Fiscal Scorecard(III) …revenue policy and performance  


Parts III and IV evaluate the effect of several tax policy and administration changes from 2017 to date. Several of these reverse policies and updates of tax laws that Parliament enacted between 2009 and 2016. Since most of the recent reversals distort the tax structure and increase direct and indirect tax burdens, they have made tax administration and compliance worse and not been successful in meeting related ambitious fiscal and budget goals.

The tendency to blame revenue shortfalls on weak tax collection mechanisms distracts from policy failures, given pre-2017 projections of a buoyant economy from the new Sankofa and TEN oil fields (increased output and better prices) and from the Energy Sector Levies Act (ESLA). Government needed to maintain or improve on the tax structure to support this goal.

Part III uses the provisional outturn and 2019/20 projections to discuss total revenues its and high-level domestic and external sources, including taxes (direct and indirect); non-tax revenues (income and fees); and grants (budget and sector support). Part IV discusses the sub-components or taxes on income and property; domestic goods and services; and international trade. Part V continues with expenditures—in the series that started in Part I with the Public Debt and Part II with the overall budget deficit and fiscal balances (i.e., cash and commitment basis).

Total Revenues

Table 1 and Figure 1 show nominal revenues from two sources: domestic (i.e., tax and non-tax revenues) and foreign (i.e. grants or aid). They show a steady rise, unlike the oscillation in the second part which uses gross domestic product (GDP) to deflate and show performance in real terms over the review period.

Table 1: Sources of Total Revenues

Sources: Budgets and Fiscal Tables (MOF Website)

Figure 1: Graph of the Source of Total Revenues

Sources: Budgets and Fiscal Tables (MOF Website)

The following are some observations on policy and performance, based on Table 1 and Figure 1 from 2013 to 2020 (projections).

  • Peak performance: in real (i.e., revenue/GDP) terms, performance reaches a peak in 2015; it has obvious lags, given that 2015 and 2016 experienced serious fiscal challenges due to the slump in commodity prices (i.e., crude oil, cocoa, and gold).
  • Milder oscillation: the rise in 2017 after a dip in 2016 reverts to a decline in 2018 and 2019—making it difficult to be optimistic about the sharp projection in 2020.
  • Grants or aid: Contrary to general view, domestic revenues dominate, with grants at a peak in 2015 and then declining to less than half this level in ensuing years (note: donors and NGOs do not channel significant amounts of flows through the Budget).
  • Peak grants: as Table-Figure 1(a) shows, the 2015 peak performance involves three main factors: lag in flows from withholding of donor budget support (till Ghana could conclude the 2014 IMF ECF Program; the declaration of the end of HIPC flows from 2013; and Ghana’s shift to middle-income country (MIC) status.

The domestic revenue boost is due to crude oil and gas output while had a positive impact at the time grants were falling due to loss of HIPC and other grants and concessional financing as well as Ghana attaining MIC status from 2008. Table 2 and Figure 2 depict the overall performance in terms of share of total revenues.

Table 2: Proportion of Total Revenues

Sources: Budgets and Fiscal Tables (MOF Website)

Figure 2: Graph of the Source of Total Revenues

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Sources: Budgets and Fiscal Tables (MOF Website)

The points made earlier reflect in Table 2 and Figure 2 rounds of the scorecard clearly in favour of FY2015 as the best in revenue, despite the boost given to the economy from increasing oil and gas production.

Domestic revenue components

The ensuing discussions derived from Table 3 and Figure 3 cover the sources of domestic revenues, which is the main element of total revenues discussed above.

Table 3: Domestic revenue sources (nominal & % of GDP)

Sources: Budgets and Fiscal Tables (MOF Website)

Figure 3: Domestic revenue sources (nominal & % of GDP)

Sources: Budgets and Fiscal Tables (MOF Website)

Table 3 and Figure 3 show further breakdown in revenue performance or generation for the period 2013 to 2020 (projected).

  • Sources of tax revenue: The “fan” and “shaded” panels show the dominant role of tax revenues in nominal and real (revenue-to-GDP) terms. This requires careful consideration before the contemplation of policies that could undermine the fiscal regime.
  • Peak performance: FY2015 tops other years in domestic revenue mobilizaton—boosted by significant flows from oil and, in the following years, nearly 1 percent of GDP boost in ESLA flows (most of the 2016 flows support the ESLA Bond issued in 2017).
  • Policy impact: the “popular” measures—halving benchmark customs values, vague “Abossey Okai/Kayayei” cuts, blocked VAT input tax credit (ITC), rise in PIT/ESLA rates, etc.—have not enhanced performance since they distort the liberal tax regime.

Revenue projections for 2020, which is set to reach the 2015 peak, seems ambitious since they depend on grants (despite crystallizing Ghana “Beyond Aid”) and non-tax revenues (which increased in the past with major measures such as HIPC/MDRI and divestiture receipts).

Table 4 and Figure 4, which express these outcomes in terms of percentage share of total tax revenues, buttress these points about the sources or components of domestic revenues.

Table 4: Percentage share of domestic revenues

Sources: Budgets and Fiscal Tables (MOF Website)

Figure 4: Percentage share of domestic revenues

Sources: Budgets and Fiscal Tables (MOF Website)

PRMA and Oil Revenues

This section uses Budgets and Petroleum report extracts, notably the 2018 Reconciliation Report on the Petroleum Holding Fund (PHF), to show the significant inflows of petroleum resources into the economy. The publication of the petroleum reports is a requirement under the Petroleum Revenue Petroleum Management Act (PRMA), 2011 (Act 815).

Table 5 and Figure 5 show the flows from the statutory sources in the PRMA into the pool accounts, Petroleum Holding Fund (PHF), since Ghana started exporting crude oil in 2011.

Table 5: Sources of flows into the Petroleum Holding Fund (PHF)

Source: Budgets and Petroleum Reports 

Figure 5: Sources of flows into the Petroleum Holding Fund (PHF)

Source: Budgets and Petroleum Reports

The following are some high-level observations from the Budgets and Petroleum Reports over the review period (2011 to 2019).

  • Sensitivity of flows and dips in 2016: The total revenue flows declined sharply in 2016 but rebounded from 2017. This shows that the flows are susceptible to price shocks, as is the case with all primary commodities.
  • Need for buffers in PRMA: The decline and rise in revenues outside the control of the nation justifies the creation of the Stabilization and Sinking Funds to improve fiscal (deficit and debt management).
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Table 6 and Figure 6 depict the change in output and prices, notably in 2016, as the underlying causes of the sensitivity of total revenues in Table 5 and Figure 5.

Table 6: Trends in Output and Price of Crude Oil and Gas

Source: Budgets and Petroleum Reports

Table 6: Trends in Output and Price of Crude Oil and Gas

Source: Budgets and Petroleum Reports

  • Decline in crude oil prices: this was due to drop in global demand, led by the meltdown of the BRIC and MIC states, notably China, Brazil and India.
  • Decline in output: this was mainly on account of damage to the turret bearing of the FPSO Kwame Nkrumah that produces crude oil and gas from the Jubilee fields.

Table 7 and Figure 7 reflect payments of all mid- and upstream petrol revenues into the Petroleum Holding Funds (PHF) before distribution into the specified accounts or funds below:

Table 7: Distribution of Petroleum Funds

Source: Budgets and Petroleum Reports

Figure 7 buttresses the delicate distribution of the amount in the PHF judiciously to fulfil a specific fiscal balance among investment, consumption, fiscal stabilization and savings.

Figure 7: Distribution of Petroleum Funds

Source: Budgets and Petroleum Reports


The following points can be deduced from the distribution of petroleum revenues, according to these fiscal objectives.

  • Investment: the national oil company (GNPC) receives payments after Parliament approves the corporation’s budget for equity calls and other expenses.
  • Budget expenditure: after GNPA allocation, 70 percent of the balance is paid into the budget as the “Annual Budget Funding Amount (ABFA)”.
  • Priority of capital budget: of the share going to the budget, 70 percent (or 49 percent of total) must go to the annual capital budget for spending in four (4) priority sectors that Parliament approves after every 3 years.
  • Fiscal stability: the PRMA creates a budget buffer called the Ghana Stabilization Fund (GSF)—which also takes 21 percent of the post-GNPC allocation balance.
  • Savings (generational) fund: The final 9 percent of the post-GNPC allocation goes into the Ghana Heritage Funds (GHF).

There are secondary funds derived from the primary distribution, including the Ghana Infrastructure Investment Funds (GIIF) for major projects; the Sinking Fund (SF) for debt management; and Contingency Fund under the 1992 Constitution.


The analyses from 2013 to date show that, in relation to GDP, total revenue (17.8 percent), domestic revenue (16.3 percent), tax revenue (13.4 percent), and grants (1.5 percent) reached a peak in 2015. Only domestic revenue could reach 16.5 percent in 2020 but this depends on a major boost from petroleum and non-tax revenue.

Hence, the concern is that the real economy appears not to grow sufficiently in response to the fast (post-2015/16) recoveries in the price and output of crude oil and gas that have seen the quadrupling of petroleum revenues between 2016 and 2019.

Another reason for the sluggish performance is the distortionary tax policies that may have resulted in higher tax burdens, consumer prices, and complex tax administration and compliance (likely leading to tax evasion and avoidance). These include meddling with the structure and rates of personal income tax (PIT), VAT (especially the decoupling of the Ghana Education Trust Fund and National Health Insurance levies) and communication services tax. This issues are discussed in further detail in Part IV of these series.

The writer is a  former Finance Minister


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