Reducing Ghana’s debt levels; MMDAs must generate their own funds – IFS

Government has been impressed upon to adopt fiscal decentralization policies and reduce the stress on the national budget.

Proponents of this policy believe the over-dependence of local governments on the national budget has contributed to increasing government obligations and subsequently the rising debt levels of the state.

In its latest report on the economic priority areas for the new government, the Institute of Fiscal Studies (IFS) explained that achieving a full decentralization should involve provisions for local authorities to raise revenue to finance their priority development needs.

“Most District Assemblies are unable to generate enough funds of their own to support their operations, making them to depend heavily on the central government for financial support. The assignment of functions from central to local government is fragmented, and there is no clear definition of responsibilities across the two levels of government.”

The Director of Research for the IFS, Dr. John Kwakye explains that abiding by the suggestions should reduce costs to government.

“Clearly delineate the functions between the central and local governments, especially in the areas of basic education, health care and infrastructure…make District Assemblies increasingly reliant on their own revenue by revising, managing and sustaining the current revenue sources available to them, specifically property tax, local fees and licenses,” he stated. The call comes at a time that some economists have cautioned against government’s continuous use of greater portions of its loans to fund recurrent expenditure.

For instance in 2016, Ghana spent about 6.4 billion cedis out of the 8.5 billion cedis it borrowed on recurrent expenditure; leaving a little over 1 billion cedis for investments into capital expenditure.

Already, there have been earlier attempts to allow the various MMDAs to raise bonds from the local market to fund their developmental needs. A successful implementation of this policy should ultimately reduce the increasing District Assembly Common Fund (DACF) allocations in the national budget