The International Monetary Fund (IMF) is set to begin crucial discussions with the Ghanaian government this week as the country finalizes its 2025 budget, which is expected to be presented in March. These talks come at a critical time, as the government considers eliminating certain tax measures, including the Electronic Transfer Levy (E-Levy), betting tax, and the COVID-19 levy.
These levies, initially introduced to boost domestic revenue, have been widely debated, with businesses and citizens expressing concerns about their impact. As Ghana remains under an IMF-backed $3 billion Extended Credit Facility (ECF) program, the Fund is expected to carefully evaluate the implications of these proposed tax cuts on the nation’s fiscal outlook.
A major concern for the IMF will be whether removing these taxes could compromise revenue targets and affect Ghana’s economic recovery. With the country still working toward fiscal consolidation, the Fund will likely seek reassurances from the government on how it plans to offset any revenue shortfalls.
Beyond tax policy, the government is also under pressure to address Ghana’s growing energy sector debt, which has placed a significant strain on public finances. The sector’s liabilities, estimated at over $2 billion, continue to pose risks to power producers and the broader economy. Independent Power Producers (IPPs) have repeatedly warned that failure to clear outstanding arrears could lead to supply disruptions, further affecting economic activity.
The financial struggles of the energy sector have also contributed to the depreciation of the Ghanaian cedi, as the government requires substantial foreign exchange to meet payment obligations to power producers. Given these concerns, the IMF will likely push for comprehensive measures to address inefficiencies within the sector, ensure cost recovery, and establish a more sustainable financial structure for energy management.
During the discussions, the government is expected to present a clear roadmap outlining how it intends to balance tax cuts with maintaining macroeconomic stability. Key aspects of this plan will include strategies to recover lost revenue, settle energy sector debts, and keep the economy on a stable growth path.
The proposed removal of the E-Levy, betting tax, and COVID-19 levy has sparked debate among economic analysts and policy experts. Some argue that these levies have outlived their relevance, while others warn that their removal could create revenue gaps that will need to be addressed through alternative means.
One of the most contentious taxes, the E-Levy, was introduced as a way to generate revenue from electronic transactions. However, critics have long argued that it discourages digital payments and slows down Ghana’s transition to a cashless economy. Calls for its removal have intensified, with some analysts suggesting that a different approach to digital taxation could be more effective.
Similarly, the COVID-19 levy, which was implemented to support pandemic-related expenditures, is now being questioned given that the immediate health crisis has passed. Economists argue that maintaining the levy beyond its initial purpose is unnecessary, adding to the financial burden of businesses and individuals.
Despite these arguments, the government must still find ways to compensate for the potential revenue loss if these levies are scrapped. Estimates suggest that removing the E-Levy and COVID-19 tax alone could result in a significant revenue gap, raising concerns about how the government will finance its obligations without derailing its fiscal targets.
The IMF’s role in these discussions will be crucial in ensuring that Ghana’s fiscal policies remain on track. The Fund has previously commended the country’s progress under the ECF program, highlighting improvements in economic growth and inflation reduction. However, it has also stressed the need for continued reforms, emphasizing that strict adherence to fiscal discipline and economic restructuring is necessary for long-term stability.
Beyond tax reforms, another key issue on the agenda will be the ongoing financial crisis in the energy sector. The rising debt burden in this sector has placed immense pressure on the government, limiting its ability to invest in critical infrastructure and social programs. IPPs have consistently warned that without a sustainable financial plan, power supply disruptions could become more frequent, affecting businesses and households.
Given the importance of a stable energy sector to economic growth, the government is expected to outline a comprehensive strategy for settling outstanding debts, restructuring power agreements, and ensuring efficient cost recovery. The IMF will likely advocate for measures that improve financial discipline within the energy sector while safeguarding economic stability.
As Ghana navigates these complex economic challenges, the government’s ability to implement effective fiscal policies, manage public debt, and foster a stable economic environment will be crucial. The upcoming discussions with the IMF represent a key moment for the country to demonstrate its commitment to responsible economic management.
The outcome of these engagements will be closely watched by various stakeholders, including investors, businesses, and international development partners. Ghana’s ability to balance fiscal responsibility with economic growth initiatives, while addressing critical challenges in tax policy and the energy sector, will shape the country’s economic trajectory in the coming years.
As the IMF and the government engage in these discussions, the focus will remain on ensuring that proposed reforms align with the broader goal of sustainable economic development. The commitment to sound fiscal management and strategic reforms will be essential in restoring macroeconomic stability, achieving debt sustainability, and fostering inclusive growth.
