Financial Institutions and Private Equity Investors Seek Outcomes from the Mid-Year Budget Review Led by the Minister of Finance
In a significant move towards fiscal consolidation, Finance Minister Dr. Cassiel Ato Forson presented the 2025 Mid-Year Budget Review on July 24, affirming adherence to the approved budget without requesting additional funds. The review emphasised key policy directions, including managing expenditure, improving revenue collection, completing critical infrastructure projects, and maintaining macroeconomic stability under the IMF program.
The review highlighted a substantial reduction in public debt (by GH¢113.7 billion) and maintained GDP growth projections (4% overall, 4.8% non-oil), signalling the government's commitment to fiscal discipline. Minister Forson underscored the importance of Ghana’s macroeconomic performance, including inflation control and exchange rate stability, as critical to sustaining growth.
Investors have expressed interest in areas such as macroeconomic stability, regulatory and policy reforms for domestic capital allocation, industrialization, job creation, and expanding Ghana’s tax base. The government's focus on creating a conducive environment for domestic capital is aligned with these expectations. While specific new policy announcements targeting foreign investment attraction, industrialization, job creation, and tax base expansion were not explicitly detailed in the publicly available summaries, the government's commitment to critical infrastructure development is a positive sign.
Improving critical infrastructure, including reliable power, transportation networks, and digital connectivity, is key to supporting industrial growth and reducing the cost of doing business. Promoting industrialization and the 24-hour economy creates demand for labor across multiple shifts, generating a significant number of decent jobs in manufacturing, logistics, services, and other key sectors, providing stable employment and contributing to economic inclusion.
The budget review should promote and de-risk specific domestic investment opportunities, particularly those aligned with the government's 24-hour Economy policy and broader industrialization agenda. By directing a small percentage of pension funds into private enterprises, the budget will facilitate the growth of key sector businesses, increasing their profitability and corporate income tax contributions, thereby diversifying the tax base.
The National Pensions Regulatory Authority (NPRA) is reaffirming 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 could 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 investment community needs clear signals on where the government wants private capital directed, linking incentives to the 24-hour Economy policy. The focus areas for regulatory reforms include the Limited Partnerships (LP) Act, with clear legislative timelines and details on operationalizing the LP Act. Having an LP option under the Office of the Registrar of Companies will make Ghana a more competitive jurisdiction for private equity funds.
Investors want to see a clear and sustained commitment to macroeconomic stability through fiscal discipline and prudent monetary policy. Concrete measures desired for macroeconomic stability include controlling inflation, stabilizing the cedi long-term, reducing government borrowing from domestic markets. The budget review should signal accelerated implementation and robust enforcement of regulatory reforms designed to channel domestic capital, especially pension funds, into productive private sector investments.
As the mid-year budget review date approaches, the Ghanaian Minister of Finance, Dr. Ato Forson, is set to deliver the review, providing further insight into the government's plans for the remainder of the year. The review is expected to provide clarity on specific policy announcements and measures aimed at attracting foreign investment, supporting industrial growth, creating jobs, and broadening the tax base.
Investors are anticipating policy reforms in areas such as macroeconomic stability, regulatory changes for domestic capital allocation, industrialization, job creation, and tax base expansion. The government's focus on improving critical infrastructure and promoting a conducive environment for domestic capital is aligning with these expectations.
To attract foreign investment and diversify the tax base, the budget review should promote and de-risk specific domestic investment opportunities, potentially directing a small percentage of pension funds into private enterprises. Additionally, the National Pensions Regulatory Authority (NPRA) is reinforcing guidelines for pension funds to allocate at least 5% of their assets to alternative investments like private equity and venture capital by 2026.
