Fiscal Discipline Drives Ghana’s Debt Management

In a move to enhance fiscal discipline and address Ghana’s escalating fiscal challenges, Finance Minister Hon. Cassiel Ato Forson has unveiled a comprehensive plan to manage the growing pile of payable debts accumulated in 2024.

At the heart of the strategy is a robust auditing process, stringent controls, and key amendments to public financial laws designed to promote long-term stability and transparency.

One of the cornerstone initiatives of this fiscal overhaul is an intensive audit of outstanding payables and commitments.

“The Ministry of Finance (MoF) has engaged the Auditor General and two independent audit firms to conduct an intensive 8-week audit of outstanding payables and commitments” Hon. Cassiel Ato Forson.

According to the Finance Minister, the goal is to ensure that the figures being reported are both accurate and legitimate.

“The expected outcome is to receive recommendations for corrective measures to resolve any issues or irregularities identified during the audit.”

The move is indicative of the government’s commitment to transparency, as it aims to clear the fog surrounding the financial obligations that have accumulated over time.

This, the Finance Minister explained, is the first step in restoring order and accountability to Ghana’s public financial management systems.

Fiscal-responsibility

The next phase of the reform involves enhancing the government’s commitment control system.

As Ato Forson pointed out, “Strengthened Commitment Control System” will be implemented to curb unauthorized obligations and ensure that public contracts are only approved after a prior commitment authorization from the Ministry of Finance.

This provision, effective from April 3, 2025, will play a vital role in ensuring that public spending is in full alignment with established financial regulations.

In addition to this, significant amendments have been proposed to the Public Financial Management (PFM) Act of 2016.

These changes are geared towards securing macroeconomic stability in the long run. “Key fiscal rules have been introduced to support long-term macroeconomic stability.”

A prominent feature of these amendments is the introduction of a debt rule, which sets a target for reducing the debt-to-GDP ratio to 45% by 2035.

“Operational Rule: Aiming for an annual primary surplus of at least 1.5% of GDP on a commitment basis; An Independent Fiscal Council will monitor compliance and promote greater transparency and accountability.”

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Hon. Ato Forson also indicated that midway through 2025, the government will also focus on enhancing fiscal discipline and compliance monitoring across government institutions.

A new Compliance Division has already been established under the MoF to ensure Ministries, Departments, and Agencies (MDAs) adhere to fiscal commitments.

According to Forson, this division will be led by a newly appointed director, who will oversee a dedicated system for monitoring and enforcing fiscal rules.

In a further bid to maintain accountability, a “PFM Commitment Control Compliance League Table” will be published, ranking MDAs based on their adherence to fiscal management standards.

This public accountability mechanism is expected to spur competition among MDAs, urging them to remain compliant with fiscal policies and regulations.

These steps, as articulated by Hon. Ato Forson, represent the government’s determination to address long-standing fiscal challenges, improve public financial governance, and ensure that Ghana remains on a path to economic stability.

The measures are poised to significantly enhance the government’s ability to monitor spending, enforce compliance, and ultimately rebuild public trust in the nation’s financial systems.

Reforms Amid Challenges

By embracing these reforms, the government aims not only to address the immediate issue of the large payable build-up but also to implement structural changes that will ensure sustainable financial practices for years to come.

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As the Finance Minister stated, these actions demonstrate a strong commitment to enforcing fiscal discipline and creating a more accountable public financial management framework.

While these steps represent a positive shift in the right direction, they also come with their share of challenges.