fter having its public debt cancelled under the High Indebted Poverty Countries (HIPC) programme almost two decades ago, Ghana is faced with another looming debt crisis, with public debt hitting GH¢334.56 billion, representing 77.1 per cent of GDP. This has become a major concern for the country and its international partners, with both the International Monetary Fund (IMF) and the World Bank, warning that the country’s debt was reaching unsustainable levels.

But does the government has any other choice aside borrowing? Looking at the country’s budget now, it appears borrowing is no longer a matter of choice but a necessity to keep the country running. Currently, the government’s total revenue, including aids and grants is not sufficient to even finance two budget items, namely, interest payments and compensations.

According to the 2021 mid-year budget, interest payments which are monies paid by the country on loans it had procured cost GH¢15.02 billion in the first six months of the year, with workers compensation for the period also costing GH¢14.69 billion. These two budget items which are recurrent expenditures, put together cost the country GH¢29.71 billion.

On the other hand, the government’s total revenue, including grants and aid for the first six months, stood at GH¢28.2 billion which is about GH¢1.1 billion shy of what the country paid for interest payments and workers compensation. Considering that these two expenditure items are mandatory, it means the government did not have any choice than to borrow to bridge this GH¢1.1 billion gap. In addition to these two expenditure items, the government had other spending obligations to make in the first half of year.

These spending obligations included capital expenditure, goods and services, subsidies, and arrears. In total, the government spent GH¢49.61 billion in the first six months of the year, which is almost double the amount it raised in total revenue. This meant that the government borrowed GH¢21.31 billion to finance the budget in the first six months of the year. Speaking in an interview with the Vaultz Magazine, a Former Minister of Finance, Mr Seth Terkper, said, using the government’s own figures in the main 2021 budget and the mid-year budget, it appears the country’s debt would continue to balloon. “I will use the government’s own figures to show what I think of the budget.

This is a budget which by the half year generated GH¢28 billion by way of total revenue. It used to be tax revenue but now, our entire revenue is not sufficient to pay for just interest payment and compensation. “This means that some major components of the budget had to be financed through borrowing. Capital expenditure of about GH¢ 7 billion had to be financed through borrowing, arrears for the year, and exceptional expenditure like the bailout cost had to be financed from borrowing,” he explained. He said this situation had been the genesis of the country’s growing public debt, adding that this had been the trajectory since 2018. 


Over the years the country’s fiscal deficit and rising debt levels had been largely attributed to poor expenditure management, but with the government now even struggling to pay for just two budget items from its own revenues, it appears the problem has more to do with the inability of the government to raise enough revenues to fund its activities. The country’s tax revenue to GDP, which is around 12 percent is currently one of the lowest in the sub region and way lower than the region’s average of 17 to 18 percent.

Despite the introduction of new taxes and the increase of existing ones in the 2021 budget, the government still failed to meet its revenue target for the first six months. Total revenue and grants for the period amounted to GH¢28.3billion, equivalent to 6.5 percent of GDP, against a programmed target of GH¢32.4billion or 7.5 percent of GDP. The mid-year budget review also showed that the new tax measures, consisting of the COVID-19 Health Levy and the Financial Sector Clean-up Levy, yielded only GH¢249.7 million in the first half of the year, below the target of GH¢358.1 million.

This situation gives credence to the country’s poor revenue mobilisation drive. The need for the country to boost its revenue mobilisation could not be overstated, with the Institute of Statistical, Social and Economic Research (ISSER) of the University of Ghana, in its mid-year budget analysis, calling for the acceleration of domestic revenue mobilisation generation efforts to minimise the tendency of borrowing to finance the fiscal gap.

The institute called for the need to take a critical look at the new taxes that were introduced in the 2021 budget to assess whether they are yielding the needed results. The Institute of Economic Affairs, also in its post mid-year budget analysis, emphasised the need to plug all loopholes in the tax system in order to boost revenue. The research institute noted that the lack of sufficient ambition in scaling up revenue had contributed to higher financial imbalances (deficit), while constraining economic growth, adding that the projected total revenue of the GH¢72 billion for the year was insignificant.

In GDP terms, the country’s tax and total revenue are 12.7 percent and 16.5 percent, respectively, which compare unfavourably with other middle-income peers, which average of 25 percent and 30 percent. Mr Terkper, for his part called for the need to empower the Ghana Revenue Authority (GRA) to boost the country’s revenue mobilisation drive. “We need to generate more revenue and we need to support the GRA to do this.

The revenue to GDP ratio as we speak is hovering around 12 to 13 per cent as compared to our peers who are doing 17 to 18 per cent,” he said. With the coming on board of two additional oil fields, he said the country should have been doing better with its revenue than it was currently doing. On the expenditure side, he said it was necessary for the country to manage its expenditure well and cut out all unnecessary expenditures.


Prior to the presentation of the 2021 mid-year budget, economists, business leaders, and people in academia urged the Finance Minister to resist any temptation to request for a supplementary budget. With COVID-19 cases spiking around that time, the finance minister was advised against using COVID-19 expenditure as a reason to request for additional money.

The Finance Minister appeared to have heeded to this advice and when he appeared before Parliament on July 29 in his trademark all white caftan, Mr Ken Ofori Atta did not request for a supplementary budget. On whether this was a demonstration of the government’s commitment to fiscal consolidation, Mr Terkper, responded in the negative, stating that, the government had no basis to request for a supplementary budget. “Supplementary budget is not a routine budget, it is defined by the constitution and the Public Financial Management Act (PFMA) and the definition is where in a fiscal year, an expenditure arises which was not anticipated when the original budget was presented and approved, then to finance those, the government has to go for the supplementary. “Now if you ask yourself, what was the one thing that arose in 2020 and 2021?

Of course it was COVID-19 and it would have been surprising if even with the spike in cases, government had requested for a supplementary budget,” he noted. He said this was because all the COVID-19 expenses had been more than taken care of already. “The IMF gave us US$1 billion to cover for the COVID shortfall, the World Bank, AfDB and other development partners also gave us about US$600 million or more for COVID and then our own Stabilisation Fund contributed about GH¢250 million and we are still drawing from it.

The Bank of Ghana also for the first time since 2015 financed the government’s budget with US$1.7 billion. “So all COVID-19 expenses have been fully provided for. We had so much for COVID that we even did some substitutions and used part of the COVID funds to pay compensation and part as seed funding for the Development Bank Ghana,” he explained.

The former minister, pointed out that the surprising element for which the minister could have requested for supplementary budget was workers compensation and this was because the negotiations for new workers salary came late and it covered 2020 and 2021 and went forward even to 2022 in compliance with the law. “So the element for which the government could have come to parliament for additional money was compensation but there was some comfort in the COVID reserves that part of it was used to finance that increase in wages,” he stated. 


With employee compensation taking a chunk of the country’s revenue, Mr Terkper, said this had always been a problem for the economy and would continue to be. “This has always been a concern and would continue to be a concern. Single spine was taking at a point 70 per cent of tax revenue but that one had an element of onetime cost because we were dealing with arrears.

Even that we couldn’t deal with it all in one year and it took us about five years to clear the arrears. “And this really slowed down growth. We are not saying it is not important because the public servants need to be compensated but it was also an experiment that went wrong in many ways,“ he stated.


Government in the 20211 budget introduced some new taxes and revised existing ones in a bid to generate more revenue. The new taxes included ‘COVID-19 Health Levy’ which saw a one percentage point increase in the National Health Insurance Levy and a one percentage point increase in the VAT Flat Rate to support expenditures related to COVID-19.