Big-Push Funding Source Raises Risks of Likely Project Delays – Will Gov’t Be Able to Change the Narrative

Residents in the areas where President John Dramani Mahama recently cut the sod for road construction to begin, as part of the Big-Push Programme, are in a jubilant mood.

For the start, three flagship road projects have been launched amid fanfare. The three projects are the Atimpoku–Asikuma–Anyrawasi–Ho–Denu–Aflao corridor, the Dawhenya–Ayikuma–Dodowa stretch, and the Tema–Aflao road.

These marked the first tangible signs of the administration’s US$10-billion infrastructure agenda.

Funding Source

What makes these projects stand out is their funding model. Unlike many past road construction projects, which are backed by donor loans or external credit, the government says the Big-Push will be driven mainly by domestic revenues.

Specifically, the projects will be particularly funded by oil and gold receipts and budgetary allocations. This signifies that the project will be mainly Government of Ghana-funded.

The president has already announced that GH¢14 billion has been set aside in the current fiscal year, with another GH¢30 billion earmarked in the next budget to sustain works.

The Risk of the Funding Source

The bold move of the government to fund the project internally deserves commendation and celebration. At least for the benefit that it will inure to the country’s public debt stock. The government will get to keep debt under control compared to if it were funded by external loans, which mostly come at a higher cost.

Moreover, the cedi can have a breathing space since there won’t be any external debt servicing to put pressure on the local currency.

Yet, the benefits come with a downside. For a long time, Ghana has “mastered” a bad history of government-funded projects.  Government-funded projects are without guaranteed and secured multi-year financing, which often leads projects to stall halfway.

There are numerous evidence to buttress this common pattern. Government-funded projects are often without guarantee, which leads to delayed payments to contractors. The contractors are then forced to abandon sites, leading to cost overruns and incomplete work.

In some cases, contractors accessed initial funds but failed to complete projects, prompting the government to order a forensic audit into dozens of stalled projects earlier this year.

Even an audit by the current government has acknowledged that many road contracts were awarded without guaranteed funding pipelines, creating a pile-up of obligations the treasury could not meet.

This has left projects scattered nationwide in limbo, bridges half-finished, highways narrowed to gravel, and contractors demanding arrears before returning to the site.

Why the Big-Push May Not be Immune

Given that these projects will solely be funded by the government, the Big-Push roads risk falling into the same trap if lessons are not applied. Relying solely on annual budget allocations exposes projects to the volatility of commodity revenues.

There are risks of a dip in oil or gold receipts, which could quickly choke cash flow, halting work. Similarly, if payments are not made on time, contractors will again be forced to slow or suspend activity.

With very limited and scarce domestic revenues and numerous obligations for the government to honour, it is safe to say the funding is shaky. Already, President Mahama has signalled that he is not in a hurry to return to the international capital market, leaving only the option for domestic funding.

With gold and oil prices susceptible to external shocks, one cannot gloss over the funding risk these projects could face.

How the Government Can Break the Cycle

The government faces a daunting task considering the path of funding it has chosen. However, with some reforms, this administration has a chance to rewrite the script.

Experts call on the government to consider the following reforms.

The government can consider ring-fencing project allocations. The finance ministry must commit legally or administratively to multi-year financing envelopes for each Big-Push road, ensuring funds are secured beyond a single fiscal year.

One fear is the lack of guarantee and timely payments for government-funded projects. The government must commit to publishing and adhering to clear cash-flow schedules tied to construction milestones, preventing arrears from piling up.

There should be rigorous and strengthened oversight over these projects. With this, the government must implement independent milestone audits before releasing tranches to contractors, building on the ongoing forensic review.

The Bottomline

It is safe to say that just sod-cutting is an easy part of the project cycle. The real task lies in sustaining and completing roads on time, and delivering the promised economic benefits.

This requires steady funding, rigorous oversight, and strong political follow-through like never before, considering the funding source of these projects.

If the Big-Push succeeds, it will not only transform Ghana’s transport network but also prove that large-scale projects can be delivered credibly with domestic resources.

But if history is ignored, these corridors risk joining the long list of stalled government-funded works.

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