June 5, 2025
Introduction
In a significant step toward strengthening fiscal governance and as a response to the recommendations of the National Economic Dialogue in March 2025, the government of Ghana has amended the Public Financial Management Act, 2016 (Act 921) (the PFMA) through the Public Financial Management (Amendment) Act, 2025 (Act 1136) (the PFMA Amendment). The PFMA was operationalised in 2018 to bring structure and discipline to public finance.
We highlight the reforms made by the PFMA Amendment in this briefing and explore its potential impact on Ghana’s broader legal and fiscal governance framework.
Repeal of Fiscal Responsibility Act
The PFMA Amendment repeals the Fiscal Responsibility Act, 2018 (Act 982) (FRA), and streamlines its provisions into the PFMA, with some improvements. For example, the PFMA Amendment now provides the fiscal responsibility rules (discussed below) which were formerly in the FRA. The overarching aims of the PFMA Amendment (through the reforms discussed below) are to ensure fiscal discipline, prevent fiscal slippages, improve debt sustainability, and correct any other incentives that may have a negative effect on the national fiscal objectives.
Fiscal responsibility rules
The PFMA Amendment introduces a primary balance rule which requires that, for every year, the government must ensure that its total revenue exceeds its expenditure (excluding interest payments on existing debts) by a value equivalent to 1.5% of the GDP of that year. This rule was previously in the FRA but did not set a value for the annual primary balance. The new adjustment to the primary balance rule is intended to compel government to prudently manage its expenditure.
The PFMA Amendment also introduces a debt rule that aims to reduce the public debt to GDP ratio to 45% by 2034. The introduction of the public debt rule is intended to ensure long-term debt sustainability, prevent excessive borrowing, and compel government to either raise revenue or cut excessive spending, thereby ensuring fiscal discipline.
If the primary balance rule or the public debt rule is breached, the government must include corrective fiscal measures in the next budget to be approved by Parliament. The Minister of Finance has the power to suspend either the primary balance rule or the public debt rule if there is a force majeure or unforeseen economic circumstance which will render compliance harmful to the fiscal, macroeconomic or financial stability of the country. The suspension of either rule requires the prior approval of Parliament. For the purposes of the approval, the Minister of Finance must submit a memorandum (containing the request for approval and the reasons for the suspension) to Parliament. The Fiscal Council (discussed below) must also submit its independent assessment of the reasons for the proposed suspension to Parliament. Once Parliament approves a suspension, the Ministry of Finance must publish the memorandum on its website within 14 days.
Establishment of new independent Fiscal Council
The PFMA Amendment establishes a Fiscal Council which will independently assess the fiscal policy of the country and compliance with the primary balance and the public debt rules, to promote transparency, accountability and long-term sustainability in public finances. The Fiscal Council is made up of a chairperson (with expertise in economics or public finance), representatives from academia and research think tanks, and former public policy experts from the Bank of Ghana and Ministry of Finance. The President will appoint the members of the Fiscal Council with the approval of Parliament.
The Fiscal Council will provide the government with recommendations in respect of fiscal policy, and provide the parliamentary committee responsible for the budget with an assessment of government’s adherence to the primary balance and the public debt rules. The Fiscal Council will also, at least twice a year, hold media engagements to update the public on its findings and recommendations.
The Fiscal Council replaces the Presidential Fiscal Advisory Council set up in 2018 to offer independent advice on fiscal responsibility and ensure the stability of the entire financial system. The new Fiscal Council has the advantage of being established by statute, with distinct and comprehensive powers to supervise government (particularly the Ministry of Finance) in the implementation of the fiscal rules and strategies envisaged in the PFMA.
The PFMA Amendment sets out detailed criteria for appointing members to the Fiscal Council and, notably, prohibits appointees from holding any position within the government. This significantly assures the independence of the members of the Fiscal Council.
Periodic reporting on fiscal performance
The Minister of Finance is required to submit a quarterly report to Cabinet on the fiscal performance and adherence to the primary balance and the public debt rules with a delay of 3 months after the actual period the report covers. The quarterly report will propose corrective measures in instances where quarterly targets are breached. The Ministry of Finance is also required to publish an annual report detailing adherence to the primary balance and the public debt rules on its website and submit the same report to Parliament by the end of April in the ensuing financial year. Where there is a deviation from the targets of the primary balance and the public debt rules, the reports will include corrective fiscal measures and a timetable for returning to the required targets.
The Fiscal Council is also required to provide:
- a first half-year assessment report on compliance with the primary balance and the public debt rules not later than September every year;
- an annual assessment report on compliance with the rules not later than April after the end of each financial year; and
- any other analytical report on fiscal performance and outlook that it wishes to provide.
Additionally, the Fiscal Council has the power to request public entities to provide relevant information to enable performance of its functions.
Sanctions for fiscal mismanagement
The PFMA Amendment introduces enhanced sanctions for breaches of the primary balance and the public debt rules to ensure compliance and to protect the national economy.
For breaches of the primary balance rule, there will be an automatic moratorium preventing any new non-essential discretionary project (including an infrastructure project) from being admitted to the budget until the fiscal situation is corrected. This automatic moratorium acts as a limit on government expenditure and will help remedy government finances to restore a positive primary balance. Similarly, if the public debt rule is breached in or after 2034, the Minister of Finance will have to set and implement limits on new borrowing until the slip on the debt threshold is corrected.
The PFMA Amendment allows Parliament to pass a vote of censure on the Minister of Finance if there is a breach of either the primary balance or public debt rules by more than one percentage point in 2 successive years. Additionally, heads of any covered entity or ministers of state are liable to the full extent of sanctions provided by the PFMA where their actions or inactions contribute to a failure to achieve a fiscal target in the national budget.
What’s next?
The PFMA Amendment is bold, timely, and much needed. It aligns with Ghana’s broader commitment to fiscal responsibility under its International Monetary Fund-supported programme, and more importantly, sends a strong signal to investors, citizens, and lenders on the country’s commitment to fiscal discipline. If implemented fully and enforced consistently, this law could serve as a turning point toward sustainable debt management and macroeconomic stability.
Time, and political will, may determine whether this ambitious legal framework will translate into real economic progress. But for now, the PFMA Amendment sets the stage for a more disciplined, transparent, and accountable fiscal future.
