Perspective Report on Shortage of Fiscal Means for District Assemblies in Ghana

The provision of infrastructure and services is essential for sustainable economic, social and environmental development. Local governments provide goods and services such as roads, public transport, water supplies, sewerage, waste disposal, health care, schools, maintenance of security and public safety. They also provide amenities that enhance citizens’ quality of life, e.g. recreational parks, sports facilities, youth and cultural centers. All over the world, local governments are facing enormous challenges in satisfying the increasing need in these investments. There is a rising expectation of citizenry on local government. Ironically, fiscal resources for local governments to deliver on the above are generally at the whims and caprices of Central Government. Generally, Local Governments lack fiscal autonomy to properly perform their functions. In Ghana, local governments (Metropolitan, Municipal and District Assemblies- MMDAs), in performing the above functions receive funds from external sources to supplement their Internally Generated Fund (IGF). These external sources are in the form of transfers from the District Assemblies Common Fund (DACF), the District Development Facility, government grants and other donor support. However, these funding streams have not yielded enough fiscal resources for MMDAs to deliver efficiently. The objective of this paper is to assess the issue of shortage of fiscal autonomy of MMDAs in Ghana and its effects. The paper explores key lessons and experiences with the Japanese local finance system which are relevant to mitigating the problem of insufficient funding for local governments in Ghana.The paper specifically reviews the Local Allocation Tax (LAT) system, the Local Tax Law and the Local bond systems in Japan. The paper then, proposes key recommendations to improving fiscal autonomy of Local Governments in Ghana, in line with the principles, but not by design of local public finance in Japan.