With the scheme, the bank aims to strengthen institutional capacity in domestic revenue mobilisation to reduce the debt burden. It also intends to support public investment management, and bolster the governance of state-owned enterprises in the West African country.
Once one of Africa’s strongest economies, Ghana has struggled to bounce back from a number of external shocks, including the collapse in commodity prices.
Public debt and inflation in Ghana remain high, despite repeated attempts to refinance its existing arrears.
In June, the nation said it would sell $1bn in Eurobonds this year despite concerns over rising borrowing costs. Ghana made the $1bn issue in August, but had to scrap the scheme after failing to attract interest from international investors. Critics blamed the failure of the plan on economic mismanagement.
The government now intends to sell $2bn in bonds by the end of the year in order to consolidate the debt of four state utilities, which have run up over $1.5bn in debt over the last two decades.
The World Bank said reforming state-owned governance and improving the Ghanaian administration’s oversight will not only shore up the public finances, but improve public service delivery, contributing to economic competitiveness.
The project will specifically target the country’s Ministry of Finance, the Ghana Revenue Authority, the National Development Planning Commission, targeted SOEs and other select ministries, departments and agencies.
Henry Kerali, World Bank country director for Ghana, said the scheme would help institutions build capacity to better employ medium-term debt management strategies. Also, it would help ensure government financing needs were met at the lowest cost – and with prudent levels of risk.
Albert Kan-Dapaah, head of the University of Professional Studies Centre for Public Accountability in Ghana, expressed concerns this week about PFM in the country, especially in regards to the Ghana Revenue Authority.
He pointed out that of the six million registered taxpayers in Ghana last year, only two million actually paid, while the remaining four million evaded levies altogether.
Meanwhile, a $918m, three-year financial aid programme involving the International Monetary Fund hit a wall earlier this month, after Ghanaian legislators passed a bill breaching the terms of the deal.
The bill reduced the ceiling for central bank financing of the government deficit from 10% to 5%, despite an IMF stipulation that this be reduced to zero. This requirement was needed to unlock the next tranche of funds under the programme.
The fund said it will be re-evaluating Ghana’s economic performance and discussing the matter with authorities before releasing further finance for the country.
The African Development Bank also announced a $56.2m loan to improve PFM in Ghana earlier this year.
