The World Bank has pointed out that a lack of budget discipline since 2010 has resulted in booming public spending marked by volatility, high-interest payments, and mounting rigidities.

According to its Ghana Public Finance Review, the government expenditure grew faster than Gross Domestic Product (GDP) between 2010 and 2022 while non-discretionary spending severely limited the fiscal space.

It added that overspending during election years, contingent expenses in the financial and energy sectors, and efforts to address the COVID-19 pandemic all contributed.

From 2010 to 2023, the World Bank said 70% of total expenditure (15.8% of GDP on average, nearly 100% of revenue) was dedicated to three spending items: public sector wages, interest payments, and earmarked transfers to statutory funds.

As Ghana’s borrowing became more expensive, it continued that a growing interest burden started crowding out capital expenditures.

PFM Weaknesses Undermined Fiscal Policy

Similarly, weaknesses in public financial management have undermined fiscal policy effectiveness.

Furthermore, it said the recent fiscal pressures have shed light on Public Finance Management (PFM) weaknesses related to commitment controls and cash management and led to arrears accumulation (5.8% GDP in 2022).  

However, Ghana’s PFM reforms, including the enactment of the PFM Act, 2016, and the ongoing PFM Strategy 2022–2026, have yielded some success, but major challenges remain.

The challenges include the budget preparation schedule routinely suffers significant delays; the indicative budget ceilings are often ignored for final expenditure allocations and the Medium-Term Expenditure Framework (MTEF) and Program-Based Budgeting (PBB) estimates are not comprehensive or reliable.