The African Development Bank Group has provided funds to the Ministry of Finance, Ghana for an Institutional support project worth US$7.4 million.
The overarching aim of the project is to close the country’s domestic revenue mobilization gap and improve debt management capacity.
The AfDB announced a launch of the project on Wednesday, August 18, 2021 after signatures were appended to the loan and grant agreements and a first disbursement of the funds for the project.
According to the Bank Group, the project’s design is to assist the country return to prudent debt levels through improved debt management capacity. It is also to assist the government ensure a sustainable cash flow to smooth public spending.
Following an escalating debt and a rather slow revenue mobilization drive, the government appears to be cash strapped. Current government actions include resorting to more avenues for commercial loans as it missed its mid-year revenue target.
Recent debt statistics reveal that Ghana’s debt went through the roof reaching 77.1% as at June 2021. The IMF projects Ghana’s public debt to reach 83.5% in 2021 and 84.5% in 2022, according to the IMF’s Article IV Consultation.
Despite the efforts to increase revenue generation, Ghana failed to meet its projected revenue for the mid-year; nonetheless, the IMF projects the country’s revenue-to-GDP to reach 14.9% at full year and 15.0% in 2022.
As a way of complementing existing efforts towards this end, the project will facilitate prudent debt management. This deepen financial sector reforms and support capital market development.
Particularly, the project fund targets the provision of technical assistance and capacity building to improve efficiency in non-tax revenue collection. Also, the project will accelerate Ghana’s debt and cash management reforms.
The Launch of the Project
Furthermore, this has become necessary due to the unrivalled challenges in revenue mobilization. This emanates from supply disruptions caused by the Covid-19 pandemic.
At the project launch, Mr. Emmanuel Fordjour, Manager at the Resource Mobilization and Economic Relations Division of the Finance Ministry, thanked the African Development Bank for supporting the government. He expressed the Ministry of Finance’s commitment to accelerating the project’s implementation.
The African Development Bank Country Manager for Ghana, Eyerusalem Fasika, emphasized the importance of the project to Ghana’s medium-term development objectives and the Finance Ministry’s 2018-2021 strategic plan.
Ms. Fasika noted that the project aligns with the Bank’s Country Strategy Paper (2019-2023). She further indicated it provides the foundation for additional fiscal space to meet these thematic areas: support investments in infrastructure to bolster industrialization job creation; and spur private sector activity and regional integration.
With plans to become a beacon of hope for Africa, in terms of the quest to have a “Ghana Beyond Aid,” the project will support the country to transition from aid dependency to prosperity and self-reliance.
The Bank Group also rallied behind the country’s ambition to become a regional financial services hub. That said, the project will support the establishment of an international financial services center in Accra.
This is not the first assistance offered by the Bank to Ghana this year. Earlier, the Bank supported Ghana’s Capital Market with a grant of US$400,000 to develop a risk-based supervisory solution for the Ghanaian local capital market.
In addition, the Bank assisted in the automation of a regulatory compliance monitoring system for the Securities and Exchange Commission.
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