After the graduation in 2010, the Government of Ghana presented a policy for partnerships with donors, including some ideas for a financing strategy (Government of Ghana, 2012), but the financing strategy was never developed in any detail. The agenda has, however, received renewed attention under the present government. President Akufo-Addo’s vision and ambition of developing a ‘Ghana beyond Aid’ has been accompanied by a range of reform plans that are meant to address the fiscal imbalances, reduce the burden of debt (foreign and domestic), increase domestic resource mobilization, and crowd-in non-state resources not least in infrastructure and service delivery in order to counteract the fall in public investments over the last years.
The government’s policy is based on the commitments of the Addis Ababa Agenda for Action (UN, 2015) and the SDGs, but so far no attempts seem to have been made to estimate the SDG financing gap or to develop a financing strategy for the individual SDGs. The recent Memorandum of Economic and Financial Policies (Government of Ghana, 2018) indicates, however, that the government intends to develop a detailed plan, which can guide the implementation of the SDGs. The present government also envisages a new partnership with development partners, as formulated in the Ghana Development Cooperation Policy (Government of Ghana, 2017).
The intention is that a significant share of the development needs should be financed by domestic resources (Government of Ghana, 2018), but external finance delivered through various financing instruments should be maintained and increased at the same time. Both concessional and non-concessional financing will continue to be mobilized. ODA is also in the future – at least in the short to medium term – seen as a relevant source of financing to complement domestic resources. However, as indicated in the ‘Ghana beyond aid’ agenda, the ambition is to move out of aid dependency. The government will also consider a range of innovative financing mechanisms to raise additional funds, including private investments, for development purposes, and it will strengthen Ghana’s engagement in South-South cooperation and further develop the relationships with countries such as China, Russia, India, Mexico, Brazil and Japan.
The government of Ghana seems therefore aware of the need to address the challenges and to adapt to the changing landscape of development finance, and several policies and strategies have been developed. The following will briefly review four areas critical for the future of development finance in Ghana. These are debt management, the local financial market, domestic resource mobilization, and attempts to mobilize private investments in the form of public-private partnerships. As will be seen in the following, the stated ambitions are at varying levels of operationalization.
As mentioned, public debt in Ghana has increased significantly, and in the most recent debt sustainability analysis Ghana was classified as a country at high risk of external debt distress (IMF, 2018). In 2016, a Medium Term Debt Management Strategy was adopted, which stated that commercially viable projects could be financed by non-concessional lending, while concessional loans should fund social sector activities. However, as shown in previous sections in this analysis, both international and domestic debt has continued to grow. Figures for 2017 indicate, however, a reduction in the public deficit and the debt-to-GDP ratio mainly as a result of strengthened expenditure control. The government intends to continue its effort to strengthen budget formulation and execution, and a set of public financial management regulations have recently been submitted to Parliament (IMF, 2018). The government has also in recent years prioritized a re-profiling of debts from short term to medium and long term with the implication that financing needs have been reduced. This policy has been supported by an active use of Eurobonds as financing instrument. In addition, Ghana’s significant increase in domestic debt has put an upward pressure on interest rates and is crowding out financial capital to the private sector, which reinforces the need for proactive debt management and a continuation of the efforts to strengthen public financial management.
Several analyses have mentioned the weak domestic financial markets as a ‘host-country barrier’ for ensuring long-term investments in Africa (see e.g. Kappel et al., 2017). Attempts to address this barrier in order to mobilize private finance for Ghana’s continued development are therefore pertinent. Doing so does not only require less excessive domestic borrowing by government, but also that the right institutional framework is in place. The government recognizes this and has addressed the issue in several official statements, including in the latest budget statement for the financial year of 2018, where a number of initiatives are mentioned, but still not implemented (Government of Ghana, 2017). Several initiatives have, however, already been implemented, including the establishment of the Ghana Fixed Income Market (GFIM) in 2015 and the Bloomberg e-Bond trading platform. In addition to the GFIM, the Ghana Alternative Exchange (GAX) has been introduced to support existing SMEs and startups to raise funding. The government has also introduced financial sector reforms in order to ensure financial stability, including efforts to address the increase in non-performing loans (IMF, 2018).
As mentioned, the Government of Ghana’s aim is to finance a significant share of the country’s development needs with domestic resources. The aim is to move Ghana’s tax-to-GDP ratio from 17 percent in FY 2017 to 24 percent in the medium term. The provisional revenue figures for 2017 were, however, lower than programmed (IMF, 2018), and Ghana’s revenue-to-GDP is significantly under the ratio in most of the comparable countries. Assessments have identified a number of reasons for the low tax revenue, including tax evasion and exemptions as well as an inefficient tax administration (World Bank, 2017). In order to address these issues several reforms in tax policy and tax administration are planned with a particular focus on broadening the tax base and ensuring compliance. Also in 2018, a specific effort will be made to improve the tax administration (IMF, 2018). The scope of broadening the tax base hinges on the fact that only approximately 1.5 million people are registered with the Ghana Revenue Authority (GRA) out of 6 million potential taxpayers. Moreover, the Ghana Statistical Service in 2016 estimated that non-tax paying businesses make up 62 percent of all commercial enterprises. Two institutional reforms both related to creating a national identification system were initiated in 2017 with the aim of broadening the tax base while at the same time improving the formalization of the economy: (i) the Ghana Card and (ii) the Digital Address System (DAS). Together, the two initiatives are meant to help the GRA identify taxpayers. However, neither the Ghana Card nor the DAS will automatically bring in more revenue to the state. This will require systems integration, i.e. a much closer collaboration and coordination between government institutions including more efficient links and communication between relevant IT systems. It will also require significantly more resources and capacity building in order to be able to follow up on identifying and registering new taxpayers, and pursuing non-compliant (defaulting) taxpayers. In addition, the suggested tax reforms include a range of measures regarding VAT, Tax Stamp Policy, updating of the Revenue Administration Act and the Transfer Pricing Regulations, Automatic Exchange of Financial Information Bill, etc. It should, however, be noted that extensive reforms in both tax policies and tax administration were made in the past, but as shown in Figure 4, public revenues in Ghana have remained more or less at the same level in the last 5-6 years, which obviously questions the realism of the government’s strategy to give domestic resources a key role in financing the country’s development.
In order to attract private investments, Public-Private Partnership (PPP) has re-surfaced as a financing instrument in response to the huge infrastructure and service delivery gap. PPP is not new in Ghana. PPP became a national policy in 2004, and another policy was formulated in 2011, but these policies were never operationalized. Since 2012 the World Bank has assisted Ghana in improving the legislative, institutional, financial, fiduciary and technical framework for PPP, and in generating a pipeline of bankable PPP projects. With this support, a pipeline of PPP projects has been established that are at various levels of implementation, but with only a few at construction stage. Also, a draft PPP bill has been produced that establishes the legal and institutional framework for PPP. The bill is yet to be presented to Parliament. The absence of a solid, legal framework for PPP has been a concern for investors as it has made it difficult for private sector operators to enter into investment projects on a legal and regulatory conducive platform for PPP. The appetite of private investors to enter into PPP agreements is also affected by the general functioning of the government system, in the sense that private investment depends on the government’s ability and willingness to comply with often long-term agreements. This may be challenging especially across periods of changing governments. Also, although there are no legal restrictions in respect of participation of foreign companies in PPP projects, the government’s policy of the local content requirements in foreign investment projects may deter private investors. This is affecting not only PPPs but also the ability of Ghana to attract FDI. Lastly, even if the government may not necessarily need financial resources to provide debt financing for PPP projects, the issue of guarantees – either payment guarantees to the private company or loan repayment guarantees to the lender - may still pose financial challenges for the state as contingent liabilities.
Many of these strategies and policies are still new, and it is too early to assess their potential impact, but the first test is whether the government is able to operationalize and implement them. Several analyses have focused on Ghana’s mixed record in the past when it comes to implementing necessary policy actions (see e.g. Whitfield (2010), Whitfield (2011a) and Whitfield (2011b), Abdulai and Hickey (2014), Resnick (2016), Botchway (2018). It has thus been argued that the balance in Ghanaian democracy leads to a strong focus on short-term policy considerations while prohibiting policy reforms with a medium to long-term perspective and an economic transformation in Ghana which would be required also to finance the public sector. In the recent Memorandum of Economic and Financial Policies (Government of Ghana, 2018) several ideas are, however, mentioned on how to strengthen the private sector and economic growth, but most of these ideas still need to be developed in more detail.
 In 2017, the top five countries with the highest number of projects based on foreign direct investment into Ghana were China, India, United Kingdom and South Africa (Ghana Investment Promotion Centre, 2017), and several Memorandum of Understandings have been signed recently. For a discussion of some experiences with South-South Cooperation in Ghana, see also Amanor and Chichava (2016).
 See World Bank (2017) for an assessment of budget management and execution in Ghana.
 For further analyses of the issuance of local bonds, see also Te Velde (2014) and Essers et al. (2016).
 One implication was that Bank of Ghana closed two insolvent banks in August 2017 (Government of Ghana, 2018).
 Revenues were programmed to reach 18.9 percent of GDP in 2017, but provisional figures indicate that only 17.5 percent was collected.
 See table 4. See e.g. also World Bank (2012) and Osei-Kyei and Chan (2017) for various perspectives on PPPs in Ghana.Top