Ghana has a Recurrent Problem of Weak Budget Credibility, Expenditure Arrears – IMF Says
The International Monetary Fund (IMF) has expressed concern over Ghana’s persistent weak budget credibility and the continuous accumulation of expenditure arrears, describing them as core governance and fiscal management weaknesses that undermine macroeconomic stability and heighten corruption risks.
According to the IMF’s 2025 Governance Diagnostic Report on Ghana, the country continues to face significant discrepancies between budgeted and actual revenue and expenditure outturns. The Fund observed that while tax revenues have generally met expectations, non-tax revenues have persistently underperformed, weakening budget execution and undermining fiscal discipline.
“Ghana has a recurrent problem of weak budget credibility, which is at the root of a number of macro-critical governance weaknesses,” the report noted.
The Fund revealed that revenue shortfalls have consistently led to expenditure arrears, which stood at an estimated 6.3 percent of Gross Domestic Product (GDP) in 2023. It added that despite a number of Public Financial Management (PFM) reforms, such as the enactment of a stronger PFM Act and the rollout of the Ghana Integrated Financial Management Information System (GIFMIS), the problem has persisted.
Ministries, Departments, and Agencies (MDAs), the IMF observed, frequently commit to spending beyond available resources, a trend that has often resulted in the abandonment of investment projects and increased fiscal pressure.
The report further highlighted the governance and corruption risks associated with the accumulation of arrears. Citing analysis by the World Bank, the IMF explained that arrears introduce administrative discretion into public financial management, allowing officials to determine which obligations to settle first when funds are limited. This, the Fund cautioned, creates avenues for corruption as payments can be influenced by bribes or personal interests.
To address these systemic weaknesses, the Fund disclosed that the government developed an Arrears Clearance and Prevention Strategy in mid-2023. The strategy seeks to strengthen fiscal discipline through measures such as tighter commitment controls, alignment of quarterly allotments with cash forecasts, more comprehensive medium-term budgeting for investment projects, standardized contracting, and expanded GIFMIS coverage. However, the IMF noted that implementation of the strategy has been inadequate so far.
“At the time of the mission, the Arrears Clearance Committee had been formed but had yet to met, and its Terms of Reference had not been agreed,” the report stated. It added that while some progress had been made in improving cash forecasting, major reforms of fiscal institutions and PFM processes remain crucial.
The IMF urged Ghanaian authorities to prioritize the full and timely implementation of the Arrears Clearance and Prevention Strategy to enhance fiscal transparency, improve governance, and reduce corruption risks. The Fund emphasized that restoring budget credibility will be critical to ensuring fiscal sustainability and maintaining confidence in Ghana’s ongoing economic recovery efforts.
