The Government of Ghana has disclosed to the International Monetary Fund that its objective under the Economic Credit Facility programme remains to achieve a primary surplus of 1.5% of Gross Domestic Product (GDP) by 2025, to be maintained at least until 2028.

Captured in the second review of the ECF, the government said it is pursuing an ambitious and lasting fiscal adjustment to support its goal of restoring debt sustainability.

“The fiscal consolidation strategy is driven by strong revenue-enhancing measures in the short and medium-term and expenditure rationalisation. The programme objective remains to achieve a primary surplus of 1.5% of GDP by 2025, to be maintained at least until 2028”.

According to the government, the 2024 Budget carries forward its consolidation efforts by targeting a primary surplus of 0.5% of GDP (commitment basis).

This is predicated on implementing an ambitious package of non-oil revenues of about 0.9% of GDP and stabilising primary expenditures as a share of GDP.

The main elements of the revenue package include the removal of selected Value Added Tax exemptions, revision of various taxes on gambling, and introduction of green taxes, supported by efforts to enhance compliance by accelerating the implementation of the E-VAT system, facilitating electronic payments, and enhancing oversight on large taxpayers.

On the spending side, the government said its budget aims at reallocating spending towards capital outlays and social protection programmes to sustain stronger and more inclusive growth while cushioning the most vulnerable from the impact of the ongoing macroeconomic adjustment.

Government to implement VAT on electricity when inflation improves

Meanwhile, the government said it would implement the VAT on residential electricity when inflation dynamics are conducive.

“On the revenue side, the implementation of VAT on residential electricity sales faced strong resistance given the high inflationary environment and the ongoing efforts to bring electricity tariffs closer to cost recovery to address energy sector challenges. While still committed to implementing this measure when the inflation dynamics are more conducive, we have suspended it for now and introduced several alternative measures to safeguard our revenue mobilization target for 2024”.

On the spending side, it pointed out that disbursements from its external partners are likely to be larger than initially expected, with $3.8 billion not disbursed from prior external bilateral commitments alone.