Good financial governance

Project description

Title: Improving good financial governance in Ghana
Commissioned by: German Federal Ministry for Economic Cooperation and Development (BMZ)
Country: Ghana
Lead executing agency: Ministry of Finance
Overall term: 2016 to 2019

Context

Ghana has recorded strong economic growth over the past two decades. The country has been an oil exporter since 2010 and it now ranks among the lower middle-income countries. Despite these developments, public expenditure still considerably exceeds revenues, and only around 65 per cent of the estimated budget is available for implementing the Ghana Shared Growth and Development Agenda.

Ghana’s taxation and budgeting systems are not sufficiently transparent, and they do not fully adhere to clearly defined rules. Equally, the mechanisms of public accountability and control are still fragmentary and do not offer adequate incentives for improved public financial management.

Objective

Financial governance in Ghana has improved in terms of the effectiveness of public revenue management, the credibility of budgeting, and with regard to accountability, particularly in the extractive industries.

Approach

On behalf of the German Federal Ministry for Economic Cooperation and Development (BMZ), the project works in close coordination with the KfW bilateral financial cooperation measures and with the activities of other donors, who cooperate through a working group to improve Ghana’s public finance sector. Included in this group are Canada, Denmark, the EU, Japan, the Netherlands, Switzerland and the United Kingdom, as well as the African Development Bank, the International Monetary Fund and the World Bank. Since it was launched, the project has also entered into cofinancing arrangements with the Embassy of the Kingdom of the Netherlands (EKN), the Swiss State Secretariat for Economic Affairs (SECO) and the United States Agency for International Development (USAID). The project thus facilitates joint action, which contributes to greater efficiency and effectiveness by coordinating the public finance development programmes of four donors in Ghana.

The project pursues a comprehensive, systemic and values-based approach (Good Financial Governance, GFG) that supports improvements to Ghana’s public finances in three core processes:

  1. Tax administration and policy (revenue management)
  2. Budgeting and budget processes (budget management)
  3. Public accountability and transparent management of revenue from the extractive industries

The project promotes reform processes in the Ghanaian partner institutions through providing targeted sector advice, while at the same time providing general advice on process management. It also supports human resources development, particularly with regard to equal opportunities for women.

The consultancy company Particip GmbH provides specialist consultants to respond to specific needs.

Results

Through its involvement in the public finance reforms, the project has contributed to a number of substantial achievements:

Tax administration and policy

  • The Tax Policy Unit under the Ministry of Finance has become established, and is responsible for the provision of expert advice and the completion of analytical studies.
  • A number of acts have been implemented in law, including the Ghana Revenue Authority Act and the Petroleum Revenue Management Act.
  • The Ghana Revenue Authority has developed a strategic and a modernisation plan that serves as a foundation for future reform projects.
  • The Ghana Revenue Authority has opened medium and small-scale taxpayer offices throughout the country.
  • A standardised human resource strategy and a code of conduct have been developed to improve integrity in the Ghana Revenue Authority.

Budgeting and budget processes

  • The budget unit of the Ministry of Finance has standardised working processes for improved budgeting and budget processes.
  • The Ministry of Finance compiles Citizens’ Budgets to increase the transparency of its budget documents, and to keep citizens and civil society informed about how the government implements the budget plan.

Public accountability and transparent management of revenue from the extractive industries

  • The Ghana Extractive Industries Transparency Initiative (GHEITI) has been extended to include the oil and gas sector. Independent reports on the use of mining, oil and gas revenues are published regularly by the government and subject to debate in parliament, the media and civil society.
  • Public institutions are better equipped to collect taxes and dues from the extractive industries sector and to use this revenue sustainably.
  • The parliament’s Public Accounts Committee has cleared a six-year backlog of outstanding audit reports.
  • The Ghana Audit Service has an extractive industries unit, and carries out independent audits in the extractive industries.