This Selected Issues paper examines competitiveness and the equilibrium real exchange rate for Ghana. It estimates a behavioral equilibrium exchange rate model for Ghana to establish to what extent real effective exchange rate (REER) movements have been driven by an adjustment to its equilibrium values, consistent with changing fundamentals. The paper discusses measures of Ghana’s external competitiveness other than the gap between the actual and the estimated equilibrium REER. Achievements, challenges, and priorities in the areas of public financial management, wage policy, tax administration, and tax policy are also described in detail.


This Selected Issues paper examines competitiveness and the equilibrium real exchange rate for Ghana. It estimates a behavioral equilibrium exchange rate model for Ghana to establish to what extent real effective exchange rate (REER) movements have been driven by an adjustment to its equilibrium values, consistent with changing fundamentals. The paper discusses measures of Ghana’s external competitiveness other than the gap between the actual and the estimated equilibrium REER. Achievements, challenges, and priorities in the areas of public financial management, wage policy, tax administration, and tax policy are also described in detail.

II. Structural Fiscal Issues1

A. Introduction

1. Ghana’s economic performance has improved since 2000 as a result of sound macroeconomic policies and a favorable external environment. Real GDP growth has averaged about 5 percent a year for the last five years. Although inflation is still relatively high (slightly below 10 percent at the end of April 2007), it has been reduced by more than half since the early 2000s. The primary fiscal balance was consistently positive until 2006, when it turned negative. Meanwhile, the sustainability of external debt was much improved when Ghana reached the HIPC completion point and received MDRI debt relief.

2. Though there has been progress toward achieving the Millennium Development Goals (MDGs), there are areas of concern. Growth has led to an improvement in social indicators, so that the goal of reducing the poverty rate by half before 2015 is now within reach. However, a deterioration in some health indicators—in particular the under-5 and infant mortality rates—suggests that additional resources and efficient spending will be required to reach those MDGs.

3. In view of the need to scale up productive spending to promote growth and reduce poverty, Ghana faces major medium-term challenges if fiscal sustainability is to be preserved. This paper discusses achievements and remaining challenges and priorities in the areas of public financial management, wage policy and civil service reform, tax administration, and tax policy (Table II.1).

Table II.1.

Ghana: Structural Fiscal Reform Priorities

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B. Public Financial management

Achievements over the last Decade

4. Under the ESAF (1995-98) and the first PRGF (1999-2002), progress on addressing long-standing weaknesses in public financial management (PFM) was mixed. On the positive side, the Medium-Term Expenditure Framework (MTEF) was introduced in 1999 to improve the quality and sectoral allocation of public spending. On the negative side, inadequate payroll management made it difficult to track wages and salaries for the civil service and subvented agencies, so there were recurrent overruns in the government wage bill. Significant delays in preparing budgets2 also made it hard to control expenditures, and lack of basic systems of commitment control meant that domestic arrears were building up continuously. These structural weaknesses in PFM culminated in a breakdown of budget control as the 2000 elections neared.

5. With improved governance and strong donor support, PFM reforms gained momentum under the last PRGF (2003-06), with tangible results. Regulation of public finances was strengthened by the enactment of several laws, among them the Financial Administration, Internal Audit, and Public Procurement Acts. Steps are being taken to ensure that the Public Procurement Act is fully implemented with use of better procurement methods and publication of tender notices.3

6. Expenditure control and the timeliness of fiscal reporting are also getting better. Since the 2000 spending spree, functional systems for cash planning, commitment control, and fiscal reporting have been installed, with extensive technical assistance from FAD. Moreover, internal audit units have been established in all ministries, departments, and agencies (MDAs), and external oversight of budget execution has improved through timely submission of Auditor-General reports to Parliament and clearance of the backlog of outstanding reports. Since August 2005 monthly reports on budget execution have generally been completed within six weeks, although work is needed to reduce the discrepancy between above- and below-line data and fully cover externally financed projects.

7. The commitment control and cash management systems have been enhanced by the continuing treasury reform. The review of government accounts has already led to a reduction in the number of active accounts from 5,700 to 2,052; and a decentralized payment system has been introduced to speed up transfer of funds to ministries, regional administrations, and district assemblies.4 This new payment system is expected to help streamline treasury management and facilitate fiscal decentralization.

8. Deployment of computer systems is strengthening PFM capacity. In all eight pilot MDAs the computerized budget and public expenditure management system (BPEMS) has been set up, three out of six modules are fully functional, and the last three modules are ready for deployment. By year-end the BPEMS will be rolled out to other MDAs in Accra and the three regional capitals. The new computerized payroll management system (IPPD2) has also been deployed and subvented agencies are being integrated into it.

9. External assessments now recognize that Ghana’s PFM system has substantially improved since the 2000 breakdown. The HIPC Assessment and Action Plan follow-up in 2004 judged 7 of the 16 benchmarks to have been met, compared with only 1 of 15 in the previous assessment (Figure II.1). Similarly, the 2004 assessment of fiscal transparency practices in Ghana—comparing them against the requirements of the IMF Code of Good Practices on Fiscal Transparency—concluded that the country already meets the standards of the fiscal transparency5 code in several areas.6 The 2006 external review of the PFM system, using the new Public Expenditure and Financial Accountability (PEFA) diagnostics, also confirms that Ghana’s PFM system is performing at an average standard.

Figure II.1.
Figure II.1.

Quality of PEM System, 2006

(Benchmarks met, out of 16)

Citation: IMF Staff Country Reports 2007, 208; 10.5089/9781451814972.002.A002

Source: IMF.

Challenges and Priorities 7

10. Capacity to manage government finances efficiently needs to be further enhanced. In view of the need to scale up productive spending to achieve growth and poverty-reduction objectives, strengthening public financial management capacity in controlling, monitoring, and evaluating the effectiveness of government spending should continue to be a high priority.

11. To further reform PFM, the government has drawn up a three-year public financial management plan, with the support of development partners. Using the recent PEFA diagnostics, the new PFM plan has prioritized and sequenced the reform agenda. It also strives to better identify actions that can produce results quickly while still pursuing those that will take longer to come to fruition. To move from the conception to the implementation stage, work is underway to cost various activities with a view to identifying funding gaps.

12. The two major PFM challenges facing Ghana are to improve the efficiency of public spending and strengthen the oversight of fiscal risks stemming from state-owned enterprises (SOEs).

Improving the Efficiency of Public Spending

13. Total spending and capital spending are high in Ghana relative to comparator countries (Figure II.2). There is a risk that the projected acceleration in growth, a key mixed of the government’s agenda, may not materialize if the productivity of the government investment is significantly lower than envisaged because of lower than expected returns on projects, poor investment allocation and efficiency, or implementation difficulties.

Figure II.2.
Figure II.2.

Government Spending in Selected Countries, 2006

Citation: IMF Staff Country Reports 2007, 208; 10.5089/9781451814972.002.A002

Source: Ghanaian authorities and IMF.

14. Priority should therefore be given to making spending more efficient by undertaking public expenditure tracking surveys (PETS); better aligning the annual budget with the Ghana Poverty Reduction Strategy II (GPRS II); improving evaluation of investments and projects; and strengthening the legal and regulatory framework for public/private partnerships (PPPs).

15. A PETS is needed to evaluate spending efficiency and identify ways to improve service delivery. No comprehensive survey of resources has been conducted for the last three years. Thus, the efficiency of service delivery cannot be properly monitored, and funding constraints may not be identified. As the 2006 PEFA review recommended, the government in 2007 will be carrying out a PETS in the education and health sectors.

16. GPRS II and the annual budget should be better aligned by strengthening the MTEF. The PEFA review found an apparent disconnect between the MTEF and budget implementation; when budgets are implemented, there is no mechanism to link a large number of activities8 to resources. Although the MTEF has been simplified to adapt it to the limited capacity of MDAs, to make the budget more credible its capacity needs to be increased to reflect the costs of current and new policies and programs.

17. Improving investment and project evaluation is critical for ensuring value for money. Large government projects that are planned have been rigorously vetted by the Capital Market Committee (CMC), a body composed of central bank and Ministry of Finance officials. A new “Value for Money” unit in the Ministry of Finance and Economic Planning is expected to support the CMC’s work. This unit should strive to uphold the following principles (drawn from experience in other countries):

  • Public investment projects should not pose risks to the country’s debt sustainability, and they need to be considered in the context of a debt sustainability analysis (DSA).

  • Increases in public investment should be concentrated first on high-priority, high-return projects in economic sectors where bottlenecks have been clearly identified.

  • Complementarities between spending on infrastructure and noninfrastructure need to be taken into account when increasing public investment or changing spending priorities.

  • Investing in the rehabilitation and upkeep of infrastructure usually has higher returns than investing in new projects.9

  • The likely future recurrent costs of operation and maintenance should be taken into account in assessing the appropriateness of new investments.

18. Strengthening the legal and regulatory framework for PPPs is equally important in obtaining value for money. The framework for PPPs should explicitly take into account certain key principles,10 including (i) using a public sector comparator to determine whether the best private sector bid for PPP contracts offers the government value for money; (ii) giving foreign partners access to PPP projects that is equal to domestic partner access; (ii) disclosing PPP contracts; (iii) upholding the basic principle of risk sharing that each risk should be borne by the party that can manage it best; and (iv) ensuring that any fiscal risks and contingent liabilities stemming from PPPs are disclosed and properly accounted for in the budget.

Improving Oversight of Fiscal Risks from SOEs

19. Inadequate monitoring of SOE operations can pose significant fiscal risks and may undermine the effectiveness of fiscal policy. SOEs that consistently run losses or accumulate excessive debt often end up being bailed out by the government (their main or sole shareholder). Because SOEs are thus a potential source of fiscal risk, it is important that governments systematically monitor their operations and report to the public with enough detail that the risks can be properly evaluated.

20. SOEs thus need careful monitoring. To foster accountability, the State Enterprises Commission (SEC) should closely monitor performance contracts signed by wholly state-owned enterprises. A quarterly consolidated report should be prepared, and a comprehensive database on SOEs should be set up promptly. It would also be useful to begin systematically to compile and disseminate statistics on SOE operations according to GFSM 2001 standards.

21. In the near term, the authorities should give priority to the four largest wholly state-owned enterprises that account for the bulk of quasi-fiscal activities and pose substantial fiscal risks.11 Because the financial situation of these four SOEs critically depends on pricing, reform of utility pricing should be pursued vigorously to allow for a move to full cost recovery in the near future.

22. Transparency requirements—in the form of observance of codes of good governance—need to be enforced. To make the financial relations between the government and SOEs more transparent, it would be best to avoid netting operations in the settlement of debts. Moreover, the government should require that the financial statements of large SOEs be audited by reputable private firms that adhere to international standards.

C. Wage Policy and Civil Service Reform


23. Comprehensive restructuring of the civil service is a long-standing issue that has yet to be tackled despite repeated public sector reform plans. Civil service reform has been on the government’s agenda under the National Institutional Reform Program (NIRP) since 1994. The cabinet approved in December 1997 a strategy for public service reform over 10 years, but this has not been pursued. In 1999 a new public sector wage policy based on a 22-level grade structure was introduced; the wage bill increased but the public sector did not become more efficient. In October 2005 the government again approved a civil service reform plan to design a new human resource policy, review the organization and structure of the civil service, and address wage policy and payroll management deficiencies. Steps are now being taken to review the wage policy, restructure subvented agencies, reform work conditions, and review the business model of critical MDAs.

24. With across-the-board wage increases and rising employment the wage bill has increased dramatically to beyond that of comparator countries (Figures II.3-4). It grew by about 4½ percentage points of GDP for 2001-06 and claims an increasing share of domestic revenue and total spending. The question arises: how sustainable are these wage outlays, particularly when donors' support, at around 7 percent of GDP annually, starts to decline?

Figure II.3.
Figure II.3.

Ghana: Trends in Wage Bill, 1995-061

Citation: IMF Staff Country Reports 2007, 208; 10.5089/9781451814972.002.A002

Source: Ghanaian authorities and IMF.1 Excludes wage-related benefits and allowances.
Figure II.4.
Figure II.4.

Wage Bill in Selected Countries, 2006

Citation: IMF Staff Country Reports 2007, 208; 10.5089/9781451814972.002.A002

Source: Ghanaian authorities and IMF.

25. Despite the excessive wage bill, skilled public workers appear to earn less than they would in the private sector,which makes it difficult to recruit and retain them. For example, as it decentralizes the payment system, the government has not been able to recruit enough qualified accountants. Low retention of skilled accountants has also delayed creation of a comprehensive database on SOEs at the SEC. It has been reported that the public-private wage differential is up to 400 percent for qualified accountants.

Causes and Implications of the Excessive Wage Bill

26. The high government wage bill reflects structural lapses in recruitment and wage policy. In the past, repeated wage overruns stemmed from serious weaknesses in payroll management and recruitment in subvented agencies. For example in 2002 there were large wage bill overruns relative to the budget. Control over the wage bill was lost because staffing and wage demands occurred outside the budget and thus were not subject to budgetary constraints and trade-offs among competing spending needs.

27. The rising wage bill may undermine progress in education and health by crowding out pro-poor nonwage operating spending (e.g., education materials and basic medical supplies).

28. An excessive wage bill also makes the budget more rigid and more vulnerable to shocks, as necessary adjustment becomes difficult. 12 The consolidated budget already contains numerous protected items and inflexibility due to the earmarking of tax revenues for statutory funds. The high wage bill adds to fiscal rigidity, given the strong resistance of trade unions to wage adjustments.

Policy Options

29. In the 2007 budget the government announced its intention to implement civil service reform (Table II.2). The main objectives would be to link public sector pay to productivity, position, and qualification; maintain the competitiveness of public sector incomes relative to the private sector; and determine the optimal number of workers needed to efficiently deliver public services, particularly in subvented organizations. The reform will have three main components: short-tem measures to contain the wage bill, wage policy reform, and employment reform.

Table II.2.

Wage Policy and Public Sector Reform Schedule

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Short-term measures to contain the wage bill

30. A number of short-term measures could be implemented quickly to contain the wage bill and reduce the size of the civil service,among them (i) combining attrition with a selective hiring freeze; (ii) centralizing recruitment; (iii) performing regular audits of the new payroll system to maintain its integrity; and (iv) avoiding across-the-board salary increases.

Wage policy reform

31. As part of this reform, a new pay system is being implemented in two phases: First, in 2006, the government removed distortions in the Ghana Universal Salary Structure (GUSS) that led to large wage increases. Next, in the second half of 2007, an assessment of job content and the consequential placement of all public sector employees will take place. The resulting pay increase will be completed in 2008.

32. A newly created Fair Wage Commission is expected to take a systematic approach to wage setting. The current approach is mostly driven by union demands for wage increases, sometimes outside the budget process. It will be important to replace this ad hoc approach with a systematic approach based on key indicators (e.g., budget constraint, expected inflation, priority objectives, and productivity growth). The wage-setting framework should be linked to the budgetary process in order to improve budget preparation and execution.

33. The wage reform would benefit from commitment to the following principles:

  • The pay scale should be decompressed gradually to facilitate recruitment and retention of skilled personnel. In reforming the pay structure, the government needs to be mindful of how decompression will affect the average wage and the wage bill.

  • To the extent possible, private sector wage comparators should be used in setting public wages for highly skilled personnel,but the exercise must take into account all aspects of compensation (including in-kind and nonmonetary benefits) and the greater job security in the public sector. International evidence suggests that public wages would still be competitive at about 80-90 percent of the private sector average13

  • In-kind benefits and allowances should gradually be merged into the pay scale. This would improve budgetary transparency and decision making while contributing to fairness in government compensation across sectors. Moreover, it would broaden the income and social security tax base.

  • A tighter link between pay and performance will give workers an incentive to improve efficiency and productivity. Wage policy should be based on transparent rules and objective criteria for promotion.

Employment reform

34. The government plans a functional review of the civil service followed by a plan and a schedule for right-sizing. A comprehensive functional review would help rationalize government employment. With development partners assistance, the government also intends to step up the restructuring of subvented agencies, which are deemed to be overstaffed. Subvented agencies that are no longer relevant to the government’s objectives would be eliminated; and some agencies would be partially or fully commercialized. Savings from reductions of government employment could be used to gradually decompress salary scales and incorporate allowances in monetary pay.

35. A number of factors will likely contribute to the success of this reform after many earlier failures. In particular, the new payroll system will help gain control over the number of civil servants. Also, the government will strive to avoid shortcomings in past attempts at civil service reform. These include (i) the inability to tackle system wide issues, such as public sector pay, rightsizing of public-sector agencies, and human resource development; (ii) capacity constraint at managerial and professional levels; (iii) fragmented and uncoordinated public sector modernization programs.

36. Experience in other countries suggests that civil service reform should be part of the medium-term plan. Structural weaknesses in the civil service are best addressed over the medium term, even if that means lower savings in the short term. Integrating civil service reform into a larger context helps to clearly identify the costs of reform and ensure that they are not merely shifted from wages and salaries to another budget item.

D. Tax Administration


37. Under Fund-supported programs, the government moved effectively to reform tax administration. It created a Central Revenue Authority (CRA), set up a large-taxpayers’ unit (LTU), introduced a single taxpayer identification number (TIN), an automated customs system, and it scaled back exemptions.

38. With the help of FAD technical assistance, in 1998 the Central Revenue Authority (CRA) was established to improve coordination among various tax agencies. Its main responsibilities are to administer the TIN system; monitor tax collections and the audit activities of the revenue agencies; encourage effective cooperation among the agencies; design and implement uniform personnel policies; and put in place an effective internal audit system.

39. The Large Taxpayers’ Unit has strengthened tax administration. The LTU started full operation in April 2004, administering the accounts of more than 350 large taxpayers on a unified basis. Adoption of a single TIN14 and creation of a national tax audit team have enhanced compliance. Customs administration is also being modernized through automation and improved control of bonded warehouses.

40. Tax exemptions were reformed under the ESAF in 1997, but they have recently risen. After a review of the legal basis for customs exemptions, the government in 1997 withdrew unjustified exemptions and vested in the Ministry of Finance sole authority to solicit the approval of parliament, made mandatory, for granting any tax and customs exemptions. Monitoring of remaining exemptions was reinforced, and abuse of duty-free imports under public and donor-funded projects substantially reduced. However, since this major review, revenue loss from exemptions has begun to rise again. The 2007 budget estimates that import exemptions alone resulted in revenue loss of about 2 percent of GDP in 2006.

Challenges and Priorities

41. Tax processes need to be further modernized to improve efficiency and collections. All manual processes should be computerized, and the three separate tax systems (income tax, VAT, and customs and excises) should be linked. The latter would help address tax evasion that takes place through underregistration, underdeclaration of turnover, and inflated claims for VAT refunds. Reform of the penalty system and strict enforcement would improve collections and recovery of tax arrears (the latter was estimated at about 0.5 percent of GDP in 2006).

42. A risk-based auditing system should support tax administration. Although there are annual programs for tax audits, the recent PEFA assessment finds that only about 25 percent are carried out and there is no risk-based selection of cases for audit. An effective audit program will make taxpayers aware that not complying with tax laws will result in sanctions. Taxpayer perception of the probability of being audited strongly influences their compliance. Since risk-based auditing does not seek to audit all taxpayers, scarce resources should be targeted at the larger taxpayers and those most likely to be evading their tax liabilities.

43. Customs operations should be further modernized to detect undervaluation of imports. This can be done by (i) strengthening the customs valuation process and the post-clearance audit; (ii) introducing more comprehensive audits; (iii) ensuring that inspectors are properly trained; and (iv) creating an antismuggling program. Other measures are needed to minimize abuses of bonded warehouses, the free zone facility, the transit regime, and permits granted to MDAs to clear goods from customs without first paying duties.

44. Tax exemptions should again be thoroughly reviewed and drastically reduced as they have risen since the 1997 review. The 2007 budget plans a thorough review exemptions in 2007 to reduce their scope and eliminate abuses.

45. The government is taking the following initiatives to improve tax administration and curb tax evasion:

  • Expand computerization of VAT and customs operations.

  • Step up purchase tests and physical surveillance of VAT businesses.

  • Intensify the operations of the Small Taxpayers Bureau and the Tax Stamp program.

  • Establish a unit to monitor the 5 per cent withholding tax.

  • Strengthen customs valuation by introducing an electronic transactions price database.

E. Tax Policy


46. Ghana’s tax policy has been overhauled in the last decade. The VAT has been introduced, petroleum taxation and tariffs reformed, and the income tax rationalized. The efficiency and buoyancy of the tax system have increased, and the tax structure is shifting toward taxation of consumption. As a result, the tax revenue-to-GDP ratio is above the average for African countries (Figure II.5).

Figure II.5.
Figure II.5.

Tax Revenue for Selected Countries, 2006

(Percent of GDP)

Citation: IMF Staff Country Reports 2007, 208; 10.5089/9781451814972.002.A002

Source: Ghanaian authorities and IMF.

47. Indirect taxation became more efficient with the introduction of the VAT under the ESAF After a failed attempt in 1995, a broad-based VAT was successfully introduced in late 1998, with a single positive rate of 10 percent, exemptions in line with standard practice, and an effective refund mechanism. In 2000 the VAT rate was increased to 12.5 percent and in 2004 was again raised by 2½percentage points to finance the new national health insurance. Another important reform of consumption tax was the extension in 1997 of the sales tax on services to cover a range of professional services.

48. Taxation of petroleum products has been reformed. In addition to the specific excise duty, an ad valorem excise duty of 15 percent was imposed on petroleum products so that changes in the international oil price and the exchange rate would be automatically passed through to retail prices. In February 2005 an additional levy on gasoline was added to cover the cost of mitigating measures for vulnerable households. Since August 2006 the authorities have moved from ad valorem to specific taxation on petroleum products.

49. The tariff on international trade has been simplified. In 1998 under the EASF, a new tariff range of 0, 5, 10, and 25 percent was introduced to reduce tariff dispersion and treat imports more uniformly. Particular attention was given to limiting as much as possible the number of items that were zero-rated or exempt. To further reduce dispersion, the top rate was later reduced to 20 percent. Currently, Ghana maintains a common tariff based on the Harmonized System of Customs Classification that has four ad valorem rates. As for exports, Ghana continues to tax cocoa and timber exports15, at a rate determined by the Minister of Finance.

50. The income tax system has been rationalized. Under the EASF, measures were taken to improve incentives for private savings and investment by adjusting tax brackets for inflation and harmonizing the withholding tax on dividends and interest. Later, under the second PRGF-supported program, to spur investment the government reduced the corporate income tax rate from 32.5 percent in 2004 to 25 percent in 2006. At the same time the top personal income tax rate and the rates for low-to medium-income earners were also lowered.

Challenges and Priorities

51. The most important challenge in tax policy is broadening the income tax base. The 2007 budget notes that of 5 million potential tax payers, only 1 million are paying income taxes. Moreover, while public sector employees pay taxes, only a small proportion of private sector employees do. Efforts to broaden the tax base have also been constrained by the predominant role of the informal sector in generating employment.

52. The 2007 budget introduces innovative methods to widen the tax net to the informal sector. The government intends to put in place a system to assess and collect income tax using the value of vehicles registered, because most tax evaders in the informal sector do register their vehicles. To expand the VAT net to cover the informal retail sector, the government will impose a flat VAT rate at 3 percent of sales value without recourse to input VAT claims.

53. A comprehensive review of excise duties is planned for 2007. The review will aim to rationalize duties while discouraging tax evasion and improving enforcement and administration. In line with international best practices, the excise regime will move from ad valorem to specific taxation. The revenue impact of this reform is expected to be neutral.

F. Conclusion

54. Since the breakdown of budget control in late 2000, Ghana’s fiscal institutions have improved markedly, with tangible achievements in PFM. However the recent fiscal slippages in 2006 highlight the need to accelerate the reforms. In the area of PFM, the two major reform priorities are to improve the efficiency of public spending and strengthen the oversight of fiscal risks stemming from state-owned enterprises (SOEs). In the area of expenditure policy, decisive and timely implementation of wage and employment reforms would be critical. In the area of revenue mobilization, tax and customs administration need to be further modernized to improve efficiency, while sustained efforts are required to broaden the tax base, notably by reducing tax exemptions and widening the tax net to the informal sector. All these challenges need to be addressed in a timely manner if the country is to meet the MDGs, while preserving fiscal sustainability.


Prepared by Bernardin Akitoby (FAD).


For 2006, for the first time, the budget was presented on time.


The 2007 External Review of Public Financial Management, led by the World Bank, will focus on Ghana’s public procurement practices to support the government’s efforts to make the use of public funds effective, efficient, and transparent.


The 2006 PEFA points out the risks to expenditure control associated with a decentralized payment system. It also stresses the need to ensure that the decentralized payment system does not reduce the Government’s ability to conduct efficient treasury management.


Ghana has volunteered to participate in the Extractive Industries Transparency Initiative (EITI). This will further enhance fiscal transparency, given the importance of revenues from the mining sector, which accounts for about 10 percent of the government’s revenue.


These include (i) the responsibilities of the different branches of government are clearly defined; (ii) a transparent and fairly comprehensive legal and administrative framework for budget preparation and execution has been put in place; and (iii) the annual budget is based on a comprehensive and consistent quantitative macroeconomic framework.


These priorities are those identified in the 2006 PEFA.


The number of activities has recently been reduced from more than 17,000 to 45 standard activities.


Even countries with a long tradition of planning for public investment tend to give a higher priority to new projects, often for political reasons.


More discussion of PPP fundamentals can be found in B. Akitoby, R. Hemming, and G. Schwartz (2007), “Public Investment and Public-Private Partnerships,” IMF Economic Issues No. 40, Washington, DC.


These are the Volta River Authority (VRA), Electricity Company of Ghana (ECG), Tema Oil refinery (TOR), and Ghana Water Company Ltd (GWCL). For further details, see Mali Chivakul and Robert C. York (2006), “Implications of Quasi-Fiscal Activities in Ghana,” IMF Working Paper No. 06/24, Washington, DC.


The experience of other countries suggests that an unsustainable wage bill often contributes to fiscal crisis: Côte-d'Ivoire (1993-2000); Lebanon (1998-2002); South Africa (1993-2001); and Nigeria (1990-2000).


See Schiavo-Campo, Salvatore, 1998, “Government Employment and Pay: The Global and Regional Evidence,”Public Administration and Development, Vol. 18, pp. 457-78.


To better identify taxpayers, a TIN system bill was approved in July 2002.


The government is contemplating the reform of export taxation.

Ghana: Selected Issues
Author: International Monetary Fund