Agricultural input subsidies have been used by governments to increase agricultural production and food security by making farm inputs more affordable and accessible to small-scale farmers. However, subsidy programs can create large financial burdens for governments and should be designed with realistic exit strategies. An effective subsidy intervention should help farmers to improve their yields and economic well-being, so they can afford to buy inputs on their own after the subsidy program ends. Expanding subsidy programs can put a strain on national budgets and create implementation risks such as diversion, displacement and market distortions.
Ghana’s fertilizer subsidy program has been characterized by persistent over-expenditure and under deliveries. This is due in part to the government’s inability to pay suppliers on time. Delayed payments, also known as payment arrears, can hide the true amount of spending on a program each year, which undermines effective planning, budgeting and oversight of the subsidy program. This study reviews the budget credibility of the fertilizer subsidy program, or whether the approved subsidy budget is executed as planned and assesses the drivers and impact of budget deviations on the delivery of subsidized fertilizer to farmers.
This study aims to document the connection between the execution of the fertilizer subsidy budget and the delivery of fertilizer subsidies in Ghana. Based on this analysis, it aims to recommend public financial management (PFM) reforms to improve the subsidy program and explore more sustainable ways government could support smallholder farmers in Ghana.