Ghana’s IMF programme: Structural fiscal reforms to anchor sustainability
Ghana’s IMF programme: Structural fiscal reforms to anchor sustainability

Ghana’s IMF programme: Structural fiscal reforms to anchor sustainability

Ghana’s fiscal problems are rooted in structurally weak domestic revenue mobilisation. Ghana’s tax-to-GDP ratio has been low compared to peers, with non-oil revenues stagnating in recent years.


Tax policy design suffers from widespread tax expenditures (estimated around 4 per cent of GDP), especially in VAT, and underexploited taxes (property tax, excises). 

Weaknesses in revenue administration continue to be reflected in limited compliance and recoveries.

To address these challenges and achieve the program’s revenue mobilisation objectives, the authorities are preparing a Medium-Term Revenue Strategy (MTRS).

This strategy will focus on tax policy and revenue administration measures necessary to reach the authorities’ program revenue objectives over the 2023-26 period. 

An IMF’s Fiscal Affairs Department (FAD) tax diagnostic mission identified the following potential measures to sustainably generate significant revenue while addressing efficiency and equity concerns: (i) removing VAT exemptions (which are estimated at close to 2 per cent of GDP), (ii) reforming the CIT by phasing out tax holidays and exemptions and strengthening safeguards against profit shifting, (iii) reducing customs exemptions, (iv) increasing progressivity in personal income taxes, (v) automatically adjusting fuel levies by exchange rate movement or inflation, and (vi) adopting the new fiscal regime for the extractive industries. 

FAD is also providing technical assistance in designing the MTRS and, along with Ghana’s development partners, will continue supporting implementation of the strategy. The MTRS, which will be approved by Cabinet and published by end -September 2023 (structural benchmark), will serve as input into the 2024 budget.

Reforms will also aim at further strengthening revenue administration. With technical support from the IMF, the authorities will accelerate the procurement of the Integrated Tax Administration System (ITAS) and fully operationalize the system by end-2023.

For a successful ITAS rollout, a recent IMF technical assistance mission advised the authorities to set up the required project governance mechanisms and implement a robust change management plan.

Annual tax expenditure reports will be published to promote accountability and transparency. The e-VAT invoicing system initiated last year will be expanded to cover all large taxpayers by mid-2023. 

The authorities will also develop the Ghana Revenue Authority's (GRA) capacity in the area of extractive industries while finalizing the new fiscal regime framework for the sector, strengthen compliance of e-commerce, complete the data warehouse and other transformation-related projects of GRA, and increase online filing and payment of taxes.

Public Financial Management (PFM)

Ghana’s fiscal policy has been characterised by recurrent periods of overspending. Past budgets have been marked by overly optimistic forecasts despite the existence of a fiscal council.

The fiscal rules adopted in 2019 lack a debt target and feature an overly complex double operational rules system, with poorly defined escape clauses and no effective enforcement mechanisms.

Ghana’s fiscal framework is also weakened by persistent challenges in public financial management. Large revenue earmarking to statutory funds and retention of internally generated funds (IGFs) (18 per cent of primary expenditures) are creating significant budget rigidities.

Statutory funds have independent governance structures and are responsible for a large share of capital expenditures (estimated at 70 per cent of their spending).

Spending by most statutory funds and IGF-reliant institutions is not integrated with the budget planning system (Hyperion) and the expenditure accounting and control system (GIFMIS), contributing to severe deficiencies in expenditure controls.

The authorities are committed to addressing these PFM weaknesses and to strengthen the fiscal framework and institutions under the program.

• All central government expenditure will be integrated into the budget planning and accounting systems.

To this end, several important statutory funds (GETFund, Road Fund, and District Assemblies Common Fund) have started reporting their spending budgets in Hyperion at a disaggregated level to use all functionalities of GIFMIS (prior action). 

The planned rollout of the GIFMIS infrastructure with all available functionalities to over 265 large IGF-reliant institutions will be completed by end-2023.


The authorities will also design a program with clear timelines to ensure that all IGF-reliant institutions start using GIFMIS for IGF receipts, for receiving payment warrants, and for processing their expenditure.

• Statutory funds will be reformed and rationalized. The authorities are in the process of hiring an external consultant to undertake a comprehensive review of all the statutory funds.

The objective is to (i) evaluate their spending and assess efficiency, value for money and relevance, as well as alignment of the earmarking formulae with spending needs, (ii) identify fiscal risk, (iii) identify possible duplication of efforts by government institutions, and (iv) make recommendations on streamlining or merging these institutions with line ministries. 

Based on this review, the authorities will publish (after Cabinet approval) by end-September 2023 a strategy that spells out the future course of action for each statutory fund.


• A strategy will be developed to tighten expenditure commitment controls and prevent arrears’ build-up.

Public procurement will be fully integrated with GIFMIS to ensure that only projects that benefit from approved budgets and quarterly allotments can obtain procurement approvals to award contracts.

Enforcement of sanctions under the PFM Act will be strengthened, including penalties for covered entities committing spending above their allotments and allocations. 

The human resources information system (HRMIS), the bank clearing system (GHIPSS), and GRA’s tax portals will be integrated with GIFMIS.


The automatic bank reconciliation (ABR) functionality for GIFMIS-linked accounts will be rolled out, and the chart of accounts will be standardized if needed. 

With technical support from FAD, the authorities will develop a strategy to tighten commitment controls and prevent arrears’ build-up. It will be approved by the Cabinet by June 2023.

• The Fiscal Responsibility Act will be amended to strengthen fiscal discipline.

The fiscal rule will be reinforced by adding a debt target with a broad coverage to control extra-budgetary spending.

It will also be simplified by focusing on a single operational rule. 

Escape clause and correction mechanisms will be further detailed.

The existing Fiscal Advisory Council will be reformed to bolster the credibility of macro-fiscal projections and to ensure the fiscal rule is adequately implemented and enforced.  IMF technical assistance could be deployed to support these reforms.

Fiscal costs and risks from SOEs

SOEs are imposing a direct fiscal cost to the central government and are a major source of fiscal risks.

This reflects both weak institutional arrangements and unsustainable sectoral policies. Problems are particularly acute in the energy and cocoa sectors: 

• Shortfalls in the energy sector have been significant due to below-cost-recovery tariffs, large distribution losses, and excess capacity amid take-or-pay contracts.

This has cost the central government some 2 per cent of GDP in transfers per year since 2019 and has also led to accumulation of payables to IPPs and fuel suppliers.

• Ghana’s Cocoa Board (Cocobod)—the state-owned entity mandated with facilitating cocoa production and exercising export monopoly—has accumulated annual losses for many years, due to high rollover cost of outstanding cocoa bills, high purchase price to cocoa producers compared to its operational costs, and elevated quasi-fiscal operations (e.g., fertilizers provision, rural roads development) that have also been a burden on Board’s administrative expenses. 

The authorities’ reform program includes important steps to tackle these challenges:

• Institutional arrangements for managing and monitoring SOEs are to be reformed to foster competition and efficiency. Audited SOE financial statements are to be submitted to the MoF in a timely manner.

Given the diversified nature of SOEs, strengthening the technical capacity of the State Interests and Governance Authority (SIGA) to evaluate sector specific risks is crucial and already underway with technical assistance from the IMF. 

Fiscal Risk Statements that evaluate various macroeconomic and contingent liability risks and outline a clear mitigation strategy will be published regularly to enhance transparency and accountability.

• Designing and implementing comprehensive energy sector reforms constitutes a key plank of the authorities’ program. The authorities aim at having updated their Energy Sector Recovery Plan (ESRP) by end-June 2023. 

This exercise, which is being conducted with the help of the World Bank, focuses on expediting Purchasing Power Agreements renegotiations (to reduce the take-or-pay liability), tariff adjustments, improving operational performance of energy SOEs, reforming subsidies to reduce the revenue shortfall, and formulating a strategy (with clear benchmarks) on the reduction of distribution losses and improving collections. 

The authorities will further enhance transparency in the tariff determination process, including by publishing technical notes explaining and justifying final tariff decisions.

They will also develop and operationalize a framework to guide the granting of energy sector subsidies.

• The Power Utilities Regulatory Commission (PURC) recently raised electricity tariffs by close to 30 per cent, bringing the cumulative increase since mid-2022 to 57 per cent, to help reduce the cost-recovery gap and limit this year’s shortfall to around 2.7 per cent of GDP, offsetting underlying upward pressures from a more depreciated exchange rate.

Additional quarterly tariff adjustments will be implemented in 2023 to compensate for any exchange rate and price movements and to bring tariffs close to cost-recovery level, while efforts to improve operational efficiency of energy distribution as planned in the ESRP and the renegotiation of contracts with IPPs are expected to further reduce costs. 

Beyond 2023, the program’s baseline projections conservatively assumes that the sector shortfall will be gradually reduced to reach 1.7 per cent of GDP in 2026 (assuming modest tariff adjustments and slight improvement in grid/recovery losses).

Staff urges the authorities to aim at a more rapid reduction in the sector shortfall under the ESRP to create fiscal space for priority spending.

This could be notably achieved through additional ad-hoc tariff increases while protecting vulnerable households.

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