The Ghanaian government has unveiled a major fiscal restructuring plan aimed at reversing years of rising debt accumulation and restoring confidence in the country’s public financial management system.
As part of the midyear budget review, the government announced sweeping reforms, including a new binding fiscal rule that will limit debt levels and enforce stronger spending controls.
The reforms, according to the government, represent a decisive shift from previous approaches to managing public finances, with greater emphasis now being placed on controlling expenditure, improving accountability and ensuring that public resources deliver measurable benefits to citizens.
Presenting the Mid-Year Budget Review to Parliament, Finance Minister Dr Cassiel Ato Forson stated that the country’s International Monetary Fund (IMF) programme had been recalibrated to focus more on expenditure management rather than relying heavily on revenue increases.
“Government also recalibrated their IMF programme, shifting the emphasis from revenue-led to expenditure-led fiscal consolidation to achieve a fairer sharing of the adjustment burden.”
Dr Cassiel Ato Forson
The move signals a new direction in Ghana’s fiscal strategy, as authorities seek to reduce debt pressures while protecting households and businesses from excessive taxation.
New Fiscal Rule Sets Strict Debt Limits
A key component of the reform package is an amendment to the Public Financial Management Act, introducing a binding fiscal rule designed to keep government finances under tighter control.
According to the FInance Minister, the new framework requires Ghana to maintain a minimum annual primary surplus of 1.5 percent of Gross Domestic Product (GDP) while working towards a debt-to-GDP ceiling of 45 percent by 2034.
“We amended the Public Financial Management Act to institutionalise a binding fiscal rule requiring a minimum annual primary surplus of 1.5% of GDP and a debt-to-GDP ceiling of 45% by 2034.”
Dr Cassiel Ato Forson
The policy is expected to provide a stronger legal foundation for fiscal discipline and prevent future administrations from accumulating excessive debt without adequate safeguards.
The government emphasised that the reforms were intended to change the perception of Ghana’s public finance management by ensuring that discipline becomes a permanent feature of state operations.
“These reforms signalled that fiscal discipline would no longer define fiscal indiscipline would no longer define the Ghanaian state,” Dr Ato Forson added.
State Enterprises Face Tougher Spending Controls
One of the major concerns highlighted by government was the growing financial burden created by state-owned enterprises (SOEs). Authorities revealed that liabilities accumulated by SOEs had contributed significantly to Ghana’s debt challenges over the years.
“Over the last 10 years, liabilities of state-owned enterprises have added the equivalent of about 3% of GDP to Ghana’s public debt every single year,” Ato Forson disclosed.
According to the Finance Minister, some SOEs failed to honour contractual obligations, forcing government to absorb their liabilities and increasing pressure on public finances.
“This occurred because state-owned enterprises failed to honour their contractual obligation compelling the government to assume and settle those liabilities,” he explained.
The government argued that these accumulated obligations diverted resources away from critical national development projects.
“This contributed to the sharp rise in Ghana’s public debt. As a result, the resources that would have financed critical infrastructure were used to pay those SOEs’ debt.”
Dr Cassiel Ato Forson
The new commitment authorisation regime will now apply to state-owned enterprises, ensuring they cannot commit government resources without approval.
Spending Controls And Accountability Measures Expanded
To strengthen expenditure management, government has established new institutions including the Value for Money Office and the Fiscal Council.
The Value for Money Office is expected to improve efficiency in public spending by ensuring that government projects and programmes provide maximum benefits to citizens.
“We established the Value for Money Office to strengthen expenditure efficiency, improve the quality of public expenditure and ensure that every city spent delivers maximum value for the Ghanaian people.”
Dr Cassiel Ato Forson
The Fiscal Council will also enhance oversight by promoting transparency and accountability in government finances.
The government further announced a comprehensive audit of public payables to eliminate irregular obligations and prevent the accumulation of unauthorized debts.
Additionally, amendments to the Public Procurement Act will require commitment authorisation before procurement activities are undertaken.
“This reform firmly linked procurement to the approved budget and restored discipline to public expenditure management across the government,” Dr Atol Forson said.
Leaner Government And Tax Reforms
Beyond expenditure controls, government announced measures to reduce administrative costs by shrinking the size of government.
The number of ministers has been reduced from 123 at its peak to 60, while ministries have been cut from 30 to 23.
Government explained that the decision was not only political but also a financial strategy.
“A leaner government is not merely good politics but is also a sound fiscal policy,” it stated.
Authorities also announced reductions in non-essential expenditure, including excessive foreign travel, workshops, conferences and unnecessary vehicle purchases.
On taxation, government said it was pursuing reforms aimed at supporting businesses, improving compliance and restoring investor confidence.
“The objective was very clear. First, to restore investor confidence. Second, to revive private enterprises. Third, to provide a relief to households and businesses.”
Dr Cassiel Ato Forson
As part of the tax overhaul, the government abolished several levies including the Electronic Transfer Levy, Betting Tax, COVID-19 Health Recovery Levy, Emission Tax and VAT on Motor Insurance.
The reforms, the government believes, will create a more efficient tax system while reducing pressure on citizens and businesses.
With the introduction of the new fiscal rule and stronger spending controls, Ghana is positioning itself for a new era of financial management aimed at reducing debt vulnerabilities and protecting future generations from excessive borrowing.
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