Ghana has made incredible progress in recent years, both in terms of democratic consolidation and development outcomes. In addition to the achievement of an increasingly competitive political sphere and greater macroeconomic stability, successive governments have made important commitments to spending on key social priorities such as health, education, agriculture and social protection.

By the end of 2010, a major influx of oil revenues should start to flow onto Ghana's budget. These revenues have the potential to help Ghana consolidate its middle-income status, with an evolving welfare state. But, as this paper argues, they also have the potential to become a missed opportunity. Ghana needs to undertake key reforms of its financial management systems to improve the transparency and effectiveness with which it spends public money. Without these reforms, Ghanaians will not benefit from the increased revenues and the unique opportunity presented by the Jubilee field will be squandered.

When a government has access to new revenues, two important questions must be answered. The first question is: on what should this money be spent? As always, governments must make trade-offs between key priorities. In order for those trade-offs to serve the best interests of Ghanaians as a whole, we believe that there should be an open, transparent debate about which priorities the government ought to finance. The Ghana Aid Effectiveness Forum calls on the Government of Ghana to join with us in promoting a National Day of Discussion around budget priorities, where government, citizens and development partners can debate and discuss ways to use the new increment in revenues from oil.

The second question that arises from the realization of new revenues is: how will the new money be spent? Will the expenditure itself be transparent? Will citizens be able to monitor it? Will it actually reach the people it is supposed to reach? Will anyone be held accountable for waste or mismanagement? We believe that Ghana needs to make substantial improvements in its approach to managing public funds to ensure that new money is spent wisely, transparently and effectively. We call on government to begin to undertake the reforms detailed in this report immediately.

This report is a call to immediate action. The Ghana Aid Effectiveness Forum, in conjunction with other partners in civil society, including the CSO Platform on Oil and Gas, the Right to Information Coalition, the International Budget Partnership, and Oxfam America, believe that the time is now to make serious reforms in Ghana's budget process and budget priorities. If Ghana's government is to spend new monies wisely, there is no time to waste. The rest of this paper discusses weaknesses in Ghana's budget process, and then makes concrete suggestions for reform. Over the course of the next year, GAEF will build on this work to produce further research on specific areas of financial management reform, as well as a detailed set of proposals for how to use increased revenues to bolster Ghana's social sector.

The key budget process weaknesses we identify are:

Lack of Transparency: Ghana's budget process has become more open in recent years, but the country still scores only a 54 out of 100 on the Open Budget Index. Government of Ghana provides insufficient information on how it is actually spending public money during the year, once the budget is approved, and inadequate explanations at the end of the year for divergences between economic forecasts and actual outcomes. CSOs frequently complain about the inability to access information on actual expenditures during and after the budget year, and some institutions, like the National Health Insurance Authority, are particularly opaque.

Lack of Adherence to the Budget: The key to a good budget process is that once decisions about how to spend money are taken by government and approved by parliament, the government sticks to these decisions. If these decisions, which are captured in the enacted budget, are not adhered to, then budgeting loses its meaning, and money can be spent in ways that are not transparent and that do not reflect the outcome of public debate. Government of Ghana has struggled to adhere to the enacted budget over the past several years, which has led to certain ministries spending more than they have been allocated. The result has been the growth of expenditure arrears, which is essentially a form of debt that is being contracted without public approval. Lack of adherence to the budget therefore leads to lack of transparency and accountability in public spending.

Limited Oversight: Ghana has made great strides in recent years in creating a more effective external audit office to monitor government spending. Nevertheless, the audit service still lacks sufficient funding to fulfill its mandate. Audit reports are also released more than 6 months after the end of the reporting period, and the auditor provides insufficient information about follow up of audit findings.

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