New Government in Ghana: Planned Policies and their Impact on Businesses

07-03-2025

New Government in Ghana: Planned Policies and their Impact on Businesses

This article highlights the policies outlined in the National Democratic Congress (NDC) manifesto of 2024 and reflects the proposals and intentions of the current government. On implementation, the actual policies may, for practical exigencies, vary either materially or insignificantly.

On the 7th of January 2025, His Excellency John Dramani Mahama was sworn into office as the President of Ghana for a four-year term ending on the 6th of January 2029. This follows his election in the 2024 presidential election. He campaigned around economic recovery, a 24-hour economy, job creation, energy, and generally to reset Ghana. These promises raise optimism in the economy.

One of the most exciting aspects of the president's campaign is his commitment to abolish several burdensome taxes including the COVID levy, emissions tax, e-levy, and betting taxes. These taxes are a burden to businesses and seen as roadblocks to growth. The planned tax cuts offer potential relief to businesses. The NDC's manifesto explicitly states, "We will scrap these draconian taxes within the first 100 days to ease the high cost of doing business and alleviate hardships." This bold vision has captured the imagination of many, promising a brighter and more prosperous future for Ghana.

It is important to note that the President has consistently talked about the energy sector, particularly the upstream oil and gas industry, and the transition to green energy. The President clearly intends to avoid the resource trap of unexploited hydrocarbon resources while positioning the country on a sustainable long-term green energy path.

This piece will look at the economic indices inherited by the new NDC Government, the Government's planned immediate tax reliefs, and planned or intended policies and actions around upstream oil & gas production and energy transition, fiscal policies and their impact on businesses. It will also cover single-digit inflation, monetary policy, exchange rate policy, and financial sector development, the 24-hour economy, trade and industry, lean government, and debt management.

On the back of the planned (i.e., intentions in the manifesto) policies of the Government are some key indicators that have been inherited. To achieve the reset agenda of the Government, the standing of these indicators are key considerations. First, the Government needs to improve on these indicators to enhance confidence in the business community. Second, the improved indicators must be sustained to underpin the reset agenda. The indicators are many, but the significant ones are highlighted below:

Consumer Price Index (Inflation): As of November 2024, Ghana's consumer inflation stood at 23.0%, up from 22.1% in October.

Producer Price Index: Inflation for December 2024 is 26.1%.

Commercial Banks' Lending Rates: Interest rates for commercial bank loans in Ghana are influenced by the central bank's monetary policy stance. The prime rate as of October 2024 stood at 27%. As of January 2025, the Bank of Ghana's 91-day Treasury bill rate was 28.1902%. The Bank of Ghana's reference rate (i.e., the benchmark for commercial banks' lending rates) in January stood at 29.72%. Most commercial banks' lending rates are above this benchmark rate. In some instances, credit could go in excess of 40%.

Business Ready Report: On the following pillars, Ghana scored 66.99% on Regulatory Framework, 54.42% on Operational Efficiency, and 47.67% on Public Services in the 2024 World Bank assessment. Particularly, on public services, more needs to be done to improve efficiency. This is vital because businesses depend on public services too.

Corruption Perception Index: Ghana is ranked 80th out of 180 countries. The country scored 42% out of 100%. A lot needs to be done to improve the nation's standing on the Index.

Debt to GDP: The country's debt to GDP ratio was projected by the International Monetary Fund (IMF) to stand at 82.9% in December 2024.

The Government intends to provide some reliefs in the economy within its first 120 days in office. These reliefs include abolishing COVID-19 levy, Emissions tax, E-levy, and Betting tax.

The Government plans to relieve taxpayers of a 1.15% tax burden by abolishing the Covid-19 levy, which is currently 1% on goods and services. VAT is charged on the total cost of goods, services, and levies. Including the Covid-19 levy in the cost before applying VAT increases the final VAT charge by 0.15%. This makes the effective VAT rate in Ghana 15.9%, with the Covid-19 levy contributing 0.15% to this rate. Removing the Covid-19 levy will reduce production input costs by 1.15%.

Eliminating the Covid-19 Levy will reduce the cost of doing business, improve business performance, lower the cost of goods and services for consumers, and increase purchasing power, thereby stimulating economic consumption. In monetary terms, the impact of removing the Covid-19 levy becomes evident when applied to the billions of cedis worth of transactions occurring annually.

The E-Levy, a 1% tax on electronic money transfers exceeding GHS100 per day per individual (excluding those exempted by law), will be removed. This change will impact the mainstream telecommunication industry and e-businesses in Ghana and provide relief to individuals. The withdrawal of this tax is expected to boost electronic transfers and online purchases, leading to increased revenue for businesses in the electronic transfer sector.

The 10% withholding tax on gross earnings from betting will be eliminated. This change will impact businesses in the betting industry and provide relief to individuals who engage in betting activities. While this tax removal may not directly affect the broader business community, it will enhance the purchasing power of bet winners.

The Emission Levy is imposed on the construction, manufacturing, mining, oil and gas, and electricity and heating sectors of the Ghanaian economy, as well as on vehicle users. By eliminating the emissions levy, the government aims to lower production costs, however small. The removal of this tax is expected to provide some immediate relief to industries that have been burdened by the environmental compliance levy.

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