Ghana: Selected Issues
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International Monetary Fund
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Publication Date:
31 Jan 2000
eISBN:
9781451814811
Language:
English
Keywords:
ISCR; CR; export; Ghana; bank; poverty monitoring; Education spending; Africa
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This paper reviews trends in GDP and other macroeconomic variables since independence. It assesses the performance of the different sectors of the economy and expenditure categories. The paper identifies a number of products that could contribute to maintaining the high growth rate that nontraditional exports have experienced. The medium-term fiscal sustainability analysis provides a useful quantification of the impact of the shocks experienced on fiscal performance. Ghana's social insurance system, stock exchange, divestiture program, rural finance, and poverty are also discussed.

Abstract

This paper reviews trends in GDP and other macroeconomic variables since independence. It assesses the performance of the different sectors of the economy and expenditure categories. The paper identifies a number of products that could contribute to maintaining the high growth rate that nontraditional exports have experienced. The medium-term fiscal sustainability analysis provides a useful quantification of the impact of the shocks experienced on fiscal performance. Ghana's social insurance system, stock exchange, divestiture program, rural finance, and poverty are also discussed.

VIII. Poverty Incidence and Reduction in Ghana73

A. Introduction

239. During the period of the economic recovery program, poverty declined from nearly 37 percent in 1987/88 to about 31 percent in 1991/92, as the country achieved moderate economic growth, inflation declined from over 100 percent in 1983 to about 10 percent in 1992, and real income per capita rose at an average annual rate of 2 percent. Growth in income and expenditures was relatively broad based and did not come at the expense of a deterioration in income distribution. An important factor contributing to poverty alleviation was the persistent effort by the government to sustain public expenditures on education and health. Social expenditures increased as a share of GDP and human capital indicators improved—primary and secondary school enrolment rose, infant mortality rates declined, malnutrition among children was cut in half, and average life expectancy increased. However, poverty reduction was not uniform, declining significantly in rural areas but increasing in urban areas.

240. From 1992 to early 1997, macroeconomic stability and growth were disrupted by fiscal imbalances associated with the first two general elections in the new political environment of constitutional democracy. Domestic and external financing of budget deficits caused inflation to surge. During 1992–95, growth of real GDP per capita declined, reaching only 0.2 percent in 1994 and implying little progress or possible reversal of progress on reducing poverty (Government of Ghana, 1997).

241. In 1997, the government renewed its efforts to reduce macroeconomic imbalances, bringing inflation below 10 percent by mid-1999. By achieving low inflation, the government has established an environment conducive to reducing poverty (Easterly et al., April 1999). More is needed, however, to substantially reduce poverty and improve the economic prospects and well-being of the poor. Improving the composition and quality of public expenditure, in particular, in education and health, is also an important element of the second generation of reforms in countries like Ghana that have achieved macroeconomic stability (Camdessus, 1999).

B. Poverty Profile for Ghana

Poverty monitoring and indicators

242. The main source of detailed information on the social and economic conditions of Ghana’s population, including detailed measures of poverty, is the Ghana Living Standards Survey (GLSS), a multi-topic household survey undertaken by the Ghana Statistical Service (GSS). Four surveys, denoted GLSS1 through GLSS4, have been conducted in 1987/88, 1988/89, 1991/92, and 1998/99, each covering a nationally representative sample of households interviewed over a 12 month period. GLSS1 through GLSS3 were used for a consistent analysis of poverty in Ghana over the years of the surveys (Government of Ghana, 1995). GLSS4 was completed in June 1999 and served as the basis for a major government report updating Ghana’s poverty profile and presenting policies for reducing it.

243. In 1996, GSS adopted a new instrument, the Core Welfare Indicators Questionnaire (CWIQ) Survey, for monitoring living standards more quickly than with the GLSS. CWIQ is a nationwide probability sample survey designed to provide timely annual indicators for monitoring poverty and the effects of development policies, programs, and projects on living standards. Rather than undertake the time-consuming and computationally demanding task of measuring expenditure and income, CWIQ employs a set of indicators that are readily observable to construct poverty quintiles that are closely correlated with the expenditure quintiles based on the GLSS. The first CWIQ survey was conducted in 1997 from September to November (Government of Ghana, 1998). CWIQ is a crucial instrument for monitoring and evaluating poverty reduction efforts at the district and community level.

244. A set of poverty indicators based on the GLSS and CWIQ has been under development over the course of their preparation, implementation, and use. Development continues with consideration given to identifying indicators that change frequently and whose impact can be easily measured from year to year. Indicators under consideration include:

  • Demographic: average household size, total fertility rate, female-headed households, and migration (rural-to-rural, rural-to-urban, and international);

  • Economic: incidence of poverty, economic participation rate, sources and levels of income, food share in household expenditure, level of savings, source of credit, proportion of adults with access to productive assets;

  • Social: literacy rate, primary school enrollment rate by gender, access to health facilities, health personnel consulted, percent of children undernourished, access to safety net programs provided by the Department of Social Welfare;

  • Household/community: average number of persons per room, access to potable water, access to electricity for lighting and productive activity, and access to sanitary facilities.

Detailed profile

245. A comparative analysis of the first three GLSS surveys shows that the overall incidence of poverty in the country declined from 37 percent to 31 percent. Most of the improvement came form economic growth and the resulting increase in incomes and expenditures. Income distribution remained stable over the period and growth benefited most regions, especially rural areas. Poverty is still predominantly a rural phenomenon, with rural areas accounting for more than 70 percent of national poverty, and is primarily located in the rural savannah and forest areas, which account for about 60 percent of total poverty. In rural savannah, the incidence of poverty fell from 50 percent in 1988 to 39 percent in 1992. Wage employees in the informal sector have gained the most from economic growth, but export crop and food crop farmers saw an improvement in their expenditures. The reduction in rural poverty appears to be related to increased reliance on non-farm self-employment, particularly trading services, which are related to the growth in exports and imports (World Bank, 1995). Urban areas, other than Accra, benefited from economic growth. Although the incidence of poverty is lowest in Accra, it increased markedly from 9 percent in 1988 to 23 percent in 1992, largely the result of rural to urban migration.

246. The most important source of income for households in Ghana is self-employment, accounting for at least 70 percent of total income. This predominance is observed in all expenditure quintiles. The CWIQ survey showed 72 percent of household heads to be self-employed in 1997. In the lower quintiles, most of self-employment income is generated from agricultural activities, whereas in the high quintiles it is generated more from non-farm self-employment. Of all employed persons, CWIQ showed 93 percent to be in the private sector, with 89 percent in the informal sector and 4.2 percent in the formal sector. The two groups least affected by poverty are public sector and formal private sector employees, for whom the incidence of poverty is consistently below the national average.

247. Households headed by women accounted for about a third of households, although the level had been rising slowly. The 1987/88 and 1988/89 surveys showed the proportion of these households falling as expenditure rose. In contrast, the pattern in the 1991/1992 is inconclusive, showing the proportion first increasing and then decreasing as expenditures rose. The CWIQ survey showed 35 percent of households headed by women in 1997, with significant proportions of these households in the lowest quintile in both rural (53.3 percent) and urban (60.5 percent) areas.

248. The 1987/88 survey showed that 40 percent of the sampled population age 15 years and over could read, 39 percent could write, and 48 percent could do written calculations. These percentages showed slight improvement in the 1988/89 survey, but could not be consistently analyzed in the 1991/92 survey. In both of the early surveys, the proportions of men who could read, write, and calculate were much higher than for women, with differences of about 25 percentage points. Both literacy and numeracy levels show a positive correlation with expenditure levels for both women and men, and are higher in urban than rural areas. The CWIQ survey showed a literacy rate of 48 percent for all household heads in 1997, with a 62 percent rate for male heads and 36 percent for female heads.

249. The CWIQ survey found a high negative correlation between education and income in both rural and urban areas and for both female and male-headed households. Poverty declined steadily with education; specifically, 54 percent of female heads and 77 percent of male heads of non-poor rural households were literate, while only 20 percent of female and male heads of households in the lowest poverty quintile were literate.

250. Overall, women experience greater poverty for a range of reasons, including: lower literacy; less access to education, employment and farm land; marital disruption; limited access to credit; and social and cultural attitudes that constrain women from making progress in business.

251. Literacy, basic education, health, safe water and sanitation contribute to the quality of life. Social indicators in these areas show Sub-Saharan African (SSA) countries faring poorly in comparison with the rest of the world. The UNDP’s 1998 report on human development places most SSA countries including Ghana in the low human development category, although Ghana is near the top of this category based on the UNDP’s human development index (United Nations, 1998). The four social indicators used in the World Bank’s development diamond for Ghana in comparison with SSA countries and the countries in the UNDP’s low human development category show Ghana comparing favorably (Figure 21) World Bank, 1997). Life expectancy and access to safe water are better in Ghana than other SSA countries, while Ghana is close to the average of real GDP per capita and gross school enrollment for these countries. Ghana’s performance in all four indicators exceeds other countries in the UNDP’s low human development category.

Figure 21.
Figure 21.

Ghana: Development Diamonds, 1995

Citation: IMF Staff Country Reports 2000, 002; 10.5089/9781451814811.002.A008

Sources: World Bank and United Nations Development Programme.1/ Index based on country group average set equal to 100.

252. The Food and Agricultural Organization (FAO) of the UN found in its latest study of hunger found Ghana to be most successful in reducing hunger between 1980 and 1996 among African countries. Over this period, Ghana cut the proportion of undernourished in the population by over half Progress in the 1990s has accelerated with the proportion declining from 29 percent in 1990 to 6 percent in 1997. This progress can be attributed to a number of factors, including higher expenditure on programs to provide food, donor support, and higher personal income as a result of economic growth.

253. Ghana has one of the more equal income distributions among African and SSA countries.74 The Gini coefficients for SSA countries vary considerably, with South Africa having the highest at 62.3 in 1992, and Ghana having the second lowest at 35.1 (Table 24) (Deininger et al., 1996). Another indicator of inequality, the ratio of the top quintile’s share of income to the bottom quintile’s share, shows South Africa again to have the highest inequality with a ratio of 32.1, while Ghana is at the other end of the spectrum with a ratio of 5.97. The characteristics of poverty in Ghana can be summarized in the broad categories of production, income, education, health, environment, living conditions, and water (Box 10).

Table 24.

Gini Coefficient in Selected African Countries

article image
Source: Deininger and Squire (1996)

Characteristics of Poverty in Ghana

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Source: Government of Ghana, “Policy Focus for Poverty Reduction,” Technical Committee on Poverty.

C. Fiscal Policies and Impacts

Overview

255. A wide range of government policies affects poverty and inequality to some degree. Fiscal policy is generally regarded as most effective in reducing poverty and enhancing equity, with expenditure policy viewed as more effective than tax policy. Further, the composition of expenditure matters. Spending on education and health, particularly basic education and health care, builds human capital which contributes to long-term growth and alleviation of poverty. An important justification for public spending on basic education is its effect on individuals’ lifetime incomes, usually measured as a rate of return based on the increase in incomes generated by public expenditures on education. Many studies have found that the rate of return is highest for primary education, followed by secondary and tertiary education (Psacharopoulos, 1994). Public spending on health, especially primary care, is generally justified by its role in reducing disease in the productive years of individuals’ lives. Many studies have concluded that the most cost-effective health care programs are preventative in nature, by increasing both individual productivity and the number of productive years in individuals’ lives (Pradhan, 1996; Sahn et al., 1993).

256. The productivity of overall government spending on education and health has improved in Africa, but the average level of efficiency has declined relative to Asia and the Western Hemisphere. Inefficiency in African countries appears to be higher at higher levels of per capita spending and may be the result of the high share of total spending going to government wage payments (Gupta et al., 1997). This is particularly acute in the health sector, where provision of essential drugs and maintenance of facilities are underfunded. Not only is the composition of public expenditures unfavorable in SSA, the incidence of spending on education and health has been found to be unfavorable to the poor (Castro-Leal et al., 1997). For example, the poor have been shown to benefit less than the rich from education expenditures in selected SSA countries (Table 25). These results imply that higher overall spending on education and health will not necessarily improve the well-being of the poor unless measures are taken to address inefficiency, especially when the level of spending is already high.

Table 25.

Benefit Incidence of Public Spending on Education in Selected African Countries

article image
Source: Castro-Leal, et al (1998).

257. Recent empirical analysis provides evidence that public spending on primary education has a greater positive impact on enrollment rates than total spending on education. The same result obtains for the effect of primary health care spending on child and infant mortality relative to total health care spending (Gupta et al., 1999). Spending on primary education and health care is more likely to improve social indicators and increase individual productivity and income, thereby reducing poverty.

Fiscal policies and impacts in Ghana

258. Under the ERP from 1983 to 1992, the government implemented programs to rehabilitate health, education, and other social sectors. The government and donors recognized that the sustainability of macroeconomic adjustment would be compromised if there were negative effects on poor and vulnerable groups. A need was identified for an anti-poverty program that would target assistance to disadvantaged groups during the transition to macroeconomic stability. To meet this need, the Program of Action to Mitigate the Social Costs of Adjustment (PAMSCAD) was initiated in 1988 with donor support of about US$84 million (Box 11). After 1992, it was replaced by a more decentralized system in which decisions were delegated to the district level to improve targeting of beneficiaries.

259. With the devolution of the PAMSCAD program to the district level, the central government addressed social safety net issues with specific tax and expenditures policies in the budget. For example, following the increase in the minimum wage in 1993, the minimum threshold for incomes taxes was raised and taxes for kerosene were kept lower than those for other petroleum products. Additional resources were devoted to the maintenance and rehabilitation of hospitals and schools in rural areas, as well as the construction of new district health centers and schools. Retrenched public sector workers were provided severance packages and access to retraining in government tertiary and vocational education facilities.

Program of Action to Mitigate the Social Costs of Adjustment (PAMSCAD)

Although the economic reform program focused by necessity on macroeconomic stability, exchange rate, financial, and structural adjustment policies, the government realized nonetheless that the program’s sustainability depended on avoiding or at least minimizing to the extent possible negative consequences for disadvantaged groups. Indeed, the government recognized that some components of the economic recovery program “will exacerbate the economic problems of certain vulnerable groups in the short run, and this may impede the sustainability of the recovery program itself” (Government of Ghana, Program of Action to Mitigate the Social Costs of Adjustment, December 1987). An obvious victim of the adjustment program were retrenched workers in public sector. Hence, the government developed and began to implement in 1988 a package of measures organized under the umbrella of the Program of Action to Mitigate the Social Costs of Adjustment (PAMSCAD) to protect vulnerable groups under the economic reform program. It focused on poor households in rural areas, especially those in the northern regions and those with limited access to income earning opportunities and social services, as well as urban poverty groups and retrenched workers from the civil service and state enterprises. The program emphasized community initiatives, employment generation through public works and food-for-work programs, training and placement services for retrenched workers from the public sector, and basic needs provision such as hand-dug wells, low-cost sanitation, essential drugs and supplemental feeding. At the central level, PAMSCAD was integrated with the government’s structural adjustment program, with joint responsibility vested in the Ministry of Finance and Ministry of Local Government. A donors conference was convened in February 1988 to discuss particular projects that donors would support, which generated pledges of support amounting to US$84 million for an initial program of 24 projects. PAMSCAD was given attention and support as an innovation in addressing social concerns while economic adjustment is being promoted. It focused on specific groups and embodied a degree of decentralized policy action. The program got off to a slow start and encountered problems. By the end of July 1990, only US$ 15 million in donor financing had been disbursed. Projects were widely dispersed geographically and across sectors, which strained implementation capacity, and targeting to the rural poor was deficient. Recommendations for improvement included: devolution of responsibility for project initiation and implementation to the district level; capacity building at the district level; reduction of the number of donors involved in each project; more attention to recurrent costs; and incorporation of some projects into the regular public investment program.

260. The growth of real per capita expenditures on health and education has fluctuated since 1993, showing a slight upward trend recently. As a share of GDP, health expenditure has risen from 1.1 percent of GDP in 1994 to an expected 1.3 percent of GDP in 1999, while education expenditure stayed level at 4 percent of GDP for these years. Real per capita expenditures on either health or education is the product of four factors: real GDP per capita, the share of total expenditures in GDP, the share of social expenditures in total expenditures, and relative prices:

Ψ = y ⁢ . ⁢ E / Y ⁢ . S / E ⁢ . P / P s ( 1 )

where ψ represents real per capita expenditure for health or education, S is nominal expenditure, E is nominal total expenditure, y is real per capita GDP, Y is nominal GDP, P represents the GDP deflator, and Ps represents the price index for health or education. Over any period, the change in expenditure on health or education can be decomposed as follows:

Δψ = Δy . ( E / Y . S / E . P . P S ) 0 + + Δ ( E / Y ) . ( S / E . P / P S . y ) 0 + + Δ ( S / E ) . ( E / Y . P / P S . y ) 0 + + Δ ( P / P ) . ( E / Y . S / E S . y ) 0 + ( 2 ) + residual

where the first term represents the contribution of real income per capita, the second term represents the contribution of the share of expenditures in GDP, the third term represents the contribution of the share of social services in total expenditures, the fourth term represents the effect of relative prices, and the last term is a residual term.

261. The increase in real health expenditure per capita can be mainly attributed to a shift in spending toward health (Figure 22). The increase was, however, dampened by reductions in overall recurrent expenditures. Increases in real GDP per capita account were relatively more important in maintaining real per capita education expenditure, although a substantial projected increase in the share of spending on education in 1999 is mainly responsible for increasing the ratio of education expenditure to GDP—without this increase in education’s share in spending, education expenditure’s share in GDP would remain flat during 1995–99. Real per capita expenditures on health and education both declined in 1997 because their shares in expenditure both declined by 10 percent. Expenditure restraint was the mechanism for fiscal adjustment in 1997, a year when there was no program supported by an ESAF arrangement.

Figure 22.
Figure 22.

Ghana: Factor Contribution to Social Expenditure, 1995–99

(Annual changes in percent)

Citation: IMF Staff Country Reports 2000, 002; 10.5089/9781451814811.002.A008

Source: Fund staff estimates.

262. Analysis by the World Bank of the incidence of education and health expenditures in Ghana suggests that the benefits of social spending are not well targeted to the poor (World Bank, 1995). This analysis found a regressive pattern to recurrent public expenditures on health, while expenditures on education were less regressive owing to the progressive pattern of spending on primary education. Specifically, the allocations across the types of health facilities appeared to be appropriate as the poor seemed to use hospitals as much as clinics, but availability and quality of services were problems. Education spending was regressive because of the highly regressive pattern at the tertiary level. The distribution of social spending across rural and urban areas showed regressive patterns with rural areas receiving less than their share of the population as well as less in per capita terms. A clear indication of the World Bank analysis is the need to allocate social expenditures more to basic education and health where economic gains are highest.

D. Institutional Structure for Reducing Povert

263. The main institution with responsibility for setting and coordinating policies for poverty reduction is the Inter-Ministerial Committee on Poverty Reduction (IMCPR), whose chairman is the Minister of Finance and is responsible for coordinating donor assistance and making budgetary allocations to poverty reduction programs.75 The IMCPR is responsible for overall policy direction and coordination of poverty reduction activities in the country. The National Development Planning Commission (NDPC) is the coordinating agency for the poverty programs of government agencies, assigning tasks to each agency with the goal of designing implementable poverty reduction programs and projects. The technical arm of the IMCPR is the Technical Committee on Poverty (TCOP) whose chairman is the director-general of the NDPC. The NDPC has a poverty reduction unit that coordinates all poverty reduction programs and activities of the TCOP. The main functions of TCOP include:

  • disseminating information on poverty reduction in collaboration with the Ghana Statistical Service;

  • establishing policy guidelines on poverty reduction for district development plans in collaboration with the Ministry of Local Government and Rural Development;

  • commissioning periodic impact studies for monitoring the effectiveness of approved programs and projects;

  • developing training aids and programs to build capacity for designing poverty reduction programs at the sub-national level.

264. The TCOP administers, manages, and coordinates all poverty reduction programs such as the National Poverty Reduction Program (NPRP) and Social Investment Fund (SIF). The TCOP also fosters linkages among non-governmental organizations (NGOs) participating in diverse donor-funded poverty initiatives, linking them to the government’s development framework for poverty reduction. In order to enhance its policy making and program coordinating roles, the TCOP has established a number of technical working groups to address several aspects of poverty problems. To address poverty in a truly participatory manner under the new development planning system dictated by Ghana—Vision 2000, the TCOP’s working groups extend to all organizations interested in poverty reduction (Government of Ghana, 1995). The Thematic Group on Poverty Reduction (TWG-PR) was established in March 1999 by the NDPC on behalf of the government and UNDP on behalf of donors. In June, the TWG-PR assumed the role of the Network on Sectoral Coordinating Groups on Poverty Reduction (NSCG-PR) for preparation of a comprehensive development framework.

265. In line with its policy of decentralization, the government has established a decentralized and participatory development planning system that extends deep into the community level of local administration. The local government law of 1988 created 110 district assemblies whose responsibilities include preparation of development plans that take into consideration development needs identified by the local communities. This community participation in decision making is intended to ensure that projects and activities implemented at the local level will address the development needs and problems identified by the beneficiaries.

E. Public Policies, Strategy, and Programs for Reducing Poverty

Public Policy

266. A long-term national development policy was completed by the government at a consensus-building workshop for all stakeholders on April 1994 and presented as a comprehensive policy framework called Ghana—Vision 2020. The main goal of this policy is to transform Ghana into a middle-income country within the first decade of the next century so that by 2020 Ghana would attain the standard of living of middle-income country. A medium-term program for the first five-year period 1996–2000 was prepared which focused on five areas: human development; economic growth; rural development; urban development; and an enabling environment for investment and entrepreneurial activity.

267. Human development is the core area for poverty reduction. The basic goals in this area are to improve health, life expectancy, and capabilities of all persons, eliminate extremes of deprivation, and ensure an equitable distribution of the benefits of development. However, other areas also address poverty reduction.

Strategy

268. The broad strategy for poverty reduction emphasizes rural development, expansion of employment opportunities for the urban poor, and improving access of the rural and urban poor to basic public services such as housing, transportation, water supply and sewerage, and family planning services (Government of Ghana, 1996). The principal elements of the strategy include:

  • promoting equitable economic growth through sound macroeconomic policies that support employment;

  • strengthening the agricultural sector by introducing modern farming methods and marketing practices;

  • increasing investment in human capital so as to have a more educated, trained, and healthy labor force;

  • providing an environment for the manufacturing and service sectors that enables creation of new business and employment in the formal sector;

  • promoting development of an indigenous entrepreneurial class to encourage micro and small-scale business and strengthen the informal sector;

  • developing firm targets for poverty reduction and improving data on poverty to ensure more effective targeting of poverty reduction policies.

269. The strategy encompasses action in five priority areas; (a) economic growth, employment, and access to productive assets; (b) social services and safety nets; (c) food security and nutrition; (d) governance and decentralization; and (e) needs of women.

Programs

270. The main approaches to reducing poverty comprise central budget expenditure targeted on poverty reduction and decentralized participatory development involving local communities. The principal programs include the District Assemblies Common Fund (DACF), NPRP, and SIF.

271. The 1992 constitution provided a strong fiscal impetus to decentralization by introducing the DACF and requiring the central government to transfer at least 5 percent of domestic tax revenue to the DACF for development projects of the district assemblies. Donors also channel funds through the DACF as, for example, is the case for the World Bank’s Village Infrastructure Project. The effort to decentralize the budget continued with the undertaking in the first half of 1999 of a fiscal decentralization project in the Ministry of Finance with assistance from the Canadian International Development Agency. A crucial aspect of the design of district budgets will be to ensure that they are fully compatible with the medium-term expenditure framework (METF).

272. The NPRP is a poverty reduction program funded by the government and UNDP and aimed at assisting communities in reducing poverty by identifying their needs and participating directly in developing strategies and programs. The main objectives of the program are to build the management capacity of district assemblies, community-based organizations, and NGOs to achieve better coordination of efforts; develop skills of the rural poor to generate employment; implement the SIF; develop community and household technologies to improve productivity; and implement mechanisms to empower women and promote female education. The program covers the period 1997–2000 and is being implemented in five pilot districts (Afram Plains, Bongo, Dangme West, Ga Mashie and Juabeso-Bia).

273. The SIF is a community-based, demand-driven, rapid-disbursing fund established with support from the UNDP and African Development Bank (AfDB). The SIF is available to about six districts during the three-year pilot period, 1998–2000. Its three main goals are to facilitate access of the poor to basic social and economic infrastructure and services; provide credit to microenterprises; and strengthen local governments’, community-based organizations’, and NGOs’ delivery of poverty reduction programs.

274. Under these funding sources and programs, resources are channeled directly to poor groups and communities through district assemblies, NGOs, and community-based organizations (CBOs) for implementation of projects that benefit the poor. For example, in addition to expenditures on health, education, and local government from the DACF, each district assembly is expected to devote 20 percent of its DACF allocation to economic activities that will generate employment and income in their communities.

275. In 1999, the TCOP began implementing a Community-based Poverty Reduction Project (CPRP) funded by the World Bank. A poverty measurement and monitoring component will identify core indicators, including district and community specific indicators, which is expected to address the limitations of the GLSS and CWIQ. Other components will address nutrition and food security, and the problem of street children.

276. The UNDP plays a critical role providing expertise across the range of issues and programs in Ghana’s comprehensive participatory approach to poverty reduction. The UNDP is coordinating activities undertaken by Ghana’s institutional structure for poverty reduction, working closely with the NDPC and TCOP, and serving as a secretariat for deliberations and decisions on policies, the design and implementation of programs.

F. Issues

277. Ghana made good progress in reducing poverty from the onset of its economic recovery program through 1992, with sustained economic growth and low inflation being critical for reducing poverty. Fiscal imbalances and high inflation over the 1992–96 period impeded further progress on poverty reduction, but improvements in macroeconomic growth and the decline in inflation since 1997 bring Ghana to a point where poverty can be reduced once again in an environment of sustained growth and price stability. However, good macroeconomic policies need to be accompanied by poverty reduction programs based on a comprehensive understanding of the nature and locus of poverty. Much of this will involve improving the accessibility and delivery of social services, and providing a safety net for the vulnerable population groups. Indicators for monitoring the outcomes of social assistance based on the GLSS and CWIQ are needed to ensure that policies and programs are well designed and effectively implemented.

278. The current system of decentralized and participatory development planning must work efficiently. Each level in this system, from central agencies through community-based organizations, needs to focus on the value-added that it can bring to policy formulation and program implementation, and have the information and resources needed to meet its responsibilities. Further, district assemblies and local government should receive resources from central government and the authority to raise their own resources through taxes and fees so that they meet their assigned responsibilities in delivering social services. An important aspect of the effective use of poverty reduction resources is that they should not go too much to project management instead of the poor. Government policies and actions must be effective, and. especially at the local level, focused on service delivery and goals.

279. The medium-term expenditure framework (MTEF) should remain at the center of efforts to develop a rational basis for annual budgeting and to provide the framework for the poverty reduction program. In particular, steps need to be taken to ensure that actual disbursements are in line with budgeted expenditures. Projects need to be monitored to establish whether their objectives are being achieved, and if not, to ensure that corrective action is taken quickly. The MTEF represents the best process for improving the efficiency of health and education spending, including identifying and rectifying imbalances between wage and non-wage expenditures.

280. The capacity of district assemblies, local governments, and communities for pursuing and completing activities in the MTEF, and meeting timetables and targets, needs to be factored in project design and implementation. In this context, the problems causing delays in the release of project funds, which affect service delivery, need to be solved. Strengthening the capacity of sub-national agencies will not only contribute to realistic budgeting under the MTEF but also broaden the consultation process of the MTEF.

281. Strengthening the capacity of sub-national agencies is, in turn, closely linked with public service reform. A well-structured and efficient public service is essential for designing programs and providing services to reduce poverty. The devolution of staff resources to sub-national agencies is an important element of public service reform supporting Ghana’s broad participatory approach to poverty reduction. It is critical for strengthening the capacity of sub-national agencies to meet their assigned responsibilities in Ghana’s poverty reduction strategy.

282. Donor and NGO support for poverty reduction activities need to be coordinated and incorporated in the MTEF. Ghana already has put in place mechanisms for achieving this—specifically, the DACF, NPRP, and SIF. The administration and operation of these mechanisms should enhance complementarities and reinforce linkages among donor-financed activities and NGOs’ projects.

283. Finally, the financial support and expertise of the World Bank and UNDP represent considerable resources available to Ghana that can substantially improve progress across the entire agenda for poverty reduction.

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  • Sahn, David and Rene Bernier, “Evidence from Africa on the Intrasectoral Allocation of Social Sector Expenditures” Cornell Food and Nutrition Policy Program Working Paper No. 45 (Ithaca, Hew York: Cornell University, 1993).

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  • World Bank, “Ghana 1997 Consultative Group Press Backgrounder”, November 1997.

  • World Bank, Ghana: Poverty Past, Present and Future, Report No. 14504-GH, June 29, 1995.

  • World Bank, Ghana: Growth, Private Sector, and Poverty Reduction, Report No. 14111-GH, May 15, 1995.

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Prepared by Anthony Pellechio and Ritha Khemani.

74

United Nations Economic Commission for Africa.

75

Membership of the committee comprises the Ministry of Food and Agriculture, Ministry of Local Government and Rural Development, Ministry of Employment and Social Welfare, Ministry of Environment Science and Technology, National Development Planning Commission, National Council on Women and Development, Ghana Statistical Service, and National Population Council.

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Cover IMF Staff Country Reports
Ghana: Selected Issues
Author:
International Monetary Fund
Volume/Issue:
Volume 2000: Issue 002
Publisher:
International Monetary Fund
ISBN:
9781451814811
ISSN:
1934-7685
Pages:
140
DOI:
https://doi.org/10.5089/9781451814811.002
  • Figure 21.
    View in gallery
    Figure 21.

    Ghana: Development Diamonds, 1995

  • Figure 22.
    View in gallery
    Figure 22.

    Ghana: Factor Contribution to Social Expenditure, 1995–99

    (Annual changes in percent)

Figure 21.

Ghana: Development Diamonds, 1995
Figure 22.

Ghana: Factor Contribution to Social Expenditure, 1995–99

(Annual changes in percent)