Financial irregularities cost Ghana yearly average of 0.52% of GDP from 2015 to 2020

A yearly average of 0.52% of Ghana’s Gross Domestic Product (GDP) between 2015 and 2020 was lost to financial irregularities by Ministries, Departments and Agencies.

Over the five year analysis period, cumulative financial irregularities represented about 3.64% of 2020 GDP.

In monetary terms, this translates into some GHS 13.9bn lost to financial irregularities.

According to the second Fiscal Recklessness Index report by policy think tank, IMANI Ghana, financial irregularities by MDAs for the five year period covered stores/procurement, cash, tax, payroll, rent and contracts.

According to the report, the analysis of fiscal indiscipline of MDAs clearly shows that tax and cash management are the main sources of fiscal recklessness among the MDAs in the last five years.

Tax and cash irregularities constituted an average of 83% of the composite of financial irregularities. The financial irregularities over the period were largely driven by high tax irregularities (GHS 9.13 billion; 65.49%) caused by the failure of the Ghana Revenue Authority (GRA) to collect taxes due to the state and enforce compliance.

Besides the tax irregularities, cash irregularities also constituted a significant proportion of the total financial irregularities. A total of GHS2.9 billion, representing about 21.4% of the total irregularities, was recorded between 2015 and 2020.

The cash irregularities were largely driven by unapproved disbursement of funds, unapproved transfer of funds, and delays in the lodgement of public funds into the respective public accounts.

Other relatively smaller irregularities comprised debts, loans & advances (GHS1.20 billion; 8.58%), contracts (GHS387 million; 2.78%), stores/procurement (GHS136 million; 0.98%); rent (GHS85 million; 0.61%) and payroll irregularities (GHS14.6 million; 0.10%).

Meanwhile, the Finance Ministry and subsidiary agencies, per the report, tops the list of MDAs as the most fiscally reckless MDA on an annual basis and also over the six years between 2015 and 2020.

According to the report, the Ministry of Finance had the highest combined Fiscal Recklessness Score (FRS) of 0.8797. Two key irregularities account for the trend observed at the Finance Ministry: (1) tax irregularities and (2) cash irregularities.

For instance, the Finance Ministry is responsible for 99.63% (GHS9.10 billion) of the combined GHS9.12 billion tax irregularities from 2015 to 2020. Likewise, the Finance Ministry accounted for 80.10% (GHS2.35 billion) of the combined GHS2.93 billion cash irregularities from 2015 to 2020.