Intergovernmental fiscal transfers and tactical political maneuverings
Evidence from Ghana’s District Assemblies Common Fund
This paper examines the influence of political considerations on intergovernmental fiscal transfers in Ghana. The two-step system GMM approach was used to estimate transfers and elections data for 167 districts from 1994 to 2014. The analysis was country-wide and covers swing districts as well as aligned districts, while the democracy transitions from ‘new’ to ‘mature’.
The results show that each district received on average GhȻ6.28 million per year and the amount generally increased by 8.4 per cent in election years. The increase favoured the swing districts over the non-swing ones, as the former received 5.2 per cent more than the latter. Aligned districts in the new democracy received 2.0 per cent more while it was 5.0 per cent more for swing districts in the mature democracy.
In conclusion, the study finds that the allocation formula was politically influenced and as a preventive measure, a revision of the formula at intervals of five years—backed by legislation—is recommended.