Riding the Tide of Oil Revenue Cyclicity: Enhancing Public Investment Management Efficiency in Ghana

Abstract

Popular expectations for more public infrastructure services (i.e., hospitals, schools, roads) run high in Ghana because of recently discovered major oil and gas reserves in its’ offshore deposits. However, Ghana doesn’t have a good track record of using natural resource revenues, be it gold or cocoa, efficiently and effectively for development. The hard fact is that despite significant gold and cocoa revenues, the country has always experienced chronic infrastructure “deficit.” It is unclear if the surge in oil revenues did translate into better development outcomes, whereas the sharp drop in oil prices would translate into more prudent allocation and use of capital budget. Weak and politicized public investment (PIM) system in Ghana exacerbates the potential cyclicality problems of natural resource revenues. To avoid these double traps of weak institutions and cyclicality, Ghana should find an appropriate strategy to “invest in the capacity to invest.” This paper employs an indicator based framework developed by Rajaram et al. (2010) to explore efficiency and efficacy of Ghana’s PIM system. Our diagnostic assessment indicates that a number of critical functions in the Ghanaian PIM system, such as project proposal screening, appraisal, monitoring and evaluation, either exist only on paper or are completely missing.

Keywords: Public Financial Management, Ghana Public Investment Management, Infrastructure Investment, Economic Development, Infrastructure Financing