Finance Minister Mohammed Amin Adam attends the mid-term budget review meeting.
On 23 July 2024, the Government of Ghana, through its Minister of Finance, Dr Mohammed Amin Adamu, MP, unveiled its 2024 interim budget, outlining a bold and comprehensive plan to lead the country towards economic stability and inclusive growth. Amidst global economic uncertainties and domestic challenges, the budget emphasises strategic investments in key areas such as education, health, infrastructure and housing, underscoring the government’s commitment to improving the quality of life for all its citizens. This paper aims to analyse the key components of the interim budget and highlight its potential impacts and benefits, as well as critically assess challenges and areas for improvement, and demonstrate how the government’s strategy is aligned with the longer-term goals of sustainable development and social equity. By focusing on these key areas, the budget lays the foundations for a brighter and more resilient future for the country.
Economic recovery and growth
A pillar of the 2024 interim budget is an optimistic outlook for economic growth. The government has revised its GDP growth target upwards to 3.1%, signalling confidence in the country’s economic recovery. This positive outlook is supported by strategic investments across various sectors, particularly agriculture, industry and services. This growth outlook is further strengthened by stabilising key macroeconomic indicators, including a 31 percentage point decline in inflation to 22.8% from December 2022 and an improvement in exchange rate depreciation to 18.6%, from last year’s 22%.
However, while these economic indicators are encouraging, it may be dangerous for the government to rely on optimistic growth projections given the volatile global economic environment. Factors such as global inflationary pressures, a potential downturn in major trading partners, and unforeseen domestic issues could hinder the achievement of these targets. The government’s proactive stance in strengthening revenue mobilization, as evidenced by the Ghana Revenue Authority’s 0.2% overshooting of its target, is commendable. However, the focus on broadening the tax base and improving tax compliance needs to be balanced with efforts to ensure that the tax burden does not disproportionately affect low-income earners and small and medium-sized enterprises.
Social Investment and Human Capital Development
Education is a central focus of the government’s social investment strategy, with the continuation and expansion of the free Senior High School (SHS) programme and significant investments in Technical and Vocational Education and Training (TVET). The construction of 10 new STEM schools and centres is a future-proof initiative aimed at equipping students with the skills required for the modern technology-driven economy. To date, over GH¢1.5 billion has been allocated to support 1,488,575 students under the free SHS programme from January to June 2024.
While the focus on education is commendable, there are concerns about the quality of education provided amid rapid expansion. Overcrowded classrooms, inadequate teaching materials, and inadequate teacher training could undermine the effectiveness of these programs. The government is actively addressing these challenges by expanding school infrastructure, improving educational resources, and strengthening teacher training to ensure quality education amid the growth of the free SHS program.
Similarly, the expansion of the National Health Insurance Scheme (NHIS) and the Livelihood Improvement Programme for Poverty Reduction (LEAP) are positive steps towards providing a safety net to the vulnerable. Recognising the importance of these efforts, the Government has prioritised ensuring their sustainability amidst financial constraints by exploring diversified funding mechanisms and seeking international partnerships.
Infrastructure Development
Infrastructure development is another key pillar of the budget, with significant investments planned for road, rail and water systems. These projects are vital for economic growth, facilitating trade, reducing transportation costs and improving regional connectivity. Completing key road networks and expanding rail lines will not only boost economic activity, but also improve residents’ quality of life through shorter travel times and increased safety.
A focus on housing, particularly the National Rental Assistance Scheme and various affordable housing projects, is addressing the immediate housing shortage. By partnering with private developers through public-private partnerships (PPPs), the government is tapping into the expertise and resources of the private sector to deliver much-needed housing solutions. However, the scale of these efforts may not be sufficient to meet the actual demand, especially in rapidly growing urban areas. Moreover, the success of these projects depends on effective project management and transparency to avoid issues such as cost overruns and delays.
Fiscal Responsibility and Debt Management
The 2024 interim budget reflects a strong commitment to fiscal responsibility, restraining public expenditure, strengthening revenue mobilization, and aiming to achieve a primary budget surplus and reduce the budget deficit. The decision not to seek additional funds underscores a disciplined approach to budget management, with a focus on living within the country’s income.
The successful negotiation of debt restructuring agreements, particularly with Eurobond holders and the Official Creditors Committee (OCC), is a major achievement. These agreements will provide significant debt relief, improve Ghana’s debt profile and ensure long-term fiscal stability and sustainability. Ghana is expected to reduce the nominal value of its $13 billion outstanding Eurobonds by $4.7 billion and realize approximately $4.4 billion in debt service relief over the 2023-2026 IMF program period.
Despite these positive developments, high public debt levels remain a concern. While the restructuring provides immediate relief, it does not eliminate the longer-term risks associated with high debt levels. The government’s ability to maintain fiscal discipline, especially in the face of potential external shocks, will be crucial to ensuring sustainable debt management. In an important and commendable move, the government has reduced expenditures by 2.1%, amounting to nearly 9 billion cedis, demonstrating a remarkable level of fiscal discipline, especially in an election year.
This is unprecedented compared to 2016, when the government not only requested an additional 1.8 billion cedis in the interim budget but also exceeded this expenditure. To further deepen fiscal responsibility, the government will amend the Fiscal Responsibility Act and reinstate the numerical debt ceiling that was suspended during the COVID-19 pandemic in 2020. By prioritizing these fiscal prudence measures, the government is demonstrating its commitment to managing the economy sustainably even under the pressures that come with an election year.
Inclusive growth and social equity
The budget includes various social programmes aimed at supporting the poor and vulnerable, such as the Ghana School Feeding Programme and increased Capitation Grant. These programmes are essential to reduce inequalities and ensure that all citizens benefit from economic growth. The focus on youth employment and entrepreneurship, represented by the 8.2 billion Ghana Cedi Small and Medium Enterprise Growth Opportunities (SME GO) programme, reflects a strategic effort to create employment opportunities and support small and medium enterprises. In the first half of 2024, the Youth Employment Agency engaged with about 90,000 beneficiaries, including 15,000 in Community Police and 6,000 in Community Health.
While these efforts are laudable, their success will depend on effective implementation and monitoring. It is crucial to ensure that resources reach targeted beneficiaries and that programmes are not hindered by administrative inefficiencies and corruption. Furthermore, more targeted efforts may be needed to address regional disparities and ensure that vulnerable groups in all regions benefit equally from government programmes.
Conclusion
The 2024 interim budget outlines a comprehensive plan for Ghana’s economic and social development. By prioritizing education, health, infrastructure and fiscal responsibility, the government has laid a solid foundation for sustainable growth. However, while the budget’s targets are ambitious and well-intentioned, the challenges of implementation, fiscal sustainability and ensuring that the benefits of growth are equitably distributed require careful consideration. While the government’s commitment to economic recovery, social equity and the well-being of all Ghanaians is clear, continued vigilance and adaptation will be essential to navigate a complex and dynamic landscape of domestic and global challenges.
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The author is the Deputy Minister of Works and Housing and Member of Parliament for Kwesimintsim. Previously, he served as the Executive Secretary of the National Council for Curriculum Assessment (NaCCA) and acted as a consultant on several projects funded by prominent international organisations such as the World Bank, UKAID, USAID and the United Nations Education Commission in Ghana.
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