Ghana and the IMF

Country's Policy Intentions Documents

See also:
Poverty Reduction Strategy Papers (PRSPs)



Ghana
Enhanced Structural Adjustment Facility
Policy Framework Paper, 1999-2001

Prepared by the Ghanaian authorities in collaboration
with the staffs of the International Monetary Fund and the World Bank
April 13, 1999

Contents

  1. Introduction

  2. Recent Economic Trends

  3. Objectives, Strategies, and Policies for 1999-2001
    1. Medium-Term Framework: Objectives and Strategies
    2. Financial Policies
    3. Structural and Social Policies
  4. Statistical Issues
  5. Technical Assistance
  6. External Financing Requirements

Table

  1. Ghana: Timing and Implementation of Macroeconomic and Structural Adjustment Policies, 1999-2001

 

I. Introduction

1.  In its document "Ghana-Vision 2020," the government set forth a development strategy aimed at creating a stable macroeconomic environment and implementing a decisive structural transformation to foster strong economic growth and a broad-based improvement of living standards1. The strategy envisages steps to achieve balanced social and regional development, and encourage private sector activity and export orientation. This policy framework paper focuses on the policies for 1999-2001 in support of which the authorities are requesting from the IMF a new three-year Enhanced Structural Adjustment Facility (ESAF) arrangement for the period 1999-2001. Also, in support of this strategy, the World Bank is expected to approve a second Economic Reform Support Operation (ERSO II) in 1999 to deepen the reforms that are being carried out under the first ERSO approved in June 1998.

Contents

II. Recent Economic Trends

2.  Growth and prices. After a period of large economic imbalances in the early 1990s, Ghana's macroeconomic performance has improved considerably since 1997 as budgetary discipline has been restored and current account deficits contained. Real GDP growth increased from 4.2 percent in 1997 to 4.6 percent in 1998, in spite of energy shortages early in the year. A good cocoa crop and higher production in the mining sector were key sources of output growth. The inflation rate declined from 21 percent at the end of 1997 to less than 16 percent at the end of 1998.

3.  Fiscal. The overall budget deficit on a commitment basis dropped from 9.9 percent of GDP in 1997 to 8.1 percent in 1998, while the domestic primary surplus improved from 3.2 percent of GDP to 3.6 percent over the same period. These results were driven mainly by higher total revenue and grants, as total expenditure remained unchanged as a percent of GDP. Recurrent expenditure rose, mostly as a result of increased domestic interest payments. Arrears to contractors in the road sector reemerged, reflecting a continued difficulty in limiting road construction to the amount budgeted. Expenditures for health and education as a percentage of GDP were above the 1997 levels.

4.  A medium-term expenditure framework (MTEF) was adopted for the first time in the preparation of the 1999 budget for all ministries, and, in late-December 1998, a value-added tax was successfully reintroduced at a rate of 10 percent. A central revenue board was appointed to oversee all tax agencies with a view to ensuring better coordination among them.

5.  Money and credit. The Bank of Ghana tightened monetary policy considerably reducing the growth rate of reserve money from 33 percent during 1997 to 17 percent during 1998. As a result, broad money expansion decelerated to 18 percent in 1998. The velocity of circulation fell in response to a decline in the inflation rate. Treasury bill rates remained high, at about 40 percent, until the third quarter of 1998 when improved macroeconomic performance brought about a noticeable decline in nominal and real interest rates. The decline in interest rates and inflationary expectations allowed the central bank to reduce its rediscount rate to 37 percent in November 1998, and to 32 percent in January 1999. Credit to the private sector expanded by 31 percent during 1998, well in excess of nominal GDP.

6.  External sector. Strong export growth resumed in 1998 propelled by a good cocoa crop. Import growth in value terms slowed as petroleum prices declined markedly. The current account deficit, including grants, is estimated to have been 3 percent of GDP, over 5 percentage points lower than 1997. The significant improvement in the current account performance allowed an increase of US$100 million in the net foreign assets of the Bank of Ghana, despite some deceleration in official capital inflows and larger amortization of external public debt during 1998. The external public debt service declined from 32 percent of exports of goods and nonfactor services in 1997 to 28 percent in 1998. The cedi depreciated by about 4.3 percent against the U.S. dollar during 1998, an appreciation of 4.1 percent in real effective terms.

7.  Structural reforms. The government is making progress in implementing key structural reforms, albeit with some delays to ensure stakeholders' support. Cocoa sector reforms continue to move ahead: the producer's share in the f.o.b. price of cocoa was increased to 56 percent for the 1998/99 crop season, and private-licensed buying companies now purchase 40-50 percent of the cocoa crop. However, the sale of the Produce Buying Company (PBC) was delayed as experts were consulted over the details of the privatization. A medium-term strategy to foster development in the cocoa sector was adopted by the cabinet in March 1999. In the energy sector, the Public Utilities Regulatory Commission (PURC), established in late 1997 to set tariffs on an autonomous basis, raised significantly electricity and water tariffs in 1998, so as to eliminate operating losses in these sectors. Ex-depot wholesale petroleum prices were introduced, based on an automatic formula for adjusting them in line with petroleum import price changes. The offer for sale of the Ghana Oil Company took place in October, while that of the Tema Oil Refinery was delayed because of ongoing rehabilitation and financial restructuring. A new public sector wage policy, based on a 22-level grade structure, will be implemented from January 1, 1999.

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III. Objectives, Strategies, and Policies for 1999-2001

A. Medium-Term Framework: Objectives and Strategies

8.  Macroeconomic framework and strategy. The strategy for the next three years, while continuing to address macroeconomic imbalances, will focus on removing structural bottlenecks and creating an environment for sustained and balanced growth. The government expects to reduce inflation to single digit levels, increase public savings, contain the current account deficit, and achieve higher efficiency in the economy. The government intends to make private investment an engine of growth by creating a supportive environment, in particular by encouraging private sector marketing and exporting of cocoa, by increasing efficiency in the financial sector, and by placing a greater emphasis on social and poverty alleviation issues and the improvement of basic infrastructure.

9.  Output growth is projected to accelerate to 5 percent in 1999 and increase to 6 percent in each of the two succeeding years, allowing output per capita to increase by over 3 percent on average in the next three years. The share of private investment in GDP is expected to rise by about 3 percentage points, as private sector activity is boosted by rising confidence levels and expanding business opportunities, such as in nontraditional exports. Over the medium term, foreign aid is projected to decline, but it is expected to remain at levels consistent with the program's import and growth targets.

10.  The main elements of the macroeconomic program for the next three years are (a) a sound fiscal policy that will maintain the domestic primary balance above 3 percent of GDP, allowing the net domestic borrowing of the government to be more than halved with respect to 1998 while gradually reducing the stock of domestic debt to 20 percent of GDP by 2001; (b) moderate growth of monetary aggregates to ensure that inflation drops to single-digit levels in 1999 and stabilizes at about 5 percent thereafter; and (c) an increase in gross international reserves to 3 months of imports at the end of 2001.

11.  The program will imply decisive structural reforms, in particular the strategy for the next three years will focus on: (a) enhancing competition in the cocoa sector by allowing private agents to export cocoa, while ensuring equal access to crop financing and warehousing; (b) increasing efficiency in the banking sector by restructuring distressed banks, strengthening supervision, and introducing improved legislation both for the banking system and the central bank; and (c) continuing the divestiture of public enterprises. In addition, the government will continue to increase the efficiency of the public sector by restructuring subvented agencies and central management agencies and decentralizing operations to local levels. The government will take steps to increase the effectiveness of resources directed to education and health. A national poverty reduction strategy will be prepared.


B. Financial Policies

12.  Taxes. The government hopes to increase the revenue-to-GDP ratio to 19 percent over the medium term. In particular, the government will monitor the performance of the recently reintroduced value-added tax (VAT) and will, if necessary, adjust the VAT rate. Efforts will also be made to cut back exemptions and reduce the top tariff rate, so as to remove distortions and improve equity. The government will also strengthen tax administration and improve collection procedures and audit practices.

13.  Expenditure. Total expenditure will be lowered by about 4 percent of GDP from 1998 to 2001. Prudent wage policies, together with a decline in domestic interest payments as a result of smaller borrowing requirements and domestic interest rates will permit for the reduction in expenditures. Domestic- and foreign-financed capital expenditures are projected to be maintained broadly at current levels. The government expects a reduction in the overall balance (on a commitment basis) of about 2 percentage points of GDP in 1999.

14.  Monetary policy. The main objective of monetary policy is to achieve single-digit inflation in 1999 and to bring the inflation rate in line with that of partner countries in the medium term. To this end, the Bank of Ghana intends to limit broad money growth in line with the projected growth in nominal GDP. Reserve money is targeted to increase by 11 percent in 1999 and by about 10 percent in the following years, through the use of instruments of indirect monetary policy, including a more extensive use of repurchase agreements.

15.  The Bank of Ghana will keep domestic and foreign exchange market developments under close review and will adjust policies as needed. It will continue to take steps to deepen its domestic and foreign exchange markets and has requested Fund assistance in this area.

16.  External sector. The current account deficit, including official transfers, is expected to gradually narrow and to reach about 2 percent of GDP by 2001, an improvement of 1 percentage point with respect to 1998. Gross international reserves are targeted to improve steadily to three months of imports in 2001.

17.  The government will continue to review the tariff structure to enhance the external competitiveness of the local industry, to harmonize tariff rates with regional practices, and to remove distortions. While taking steps to curtail exemptions, the government will gradually reduce the average tariff rate over the next three years to less than 10 percent.

18.  Debt sustainability analysis. High levels of nonconcessional borrowing in the mid-1990s caused a marked increase in the debt burden. However, since then the government has placed strict limits on contracting and guaranteeing of nonconcessional borrowing. As a result, the net present value of debt relative to exports, which stood at 198 percent at the end of 1998, is projected to fall steadily through 2001. The nominal debt stock is projected to decline to about 71 percent of GDP by 2001 from about 79 percent at the end of 1998. Given the favorable outlook for exports, combined with the largely concessional nature of Ghana's external debt, debt service is projected to decline below 20 percent of exports of goods and nonfactor services by the year 2001 from 28 percent in 1998, thus making Ghana's external debt burden sustainable, without recourse to existing debt relief mechanisms, in the absence of major external shocks.


C. Structural and Social Policies

Attaining sustainable growth.

19.  Agriculture. Consistent with the critical role of agriculture in the economy, the government has formulated an Accelerated Agricultural Growth Strategy (AAGS) designed to create an environment that will enable the private sector to boost agricultural production, agro-processing and exports, and to increase the agriculture sector's growth from the current rate of 3-4 percent to 5-6 percent. To this end, institutional reforms and investment programs will be carried out to (i) improve access to markets and promote the production and export of selected commodities; (ii) facilitate access to agricultural technology; (iii) increase access to rural finance; (iv) improve rural infrastructure and utilities; and (v) enhance human resources and build institutional capacity. The main instrument for implementing the AAGS will be the Agricultural Services Sector Investment Program (AGSSIP). This program will be financed by the government and a pool of donor funds. The program is expected to be launched in mid-2000.

20.  Cocoa reforms. In order to adapt to a rapidly changing market environment, the government is reassessing its medium-term strategy for the cocoa sector. In September 1998, a task force with a sector wide representation of stakeholders prepared a report that was discussed in a national workshop in January 1999. On the basis of these discussions the government has formulated a medium-term cocoa sector strategy, to take effect in the 1999/2000 crop season.

21.  The objective of the cocoa strategy is to ensure better performance of the industry and to increase farmers' income. Its highlights include: (i) increasing producer prices to at least 60 percent of the f.o.b. price for the 1999/2000 season and by at least 2 percentage points in each of the next two years; (ii) reducing the tax on cocoa from the current level of 26 percent of the f.o.b. price; (iii) allowing qualified licensed buying companies (LBCs), including the Produce Buying Company (PBC), to export at least 30 percent of their domestic purchases, starting with the 2000/01 crop; (iv) giving LBCs equal access to Cocoa Marketing Board (Cocobod) warehouses and crop financing; and (v) abolishing price discounts on exportable cocoa to domestic processors. As a result, cocoa production is expected to reach 500,000 tons by 2004/05. Cocobod, the cocoa marketing board, will have a regulatory role and will continue to reduce its share of the f.o.b. price. The extension services of the Cocobod and the Ministry of Agriculture will be unified. The Quality Control Division (QCD) will remain a public sector institution. The PBC will be outsourced for divestiture before end-March 1999 and will be offered for sale by end-June 1999.

22.  The government believes that this strategy will best serve the interests of the country during the next three years, but is prepared to take bolder steps, as needed, in light of its experience and that of its competitors. The authorities will assess progress during the first phase of reforms with a view to moving toward a fully competitive system with open entry.

23.  Bank restructuring. The banking system in Ghana is now dominated by private banks, though the five majority-public-owned banks still control a third of the deposits. While most banks are sound, a few are not in compliance with the capital adequacy requirements2. Therefore, the government will take immediate steps to restructure weak banks and divest public shareholding in commercial banks. To ensure the efficiency and soundness of the financial system, the Bank of Ghana will strengthen both on-site and off-site supervision procedures, ensure compliance with the capital adequacy ratio, and monitor foreign exchange exposure. Both the central bank law and the banking law will be reviewed in line with best international practices. The Bank of Ghana also intends to strengthen its supervisory practices and to bring prudential regulations in line with the Basle Core Principles. The Bank of Ghana will streamline regulations for entry and exit and has lifted the freeze on applications for banking licenses, but will continue to assess applicants by strict professional and financial standards.

24.  Divestiture program. In 1998, the government moved to a new phase of the divestiture process covering major enterprises in the transport, energy, and banking sectors. The overall divestiture program for 1999/2000 covers about 80 companies. The government intends to conduct a comprehensive review in April 1999 of the divestiture process and program. On this basis, it will set a target for program completion and take necessary steps to achieve it. An evaluation of the outsourcing program will be a key input into this overall review. In the meantime, the government will endeavor to solve the problem of the outstanding liabilities of some firms, the sale of which is constrained by end-of-service benefits and substantial customer claims. It will also seek to attract more investor interest by enhancing the quality of sale advisors and by improving disclosure of information on the program. In this respect, the government will reduce the publication lag of the annual financial reports of the Divestiture Implementation Committee (DIC), as well as complete and disseminate a detailed impact assessment of the divestiture program.

Rationalizing government operations

25.  Public sector management reform. The government has begun to implement a far-reaching public sector reform program to be carried out over the next decade. The main objectives of the program are to reform central government agencies and to rationalize 175 subvented agencies, which employ about 400,000 staff. In this context, a pilot program to commercialize, restructure, or close down at least 17 subvented agencies will be completed by the end of the year 2001; enabling legislation will be presented to parliament in 1999. The Ministry of Finance, the Public Service Commission, and the National Development Planning Commission will be restructured in the next two years. The exercise will be extended to include the Ministry of Local Government and Rural Development, the State Enterprise Commission, and the Office of the Head of the Civil Service by end-2001. Moreover, the government intends to improve and streamline policy design and implementation. To this end, the government drew a pilot public/private partnership program to increase private sector participation in activities now being performed by central government and subvented agencies.

26.  New wage structure. A Civil Service Performance Improvement Program (CSPIP) has been established and has made progress in defining performance targets in some ministries. Further work is planned to apply it throughout the central government. The government has adopted a new wage structure for public servants. In November 1998, a Central Management Board was constituted to oversee the introduction of a uniform salary and grading structure for the public service. The first phase, which involved regrading and reclassification of the entire public service, is complete. Negotiations on the implementation of the new salary structure are ongoing, and the government intends to conclude them as soon as possible.

27.  Expenditure management systems. There has been substantial progress on the government's Public Financial Management Reform Program initiated in 1996. A medium-term expenditure framework was adopted as the basis for preparing the 1999 budget and will continue to be used in the future. The exercise covered all ministries departments and agencies rather than the three priority sectors that were originally targeted. For the first time, all government resources, including external financing, have been accounted for in the budget preparation guidelines and all personnel expenses, including allowances, have been consolidated. Line ministries and agencies have based their expenditure plans on operational targets, which will facilitate the ex post assessment of performance. A new accounting framework has been adopted that allows closer monitoring of expenditures. The government has commissioned the development of a computer-based Budget and Public Expenditure Management System (BPEMS), to be fully operational by end-2000. The new rules and the BPEMS will improve expenditure control, and cash and debt management.

28.  Decentralization. In order to strengthen institutional development and capacity building, a bill is to be presented to parliament in mid-1999 to create a separate local government service and facilitate human resource development in the districts. District assemblies will be encouraged to intensify their revenue collection efforts and to improve their capacity to manage expenditures. A minimum 5 percent of total tax revenue will continue to be allocated to the District Assemblies Common Fund for development expenditures. In addition, the government has approved the decentralization of 23 line departments to districts.

Strengthening infrastructure

29.  The government is pursuing a strategy to improve the delivery of infrastructure services through increased private sector participation and improved pricing and cost recovery. Divestiture programs are under way in energy, water, and transportation.

30.  Electricity. A new regulatory framework embodying the PURC (Act 538 of 1997) and the Energy Commission (Act 541 of 1997) has been set up to attract private sector participation in power and petroleum products. In light of the vulnerabilities in power supply highlighted by the 1998 energy shortages, the government is preparing a "Statement of Power Sector Development Policy," which will outline the remaining reform agenda for discussion with stakeholders in 1999. In parallel, the government is preparing a Transitional Power System Development Plan (1999-2001). This plan will indicate a least-cost strategy for increasing thermal power supply to complement the projected availability of hydropower until 2001, prior to the delivery of natural gas from Nigeria via the proposed West Africa Gas Pipeline Project. Based on the outcome of the Transitional Power System Development Plan (1999-2001) the government will present for parliamentary consideration and approval before end-December 1999, the Electricity Regulations—Operation of the National Interconnected System, and complete the operational separation of the electricity transmission utility (National Grid Company, Ltd.) from other activities of the Volta River Authority (VRA). The VRA will divest its thermal power generation assets, and the Electricity Company of Ghana (ECG) is being restructured and will be offered for sale by end-1999.

31.  The existing power utilities will complete the implementation of the financial recovery plans approved by the government to deal with past liabilities and to restore their creditworthiness. Furthermore, the PURC will publish its "Guidelines for Fixing Rates for Electricity Services" to achieve greater transparency in setting electricity tariffs.

32.  Petroleum. The financial restructuring of the Tema Oil Refinery (TOR) Ltd. will be completed by June 1999, enabling the government to offer the company for sale before end-December 1999. The government will prepare and present for parliamentary consideration and approval before end-December 1999, the Petroleum Regulations—Marketing of Petroleum Products, which will provide the framework for phasing out maximum retail margins.

33.  Transportation. The government continues to work toward creating an efficient and integrated transport network by focusing on the maintenance and rehabilitation of the road network, on the rationalization of its capital investment program, and on the participation of the private sector in railway, port, and air transport. While the Road Fund will continue to provide adequate financing for routine maintenance, the management of the program will be strengthened further. To this end, the government has initiated institutional capacity development programs in the three road agencies. The government has been accumulating large payment arrears to road contractors. To resolve the situation, the government has decided to terminate a number of contracts, to scale down domestically financed road projects, to revise procedures for initiating projects, and to award contracts in line with World Bank procurement rules.

34.  The government aims to develop Ghana as a major regional hub and is preparing to privatize some operations at the harbors and at Kotoka International Airport. To support its policy of liberalized skies, a program of institutional reform is planned for the Ghana Civil Aviation Authority as part of the World Bank-supported Gateway Project.

Improving natural resource management

35.  Urban development and land administration. The government is addressing the infrastructural needs of urban centers throughout the country with special attention to land delivery. Investments will be targeted toward municipalities that have not benefited from previous assistance, while demand-driven allocations will be promoted. To this end, government efforts will focus on building the capacity for urban sector management throughout the district assemblies and municipalities. It is widely recognized that weak title security and insufficient information have been the main hindrances to the efficient allocation of available land. The government recently commissioned a study on urban land administration, which recommends a realignment of the numerous institutions that govern land delivery and the establishment of a land information bank; it has finalized a draft national land policy.

36.  Water and sewerage. In 1993, the government initiated a restructuring program aimed at improving the supply of water and sewerage services and allowing the sector to reach financial viability. The separation of responsibilities for urban and rural water, sanitation, and sewage is largely complete. The government is in the process of downsizing and converting the Ghana Water and Sewerage Corporation (GWSC) into the Ghana Water Company (GWC), which will lease the urban water supply network to private operators. Two lease packages, designed to promote competition in urban water supply, will be opened for bids in October 1999. The conversion of the GWSC, including a program of staff rationalization, is expected to be completed by January 2000. The government has also initiated the transfer of all small community systems to the district assemblies. These systems will be operated by the communities, with management support from the Community Water and Sanitation Agency. This transfer should be completed by end-2000. Finally, the government has established a program of tariff increases to ensure the financial viability of the sector. The average water tariff was raised by 140 percent in March 1998. The PURC is currently considering a second tariff increase, which will be sufficient to cover operating costs of the private operators.

37.  Environment. Ghana's most pressing environmental problems are deforestation from rapid timber extraction and land degradation from inappropriate cultivation and mining practices. In line with the National Environmental Action Plan the government has strengthened institutions to address environmental issues. In 1997, the government enacted a Timber Resource Management Act aimed at achieving a more sustainable rate of timber extraction and at fostering replanting and reforestation. This act provides for the adoption of transparent procedures for awarding timber rights and periodic increases in forest royalty rates; its regulations were recently enacted. The government has begun to rationalize and strengthen the various forest and timber agencies. The government will review the current ban on log exports, with a view to finding more efficient and less costly mechanisms of ensuring sustainable forest exploitation.

38.  To arrest land degradation and preserve wildlife, the government will initiate a number of collaborative pilot management schemes in the high forest and the savanna woodlands, involving individual farmers and entrepreneurs, families, schoolchildren, and communities. In addition, the government has added the preservation of biodiversity to its list of main objectives by initiating plans to strengthen the management of wildlife areas and to implement a new National Biodiversity Strategy, including the demarcation of globally significant areas.

39.  Fisheries. Ghana produces on average 400,000 tons of fish annually, which sustain about 1.5 million people. Tuna processing generates important export earnings and fish provides about 60 percent of the animal protein in the country. Marine demersal stocks and small pelagic fishes suffer from overfishing and unsustainable fishing methods, while the large pelagic species, especially tuna, are underexploited. The government intends to develop fisheries in a sustainable manner by improving the institutional and legal framework for proactive management of the fisheries. In particular, the government will promote private investment in fisheries, particularly in tuna, and will encourage comanagement systems in artisanal fisheries.

Investing in human capital

40.  Education. The government's priorities in education, as spelled out in "Ghana Vision 2020" are to achieve universal basic education and adult literacy, increase access to secondary and tertiary education, and strengthen labor force skills through increased provision of technical and vocational training. In line with these objectives, the government launched in 1996 a Basic Education Sector Improvement Program, with the assistance of the World Bank and other donors. Implementation of the program is, however, facing difficulties as teaching and learning goals are not being achieved. The government intends to address these problems through a number of actions to be adopted in close coordination with donors. These include the preparation of plans with clearly established targets; reallocating resources toward disadvantaged groups; decentralizing management of education, and improving the capacity of the Ministry of Education and the Ghana Education Service. In addition, it will seek to establish partnerships with the private sector for the provision of basic education and adult literacy programs. A textbook program which aims to provide, cost-effectively, a set of textbooks to all children is also under way. To monitor improvements in the quality of basic education, the government has targeted significant improvements in the pupils' achievements in the recently introduced Performance Monitoring Test, Criterion Reference Tests, and the Basic Education Certificate Examination. Gross enrollment ratios for 2001 have been targeted at 81.2 percent for primary schools and 64.9 percent for junior secondary schools. The national net enrollment ratio for girls in primary schools has been targeted at 48.5 percent in 2001. Expenditures in education will increase from 3.8 percent of GDP in 1998 to 4.1 percent in 2001.

41.  At the secondary level, the government's program aims to increase access to good-quality senior secondary schools. The Ministry of Education's strategic plan for the next three years targets an increase in transition rates from junior secondary schools to senior secondary schools. Investments will be made in schools' facilities and teacher housing in rural areas and the curriculum will be revised to emphasize science and math. Teachers will be given more incentives to work in rural schools. Schools will be required to run at approximately full enrollment, and underenrolled schools will eventually be closed. At the same time, the management of secondary schools will be gradually decentralized with greater participation by district assemblies and the communities. At the tertiary level, efforts are now being made to increase budgetary allocations to that subsector. The government intends to address the problems of the current student loan scheme, which is plagued by default, by redesigning a self-sustaining revolving fund.

42.  Health. The government's health sector reform program, which is based on the Medium Term Health Strategy (MTHS) to achieve Vision 2020, aims at providing universal access to basic health services, improving the quality and the efficiency of health services, and fostering linkages with other sectors contributing to health. The main strategies to achieve sector objectives include: (i) strengthening primary health services; (ii) improving the capacity for policy development and analysis; resource allocation, performance monitoring and evaluation, and regulation of service delivery and health professionals; (iii) strengthening national support systems for human resources, logistics and supplies, financial management and health information; and (iv) promoting private sector involvement in the delivery of health services.

43.  The government has adopted a sector-wide approach to health that integrates government and donor efforts to achieve defined goals and includes joint systems to monitor sector performance. The overall per capita public expenditure on health (the equivalent of about US$6 in 1997) is low even by sub-Saharan standards. It is recognized that increased funding for health, along with a reallocation of resources to recurrent costs, is an absolute necessity. The Health Sector Program, financed by the government, external aid, and private spending on health, aims at increasing public per capita expenditures to the equivalent of US$9 in the medium term.

44.  The government recognizes the need to step up efforts, including providing additional financial resources, to stop the spread of AIDS among the population. The present trends, which indicate that about 600,000 Ghanaian adults will be HIV infected by the year 2000, pose serious social and economic risks and place a heavy burden on the health sector.

Poverty

45.  Poverty remains a concern in Ghana. It is more prevalent in rural areas, especially in the north of the country. There are also pockets of poverty in urban areas. The government is committed to developing a coherent approach to poverty reduction and will prepare a national poverty-reduction program for the next three years in collaboration with donors by September 1999. Key instruments for poverty reduction will include small-scale pilot programs in rural and urban areas. Furthermore, the street-children problem and poverty monitoring at the district level will be addressed by a new World Bank project. Poverty monitoring at the national level, as well as policy interventions, will be guided by poverty assessments such as the Core Welfare Indicators Questionnaire (CWIQ) 1997 and the fourth Ghana Living Standards Survey (GLSS4), to be completed in June 1999.

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IV. Statistical Issues

46.  The quality and timeliness of the reporting of core economic statistics will continue to require government attention over the next three years. The government is taking steps to improve fiscal data. These include strengthening the Research Divisions in the Ministry of Finance, the Bank of Ghana, the Office of the Accountant General, and the Ghana Statistical Service. An important action to improve statistical reporting is the compilation of all domestic payments arrears, outstanding government loans, and loans guaranteed by the government and the Bank of Ghana. The government is committed to improving the timeliness of national income accounts, the adequacy of data on public enterprises, and the availability of labor market data. The government is also committed to reducing lags in the reporting of consumer prices and monetary accounts to not more than one month, and the budget execution data to six weeks. Furthermore, the Bank of Ghana will revise the reporting system of commercial banks to fully identify the residency of foreign currency deposits as well as expand the coverage of the reporting system to include other deposit-taking intermediaries in line with technical assistance recommendations made in July 1997. In addition, the government will assess and explain the discrepancy between the import data obtained from the Automated System of Customs Data (ASYCUDA) and those from Customs, Excise, and Preventive Services (CEPS), and will ensure that national accounts and balance of payment statistics reflect the conclusions of the assessment. A housing and population census will be carried out in 2000.

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V. Technical Assistance

47.  Ghana's program of macroeconomic adjustment, structural, and sectoral reforms will be supported by technical assistance from the World Bank, the Fund, and several bilateral and multilateral agencies.

48.  The World Bank will assist the authorities in the following areas: cocoa sector reform; implementation of an expenditure control system; effective delivery of social services; development and implementation of a public service restructuring plan; banking supervision; divestiture of parastatals; private participation in infrastructure; and reform of the management and maintenance of the road network.

49.  The Fund will provide technical assistance on national accounts and money and banking statistics; indirect monetary instruments and liquidity forecasting foreign exchange markets; banking supervision, including prudential regulations; financial sector legislation; tax structure; and measures to improve the timeliness and quality of statistics.

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VI. External Financing Requirements

50.  External financing requirements are projected to be about US$2.5 billion over 1999-2001. For 1999, external financing requirements are estimated to be about US$875 million, of which official project grants and loans are projected to be US$617 million, slightly lower than in 1998; and program loans and grants are expected to reach US$197 million, 42 percent higher than in 1998. Financing for 1999 is assured, while under currently identified commitments a gap of about US$155 million is estimated for the years 2000 and 2001. Financing for the two-year period will be firmed up in a Consultative Group meeting expected to take place in late 1999. The gap will be closed if commitments in each year do not fall below their levels for 1999.


1Republic of Ghana, "Ghana-Vision 2020 (The First Step 1996-2000)," Accra; January 6, 1995.

2For a review of the banking system see "Ghana: Banking Sector Issues" in Ghana-Selected Issues, IMF Staff Country Reports No. 99/03.

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