek a commitment to macroeconomic stability through fiscal discipline, prudent monetary policy, control of inflation, stabilization of the cedi, and reduction of government borrowing from domestic markets.
Having an LP option under the Office of the Registrar of Companies is seen as making Ghana a more competitive jurisdiction for private equity funds. The budget review can make domestic enterprise growth more attractive for both private equity funds and pension fund trustees by reducing operational costs and risks through targeted incentives and enterprise infrastructure development.
In conclusion, the mid-year budget review underscores a fiscal reset based on spending control, revenue growth (especially direct and VAT taxes), and supportive reforms to broaden the tax base and stabilize the economy, thereby creating a foundation for accelerated industrialization, job creation, and attracting both foreign and domestic capital investment.
- The mid-year budget review, as announced by the Ghanaian government, includes measures to expand the tax base and improve revenue mobilization, with a focus on regulatory reforms for domestic capital allocation, promoting private sector investments, and attracting foreign investment, all aimed at driving economic growth, job creation, and wealth management.
- In order to create a conducive environment for business growth, the government emphasized improving government expenditure management, fiscal discipline, and efficient resource allocation, as well as providing incentives for investors via pension funds and sectors like manufacturing and agribusiness, thereby encouraging personal-finance growth through various macroeconomic stability, business, and wealth-management strategies.
