Explainer: How the Akufo-Addo government ‘over-collateralised’ Ghana’s revenue

Alarm at the government’s excessive debt collateralisation and revenue monetization of statutory funds continues to sound, even as fiscal prudence points to a catastrophic outlook for Ghana’s economy.

The International Monetary Fund( IMF) in March 2019 pointed out that there was the need for the Akufo-Addo government to limit and “carefully” manage its collateralisation and monetization drive.

In April 2022, the Dean of the University of Cape Coast Business School, Professor John Gatsi, called on parliament to enact a legislation that will deal with the excessive collateralisation of some revenue streams by the government.

Two months after that, former president, John Mahama, bemoaned the risk Ghana faces because of this policy decision by the current government.

In this Explainer, Fact-Check Ghana looks at how the Akufo-Addo-led government has collateralised revenues, thereby denying other sectors of the economy the needed resources for development.

What is collateralisation? 

Generally speaking, collateralisation is using something of value – such as land, a house or other property – as security for repayment of a loan. This assurance makes a loan less risky for the lender because even if the borrower were to default on paying back, the lender can now take the house or the land to offset the losses.

Debt collateralisation and revenue monetization of statutory funds, in this case, refers to an arrangement where the country’s anticipated revenue from taxes and royalties etc, are used as security for repayment of huge loans with high-interest rates.

This happens when the government issues bonds and uses assured revenue streams to back them. The purchase of these bonds gives the government immediate funds to finance projects or refinance debt. An investor in such a bond is assured that they will be paid through the assigned revenue stream.

Realizing this innovative approach of mobilizing relatively huge funds in short periods, the NPP government began a process to systematically collateralise some of the country’s statutory funds when it assumed power in 2017.

Daakye Trust Fund

Leveraging on a portion of the Ghana Education Trust Fund’s 2.5% levy, the government gained approval from parliament to borrow $1.5billion in 2018.

The NPP administration, therefore, established Daakye Trust PLC in May 2020, as a Special Purpose Vehicle (SPV) to borrow money from investors amounting to 1.5 billion dollars (5.5 billion Ghana cedis at the time).

According to a presentation by the government, the 1.5 billion dollar loan was to help “secure the funds required to develop educational infrastructure under multiple tranches; and consolidate its funding needs for educational infrastructure including syndicated loans from commercial banks.”

Daakye Trust PLC’s objective is to issue bonds in tranches to settle the 1.5 billion dollar the government borrowed through the Ghana Education Trust Fund (GETFund). Investors in the Daakye Bond will, therefore, be paid through a portion of the 2.5% GETFund Levy.

The revenue from the portion of the GETFund levy which has been collateralised will be set aside for 12 years, from 2020 to 2031.

However, even in this third year of establishing Daakye Trust PLC, conscientious stakeholders in the education sector are demanding that this arrangement be reversed.

Energy Sector Levies Act

The Energy Sector Levies Act (ESLA) was passed in December 2015 to solve the soaring debt problem in the energy sector. Through the Act, the John Mahama administration imposed taxes on the consumption of petroleum products to repay the debt.

However, Akufo-Addo’s government amended the Act in 2018. The aim, this time around, was to create ESLA PLC to borrow 10 billion Ghana cedis to settle the debt in the sector.

The plan was to use the taxes imposed by the previous government to settle the 10 billion being raised in ten years. So, for ten years, or perhaps more, the taxes cannot be altered.

That’s because according to the prospectus that guides the implementation of the Bond Programme, the levies imposed on petroleum products will be used to settle investors “for as long as any amounts remain outstanding under any final Series or Tranche issued” by ESLA PLC.

Agyapa Gold Royalties Limited

Announced in 2020, the Agyapa gold royalties deal is an arrangement to securitise Ghana’s future gold revenues for between $500m and $750m.

The government of Ghana, through the Minerals Income and Investment Fund (MIIF), will hold at least a 51% majority stake in Agyapa Royalties Limited after it is listed on the London Stock Exchange and the Ghana Stock Exchange. 49% of the shares in Agyapa Royalties are to be sold through a listing on the London Stock Exchange.

Agyapa Royalties Limited was incorporated in Jersey, United Kingdom. This SPV will own almost 76 per cent of the royalties generated from 16 large gold mines in Ghana.

The scheme’s implementation has halted as a result of vehement opposition by Civil Society groups in the country. However, the minority leader in parliament, Cassiel Ato-Forson told Fact-Check Ghana that although the royalties are not available to the state at the moment, it is being paid into the SPV’s account.

“The mineral royalties are what they have collateralised for Agyapa but it hasn’t gone through. But the money is being paid into the account. The money is not available to us,” he said.

District Assembly Common Fund

The minority leader in parliament, Dr. Cassiel Ato Forson, also said the government has set aside a portion of the District Assembly Common Fund (DACF) as collateral for a loan it obtained from Access Bank PLC.

Fact-Check Ghana sent a Right to Information request to the DACF on March 14, 2023, for a copy of the loan agreement, but the Fund has not yet responded to the request.

As expressed earlier, although the government says it is confident in this form of borrowing, there has been significant concern from several stakeholders.

An IMF report in March 2019 pointed out that the government needed to limit and “carefully” manage its collateralisation and monetization drive.

“Staff cautioned against excessive debt collateralisation and revenue monetization, as such operations create seniority amongst creditors and uncertainty over revenues in the medium term,” the report read.

Explaining the rationale behind the government’s decision to collateralise the above-mentioned Funds in an interview with Fact-Check Ghana, political risk analyst and petroleum economist, Dr. Theo Acheampong, said the government embarked on this path because it realised there was not enough money to implement its ambitious promises when it won power.

He believes the government can do better on the domestic revenue mobilization front.

“The government wants to deliver [promises] but there is not enough revenue to be able to do that. So, the idea was that if you have this potential stream of money coming in but you have this big infrastructural commitment that you have made, then why not collateralize it and use that potential receivable or what you are getting to go and borrow and get some big initial capital outlay; then you can use that to meet all of the infrastructure commitment that you have made.”

Dr. Acheampong indicated that the idea in itself is not a bad one as the purpose of borrowing is either to pay for salaries, service debt or to build infrastructure.

The “problem,” according to him, is the “excess over-collateralisation of these Funds.”

He made it clear that the problem that arises from this over-collateralisation is that after the initial big capital sum is received, the state becomes cash-strapped in subsequent years.

“You can see how the government finds itself in a very tight fiscal corner even in the 2023 budget where there is a proposal now to further reduce the cap on the earmarked funds; the GetFund, District Assembly Common Fund and the others from 25% to 17%,” he told Fact-Check Ghana.

Dr. Acheampong said the political implication this presents is that, subsequent governments will not be able to use the funds for their policy priorities. This, he said, is because the funds are “locked up” and have to be used to service the debt raised earlier.

Minority leader in Parliament, Dr. Ato Forson, agrees with him. He says that the only way out for future governments is to “levy another tax to pay for the loan”.


Dr. Acheampong has, therefore, called on parliament to focus on amending its financial laws to “impose a hard ceiling” on the revenue subsequent governments can collateralise.

“If we decide to only commit 30% of the potential 1 billion pot into servicing the debt that has been raised, then we are all clear as a people that going forward our governments can only commit as much as 30%. And that still leaves 70% of that available for other budget programmes. I think that is where the conversation ought to be going.”

Without such a strict regime, “subsequent governments may not even have anything at all in those pots to use for their policy programmes,” he echoes Dr. Forson’s concern.

Dr. Acheampong said Ghana needs a coherent long-term national development strategy to obviate the need for constantly collateralizing portions of its revenue for national development.

“It is also the point that many at times we don’t really have a proper national investment or development strategy. So, everybody is doing something in an ad hoc manner. We are not able to say, we need to build 200,000 schools in the country and based on that every government that comes would have to commit to doing something as part of that 200,000.

He continued: “So, if I come in and I can do 50,000 by committing the state through the likes of Daakye to raise that money, then another government comes and they will be able to continue that. But we don’t even have a proper national development plan or infrastructural investment strategy. And that is also part of the issue we need to consider.”

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