Financing options for the 2026 budget beyond taxation

By Constance Gbedzo

Risk & Enterprise Development Expert 

Brief Overview of Taxation

Taxes on Income and Property and Taxes on Domestic Goods and Services (including VAT) are typically the dominant tax components. There has been a continuous policy focus on broadening the tax base and improving compliance, often through the introduction of digital tools and reforms regimes, like the Value Added Tax (VAT). For the 2026 budget, there are proposals to simplify the VAT framework and deploy electronic devices to enhance real-time reporting.

Ghana’s ability to fund its development agenda, especially in infrastructure, hinges on strong domestic revenue performance and prudent debt management. While Ghana’s tax revenue has shown significant nominal growth over the past three years, driven by new tax policies, increases in rates (like VAT), and administration reforms (digitization),  collection often struggles against ambitious budget targets. Also, revenue collection often struggles to meet targets due to factors like weak compliance, a large informal sector, administrative inefficiencies, and the impact of global/domestic economic slowdowns.

While Government revenue, primarily driven by taxation, is the lifeblood of the national budget, the ambitious revenue targets for 2026, albeit, based on compliance and digitalization gains, might not be met—remains a fundamental concern. If tax revenue falls short, the first items to be cut are typically capital and social programmes, derailing the infrastructure agenda. Also, while the government aims to avoid expensive borrowing following the Domestic Debt Exchange Programme (DDEP), the ability to fund ambitious infrastructure without reverting to unsustainable domestic or commercial external debt remains a top worry. Nonetheless, the pivot to cheaper, concessional loans (from institutions like the World Bank, AfDB) is fiscally prudent but comes with a new concern; these loans often have long disbursement timelines, which can slow down infrastructure project execution.

While the 2026 budget promises a significant push in modernizing infrastructure and agriculture, and industrialization, the public’s key concerns are rooted in the historical lack of fiscal space, the risk of not meeting ambitious revenue targets, and the past track record of project execution and payment delays.

Project-Specific Financing Models.

Given the concerns about tax revenue performance, the government has several other avenues to finance its budget and development projects for 2026. It has become imperative that public and intellectual discourse regarding the 2026 budget funding constraints are focused on Project-Specific Financing Models. Government has the option to employ Public-Private Partnerships (PPPs), and leveraging Non-Tax Revenue which may offer the best insight into how governments plan to finance large projects and diversify income away from traditional taxation. These models shift the burden of capital expenditure away from the direct government budget in the immediate term.

Leveraging Public-Private Partnerships (PPPs) for the 2026 Budget

A PPP is a long-term contractual arrangement between a public entity (the government) and a private entity, where the private sector takes on significant risk, management responsibility, and provides the upfront financing for a public infrastructure project or service. PPPs are ideal for projects that have a demonstrable commercial value (tolls, user fees, or clear government savings/service requirements). This is a critical model for large infrastructure projects (roads, ports, energy). They enable the government to leverage private sector construction and maintenance standards, often leading to better whole-life costs, and accelerate critical infrastructure – getting necessary roads, ports, and housing built years ahead of what traditional public procurement would allow.

The private sector provides financing, design, construction, and often operation, with the government making payments over time (e.g., availability payments) or granting concessions (e.g., toll roads). This model transfers construction and operational risks away from the public budget to the private sector.

Financing Mechanism

In this financing arrangement, the private sector partner (often a specially created Special Purpose Vehicle – SPV) raises the capital for the project. This is typically a mix of debt (loans from banks or issuing project bonds) and equity (cash investment from the private partners). The private partner is repaid over the long contract life (often 20–30 years) through one of two primary revenue streams. The private partner collects fees directly from the public- User-Pays; for using the service (e.g., tolls on a highway, tariffs for water). Indeed, government’s fiscal commitment is minimal. There is no immediate government debt; because the SPV takes on the debt, it is generally kept off the government’s balance sheet, although this accounting treatment is subject to scrutiny and international standards.

The government now pays the private partner a fixed, periodic fee, conditional on the asset being available and meeting specified performance standards (e.g., paying for a hospital building only if it is maintained and fully functional). This transfers demand risk to the government but provides a more stable revenue stream for the private partner.

The key benefit for the government is the ability to launch large-scale projects without immediately impacting the national balance sheet, leveraging private sector efficiency and innovation.

Common PPP Models

The specific model defines the division of responsibility, risk, and ownership. The degree of private sector involvement generally increases down the list; DBFM-BOT-BOO-LDO.

1. Design-Build-Finance-Maintain (DBFM): Private sector responsibilities are to design, build, finance, and maintain the asset. Public Sector then retains ownership. The projects include school buildings, health clinics, etc..
2. Build-Operate-Transfer (BOT): Private sector designs, builds, finances, operates, and maintains the asset for a fixed concession period. Private sector owns/leases during the term, then Transfers back to the government for free. Projects include; toll roads, power plants, port facilities, etc.
3. Build-Own-Operate (BOO): Private sector designs, builds, finances, owns, and operates the asset indefinitely. Private Sector retains ownership (or long-term lease). Projects include; water treatment or power plants (where the service is heavily regulated).
4. Lease-Develop-Operate (LDO): Leases an existing public asset, invests to develop/upgrade, and operates it. The Public Sector retains ownership. Projects include; modernization of an existing airport or state-owned factory

Leveraging Non-Tax Revenue (NT-R) Mobilization

Non-Tax Revenue (NT-R) is income generated by the government from sources other than taxes (fees, fines, state asset returns). Given the anxiety over tax performance, aggressively improving NT-R collection is a vital, and less politically sensitive financing option. Government should focus on maximizing existing non-tax and efficient sources.

The domestic resource mobilization beyond new taxes include the following:

• Internally Generated Funds (IGFs) of MDAs/MMDAs: Aggressively collecting and retaining non-tax revenue from Ministries, Departments, and Agencies (MDAs) and Metropolitan, Municipal, and District Assemblies (MMDAs) through fees, licenses, and services. For those User Fees and Charges, government should implement real-time, online payment systems for services like passports, licenses, land registration, and corporate renewals. This reduces leakage and improves collection efficiency (e.g., using a unified electronic payment platform).
• Revenue from State-Owned Enterprises (SOEs): Improving the financial management and profitability of SOEs to increase the amount of dividends and operating surpluses transferred to the government budget. For those Dividends and Profits from SOEs, government should impose strict, commercial performance contracts on State-Owned Enterprises (SOEs), require more aggressive payment of annual dividends and profits to the central government, and reducing operational subsidies.
• Asset Monetization: Selling off or leasing underutilized or non-performing state assets (land, real estate, shareholdings) to generate one-time, large-scale revenue. Government can embark on strategic divestiture/leasing; identify and selectively sell (divest) non-core, non-performing government assets (e.g., surplus land, shares in non-strategic enterprises) or lease them out long-term to the private sector to generate significant one-off revenue
• Oil and Gas Revenue especially, the Annual Budget Funding Amount – ABFA: Utilizing the country’s share of petroleum revenues (after contributions to the Ghana Petroleum Funds) to finance the national budget, particularly critical infrastructure and debt servicing.
• Administrative Fines and Penalties: Systematically enforce regulations (e.g., traffic, environmental, and business non-compliance) and ensure the generated fines are efficiently collected and deposited into the Consolidated Fund.
• Natural Resource Royalties: We need to improve monitoring and review; strengthen monitoring of extraction volumes (e.g., gold, oil, minerals) and enforce periodic review of royalty rates to ensure the government receives fair value based on current market prices.

NT-R is leveraged to diversify income and ease tax burden. It provides a stable buffer, especially when commodity prices or economic activity (and thus tax revenue) are volatile. Also generating more NT-R reduces the pressure to impose new or higher taxes to meet budget targets, addressing the experts’ worries.

The successful implementation of both PPPs and robust non-tax revenue collection will be critical to sustainably financing the 2026 budget and reducing reliance on traditional tax methods.

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