Ghana: Second Review Under the Poverty Reduction and Growth Facility and Request for Waiver of Nonobservance of Performance Criteria
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International Monetary Fund
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Publication Date:
19 Jul 2004
eISBN:
9781451814897
Language:
English
Keywords:
ISCR; CR; pay; wage bill; bill; agency wage payment; GUSS salary structure; debt service; oil price; price liberalization; due diligence; expenditure cut; economic statistics
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The staff report for the Second Review Under the Poverty Reduction and Growth Facility on Ghana highlights economic developments and policies. Efforts to consolidate the fiscal position continued, and there was no net domestic financing of the budget in 2003, implying a sharp reduction of domestic debt relative to GDP. Progress in structural policies was generally satisfactory, with the important exception of petroleum pricing. Oil marketing companies will be free to set petroleum prices according to a prescribed formula without prior authorization from any public entity.

Abstract

The staff report for the Second Review Under the Poverty Reduction and Growth Facility on Ghana highlights economic developments and policies. Efforts to consolidate the fiscal position continued, and there was no net domestic financing of the budget in 2003, implying a sharp reduction of domestic debt relative to GDP. Progress in structural policies was generally satisfactory, with the important exception of petroleum pricing. Oil marketing companies will be free to set petroleum prices according to a prescribed formula without prior authorization from any public entity.

I. Introduction

1. During the first PRGF review, Executive Directors commended the authorities for the restoration of fiscal discipline and maintaining a monetary policy stance that held out the prospect of achieving single digit inflation in early 2004. They encouraged the authorities to build on this momentum to achieve the medium-term goals of the Ghana Poverty Reduction Strategy (GPRS). In this regard, they stressed the need to safeguard the gains in macroeconomic stabilization by addressing weaknesses in the finances of public enterprises. In particular, Directors urged the authorities to adjust petroleum, electricity and water prices promptly to maintain full cost recovery.1

II. Recent Developments and Program Performance

2. Real per capita incomes increased in 2003 at the fastest pace in a decade, as GDP growth rose to 5.2 percent, exceeding program expectations. The recent upturn is confirmed by the Bank of Ghana’s (BOG) index of economic activity (Figure 1). A near-record cocoa harvest was a major driver behind recent growth, and this reflects the favorable impact of good weather, improved crop management practices, and higher producer prices. The estimates for this year’s harvest have been revised upwards, implying the program assumption for GDP growth in 2004 (5.2 percent) may now be on the conservative side.2 The 12-month CPI inflation rate fell to 11.2 percent in April 2004, down from 23.6 percent at end-2003, as the effect of last year’s petroleum price hike dropped out (Figure 2).

Figure 1.
Figure 1.

Ghana: Bank of Ghana’s Index of Economic Activity, February 2000-December 2003 1/

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Source: Bank of Ghana.1/ The composite index is based on trade volumes, electricity consumption, tourist arrivals, formal sector employment, domestic VAT collection, port activity, credit to the private sector, as well as some other indicators of private sector activity.2/ Linear trend calculated using the least squares method.
Figure 2.
Figure 2.

Ghana: Consumer Price Inflation (total, food, and nonfood), June 1999-April 2004

(Twelve-months percent change)

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Ghana Statistical Service; Bank of Ghana; and Fund staff estimates.

3. The relative stability of the nominal exchange rate has probably helped dampen inflation expectations. Over the past year, the cedi depreciated by 4½ percent vis-à-vis the dollar, compared with more than 13 percent during 2002, and the real effective exchange rate has remained broadly stable (Figure 3). The shutdown of the Volta Aluminum Company (VALCO) affected exports and, combined with a rebound in imports stemming from strong domestic demand and higher aid flows, led to a widening of the current account deficit (excluding official transfers) to 3½ percent of GDP last year (Figure 4).

Figure 3.
Figure 3.

Ghana: Nominal and Effective Exchange Rates, January 1991-March 2004

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Ghanaian authorities; and Fund staff estimates.
Figure 4.
Figure 4.

Ghana: Main External Indicators, 1996-2008

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Ghanaian authorities; and Fund staff estimates and projections.

4. The satisfactory implementation of macroeconomic policies has provided a good basis for sustained growth and reducing inflation. The fiscal outcome for 2003 was broadly in line with program projections, with a small improvement in the domestic primary surplus (Table 4). The performance criterion on (zero) net domestic financing of the budget for last year was observed. This implied a sharp reduction in the burden of domestic debt relative to GDP to below 20 percent in 2003, from just over 26 percent a year earlier (Figure 5). Tax revenue collections, though slightly below expectations for 2003, exceeded 20 percent of GDP for the first time. Partial fiscal data for the first quarter of 2004 suggest that budget implementation remains on track. However, initial figures also suggest a somewhat larger-than-expected float from 2003, which will put additional pressure on the financing target for this year.3

Table 1.

Ghana: Quantitative Performance Criteria and Benchmarks, PRGF Arrangement, 2003 1/

(Cumulative flows from beginning of calendar year to end of month indicated, unless otherwise indicated)

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Definitions of line items and terminology are elaborated in the Technical Memorandum of Understanding (TMU).

Before application of adjusters, as indicated in the TMU.

After application of adjusters, as indicated in the TMU.

Value at end of month indicated. Program targets adjusted for cumulative differences between actual and projected amounts of program support, public and publicly guaranteed debt service paid, and divestiture receipts with an upside cap of $75 million, as explained in the TMU.

Based on a fixed exchange rate of 8,504 cedis/$, the rate prevailing at end-December 2002.

Value at end of month indicated. Program targets adjusted for cumulative differences between actual and projected amounts of program support, public and publicly guaranteed debt service paid, and divestiture receipts with an upside cap of $75 million, and for higher-than-programmed oil prices, with an upside cap of $30 million, as explained in the TMU.

Program targets adjusted for cumulative differences between actual and projected amounts of program support, public and publicly guaranteed debt service paid, and divestiture receipts with a downside cap of -$75 million, and for higher-than-programmed oil prices, with a downside cap of -$30 million, as explained in the TMU.

This performance criterion applies not only to debt as defined in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by Decision 12274-(00/123) of August 24, 2000 but also to commitments or contracted for which value has not been received, as specified in paragraph 15 of the TMU.

The term “debt” has the meaning set forth in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by Decision 12274-(00/123) of August 24, 2000, as specified in paragraph 14 of the TMU.

This is a continuous criterion. The TMU stipulates the precise program definition of payment arrears.

Debt service to be paid by Ghana after projected HIPC relief in 2003.

Average from beginning of 2003 to end of month indicated, as explained in the TMU.

Table 2.

Ghana: Status of Structural Performance Criteria and Benchmarks for the Second Review under the PRGF Arrangement

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Table 3.

Ghana: Selected Economic and Financial Indicators, 2001-08

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Sources: Ghanaian authorities; and Fund staff estimates and projections.

As in (IMF Country Report No./03/395).

Assumes government take-over of remaining TOR debt at start of 2003.

In percent of broad money at the beginning of the period.

Credit from deposit money banks to public enterprises and the private sector respectively. The historical series have been revised to ensure consistency with the new banking supervision reporting form introduced in July 2003, which uses a residency rather than currency definition of foreign assets and liabilitiies.

Before domestic arrears clearance.

After domestic arrears clearance and including contingency funds.

Including official grants.

Table 4a.

Ghana: Central Government Budgetary Operations and Financing, 2001–2008 1/

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Sources: Ghanaian authorities; and Fund staff estimates and projections.

From 2001 onward, above-the-line data for domestic recurrent and capital expenditure are presented on a cash basis (payment vouchers); arrears not reflected in line expenditures.

As in (IMF Country Report No./03/395).

Prior to 2002, nontax revenue included positive balances on committed accounts outside the consolidated fund.

From 2002 onward, subvented agency expenditure for wages and salaries and goods and services are subsumed under their respective line items.

Indicates scope for additional expenditure and tax cuts (if negative) or expenditure cuts and tax increases (if positive), in line with the GPRS goal of reducing the domestic-debt-GDP ratio in half by end-2005 from the end-2002 level.

Projected discrepancy in 2004 reflects float.

Domestic debt stock estimates exclude non-interest bearing perpetual BoG revaluation stocks.

The GPRS dedicates 80 percent of enhanced HIPC relief to poverty spending and 20 percent to domestic debt reduction. Projections for poverty spending from 2005 onward are not available.

Figure 5.
Figure 5.

Ghana: Central Government Finances, 1996-2008

(In percent of GDP)

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Ghanaian authorities; and Fund staff estimates and projections.1/ Including guarantees and short-term external debt. External debt stock is evaluated at the period-average exchange rate and assumes that Ghana reaches the completion point under the HIPC Initiative during 2004.
Table 4b.

Ghana: Central Government Budgetary Operations and Financing, 2001-2008 1/

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Sources: Ghanaian authorities; and Fund staff estimates and projections.

From 2001 onward, above-the-line data for domestic recurrent and capital expenditure are presented on a cash basis (payment vouchers); arrears not reflected in line expenditures.

As in (IMF Country Report No./03/395).

Prior to 2002, nontax revenue included positive balances on committed accounts outside the consolidated fund.

From 2002 onward, subvented agency expenditure for wages and salaries and goods and services are subsumed under their respective line items.

Indicates scope for additional expenditure and tax cuts (if negative) or expenditure cuts and tax increases (if positive), in line with the GPRS goal of reducing the domestic-debt-GDP ratio in half by end-2005 from the end-2002 level.

Projected discrepancy in 2004 reflects float.

Domestic debt stock estimates exclude non-interest bearing perpetual BoG revaluation stocks.

The GPRS dedicates 80 percent of enhanced HIPC relief to poverty spending and 20 percent to domestic debt reduction. Projections for poverty spending from 2005 onward are not available.

5. There are signs that the impact of strong foreign exchange inflows on monetary growth may have begun to subside in early 2004. While the end-December 2003 monetary targets were exceeded, reserve money has sharply declined since then (Table 5, Figure 6). Broad money growth remains stronger than expected, but at a decelerating pace. The inflows of foreign exchange brought gross international reserves comfortably above program floors, rising to almost 4 months of imports at the end of last year, compared with about 2 months at end-2002.

Table 5.

Ghana: Monetary Survey, 2002-2005

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Sources: Ghanaian authorities; and Fund staff estimates and projections.

As in (IMF Country Report No./03/395).

Starting January 2003, includes holding of T-bills issued for monetary liquidity purposes.

A large part of the DMBs’ NFA for 1998–2003 were reclassified as net domestic assets to ensure consistency with the new banking supervision reporting form introduced in July 2003, which uses a residency rather than currency definition of NFA.

TOR debt swap moved 1,421 billion cedis from credit to public enterprises to government in December 2002.

Including foreign currency deposits.

Excluding foreign currency deposits.

Including deposit money banks’ foreign currency reserves with Bank of Ghana.

Credit from deposit money banks to the private sector.

Figure 6.
Figure 6.

Ghana: Reserve Money and Components 1998:Q4-2004:Q4

(In billions of cedis)

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Bank of Ghana and Fund staff estimates and projections.

6. A “fiscal dividend” has already begun to emerge. Since mid-2003, policy-controlled and short-term interest rates have declined significantly (Figure 7), and there are indications from recent (interbank) money-market auctions that a further fall is likely.4 Domestic debt service is projected to decline from about 5 percent of GDP last year, to 3 percent in 2004. Nonetheless, interest spreads and the real cost of capital remain high, particularly for small- and medium-size enterprises, and this may constrain credit growth to the private sector.

Figure 7.
Figure 7.

Ghana: Treasury Bill Rates and Open Market Operations, January 1997-April 2004

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Bank of Ghana; and IMF Fund staff estimates.

7. Some progress was made in structural policies, although the adjustment of petroleum prices remains an issue:

  • Public expenditure management has been enhanced through the enactment of several key pieces of legislation (the Financial Administration Act, Internal Audit Act, and Procurement Law), and the Budget and Public Expenditure Management System (BPEMS) is now operational, albeit on a limited basis, in five ministries;5

  • The operating framework of the Bank of Ghana (BOG) was bolstered through the implementation of the safeguards recommendations, including the government’s issuance of a ¢ 670 billion security as part of a recapitalization of BOG, one year ahead of the program schedule;

  • In the banking sector, initial steps were taken to implement the plan to restructure Ghana Commercial Bank, while the passage of the Banking Act in December 2003 strengthened BOG’s supervisory powers over commercial banks.6 GCB’s exposure to the Tema Oil Refinery (TOR, its largest borrower) continued to increase in late 2003—and the program ceiling on net domestic bank credit to TOR was breached—due to a commercial decision to repay some high-interest short-term external debt that the program assumed would be rolled over. But the exposure was subsequently reduced significantly, by the issuance of a government security in the amount of ¢ 800 billion (almost 60 percent of GCB’s net claims on TOR);7 and

  • Work continued on upgrading Ghana’s economic statistics, and the authorities have agreed to participate in the General Data Dissemination System.8

8. Petroleum and utility tariff adjustments called for by the automatic pricing formulas were not implemented as required (as structural performance criteria) in January and April 2004.9 In the case of petroleum, the government decided against raising prices ahead of the general election in December, citing the potential for social unrest and political instability. This decision has significant implications for the budget, resulting from the implied subsidies to compensate TOR and the oil marketing companies for under-recovery of their costs (see below). In the case of electricity tariffs, the Public Utilities Regulatory Commission (PURC) adjusted a parameter in the program’s pricing formula to account for more favorable water levels at the Akosombo Dam, and this obviated the need for a price increase for either electricity or water.10 Since the program objective of full cost recovery pricing has been preserved, the staff is recommending a waiver of the related performance criterion.

III. Policy Discussions

9. The authorities agreed that policies in the period ahead should focus on consolidating the gains in macroeconomic stability by maintaining firm fiscal control in the run-up to elections, strengthening the performance of state-owned enterprises, and pushing ahead with reforms to improve the environment for private sector development. The authorities’ program for 2004–05 is set out in the attached Memorandum of Economic and Financial Policies (MEFP, Appendix I, Attachment 1), and the scope of structural conditionality is summarized in Box 1. The authorities have also prepared an annual progress report on the GPRS, reviewing performance over the past year and indicating some policy priorities for the year ahead.11 On the macroeconomic front, the authorities have:

  • raised their projection for GDP growth in 2004 from 5.0 to 5.2 percent;

  • retained the GPRS goal of halving the domestic debt-GDP ratio from its 2002 level by the end of next year, while at the same time increasing poverty-related expenditures in line with the GPRS objectives;

  • kept the single-digit inflation target for 2004, aiming to bring the rate down to around 7 percent by end-2004; and

  • further improved upon their objective for the central bank’s gross international reserve position, which is now expected to exceed US$1.5 billion (about 4 months of imports) by end-2004, compared to a target of 2.7 months of imports set in the GPRS a year ago.

The staff considers these objectives to be realistic and appropriate.

10. The issue of petroleum pricing, and its fiscal implications, dominated the policy discussions:

  • The staff argued strongly, on economic grounds, against the authorities’ intention to hold retail petroleum prices fixed throughout 2004. Pump prices were already around 9 percent below full cost recovery levels at the start of the year, and the gap had risen to around 15 percent by April. The resulting subsidies were not pro-poor, and would force cuts elsewhere in the budget; the budget would be vulnerable to further price increases; and the divergence with prices in neighboring countries was promoting smuggling (especially of diesel) at the expense of the Ghanaian taxpayer.

  • The authorities acknowledged these costs. But they took the view that maintaining social and political stability during the pre-election period was an overriding imperative. The staff proposed a number of alternative options, including a one-time (perhaps partial) price adjustment, or an elimination of the subsidy on diesel alone, but the authorities insisted that any price increase at this time could trigger unrest, and they were not prepared to take such a risk.

11. In the end, the staff deferred to the authorities’ judgment on this matter, and the discussions focused on how to contain the short-run fiscal impact, and create a more robust institutional framework for setting petroleum prices in the future.

Structural Conditionality, 2004-05

Under the PRGF arrangement, structural conditionality will continue to reflect areas of macro relevance (Appendix I, Attachment I, Table 2):

  • Curtailing the costs of quasi-fiscal activities by (1) removing the government’s involvement in the petroleum sector, and (2) ensuring that the state-owned utility enterprises impose tariffs in line with cost recovery, strengthen their balance sheets, and develop financial plans to improve performance;

  • Strengthening the financial sector through the restructuring of a systemically important commercial bank; and

  • Improving the transparency and accountability of internally-generated funds, grants and loans of MDAs.

Under World Bank lending (and multi-donor support), structural conditionality is reflected in a series of annual Poverty Reduction Support Credits (each about US$125 million), and relate mainly to (Appendix III): budgeting, public expenditure management and control; public sector reform; public enterprise reform and divestiture; and financial sector reform.

A. Fiscal Policy

12. The authorities agreed with the staff that fiscal policy should remain anchored on achieving the GPRS domestic debt reduction target. They reiterated that they were especially concerned to avoid the loss of fiscal discipline associated with previous election years (Box 2). The 2004 budget had proposed a domestic primary surplus of about 2¼ percent of GDP, a repayment of domestic debt equivalent to 2.2 percent of GDP, and an increase in poverty-related expenditures to almost 7 percent of GDP (up from 4½ percent in 2001).12 With the upward revision to nominal GDP projected for 2004, the underlying path for the domestic debt-GDP ratio could be maintained with a smaller net domestic repayment than envisaged in the budget.13 The targeted net domestic repayment for this year has therefore been reduced from 2.2 to 1.4 percent of GDP.

13. In view of the unplanned petroleum subsidies, expenditure cuts of around 0.6 percent of GDP are called for in order to meet the revised fiscal ceilings for 2004.

The cost of the petroleum subsidies is projected at 1.4 percent of GDP this year.14 The scale of the required expenditure cuts to offset this cost is the net result of several factors, principally:

  • the lower net domestic debt repayment, which reduces the need for adjustment by 0.8 percent of GDP;

  • higher projected tax revenues (0.3 percent of GDP), owing to the larger cocoa harvest and increased consumption of petroleum products; in general, the program assumes some further improvement in collection rates in 2004—bolstered by the launch in February 2004 of the Large Taxpayers Unit—but at a slower pace than was achieved in 2003;

  • higher projected nontax revenues, reflecting remittances of accumulated profits by the cocoa marketing board, ports authority, and telecommunications commission totaling 0.5 percent of GDP (to be conservative, the fiscal framework does not count on further such transfers beyond 2004);

  • lower external program financing (0.3 percent of GDP), partly due to a more appreciated exchange rate; and

  • additional costs of financing the float and clearing domestic arrears from 2003 (a combined 0.5 percent of GDP).

14. The expenditure cuts have been targeted to protect poverty-related spending. The cuts are distributed between goods and services and discretionary capital expenditures, and the first tranche of adjustments will be reflected in the expenditure ceilings issued for the third quarter, as a prior action for the review. The program also specifies contingent expenditure measures in case of higher or lower world oil prices: if the petroleum subsidy bill is lower than projected, the expenditure cuts can be progressively reversed, while some additional expenditure savings would be required if the subsidy bill is higher (MEFP ¶7). It was recognized, however, that the scope to make additional cuts would be very limited without cutting into poverty-related spending, and hence the program allows for most of any overrun in the subsidy bill to be accommodated by an easing of the domestic debt repayment target. The risks this poses to the program are quantified and discussed in section F, below.

15. The long-delayed National Health Insurance Levy (NHIL) will finally become effective from August 1, 2004, providing additional revenues for the budget of over 1 percent of GDP in a full year.15 The levy was approved in the 2003 budget, but required a legislative instrument to make it effective. This instrument will be introduced in parliament in June 2004, as a prior action for the review, ensuring that revenues equivalent to about ½ percent of GDP are received this year.16 The net addition to aggregate health expenditures resulting from the launch of the new national health insurance scheme is expected to be very small. However, the staff shared the authorities’ view that, beginning in 2005, the fiscal situation may be sufficiently strong to allow a significant expansion in health expenditures over the medium term, and that such an increase would likely be desirable in order to accelerate progress toward the Millennium Development Goals (MDGs).17 At the staff’s suggestion, the authorities intend to review their medium-term health expenditure strategy—in consultation with donors, and drawing on work underway at the World Bank to “cost” the MDGs for Ghana—and to incorporate the results in next year’s budget.

B. Public Expenditure Management

16. Enhancing transparency and accountability relating to the receipt and use of public funds remains an important policy objective. While there has been substantial progress over the past 12 months in upgrading both the legislative and regulatory framework and technical capacity for public financial management, the authorities agreed with the need to intensify implementation efforts. The specific areas they intend to focus on (see MEFP ¶9) include:

  • Following the action plan to comply with the sixteen HIPC-AAP benchmarks, including steps to enhance the effectiveness of internal and external audit, the timeliness of financial information, and the procurement system (Table 7);

  • Enforcing the requirement on MDAs to provide quarterly financial reports detailing receipts of all internally-generated funds, grants and loans;

  • Tightening the operation of the cash planning and control systems by enforcing reporting deadlines and ensuring that ceilings are respected; and

  • Extending BPEMS to a further four ministries by early next year, and improving the system’s functionality (some reporting modules are not yet effective).

Table 6.

Ghana: Balance of Payments, 2001-2008

(In millions of U.S. dollars, unless otherwise specified)

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Sources: Bank of Ghana; and Fund staff estimates and projections.

As in (IMF Country Report No./03/395).

Definition changed from Net Foreign Assets to Net International Reserves at the end of 2000.

Includes interim HIPC relief from Paris Club creditors comprising Naples and Cologne flow terms.

Table 7.

Ghana: Public Expenditure Management AAP Indicators

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Fiscal Slippage During Recent Election Years

The first multiparty elections under Ghana’s new constitution were held in 1992. In the run-up to the election, the incumbent government abandoned its fiscal targets and a budgeted surplus of 1.6 percent of GDP turned into a deficit of nearly 9 percent. The pattern was repeated prior to the 1996 election and, to a lesser extent, in 2000.

Election-Year Budgets and Outturns, 1992, 1996 and 2000

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Sources: Ghana, Budget Statement and Economic Policy, 1992, 1996 and 2000; and Fund staff estimates.

C. Public Enterprise Reform

17. While control over the central government’s finances has become increasingly effective over the past year, little progress has been made in improving the financial performance of the major state-owned enterprises. Several factors have contributed, including delayed price adjustment, operational inefficiencies, weak cost control, and persistent inter-enterprise arrears. The authorities intend to address each of these weaknesses over the coming year.

18. In the petroleum sector, the most pressing problem concerns the pricing regime, and discussions centered on how to design a more effective institutional framework for setting prices. The authorities acknowledged that, so long as government was viewed by the public as responsible for petroleum price decisions, political considerations would continue to interfere with flexible price adjustment. The staff suggested two alternative ways to tackle this problem:

  • One possibility was full price liberalization, with anti-trust mechanisms to prevent collusive behavior on the part of the private oil marketing companies (OMCs). It was recognized, however, that the creation of anti-trust legislation and institutions, from scratch, would be a major challenge.

  • An alternative would be to control collusion by requiring OMCs to set prices according to a prescribed formula, with fixed margins.18 In this case, the critical innovation (compared to the current formula-based regime) would be to give full freedom to OMCs to adjust prices according to the formula without prior authorization by any national authority or agency.

19. The authorities decided on the second option, with the proviso that the OMCs’ decisions would be subject to ex post review by an oversight body on which government would be represented, so as to reassure the public that the pricing formula was being properly implemented.19 A cabinet decision specifying the key features of the new regime (see MEFP ¶21) will be published as a prior action for the review, and the details will be incorporated in a comprehensive petroleum sector deregulation bill later in 2004. The new regime will be implemented by mid-February 2005 at the latest (i.e., following the election and inauguration of the new administration in late January), as a structural performance criterion for the next (third) review.20 The staff considers that this important reform will strengthen the program significantly, and that the steps taken by the authorities to demonstrate their commitment to the new regime warrant a waiver of the related performance criterion.

20. The interests of low-income consumers of petroleum products will be taken into account in setting the structure of petroleum taxes. The system of implicit cross-subsidization of those petroleum products consumed mainly by the poor has not worked well, and would be very difficult to administer under the new pricing regime. The authorities’ intention, therefore, is to use instead (beginning in 2005) differentiated petroleum taxes to target assistance to the poor, drawing on the findings of a poverty and social impact analysis of petroleum pricing which is expected to be completed shortly.

Petroleum Pricing in Sub-Saharan African Countries

Across sub-Saharan Africa, a number of petroleum pricing regimes are in use, but in only a handful of countries are prices liberalized (see table below). In more than three-quarters of countries, a government agency or regulatory authority sets the price, with or without the use of a functioning formula (and some allow for private sector consultation). In only four countries is the price based on a formula administered by the private sector, without government involvement (Mozambique, Sierra Leone, Uganda, and Zambia).

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Source: Fund staff.

21. The deregulation strategy for the petroleum sector is also intended to strengthen TOR’s operations and finances. This would be accomplished by relieving TOR of the financial burden of importing petroleum for the entire economy, passing this responsibility primarily to the OMCs, and eventually restricting TOR’s role to refining crude oil that is imported by the private sector, on a fee basis.21 Meanwhile, a ceiling on the refinery’s net borrowing from the banking system will be maintained throughout 2004.

22. With regard to the major public utility companies, the authorities’ strategy is to clean up their balance sheets and establish monitorable financial performance plans. To this end, the authorities completed in April 2004 an audit of the cross-debts of the Volta River Authority (VRA), Electricity Company of Ghana (ECG), and the Ghana Water Company Limited (GCWL) with each other, and with TOR and the government, as of end-2003. The settlement of these debts (scheduled for end-June 2004) will help clarify the true underlying financial position of each company, and so make it easier for government to hold the managements accountable for improved performance. The companies have already submitted detailed measures they will take to raise their efficiency and reduce costs (MEFP ¶26), and by end-June 2004 will present financial performance plans, which will be monitored by the Ministry of Finance and Economic Planning. For its part, the government commits to the full implementation of the formulas for automatic adjustment of electricity and water tariffs (MEFP ¶27).

23. During the discussions, the authorities signaled their potential interest in taking a minority stake in the Volta Aluminum Company (VALCO), which its private owners have offered for sale. Their rationale was that, as an equity partner, government could ensure that a new private investor (who would be assumed to hold the controlling interest) would give due consideration to the possible development of Ghana’s bauxite deposits, and behave responsibly on environmental matters (such as in the mining sector, where government also has equity stakes). The staff argued strongly against this proposal on several grounds, including (i) that it could expose the government to large potential liabilities, and (ii) it risked creating the presumption that the state was financially underwriting the project, and would bail out the company if it incurred losses. The authorities acknowledged the moral hazard problem, but insisted that it was outweighed by the developmental considerations. They agreed, however, to await completion of the due diligence work on VALCO and to consult with the Fund before making a decision later in 2004 (MEFP ¶29).

D. Monetary, Financial Sector and Exchange Rate Policies

24. The central bank has progressively strengthened the conduct of monetary policy through the use of a Monetary Policy Committee to guide its decisions, and a prime rate to signal its intentions. In the period ahead, the BOG intends to sharpen its tools further, with the introduction of central bank paper at shorter maturities than the treasury bills now used for open market operations, and the establishment of a central securities depository, which should encourage the development of a secondary market (MEFP ¶13). It is expected that these moves will facilitate more effective control of liquidity (including the sterilization of foreign exchange inflows), and ensure that the programmed decline in monetary growth rates, to about 20 percent by end-2004, is achieved (Table 5).

25. The staff noted that, as the supply of treasury bills had tightened over the past few months, the high secondary reserve requirements had become binding for some commercial banks.22 The concern was that this would constrain the desired “crowding in” of credit to the private sector that fiscal adjustment was intended to promote. The staff therefore urged the authorities to consider reducing the secondary reserve requirements in the near future. The Bank of Ghana indicated that it was willing to consider such a move, but only once it was confident that its enhanced indirect instruments of monetary control were working effectively, so that it could manage the short-term liquidity impact of the reform (MEFP ¶13). The authorities commented that they would remain particularly cautious in the pre-election period, since the financial markets were more jittery than usual at this time, in light of past experience.

26. The authorities plan to press ahead this year with an ambitious array of financial sector legislation. Among the bills slated for introduction in 2004 are laws on insolvency, a new companies code, insurance regulation, anti-money laundering, and credit information (MEFP ¶30).23 The government is also working on a long-term savings bill, which will facilitate the development of private pension and housing finance schemes, filling an important gap in the country’s current financial system.

27. The central bank will continue to maintain a floating exchange rate regime, limiting interventions to smoothing short-term fluctuations in the foreign exchange market.24 In this context, with gross international reserves approaching comfortable levels, the BOG will increase its market sales of foreign exchange in the face of strong inflows. This will help take the pressure off monetary growth and support the disinflation process, by allowing for some modest appreciation of the nominal exchange rate. The scope for such a move without harming Ghana’s international competitiveness is indicated in Figure 8, which shows the real effective exchange at a depreciated level by comparison with the 1990s, especially in view of the recent gains in the terms of trade. The long-awaited launch of a computerized interbank market for foreign exchange is now scheduled for the fourth quarter of 2004 and, once this is operating smoothly, the surrender requirement for foreign exchange will be gradually phased out (MEFP ¶11).

Figure 8.
Figure 8.

Ghana: Terms of Trade and the Real Effective Exchange Rate, 1990-2004

(Index, 1995 = 100)

Citation: IMF Staff Country Reports 2004, 210; 10.5089/9781451814897.002.A001

Sources: Ghanaian authorities; and Fund staff estimates.

E. Private Sector Development and Trade Policy

28. In early 2004, cabinet approved a new National Medium-Term Private Sector Development Strategy. The strategy focuses on creation of a more business-friendly economic and regulatory environment, strengthening property rights, seeking expanded market access for Ghana’s exports, and promoting entrepreneurial skills. As regards the regulatory environment, the authorities cited evidence of significant improvements achieved over the past year or more, and indicated their determination to build on this progress.25 They also pointed to specific initiatives in the 2004 budget to extend and upgrade infrastructure and promote agri-business. The reforms in the financial sector would form a central element of the private sector development strategy, and would be complemented by policies being developed (with support from the World Bank) to improve access to land, enforce land use rights, and enable land to be used as collateral for obtaining credit (MEFP ¶30).

29. The government is preparing a comprehensive trade policy, which it intends to complete by end-2004. While the orientation of their external policies will continue to be multilateral, the authorities’ immediate concern is to strengthen regional integration with Ghana’s partners in the Economic Community of West African States (ECOWAS). A key objective is to harmonize and reduce tariff and non-tariff barriers to trade and promote the development of an expanded regional market. The authorities stressed that realizing significant gains from market opening would require improvements in the supply response of Ghana’s economy. Trade reform and other private sector development policies had, therefore, to be pursued in tandem.

F. External Financing, Capacity to Repay the Fund, and Program Risks

30. Donor support for the 2004 program is expected to be comparable to that obtained in 2003 (Table 6). The overall balance of payments is projected to weaken, however, owing to a higher oil import bill, a projected drop in net cocoa financing flows, and larger amortization obligations on official loans. Accordingly, the program incorporates a more modest target for the accumulation of net international reserves (US$100 million) than in recent years. Given a small net repayment to the IMF projected at US$5 million, and assuming debt relief is provided as envisaged under the enhanced HIPC Initiative, a small financing gap (US$5 million) would remain, which is expected to be filled by additional donor support.

31. Ghana’s external debt service indicators have improved significantly over the past three years, and should remain at manageable levels. In preparation for the HIPC completion point, an updated debt sustainability analysis (DSA) was undertaken. This analysis shows that Ghana’s external debt indicators will likely remain comfortably below HIPC thresholds over the long-term, and that debt sustainability is reasonably robust to moderate country-specific shocks, even if persistent in nature. To help lock in the gains from debt relief, the authorities have signalled their intention to strengthen their debt management capacity further, and to avoid contracting or guaranteeing nonconcessional debt (MEFP ¶17). Debt service to the Fund is projected at about 1½ percent of exports (or less than 3 percent of gross reserves) over the medium term, and Ghana should be able to meet these obligations on a timely basis.26

32. There are two main risks to the program: higher world oil prices, and a loss of fiscal discipline ahead of the election:

  • At the time of writing, oil prices were already sharply higher (at around US$37 per barrel) than assumed in the program, and the threat of an overrun in the petroleum subsidy bill is therefore quite plausible. However, unless oil prices were to rise well above the US$40 level, and remain there, the staff’s assessment is that the risk is manageable. As shown in Box 4, if oil prices averaged US$40 per barrel from May through end-2004, the government would still be able to make a (small) net repayment of domestic debt in 2004. This would be a setback for the debt reduction strategy, but not a reversal. As such it may slow the pace at which interest rates decline, but would be unlikely to trigger macroeconomic instability; and

  • The risk posed by weakening expenditure control in the run up to the election is harder to gauge. The authorities have stressed repeatedly and publicly, however, that they do not intend to repeat the pattern of past years and are committed to maintaining firm budgetary control.

Sensitivity of the 2004 Budget to Oil Prices

(In percent of GDP) 1/

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Source: Fund staff estimates and projections.

The baseline projection assumes an average world oil price of $30.2/barrel; scenario A assumes that oil prices rise to $35/barrel in May, and continue at that level for the rest of 2004 (resulting in an annual average price of $33.8/barrel); scenario B assumes that oil prices rise to $40/barrel in May and remain there through 2004 (resulting in an annual average price of $37.1/barrel).

IV. Staff Appraisal

33. Macroeconomic management strengthened in 2003, and this is reflected in rising business confidence, strong economic growth, and more recently, a decline of inflation. Adherence to the program targets, with improved revenue performance and more effective control over public expenditures, has already begun to yield the envisaged “fiscal dividend,” as interest rates have dropped sharply. At the same time, it should be recognized that the authorities’ task was made easier in 2003 by favorable terms of trade movements. The near-term outlook in this respect is less favorable, and will likely require intensified efforts to ensure successful program implementation.

34. In this context, the decision to rule out an adjustment of petroleum prices this year is particularly regrettable: it entails a high opportunity cost and creates a significant source of vulnerability for the budget. It also comes in the wake of similar problems experienced over the past two years. Nevertheless, the staff has taken note of the government’s argument that, in a tense pre-election period, the financial costs are outweighed by the imperative of maintaining social and political stability, without which the economic gains achieved so far would be put in jeopardy. Notwithstanding the unanticipated subsidy costs, the authorities’ program seeks to preserve, and in several ways strengthens, the medium-term objectives set out in the GPRS. In addition, the announcement of a new petroleum pricing regime, to be enshrined in legislation, offers a credible mechanism to absolve the government from making such decisions, and thereby improves the prospects for insulating future budgets against rising world oil prices. It is critically important that the new regime be implemented as announced, and on schedule. No more disbursements under the PRGF are scheduled until the required petroleum pricing mechanism is fully implemented, and consistent implementation of the new framework will be a focus of future program reviews.

35. Other pre-election pressures on government spending pose an additional risk to the program, and must be strenuously resisted. The authorities are acutely aware of the high stakes involved, and are publicly committed to bucking the historical pattern. If they succeed in holding firm, the result would likely be a substantial boost to confidence, which would brighten the economic outlook further.

36. The staff welcomes the central bank’s determination to bring inflation down well into the single-digit range, and agrees that this should be its primary goal. But reforms to promote private sector finance should be pursued in parallel. As the process of fiscal consolidation and disinflation continues, and with the imminent enhancements to the central bank’s monetary instruments, there should soon be scope for gradually reducing secondary reserve requirements on banks. The staff urges the authorities to begin moving in this direction, so as to unlock resources currently tied up in government paper, as soon as possible, and to push ahead with passage of the important legislation on developing a credit reference industry and encouraging saving.

37. The staff concurs with the need to maintain a floating exchange rate, as an effective buffer against external shocks. The increasingly comfortable level of international reserves provides room to temper foreign exchange accumulation in the face of strong inflows, should these persist, and to step up market sales of foreign exchange. In the staff’s view, Ghana could afford to allow some modest nominal appreciation of the exchange rate, if led by the market, and this would be helpful in mitigating speculative pressures and dampening inflation expectations further. It would be important, however, to press ahead with structural reforms so that any adverse effects on competitiveness from a stronger exchange rate are offset by rising productivity in the business sector.

38. Good progress has been made in enhancing the monitoring and transparency of public expenditures, although an unfinished agenda remains. The institutional and technical capacity to monitor and control expenditures—and to track poverty-related spending—has been significantly strengthened, especially at the center, but this needs to be extended fully across all MDAs. The staff welcomes the authorities’ efforts to require comprehensive reporting by MDAs of internally-generated funds, grants and loans and received, and the next step should be to insist that the uses of such resources are reported in a similarly comprehensive manner. High priority should also be given to following through on the plan to strengthen internal and external audit.

39. The authorities are also, rightly, raising the bar on the performance of the main public sector enterprises. The poor state of these enterprises has been tolerated for too long, and the staff endorses the measures taken to clean up their balance sheets, and set realistic financial performance targets. For this approach to be credible and effective, it is important that managements be held accountable if performance does not improve in line with the targets set, and that government is scrupulous in allowing cost-recovery pricing to be maintained for electricity and water through the automatic adjustment formulas.

40. The staff is not persuaded by the authorities’ view that the benefits of a minority government stake in VALCO would outweigh the potential costs. Close government involvement could distort the commercial decisions of the company, and create the perception of a possible bailout. The staff welcomes the authorities’ commitment to complete the due diligence analysis, and to consult with the Fund, before making any final decision.

41. In view of the strength of the authorities’ program for 2004–05, and the prior actions taken, the staff supports their request for completion of the second review and waivers of nonobservance for one quantitative and two structural performance criteria.

Table 8.

Ghana: Revised Schedule of Disbursements Under the PRGF Arrangement, 2003–06

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Ghana’s quota is SDR 369 million.

APPENDIX I

June 15, 2004

Mr. Rodrigo Rato

Managing Director

International Monetary Fund

Washington, D.C. 20431

Dear Mr. Rato:

The government of Ghana has been implementing a financial and economic program with support from the Fund’s Poverty Reduction and Growth Facility (PRGF). Progress under this arrangement has been satisfactory, and we are requesting completion of the second program review and the disbursement of the third loan in an amount equivalent to SDR 26.35 million. In this regard, we are seeking waivers of a quantitative and two structural performance criteria, based on program adjustments and additional measures as described in the attached Memorandum of Economic and Financial Policies (MEFP) for 2004–05.

Specifically, the quantitative performance criterion on net domestic bank credit (ceiling) to the Tema Oil Refinery was not observed at end-December 2003 because of a commercial decision to repay some high-interest short-term external debt that the program assumed would be rolled over; by mid-2004, we expect the refinery’s net position with the domestic banking system to be better than was programmed in our December 3, 2003 letter of intent. The structural performance criterion on utility price adjustments was not observed at end-January and end-April 2004 because of favorable changes in the electricity generation mix that allowed full cost recovery to be maintained without the need for higher electricity or water tariffs. With regard to the structural performance criterion on petroleum pricing, we seek a waiver on the basis of replacing the current regime, which has not functioned as intended, with a commitment to establish a new institutional framework for price setting, in the context of comprehensive petroleum sector deregulation legislation. We understand that completion of this review is conditioned upon observance of the five prior actions set forth in Table I.2 of the MEFP.

Macroeconomic performance strengthened significantly during 2003, and we believe that the policies specified in the MEFP provide the basis for sustaining strong growth, lowering inflation, and reducing poverty. We believe that the policies and measures described therein are adequate to achieve these objectives, but stand ready to take additional actions if required. The government will provide the Fund with the information needed to assess progress in implementing the program, and will consult with the Fund on the adoption of any measures that may be appropriate, at the initiative of the government or whenever the Fund staff requests such a consultation.

The government intends to make the contents of this letter and those of the attached MEFP, technical memorandum of understanding, and the staff report for this review available to the public. In this regard, it authorizes the IMF to arrange for them to be posted on the Fund’s website, subsequent to Board completion of the review.

Yours sincerely,

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Attachments (2)

Memorandum of Economic and Financial Policies for 2004–05

Technical Memorandum of Understanding

ATTACHMENT I Memorandum of Economic and Financial Policies of the Government of Ghana for 2004-05

I. Introduction

1. In May 2003, the IMF confirmed its support for Ghana’s Poverty Reduction Strategy (GPRS) and approved a new arrangement under the Poverty Reduction and Growth Facility (PRGF). We have made satisfactory progress in implementing the program, and this has been reflected in improved macroeconomic performance.

2. Real GDP registered 5.2 percent growth in 2003, slightly higher than previously projected, and above the outcome for 2002. The 12-month inflation rate of 23.6 percent at end-2003 exceeded slightly the program target, but dropped to 11.2 percent in April 2004, and is on track to meet the end-2004 target of 7 percent. The cedi-dollar exchange rate has been relatively stable since mid-2003, and this has helped dampen inflation expectations. Strong foreign exchange inflows from buoyant cocoa and gold exports, as well as personal remittances, allowed for a substantial buildup of gross international reserves to almost 4 months of imports at end-2003, up from less than 2 months’ coverage the previous year.

3. Macroeconomic policies have been supportive of rising business confidence. We observed all of the quantitative performance criteria at end-December 2003, except for the ceiling on net domestic bank credit to the Tema Oil Refinery (TOR), the latter due entirely to a commercial decision to repay some high-interest short-term external debt that the program assumed would be rolled over (Table I.1). The domestic primary surplus was 2.1 percent of GDP (compared with 1.8 percent programmed), and there was a modest net domestic debt repayment last year. Fiscal discipline and increasing confidence in monetary policy implementation have helped to lower policy-controlled and other short-term interest rates.

Table I.1.

Ghana: Quantitative Performance Criteria and Benchmarks, PRGF Arrangement, 2004 1/

(Cumulative flows from beginning of calendar year 2004 to end of month indicated, unless otherwise indicated)

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Definitions of line items and terminology are elaborated in the technical memorandum of understanding (TMU).

Before application of adjusters, as indicated in the TMU.

Value at end of month indicated. Program targets adjusted for cumulative differences between actual and projected amounts of program support, public and publicly guaranteed debt service paid, and divestiture receipts with an upside cap of $75 million, as explained in the TMU.

Based on a fixed exchange rate of 9,012 cedis/$, the rate prevailing at end-March 2004.

Value at end of month indicated. Program targets adjusted for cumulative differences between actual and projected amounts of program support, public and publicly guaranteed debt service paid, and divestiture receipts with an upside cap of $75 million, and for higher-than-programmed oil prices, with an upside cap of $30 million, as explained in the TMU.

Program targets adjusted for cumulative differences between actual and projected amounts of program support, public and publicly guaranteed debt service paid, and divestiture receipts with a downside cap of -$75 million, and for higher-than-programmed oil prices, with a downside cap of -$30 million, as explained in the TMU.

This performance criterion applies not only to debt as defined in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by Decision 12274-(00/123) of August 24, 2000 but also to commitments or contracted for which value has not been received, as specified in paragraph 15 of the TMU.

The term “debt” has the meaning set forth in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt adopted by Decision 12274-(00/123) of August 24, 2000, as specified in paragraph 14 of the TMU.

This is a continuous criterion. The TMU stipulates the precise program definition of payment arrears.

Debt service to be paid by Ghana after projected 2004 HIPC relief.

Average from beginning of 2004 to end of month indicated, as explained in the TMU.

4. Progress has also been made on structural reforms, in particular, in enhancing public expenditure management, strengthening the operating framework of the central bank, and through the adoption of several important pieces of legislation (notably the Banking, Internal Audit, Financial Administration, and Procurement Laws). We have also announced and begun implementing our strategy to strengthen the management of Ghana Commercial Bank (GCB). However, reform of the state-owned utility companies has lagged, and utility and petroleum price adjustments that were called for by the program’s automatic pricing formulas - structural performance criteria - were not made as planned in January 2004. In the former case, favorable water conditions in the Akosombo Dam altered the hydro-thermal generation mix, obviating the need for a price increase in electricity or water tariffs. In the latter case, the government decided to refrain from increasing petroleum prices to avoid potential social unrest and instability ahead of the general elections in December. This decision will result in unplanned petroleum subsidies, and we are taking offsetting fiscal measures to maintain the program’s domestic debt reduction objective (see below). In addition, we announced the key elements of a new petroleum pricing regime for early 2005, that will give oil marketing companies the freedom to set prices according to a prescribed formula, without prior authorization by any authority or agency. In light of these technical factors and remedial actions, we are seeking waivers for the non-observance of one quantitative and two structural performance criteria.

II. Economic Policies in the Period Ahead

5. Given the favorable outcomes over the past year, we are able to retain or improve upon the medium-term macroeconomic objectives set out in the GPRS. We aim to sustain the pace of economic growth, reduce inflation, and make further inroads against poverty. To this end, we envisage:

  • Furthering efforts to consolidate public expenditures, strengthen revenues, and lower domestic debt, with the goal of “crowding-in” private investment;

  • Maintaining the stance of monetary policy to achieve the targeted reduction of inflation and build on the improved external reserve position;

  • Deregulating the petroleum sector and establishing a pricing regime that will credibly remove government influence over (and, hence, responsibility for) such decisions;

  • Accelerating public enterprise reform and encouraging private sector development; and

  • Making further refinements to our poverty reduction strategy, based on the recommendations contained in the first annual GPRS progress report that was completed in May 2004.

A. Fiscal Policy

6. The fiscal stance remains anchored to the goal of reducing domestic debt in 2005 to roughly half the level at end-2002. We have made progress in this regard, and the strategy is already paying dividends in terms of lower interest rates and domestic debt service. The 2004 budget that was approved by parliament is consistent with this objective, and with our commitments under the PRGF arrangement. It provided some modest tax relief, which will have only a marginal impact on the fiscal position this year, including an increase in the minimum tax thresholds for individual tax payers; a reduction of corporate tax rates, effective in 2005; tax holidays for new agro-based enterprises; and a reduction in import duties and value-added tax deferral for some imported raw material and capital goods.

7. Within the overall fiscal framework, we are undertaking some adjustments to accommodate the decision to maintain retail petroleum prices at their current level for the rest of this year. The key elements of the modified fiscal program are as follows:

  • The targeted net repayment of domestic debt has been reduced from 2.2 to 1.4 percent of GDP. Higher GDP has made possible some relaxation of the planned fiscal effort without compromising our underlying target for the domestic debt-GDP ratio.

  • The tax revenue ratio will rise to 21.3 percent of GDP this year, which is higher than budgeted, largely on account of a better cocoa harvest and higher projected consumption of petroleum products. We also expect to boost non-tax revenue by as much as 0.5 percent of GDP this year by ensuring that several strong-performing public enterprises (in particular, Cocoa Board, Ghana Ports and Harbors Authority, and the National Communications Authority) remit profits to the budget in line with the requirements of the recently adopted Financial Administration Act (FAA).

  • The public sector wage bill will be limited to ¢ 6,632 billion (as in the budget), resulting in a small decline as a share of GDP compared with last year. The 15.8 percent wage settlement (effective March 1, 2004) granted to civil servants under the GUSS is consistent with this ceiling; and the settlements with other groups later in the year will likewise be kept within the budget allocation.

  • In light of the need to make room in the budget for an estimated 1.4 percent of GDP in petroleum subsidies, we plan to cut expenditure on goods and services by ¢ 300 billion, and domestic capital expenditure by ¢ 223 billion, relative to the 2004 budget. Half of these cuts have been incorporated into the Ministries, Departments, and Agencies (MDAs) cash ceilings that will be issued for the third quarter.

  • If the cost of petroleum price subsidies for the third and fourth quarters of 2004, as calculated using the automatic price adjustment formula specified in the technical memorandum of understanding (TMU), exceeds the programmed amount, the ceilings on net domestic financing for end-September and end-December 2004 will be raised by half of the first ¢ 200 billion in excess cost, and by the full amount of any excess cost beyond ¢ 200 billion. If the subsidy cost is less than programmed, the net domestic financing ceilings will be unchanged until the subsidy shortfall reaches ¢ 523 billion, which will allow the spending cuts to be fully reversed; beyond that point, the net domestic financing ceilings will be reduced pari passu. Expenditure ceilings for the fourth quarter of 2004 will be set consistent with the modified financing limits, and monthly expenditures will be monitored closely throughout the remainder of 2004 and adjusted as necessary to ensure that the program limits are observed.

  • Poverty-related expenditures are budgeted to rise to 7 percent of GDP this year, up from 4½ percent of GDP during our first year in office (2001), and we intend to protect these expenditures against any cuts that may be needed to meet the financing ceilings. Reflecting this commitment, we have introduced into the program quarterly indicative floors on poverty-related expenditure for 2004.

  • The revised program provides for interest payments related to a ¢ 670 billion recapitalization of the Bank of Ghana (BOG), one year ahead of schedule; the aggregate domestic interest bill is expected to remain in line with the budget, however, thanks to lower projected interest rates.

8. By June 15, 2004 we will lay the legislative instrument before Parliament to implement the National Health Insurance Levy (NHIL), which will become effective on August 1, 2004, so as to begin accumulating resources for the successful launch of the new health insurance scheme. The 2004 budget provides adequate resources to finance expected health expenditures this year, but we expect that these resources will need to be augmented in coming years to achieve the Millennium Development Goals (MDGs). In consultation with development partners, we plan during 2004 to review our medium-term health expenditure strategy, taking into account ongoing work on the costing of the MDGs, and reflect the results of this review in the 2005 budget. On current projections, there will be scope gradually to increase domestically financed expenditures (including from the National Health Fund) by around 1 percent of GDP a year over the medium term without compromising our objectives for domestic debt reduction. We would also hope to receive additional donor resources to support our efforts to meet the MDGs.

B. Public Expenditure Management

9. We have undertaken a number of measures to reform public expenditure management that have enhanced the transparency and accountability of government outlays. Indeed, a recent assessment of Ghana’s capacity to track poverty-related expenditures (HIPC Initiative Assessment and Action Plan, HIPC AAP) shows significant improvement over the past two years. Nonetheless, there is substantial room for further improvement. In the year ahead, we intend to:

  • Address weaknesses identified in the HIPC AAP, in particular by: increasing the coverage of fiscal information provided in the budget; disclosing fiscal information of all entities that carry out public services or activities; improving the ex-post integration of donor flows in the financial reports of MDAs; launching an appropriate and cost effective strategy to implement the new Internal Audit Act and improve the effectiveness of internal audit; and establishing and making operational institutions created by the new Procurement Law;

  • Monitor the operation of the cash planning and commitment control systems that were rolled out to all MDAs in October 2003, ensuring that reports are produced on schedule and ceilings respected;

  • Require all MDAs to submit to the Ministry of Finance and Economic Planning (as required under the FAA) a quarterly financial report detailing receipts of all internally-generated funds, grants, and loans; the first such reports, for the first quarter are expected by early June 2004, after which they will be required with a lag of no more than eight weeks;

  • Extend the budget and expenditure management system (BPEMS) to three line ministries by end-June 2004 (Ministries of Health, Education, and Roads and Transport), and a further four ministries by early 2005;

  • Continue to close all overdraft accounts at the Bank of Ghana, as well as government accounts that have been dormant for more than one year;

  • Replace the current wage-payment monitoring module (IPPD1) with the resource based, IPPD2, and add in wage payments to subvented agencies (with automatic deductions for social security and income tax) by the first half of 2005; and

  • Enforce a cut-off date of December 15, 2004, for issuance of checks for discretionary expenditures, so as to prevent a recurrence of the large float that arose in 2003.

C. Monetary and Exchange Rate Policies

10. The goal of monetary policy continues to be the reduction of inflation, with a target of 7 percent for CPI inflation at end-2004. The BOG will use open market operations and adjustments to the prime rate to achieve its objectives, implying annual growth of reserve and broad money (excluding foreign-currency deposits) of about 21 and 19 percent, respectively, during this year.

11. With gross international reserves now approaching comfortable levels, BOG will temper the pace of reserve accumulation in the face of strong inflows, and step up market sales of foreign exchange surrendered to it. This could allow for some nominal exchange rate appreciation that could mitigate market pressures and help further dampen inflation expectations. The new computerized interbank foreign exchange market is on schedule for launch by the fourth quarter of this year, and once the BOG is satisfied that the market is functioning smoothly, the surrender requirement for foreign exchange will be gradually phased out. The BOG will continue to allow the cedi’s external value to be market-determined, limiting interventions to smoothing short-term fluctuations in the foreign exchange market and ensuring attainment of the program’s targets for reserve accumulation.

12. The BOG has taken steps to strengthen its operating framework, in line with the recommendations made in the context of the Fund’s safeguards assessment. At this stage, BOG has addressed all of those recommendations, including:

  • The adoption of international accounting standards;

  • The issuance of government securities to cover accumulated balances in the Revaluation Account;

  • Establishing, in collaboration with external auditors, a task force to review and recommend changes to the central bank’s financial statements and disclosure practices; and

  • Establishing formal procedures for frequent reconciliation of registers and account balances maintained by BOG departments, in particular, the Issue and Treasury Department, and for verifying program data reported to the Fund.

D. Financial Sector Reform

13. The improved fiscal situation is intended to provide opportunities to expand credit growth to the private sector. For some major banks, however, secondary reserve requirements are beginning to constrain this shift in resources. The BOG envisages a two-phase approach to address this problem. In the first phase, which will begin in the third quarter of this year, the central bank will aim to strengthen its indirect instruments for controlling liquidity by introducing central bank paper at shorter maturities than the treasury bills currently used for open market operations. It will also establish, by September 2004, a central securities depository, which should encourage the development of the secondary market. After a transition period to ensure the smooth functioning of the central bank bill market, and integration with the existing treasury bill and auction system, the BOG will consider a gradual reduction of the secondary reserve requirement.

14. The passage of the Banking Act in December 2003 has enhanced the central bank’s supervisory powers over the commercial banks. The BOG will use these powers to ensure that commercial banks meet the strengthened fiduciary and prudential requirements and to apply sanctions for non-compliance.

15. With regard to GCB, the 2004 budget statement announced the plan for (a) flotation of new shares on the stock exchange to bolster its capital resources, and (b) to seek bids by competitive tender for a management contract, following completion of the share issue. At an extraordinary shareholder meeting expected to be held in September 2004, the proposed share flotation will be tabled for acceptance, and scheduled for the first quarter of 2005. With regard to the management contract, GCB intends to appoint a transactions advisor by end-September 2004, with a view to putting a contract to competitive tender by June 2005.

E. External Policies and Debt Management

16. The government is developing a comprehensive trade policy for Ghana, to be finalized by the end of 2004. The policy would, inter alia, aim at gaining greater access to external markets for its products. In this regard, an important objective would be to promote the successful implementation of the Economic Community of West African States (ECOWAS) trade liberalization scheme to facilitate regional integration, through the harmonization and reduction in tariff and non-tariff barriers to trade.

17. We hope that Ghana will reach the completion point under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative around mid-2004. This will bring the country’s debt to sustainable levels, reduce its external vulnerability, and allow us to redirect fiscal resources toward poverty reduction. We are aware that, after the completion point, we will need to strengthen further our debt management capacity and adopt a policy of assessing our domestic and external debt sustainability on an annual basis (beginning in 2005) through in-house and independent analysis. We also reiterate our commitment to avoid contracting or guaranteeing nonconcessional debt, as defined in the TMU. In this context, we have decided not to sign a recently proposed loan agreement from a private company, unless grant support for this loan from official sources can be secured.

F. Public Enterprise Reform

18. Progress to date on public enterprise reform has been limited, and we are taking a range of measures that we hope will have greater success in enhancing the efficiency of the key public enterprises, and reducing the direct and indirect burden they impose on the budget.

19. The petroleum sector has traditionally been dominated by state institutions, and this has made it extremely difficult to depoliticize petroleum pricing. We are committed to addressing this problem through a fundamental deregulation of the sector, allowing the private sector to undertake the procurement, financing, distribution and pricing of petroleum products.

20. We have already taken several steps in this direction. From the beginning of 2004, TOR ceased to have a monopoly on the importation of petroleum products, and in March 2004 the private oil marketing companies (OMCs) participated in the first competitive tender for gasoline, with financing from a syndicate of commercial banks. Beginning in the third quarter, we will widen the tender process to include the importation of crude oil, for processing at TOR for a fee.

21. Cabinet has approved a petroleum sector deregulation plan as announced in the Budget Statement presented to Parliament on February 5, 2004. On June 10, 2004, Cabinet further endorsed the details of our plans for a new pricing regime for petroleum products with the following key features:

  • Oil marketing companies (OMCs) will be given the right to set retail prices for petroleum products according to a prescribed formula, without prior review or approval by any national authority or agency;

  • An independent oversight body, on which the government will be represented, will monitor application of the formula to ensure its full and timely implementation. This entity will be empowered to intervene only in the event that the formula has not been applied appropriately, in which case it could insist on corrective actions, and possibly sanctions;

  • The pricing formula calculations will be published on a regular basis (and at the time of a price adjustment); and

  • The pricing formula will be specified along similar lines to that currently monitored by the National Petroleum Tender Board, with parameters set to ensure full cost recovery of all costs and taxes, and to avoid the need for further budget subsidies. The parameters of the pricing formula would be subject to periodic review, and could be modified by mutual consent of the oversight body, the government and the OMCs.

22. The new pricing regime will come into effect no later than February 15, 2005, at which time the responsibilities of the National Petroleum Tender Board will be restricted to conducting the competitive tender process for imported petroleum products and facilitating arrangements for sharing access to the storage and distribution infrastructure. Meanwhile, TOR has ceased all involvement in the importation of petroleum products, and will phase out its importation of crude oil, moving instead towards refining crude oil that is imported by the private sector, on a fee basis.

23. These and other detailed elements of the petroleum sector reform will be embodied in legislation, which we intend to present to Parliament in late 2004. This legislation will define and circumscribe the roles of the key institutions, including the OMCs, NPTB, TOR, and relevant government agencies.

24. The government will continue to be concerned that the poor should have access to essential petroleum products (especially kerosene) on relatively favorable terms. This objective will be more effectively achieved through careful structuring of petroleum duties and flexible formula-based pricing than it has been under the variable cross-subsidization inherent in TOR’s pricing regime. The duty structure to be applied at the launch of the new pricing regime will take into account the findings of a poverty and social impact assessment that is currently underway, and will be implemented with the 2005 budget.

25. We have reduced TOR’s debt (and GCB’s exposure to the refinery), by issuing a government security in the amount of ¢ 800 billion in May 2004. To help ensure that TOR’s debt remains sustainable, we will maintain a ceiling on TOR’s net borrowing from the banking system throughout 2004.

26. We have also embarked on a program to reduce costs, trim losses, and improve the efficiency of other major public utility companies: the Volta River Authority (VRA), the Electricity Company of Ghana (ECG), and the Ghana Water Company Limited (GWCL). As a first step in this process, we have audited all the cross-debts of these companies to each other and to the government of Ghana that were outstanding as of December 31, 2003. These debts will be settled and cleared by end-June 2004, together with liabilities associated with on-lending from the government, making transparent the true cash flow position of the companies, and permitting the establishment of realistic and monitorable financial performance plans. By the same date, each company will be required to present such plans for review and subsequent monitoring by the Ministry of Finance and Economic Planning. We expect the companies to achieve tangible improvements in financial performance during 2004, based on efficiency measures already underway, including:

  • At Volta River Authority: to reduce expenses, VRA will secure fuel through competitive tender and search for new sources of financing to reduce capital costs. VRA is also seeking additional financing to convert a simple cycle turbine to a combined cycle plant, so as to increase efficiency and further reduce generation costs.

  • At Electricity Company of Ghana: to stem commercial losses (nonpayment), the company is stepping up efforts to collect arrears, making payment easier (opening more cash collection points), and disconnecting non-paying customers.

  • At Ghana Water Company Limited: the ratio of metered customers (both commercial and domestic) will be raised from the current level of below 50 percent; prepayment metering will be expanded; non-paying customers will be disconnected; house-to-house collections will be halted, to reduce fraud and theft; the number of collection points will be increased, to encourage payment; and internal cost control systems will be enhanced.

27. To support these efforts, full cost recovery will be ensured in electricity and water pricing through implementation of the formulas for automatic adjustment of these tariffs. The tariff rates applicable for the quarter beginning May 1, 2004 were established in April. Given a further improvement in the hydro-thermal generation mix, no increase in electricity tariffs was required. Water tariffs were raised by 15 percent to full cost recovery levels, in line with the formula, and the Ghana Water Company Limited has confirmed that the new tariffs are being charged to customers with effect from April 1, 2004. The Public Utilities Regulatory Commission will continue to be responsible for approving tariff adjustments based on the formulas, and the government will refrain from intervening to prevent prompt implementation of such adjustments by the utility companies.

28. The government will continue to divest its holdings in a number of joint venture companies. By the end of this year, the Divestiture Implementation Committee is projecting revenues from the sale of shares in seven joint venture companies of just over ¢ 400 billion (equivalent to 0.5 percent of GDP). The government is seeking a strategic investor to take control of and rehabilitate Ghana Airways, and does not intend to provide financial support to the company in 2004.

29. We are currently undertaking due diligence to explore options for government involvement in the potential sale of the Volta Aluminum Company (VALCO) by its private owners. The information and analysis on which our final decision will be based is expected to take several more months to compile, following which the options will be considered by cabinet and in parliament. The government will not make any commitment of financial resources to invest in the project until this process is completed, and will consult with the Fund on its decision.

G. Private Sector Development

30. We believe that enhancing private sector development is critical to achieving sustained growth and poverty reduction. In this context, deepening the financial sector will also play a key role. To guide government policy in this area, a Medium-Term Private Sector Development Strategy has recently been established. This strategy envisages three main outputs: growth of Ghana’s exports in regional and global markets; a business-friendly economic and regulatory environment, based on market principles and private property rights; and increased entrepreneurial skill at the firm level. While the strategy will be implemented over time, a number of high priority measures will be pursued this year:

  • A further strengthening of the supervisory and regulatory framework of the financial sector, through the passage of an Insolvency Bill, Companies Code, Insurance law, and Anti-Money Laundering Bill;

  • Developing credit information legislation which will provide a framework for regulating consumer (credit bureau) and business (credit reference agencies) credit information;

  • Reducing regulatory red-tape (the current complex system of fees, fines and permits) both at the local and national level;

  • Completing a diagnostic study on the legal and institutional mandates of anticorruption agencies, and implement agreed recommendations by March 2005; and

  • Strengthening the Land Administration Project by accelerating the process to secure property rights, enforce land use rights, and make operational the adjudication board of the Land Title Registry.

H. Statistics

31. We are committed to improving the quality and timely delivery of economic statistics upon which macroeconomic policies and program monitoring are based. We have agreed to participate in the General Data Dissemination System, and while progress in re-estimating the consumer price index and re-basing the national accounts is slower than anticipated, we now plan to complete this work early in 2005. The work will be facilitated by the recent appointment of a new Government Statistician for the Statistical Service, who comes with significant international experience, and ongoing technical assistance from an STA advisor. In addition, to ensure accurate and comprehensive monitoring of the fiscal position, BOG circulated to the commercial banks in May 2004 its definition of government, to facilitate consistent reporting of these accounts.

III. Program Monitoring

32. Prior actions for the second review, together with quantitative and structural performance criteria, indicative targets, and structural benchmarks for the third review, are set out in Tables I.1 and I.2. The third review of the program will take place by May 31, 2005, with December 31, 2004 as the test date for the quantitative performance criteria. The review will focus, among other issues, on implementation of the petroleum sector deregulation strategy, and on the nature of government involvement in VALCO. At the time of this review, performance criteria, structural conditionality, and the phasing of disbursements will be established for the fourth program review, based on a program of policies for 2005. Detailed definitions, reporting requirements and adjustors for all performance criteria and structural conditions are contained in the TMU attached to this memorandum. The government will make available to Fund staff all core data, appropriately reconciled and on a timely basis, as specified in the TMU.

Table I.2.

Prior Actions Structural Performance Criteria and Benchmarks for 2004–05

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GHANA: Technical Memorandum of Understanding

1. This technical note contains definitions and adjuster mechanisms that are intended to clarify the measurement of items in Table I.1, Quantitative Performance Criteria and Benchmarks, PRGF Arrangement, 2004, attached to the Memorandum of Economic and Financial Policies. Unless otherwise specified, all quantitative performance criteria and benchmarks will be evaluated in terms of cumulative flows from December 31, 2003.

Provision of Data to the Fund

2. Data with respect to all variables subject to performance criteria and indicative benchmarks will be provided to Fund staff on a monthly basis with a lag of no more than eight weeks (except for select data for which the data reporting lag is explicitly specified in Table I.3). The authorities will transmit promptly to Fund staff any data revisions. For variables that are relevant for assessing performance against program objectives but are not specifically defined in this memorandum, the authorities will consult with Fund staff as needed on appropriate measurement and reporting.

Table I.3.

Data to be Reported to the IMF

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Definitions

3. Government is defined for the purposes of this memorandum to comprise the central government as well as all special funds (the Education Trust Fund, the Road Fund, the District Assembly Common Fund, and the National Health Insurance Fund) and various subvented and other government agencies that are classified as government in the Bank of Ghana (BOG) Statement of Accounts (SOA). SSNIT and public enterprises, including Cocobod, are excluded from the definition of government. With regard to government deposits in commercial banks, BOG’s definition of government, circulated to commercial banks in May 2004, will apply for program purposes.

4. Government domestic revenue comprises all tax and non-tax revenues of government (in domestic and foreign currency), excluding foreign grants and divestiture receipts. Revenue will be measured on a cash basis as gross inflows to government uncommitted treasury collections accounts (as reported by the BOG).

5. Government domestic expenditure comprises all spending from uncommitted accounts for Items 1–4, as captured by the accounts of the Controller Accountant General’s Department (CAGD). Reporting will be based on the current NETS accounting system, and its associated 15-digit chart of accounts, and will be fully reconciled with BOG bank statements on spending (outflows) from the 42 newly created MDA Operational Accounts (plus any residual use of existing Treasury Drawing/overdraft accounts). Expenditure will also be verified by comparing it to accounts produced by the BPEMS accounting system, until such time as the latter system becomes fully operational.

6. Within the above total, poverty-related expenditures refer to those expenditures identified in Table 6 of the Decision Point Document for the Enhanced Heavily Indebted Poor Countries Initiative. Budgeted poverty spending for these categories will be taken from each year’s final appropriations bill, and will include spending financed by government, donors, and internally generated funds. Actual poverty-related spending will be identified using the last three digits of the 15-digit chart of accounts of CAGD’s current NETS system, and the sub-component which is financed by HIPC relief. These data will be supplemented with that proportion of transfers to the District Assembly Common Fund, Ghana Educational Trust Fund, and Road Fund which are deemed by those entities to be poverty-related. Accordingly, actual poverty spending will exclude some donor-supported expenditure not currently captured by CAGD (including, among others, the pooled donor health fund).

7. Net domestic financing (NDF) of government is defined as the change in net credit to government by the banking system (i.e., the Bank of Ghana plus deposit money banks) plus the net change in holdings of treasury bills and other government securities by the nonbank sector, but excluding divestiture receipts and government liabilities assumed in the restructuring of the domestic debts of the Tema Oil Refinery, the Electricity Company of Ghana, the Volta River Authority, the Ghana Water Company Limited, and/or in connection with the recapitalization of the Bank of Ghana. Such credit will also exclude Treasury bills issued for Open Market Operations purposes from January 1, 2003 onward (the holdings of which are excluded from the BOG Treasury Department’s Debt Registry of central government securities, and the proceeds of which are sterilized in deposits held as other BOG liabilities, as defined in the Monetary Template provided to the IMF on December 3, 2003). Funds placed in escrow for the potential investment in the Volta Aluminum Company Limited (VALCO) will be classified as a government domestic asset for the purposes of calculating NDF so long as they continue to be the proprty of the government of Ghana. Outstanding net credit to the government by the Bank of Ghana is comprised of the sum of claims on government (SOA codes 0401 and 050101-4) less government deposits (1101 including the main HIPC receiving account, and 1202) as defined in the Monetary Template) Outstanding net credit by deposit money banks is comprised of DMB holdings of government securities at cost of purchase value, as reported by the BOG Treasury Department’s Debt Registry, plus overdrafts less government deposits as reported by DMBs in the revised BSD2 report forms. (and defined in the Monetary Template). Nonbank financing will be the difference between total net cash receipts to the Treasury Main Cash Account (issues/redemptions account when it becomes operational) from the sale/repurchase of government securities, less the corresponding net cash value received from the BOG and DMBs as indicated on the Debt Registry by holder at discount value. For each test date, any adjustment by the BOG to the data reported by individual DMBs, on account of their misclassification of government or for other reasons, will be reported to the Fund.

8. The domestic primary balance is defined as the difference between government domestic revenue and non-interest government expenditure as reported by the CAGD (i.e., payment vouchers issued for expenditures on items 1–4). It will exclude foreign-financed capital expenditure, for which data are reported by the Aid and Debt Management Unit. The measurement will be on a cash basis, with any positive (negative) discrepancy between the above- and below-the-line measure of the overall balance being added to (subtracted from) the measure of the domestic primary balance (including unspent balances remaining in committed accounts).

9. Net domestic credit to Tema Oil Refinery (TOR) from the banking system will be defined as total advances to TOR by deposit money banks, less TOR’s deposits with deposit money banks, and will be reported by the Research Department of the Bank of Ghana.

10. The program exchange rate for the purposes of this memorandum will be 9,012 cedis per dollar, which was the average interbank transaction rate prevailing at end-March 2004.

11. Reserve money is defined as the sum of currency in circulation (BOG statement of accounts codes 901 plus 902), plus cedi denominated currency deposits at the Bank of Ghana (excluding accounts which are overdrawn, blocked, or owned by banks in liquidation) of the following entities: commercial banks, other financial institutions, private sector entities, public institutions, and public enterprises. A more detailed listing of accounts to be included in the measure of reserve money is contained in the Monetary Template referred to above. If aggregate reserves fall below the legal reserve requirement of 9 percent of bank deposits (as reported in the quarterly STCRBB), then reserve money will be adjusted upward to the extent of any shortfall in compliance with that reserve requirement.

12. Net foreign assets (NFA) are defined in the monetary survey as short and long term foreign assets minus liabilities of the Bank of Ghana which are contracted with non-residents. Short-term foreign assets include: monetary gold (valued at the spot market rate for gold, US$/fine ounce, London), holdings of SDRs, reserve position and HIPC trust investment in the IMF, the HIPC umbrella SDR account (all as reported by the IMF), foreign notes and travelers checks, foreign securities, positive balances with correspondent banks, and other positive short-term or time deposits. Short-term foreign liabilities include foreign currency liabilities contracted by the Bank of Ghana at original maturities of one year or less (including overdrafts), outstanding liabilities to the IMF, and deposits of international institutions at the BOG. Long-term foreign assets and liabilities are comprised of: other foreign assets (303), investments abroad (a subset of 60201), other long-term liabilities to nonresidents (a subset of 1103), and bilateral payment agreements (305). All values are to be converted to U.S. dollars at actual market exchange rates prevailing at the test date. A more detailed listing of accounts to be included in the measure of NFA is contained in the Monetary Template referred to above.

13. Net international reserves (NIR) of the Bank of Ghana are defined for program monitoring purposes and in the balance of payments as short-term foreign assets of the Bank of Ghana, minus short-term external liabilities. To the extent that short-term foreign assets are not fully convertible external assets readily available to and controlled by the Bank of Ghana (i.e., they are pledged or otherwise encumbered external assets, including, but not limited to, the HIPC umbrella SDR account, and assets used as collateral or guarantees for third party liabilities such as the two identified encumbered accounts held abroad totaling US$9.3 million as of June 2003, and funds placed in escrow relating to VALCO) these will be excluded from the definition of NIR. Net international reserves are also defined to include net swap transactions (receivable less payable), and exclude all positive foreign currency deposits at the BOG held by resident deposit money banks, public institutions, nonfinancial public enterprises, other financial institutions, and the private sector. All values are to be converted to U.S. dollars at actual market exchange rates prevailing at the test date. A more detailed listing of accounts to be included in the measure of NIR is contained in the Monetary Template referred to above.

14. Net domestic assets of the Bank of Ghana are defined as the difference between reserve money and net foreign assets of the Bank of Ghana, excluding the HIPC Umbrella SDR account, converted from U.S. dollars to cedis at the program exchange rate.

15. The performance criterion on short-term external debt refers to the outstanding stock of external debt with original maturity of one year or less, including overdraft positions and debt owed or guaranteed by the government or the Bank of Ghana.27 Data on the Bank of Ghana’s short-term external debt are those reported from the statement of accounts template as short-term liabilities to non-resident commercial banks (1201 plus 301 overdrafts plus Crown Agent). The limit on short-term external debt will exclude US$5.5 million in overdrafts with correspondent banks which are in dispute, until such time as these assets are re-classified.

16. The performance criterion on nonconcessional medium- and long-term external debt (Table I.1) refers to the contracting or guaranteeing of external debt with original maturity of more than one year by the government or Bank of Ghana.28 Medium- and longterm debt will be reported by the Aid and Debt Management Unit of the Ministry of Finance and (as appropriate) the Bank of Ghana, measured in U.S. dollars at current exchange rates.

17. The stock of payment arrears in the road sector will include any arrear on a duly certified expenditure commitment that was not paid during a period of 90 days after the date the bill was issued. Any arrear in foreign currency will be converted into cedis at the actual exchange rate prevailing at the end of period date. Data on the stock of road arrears will be reported to the IMF staff monthly (with the lag specified in Table I.3) by the monitoring and evaluation department of the Ministry of Roads and Highways. At end-December 2003, the stock of road sector arrears was recognized to be ¢ 30 billion, and is expected to be paid down according to the quarterly schedule in Table I.1 (an indicative benchmark under the program).

18. External payment arrears occur when undisputed interest or amortization payments of the government of Ghana are not made within the terms of the debt contract, or in conformity with the terms for interim relief provided under the enhanced HIPC Initiative and the deferral agreed with the Paris Club on December 10, 2001. This is a continuous performance criterion.

19. Official external program support is defined as grants and loans provided by foreign official entities that are received by the budget, excluding project grants and loans, and other exceptional financing. Amounts assumed in the program consistent with this definition are shown in the memorandum item entitled “external program support” of Table I.1.

20. Divestiture receipts are payments received by the government (in domestic and foreign currency) in connection with the sale of state assets. The programmed amounts consistent with this definition are shown in Table I.1. Divestiture receipts in foreign exchange are those recorded as such in the Bank of Ghana’s Cash Flow; domestic receipts are the difference between total divestiture receipts received by the budget, and receipts in foreign exchange.

21. Automatic adjustment formulas for the pricing of petroleum, electricity and water are defined to ensure full cost recovery at Ghana’s state-owned oil refinery (TOR) and utilities by passing on to consumers changes in the costs of exogenously determined inputs including crude oil, exchange rates, and the electricity generation mix. In the case of petroleum products, the formula (see Table I.4) will be calculated by the tenth of each month, using an average of representative petroleum product prices (fob Mediterranean, from Platt’s Oilgram) for the previous three calendar months for each of the following products—premium gasoline, kerosene, gas oil, residual fuel oil, and liquefied petroleum gas. The formula will then add TOR’s shipping, insurance, and related charges, to arrive at a set of ex-refinery prices at full-cost recovery levels. Premix will be computed as a weighted average of premium gasoline (96.67 percent) and engine oil (3.33 percent) at full cost recovery prices. All full-cost recovery prices, and the prices currently charged by TOR, will each be multiplied by TOR’s sales volumes for those products for the previous month, and the resulting actual and full-cost recovery sales values summed across products. The National Petroleum Tender Board will use the current formula to determine cost recovery prices, which will be compared with actual prices to determine the magnitude of the implied subsidies to TOR and the oil marketing companies. These prices will be determined once a quarter, on or before July 31 and October 31, 2004, and January 31, 2005. Cost recovery prices will reflect the full pass through of all taxes, levies, and distributor margins as indicated in Table I.4. The NPTB will inform TOR, the oil marketing companies, and the IMF of the results of the formula’s calculations as set out in Table I.4 on the above test dates.

Table I.4.

Ghana: Petroleum Products Pricing Formula, January 2004 1/

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Calculations based on October 1-December 31 Platt prices, existing ex-refinery prices, and December 2003 volumes.

Premix price computed as a weighted average of full cost recovery prices for premium gasoline (96.67 percent) and gasoil (3.33 percent), the latter as a proxy for engine oil when that market price unavailable.

Table I.4.

Ghana: Petroleum Products Pricing Formula, April 2004 1/

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Calculations based on January 1-March 31 Platt prices, existing ex-refinery prices, and March 2004 volumes.

Premix price computed as a weighted average of full cost recovery prices for premium gasoline (96.67 percent) and gasoil (3.33 percent), the latter as a proxy for engine oil when that market price unavailable.

22. The electricity and water tariffs for the August 1-October 31 quarter will be announced publicly and implemented at the latest by August 15, 2004, based on data compiled for May 1-July 31, 2004. The tariff rates for subsequent quarters will be implemented in a similar manner by November 15, 2004, and February 15, 2005. The electricity tariffs will be calculated according to the formula in Table I.5, and the water tariffs will be calculated according to the formula in Table I.6, using data from the specified sources. The public utility companies will ensure that the weighted average tariff rates charges to consumers are not lower than the rates derived from these formulas, from the specified dates. Projected variables in the formulas will be calculated as follows:

Table I.5.

Ghana: Automatic Adjustment Formula for Electricity Tariffs

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Assuming the percentage of the hyd ro-contribution ca pped at 50 percent as specified in the TMU (IMF Country Report No. 03/395).

Table I.6.

Ghana: Water Tariff Formula

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The average tariff was authorized by the PURC beginning Novermber 2003, but not implemented until May 1, 2004.

Assuming the percentage of the hydro-contribution capped at 50 percent as specified in the TMU (IMF Country Report No./03/395).

  • (i) for the price of Nigerian Bonny Light crude oil in the coming quarter, the futures prices on the last working day of the current quarter will be used, as quoted on the NYMEX, for deliveries of Light Sweet Crude in each month of the coming quarter, averaged across the three months, plus US$0.15 for the premium of Bonny Light over Light Sweet.

  • (ii) for the U.S. inflation rate in the coming quarter, the recorded change in the U.S. consumer price index during the latest three-month period for which data are available in International Financial Statistics will be used.

  • (iii) for the U.S. dollar-cedi exchange rate in the coming quarter, the interbank transaction rate quoted by the Bank of Ghana for the last day of the second month in the preceding quarter will be used, multiplied by the percentage change in that rate from the last day of the second month in the quarter before that.

  • (iv) the percentage contribution of hydro power to the generation mix will be assumed not to exceed 70 percent.

Adjusters

23. Deviations in official external program support, external debt service payments, and divestiture receipts from the amounts programmed in Table I.1 will trigger adjusters for domestic financing of government, net domestic assets of the Bank of Ghana and net international reserves as indicated below. These and other adjusters as set out below will be measured cumulatively from the end of 2003.

24. Ceilings on net domestic financing (NDF) of the government and net domestic assets (NDA) of the Bank of Ghana. Monthly differences between projected and actual official external program support, external debt service payments, and divestiture receipts in foreign exchange will be converted to cedis at the actual monthly exchange rate and cumulated to the test date. The ceilings on net domestic financing of government and NDA will be reduced by the sum of: (i) excess official external program support; (ii) excess divestiture receipts; and (iii) the shortfall in external debt service payments. The adjustment to the ceiling on the NDA of the Bank of Ghana with respect to deviations in divestiture receipts will apply only to foreign exchange receipts. Both ceilings will be increased by 100 percent of any cumulative shortfall in official external program support or excess in external debt service, but will not be adjusted for a shortfall in divestiture receipts. The upward adjustment is capped at the equivalent of US$75 million, converted to cedis at actual exchange rates.

25. Floor on net international reserves (NIR) of the Bank of Ghana. Quarterly differences between projected and actual official external program support, external debt service payments, and divestiture receipts in foreign exchange will be converted to U.S. dollars at the actual exchange rates prevailing at the test date. The floor on NIR will be raised by the sum of: (i) excess official external program support; (ii) excess divestiture receipts in foreign exchange; (iii) any shortfall in external debt service payments; and (iv) the unblocking of escrow deposits relating to VALCO. The floor will be lowered by 100 percent of any shortfall in official external program support or excess in external debt service payments, but will not be adjusted for any shortfall in divestiture receipts. The downward adjustment is capped at the equivalent of US$75 million.

26. Oil price adjuster. NIR floors will be adjusted downward, and NDA ceilings upward, when world oil prices exceed the baseline price path assumed in the program. The floor on NIR will be reduced by the cumulative quarterly difference (if positive) between actual oil prices and projected prices as defined in Table I.1, multiplied by a coefficient of 20 (a multiplier which quantifies the approximate impact that a US$1 rise in oil prices has on the value of oil imports in Ghana) on an annual basis. For March, the adjuster will be computed as the difference (if positive) between the average actual and forecast prices during the fourth quarter (2003), times a coefficient of 20/4; for June, the adjuster will be computed as the difference (if positive) between the average actual and forecast prices during the first quarter, times a coefficient of 20/2; for September, the adjuster will be computed as the difference (if positive) between the average actual and forecast prices during the first half of 2004 times a coefficient of 20*(3/4); and for December, the adjuster will be the difference (if positive) between the average actual and forecast prices during the third quarter, times a coefficient of 20. The adjuster at all test dates will be capped at US$30 million. The ceiling on the NDA of the Bank of Ghana will be raised by the same adjuster amounts as for NIR, converted to cedis at actual exchange rates, up to a cap equivalent to US$30 million.

27. The budgetary cost of petroleum subsidies. If the cost of petroleum price subsidies for the third and fourth quarters of 2004, as calculated using the automatic price adjustment formula specified above, exceeds the programmed amounts shown in Table I.1, the ceilings on net domestic financing for end-September and end-December 2004 will be raised by half of the first ¢ 200 billion in excess cost, and by the full amount of any excess cost beyond ¢ 200 billion. If the subsidy cost is less than programmed, the net domestic financing ceilings will be unchanged until the subsidy shortfall reaches ¢ 523 billion, which will allow the spending cuts to be fully reversed; beyond that point, the net domestic financing ceilings will be reduced pari passu. Expenditure ceilings for the fourth quarter of 2004 will be set consistent with the modified financing limits, and monthly expenditures will be monitored closely throughout the remainder of 2004 and adjusted as necessary to ensure that the program limits are observed

Reporting of Data to the IMF

28. The Ministry of Finance, Bank of Ghana, Ministry of Roads and Highways, and Ghana Statistical Service will provide to IMF staff the fiscal, monetary, balance of payments, and real sector data indicated in Table I.3, with the reporting lags set out in that table.

29. The aggregated balance sheet for deposit money banks is being reported in accordance with the revised BSD2 Report Form, as set out in the Monetary Template referred to above. This new format, among other things, better differentiates banks’ reported foreign exchange holdings as between those held with residents (mostly at the BOG) and those held with nonresidents abroad. The first submissions based on the new form were for July 2003. Comparable data from December 1998 to June 2003 have been taken from the 20R report form to provide a comparable back series.

External Data, Debt and Debt Service, and HIPC Relief

30. To improve the transparency and accountability of external debt management, the Minister of Finance has written to the Controller Accountant General (CAGD) and the Governor of the Bank of Ghana setting down the formal procedures for settlement of debt and specifying the functions that the CAGD and the Bank of Ghana are expected to fulfill in carrying out those procedures. In addition, the following measures have been initiated and will be maintained:

a) All Ministries, Departments and Agencies (MDA) have been informed that the Aid and Debt Management Unit (ADMU) in the Ministry of Finance is the only entity authorized to contract or guarantee external debt, and all leases with a total value above US$100,000 should be submitted to ADMU for authorization. ADMU will report to the IMF with a lag of not more than one month on the concessionality of all new loans contracted.

b) The Minister of Finance has sent a circular to all donor desks officers in the Minister of Finance requesting that arrangements be put in place to ensure that the ADMU is informed of all correspondence with creditors, including the latest information on disbursements and project financing developments and any notices of payment due. All new loan documents should also state clearly that the ADMU is the main initial point of contact for settlement of all debt obligations.

c) Formal procedures have been established requesting donors and creditors to confirm with ADMU debt payment obligations - including for government guaranteed obligations - in advance of payment due dates.

d) Formal delegations have been put in place in the Ministry of Finance and at the CAGD to ensure that an absence of sufficient signing authority does not delay payment requests. In addition, a register will be kept of the timing of formal debt payment actions. This register should be signed by the various institutions involved in the payment of external debt.

e) At the same time, procedures instituted in early 2003 relating to prior authorization and fiscal booking of external and other payments by direct debit will be maintained.

f) In the event that a shortage of foreign exchange results in a queuing of debt service obligations at the Bank of Ghana, delaying payments beyond their due dates, the Ministry of Finance is responsible for issuing any instructions needed to revise payment priorities and for maintaining a record of payment arrears. Formal reporting and follow-up procedures have been established for the Bank of Ghana to confirm the transactions to CAGD and the ADMU in the MOF on a daily basis. These reports contain information on the transactions completed as requested, transactions previously queued and paid and transactions added to the queue. These reports are copied to both the governor of the Bank of Ghana and the Minister of Finance and his senior officials, and to the IMF staff on a monthly basis.

g) The procedures for verifying Bank of Ghana data to the Fund have been formalized, so that a senior officer from the Bank of Ghana has been formally delegated with the responsibility for the compilation and verification of data on program conditionality to be reported to the Fund. Formal reconciliation procedures to verify both the derivation of data reported to the Fund and the Bank of Ghana internal audit procedures have been amended to include a periodic check that procedures are followed.

h) Two HIPC accounts have been established at the BOG for the receipt and disbursement of HIPC relief. When each debt service payment falls due, the Government of Ghana (or the BOG for IMF repurchases) will transfer to the HIPC account that proportion of the amount due which, under the terms of the HIPC Initiative, does not have to be paid to the creditor. For debt owed by public enterprises under the HIPC Initiative, the Government of Ghana will transfer to the HIPC account the debt-relieved portion of the debt service payment if the enterprise fails to do so on the due date. ADMU will issue, in advance of the due date, a request for payment to the CAGD indicating the portions due to the creditor and the HIPC account. ADMU will prepare a monthly report indicating for the coming month (i) the total debt service due by creditor, (ii) the amount of HIPC relief on each transaction, as well as (iii) the debt service paid and the transfers to the HIPC account by creditor for the previous month. This report will be provided within 2 weeks of end-month to the CAGD and to the IMF.

APPENDIX II Ghana: Relations with the Fund

(As of April 30, 2004)

I. Membership Status: Joined: September 20, 1957; Article VIII.

II. General Resources Account

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III. SDR Department

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IV. Outstanding Purchases and Loans

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V. Latest Financial Arrangements

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VI. Projected Obligations to Fund (before HIPC Assistance):

(SDR million; based on existing use of resources and present holdings of SDRs):

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Projected Payments to Fund (with Board-approved HIPC Assistance)

(SDR million; based on existing use of resources and present holdings of SDRs):

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VII. Implementation of HIPC Initiative:

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Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Safeguard Assessment:

Under the Fund’s safeguards assessment policy, the Bank of Ghana was subject to a safeguards assessment with respect to the PRGF arrangement approved on May 9, 2003. The assessment was completed on October 15, 2003 and proposed specific recommendations to address remaining vulnerabilities in the external audit, financial reporting, internal audit, and internal controls areas. These measures have now been implemented.

Exchange Rate Arrangement

Ghana accepted the obligations under Article VIII, Sections 2 (a), 3, and 4 of the Fund’s Articles of Agreement on February 2, 1994. Accordingly, Ghana maintains a flexible exchange rate (defacto classified as a managed float), using the U.S. dollar as the intervention currency, that is free of restrictions on payments and transfers for current international transactions. At end-March 2004, the average exchange rate for transactions in the interbank market was ¢9,018.3 per U.S. dollar.

Article IV Consultation and Current Fund Arrangement

On May 9, 2003, the Executive Board concluded the 2003 Article IV Consultation with Ghana (IMF Country Report No. 03/133), endorsed the Ghana Poverty Reduction Strategy as a sound basis for promoting growth and reducing poverty, and approved a three-year arrangement under the PRGF amounting to SDR 184.5 million (50 percent of quota). An earlier PRGF arrangement expired on November 30, 2002 without disbursement of the final tranche.

FSAP Participation

Ghana participated in the FSAP during 2000–2001, and a Financial System Stability Assessment (FSSA) was issued to the Executive Board in 2001. An FSAP update was presented to the Board in December 2003.

Technical Assistance, 1999–2003

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Resident Representative

A Fund Resident Representative has been stationed in Accra since June 1985. Mrs. Muttardy is the current Resident Representative, having assumed the post in April 2004.

APPENDIX III Ghana: IMF-World Bank Relations

(As of April 30, 2004)

IV. Partnership in Ghana’s Development Strategy

1. Ghana’s development objectives are stated in the Ghana Poverty Reduction Strategy (GPRS) approved by the Government in February 2003. The broad objectives of the GPRS are to create an environment favorable to private sector-led growth and sustainable poverty reduction, and to create room within the Government’s budget for increased expenditures on education, health, and other priority services. The GPRS outlines five pillars focused on: (i) achieving macroeconomic stability; (ii) stimulating employment and production; (iii) improving access to basic social services; (iv) strengthening the protection of the vulnerable and excluded; and (v) improving public sector performance and governance. After a year’s implementation of the GPRS, an Annual Progress Report is currently being finalized.

2. The Bank and Fund teams are closely coordinating their policy advice to the Ghanaian authorities. There is collaboration in terms of common objectives and joint support to implementation of Ghana’s GPRS, including through joint assessments such as the recent “HIPC Expenditure Tracking Assessment and Action Plan (AAP)”, assessment of progress towards the completion point under the Enhanced HIPC Initiative, and update of the findings of the 2000–2001 Financial Sector Assessment Program (FSAP).

3. The completion of the Ghana Poverty Reduction Strategy (GPRS), created the momentum for a significant group of donors to align their assistance under a common Multi-Donor Budget Support (MDBS) framework agreed with the Government of Ghana (GoG) in June 2003. The GoG and development partners (DPs) consider the MDBS as the basis for support to the implementation of GPRS through the budget.

V. The World Bank Group Country Assistance Strategy and Portfolio

4. The new Country Assistance Strategy (CAS) for Ghana (FY 04-07), prepared jointly with the International Finance Corporation (IFC) was discussed by the Bank’s Board on March 16th, 2004. The Country Assistance Strategy (CAS) was designed to support the GPRS in a manner that could effectively help the country achieve its development objectives. It complements the interventions of other donors and focuses on three main pillars: (i) sustainable growth and job creation, (ii) service provision for human development, and (iii) governance for empowerment. The Bank Group strategy, described in the CAS, aims at helping the Government to: (a) maintain progress made in achieving macroeconomic stability in recent years, while pursuing accelerated growth policies through improved investment climate and harnessing sources of growth; (b) develop further the level of human capital through improved human development services delivery, and (c) promote good governance and public sector reforms. The CAS for Ghana was prepared after broad consultations with Government and key stakeholders, including through regional meetings with civil society, the private sector and others. A mid-term review is foreseen to be undertaken together with other development partners, aiming at further progress on harmonized responses to Ghana’s poverty reduction strategy.

5. The new CAS defines the Bank’s contribution to the achievement of the government’s desired results, in particular achieving an annual average rate of economic growth of at least 5 percent in the period through 2007, and reducing poverty levels from 40 percent in 1999 to 32 percent in 2007. Public expenditure management, including at the district level, is to be strengthened to help increase the share of poverty-related spending to about a third of domestically-financed expenditures by 2007 and bringing domestic debt down from 26 percent of GDP in 2002 to the GPRS target of 14.8 percent of GDP in 2005, and further increasing the share of private sector borrowing. Moreover, from 2002 to 2007, the following results are also expected to be achieved: removing constraints to private sector development by reducing the time required for land registration from an average of four years to four months and for business registration from 120 days to 30 days and by providing more reliable and cost effective road, energy and financial services; capping at 5 percent, the prevalence of HIV among pregnant women; increasing Gross Primary Enrollment Rates (GER) in the 40 most deprived districts from about 71 to 89 percent, and the rate for girls from almost 66 to 89 percent; and increasing immunization coverage from 80 to 90 percent, and the proportion of births attended by skilled health personnel from 45 to 55 percent.

6. Overall development partner coordination in Ghana is strong. The Bank group’s strategy in Ghana emphasizes deepening its collaboration with other development partners through the Multi-Donor Budgetary Support (MDBS) framework, partnership programs such as the Health SWAp and other sector programmatic support, and further deepening harmonized approaches in areas such as analytical work, fiduciary underpinnings and meeting and mission management. The MDBS provides a framework for policy dialogue and decisions linked to progress in the implementation of the GPRS.

7. The Bank’s cumulative commitments to Ghana as of April 30th, 2004, amount to US$4.6 billion, and total 141 operations. As of April 30th, 2004, the portfolio contained 20 active projects totaling US$972.1 million, of which US$548.9 million remains undisbursed. The portfolio is diverse in terms of sectoral priorities and lending instruments. It consists of one single-tranche Poverty Reduction Support Credit and Grant (PRSC) to provide continued support to policies and reforms aimed at achieving the objectives of the Government’s poverty reduction strategy, complemented by major programs in health and education, agriculture, roads, community water and other infrastructure in both rural and urban areas. Annex 1 summarizes the World Bank operations in Ghana. The overall performance of the portfolio is satisfactory, though implementation in several projects is lagging.

8. Under the new CAS, the FY04-07 lending program will cover quick disbursing programmatic lending in the form of PRSCs, sector-wide operations to support human development, investment in infrastructure and other support to private sector development, and several projects to support community and local government based programs in water, sanitation, infrastructure and services provision. Projects in FY04 include Land Administration ($20 million approved in July 2003), the Education Sector Project (US$78 million, approved in February 2004), and the Second Urban Environmental Sanitation Project (US$62 million, approved later in April 2004). The PRSC 2 (US$125 million), and the Community-Based Rural Development (US$50 million), Urban Water (US$103 million) and Small Towns Water Supply and Sanitation (US$25 million) projects are prepared for approval in July 2004. Projects for FY05 will include PRSC 3 and support to two regional projects, the West African Gas Pipeline and the West Africa Power Pool.

9. Non-lending services include updates on the core diagnostics, as well as targeted analyses to strengthen the analytical base for the assistance program supported by the FY04-07 CAS. During FY04, this work includes a CFAA update, a CEM on public policy, growth and poverty, a Financial Sector Assessment Update, a Energy Policy Note, and a report on strategic purchasing of priority health services under the new National Health Insurance Scheme. In addition, a Public Expenditure Review (PER) is being carried out in collaboration with the government and development partners. The first Poverty and Social Impact Assessment in the power sector in Ghana, focusing on electricity tariffs, and the Diagnostic Trade Study will also be completed soon. For FY05, planned non-lending services include an Investment Climate Assessment, a Country Portfolio Performance Review, the annual PER, and analytical work on youth and employment, decentralization, urban policy, forestry and telecommunications.

VI. IMF-World Bank Collaboration in Specific Areas

10. The Bank and Fund teams are closely coordinating their policy advice to the Ghanaian authorities. There is collaboration in terms of common objectives and joint support to Ghana’s GPRS and HIPC processes, and also in determining structural conditionality.

11. Areas in which the Fund leads. In general, the IMF leads the policy dialogue on macroeconomic policies, including overall fiscal and monetary policies. The IMF has supported Ghana’s poverty reduction efforts through several arrangements under the Poverty Reduction and Growth Facility (PRGF). The Government had requested a new three-year arrangement for 2003–2005, under the PRGF, and this was put in place in May 2003, following discussions by the Fund’s Board of Executive Directors. Reforms under the PRGF center around measures to substantially raise revenue to make room for increased poverty-related spending and development needs, strengthen public expenditure management, further reform of energy and utility pricing, and use appropriate monetary policy to deliver on the single-digit inflation target. The first review under the three-year PRGF arrangement was completed in December 2003.

12. Areas in which the Bank leads. The World Bank leads the policy dialogue on economic reforms in a number of sectors. These are: infrastructure, including roads, community water and sanitation, and urban and local government development; agriculture and rural development; human development; and private sector development.

  • Infrastructure. Infrastructure accounts for about 55 percent of commitments, and comprises several operations. The on-going Road Sector Development SIL has the objective of achieving sustainable improvements in the supply and performance of road transport services in a regionally equitable manner. The Bank Group’s engagement in energy has grown to include ESW and PSIA, a key component in the PRSC policy matrix to support power sector reform, investment lending to support operational efficiency, IFC investment in generation and preparations for support to the West African Gas Pipeline and Power Pool. Dialogue on water and sanitation policy is pivotal to underpin the major new investments in urban, small town and community water. In view of their importance for the delivery of reliable and cost-effective services, key policy issues in the roads, power and water sectors are also part of the PRSC-supported policy agenda. Based on new developments in government’s approach to telecommunication, the Bank Group has re-engaged in dialogue on sector strategy, policy and regulation.

  • The Agriculture and Rural Development strategy emphasizes increasing agricultural productivity and diversification, deepening financial intermediation in rural areas, and rehabilitating land, forest and wildlife resources in a sustainable manner. In addition to cross-cutting issues tackled in the context of the PRSCs, two ongoing IDA operations (10 percent of total lending) are supporting this agenda, the presently restructured Agriculture Services Sub-Sector Investment (AgSSIP) APL and the Rural Financial Management Services SIL. There are also two GEF projects in support of the natural resource management agenda and preservation of biodiversity. The Community-Based Rural Development Project will build on the closed Village Infrastructure Project to further a more comprehensive approach to rural based economic growth and poverty reduction.

  • In Human Development, there are five projects that account for 23 percent of total lending. The Board approved the financing for the Education Sector Project in February 2004. Twelve months earlier, it approved the Health Sector Support Program prepared using a sector-wide approach (SWAp). In addition, Bank support addresses issues in adult literacy, the prevention and treatment of HIV/AIDS, and by developing new approaches to service provision for poor and marginalized groups. PRSCs complement existing sector focused operations, leveraging their poverty focus by ensuring improved expenditure allocation (level and structure) and by addressing some of their financing implications for the poor (e.g., removal of school fees for girls in underserved areas and for disabled pupils across the country, and implementation of fee exemption policy for maternal deliveries).

  • IDA’s assistance in Private Sector Development is provided by three investment credits (10 percent of commitments). The Trade and Investment Gateway SIL, presently being retrofitted to respond to new policy approaches by government, seeks to attract a critical mass of export-oriented investors to Ghana, to accelerate export-led growth and facilitate trade, while the now closing Public Enterprise Privatization Technical Assistance has aimed to improve the business environment through policy and regulatory reform in key sectors, including energy and telecommunications. The recently-approved Land Administration project will help develop sustainable, fair, efficient and decentralized land administration system in order to increase land tenure security. In addition, the PRSCs support reforms aimed at tackling the high cost business environment, promoting trade facilitation and encouraging financial intermediation. Further Bank Group support to private sector development and financial sector reform is under active dialogue with government.

13. Areas of Shared Responsibility. The IMF and World Bank staff maintains a close collaborative relationship in supporting the Government’s structural reforms, in the areas of budgeting, expenditure and financial management, public sector reform and privatization, and the financial sector, as outlined below. Bank support to Governance and Public Sector Management is mainly provided in the context of the PRSC and through the programs supporting decentralization.

14. Budgeting, public expenditure management (PEM) and control. A February 2004 joint Bank-Fund assessment of the Government’s capacity to track poverty reducing expenditures confirmed encouraging progress compared to the 2001 evaluation and highlighted the need to substantially improve budgetary management. That assessment informed the identification of priority PEM actions being supported by the PRSC. IMF technical assistance missions and a resident advisor provide technical advice to Government on budget formulation, monitoring of budget execution, and expenditure control.

15. Public sector reform. The Fund closely follows public service reforms through their impact on macroeconomic aggregates (wage bill, overall government expenditure) and discusses the macroeconomic trade-offs the government faces in supporting a large public sector. Building on lessons learned, the Government is in the process of defining its public sector reform strategy which is expected to focus on the basic needs of running government, and shift away from the technology driven, all encompassing reform programs of the past. The Bank’s support to implementation of the Government strategy will take place in the context of PRSC and by investment projects at the sector level, including those aimed at supporting the Government’s decentralization agenda.

16. Public enterprise reform and divestiture. The Fund closely monitors the financial position of large public enterprises, mostly in the energy and financial sectors, due to their importance for public finances and macroeconomic stability. Bank assistance is provided through several projects, including the technical assistance project to support public enterprise reform and divestiture of public enterprises selected by the government for privatization. Bank dialogue in the energy sector, pursued through the Energy ESW and the PRSC, emphasizes the unbundling of VRA and private-public participation options for ECG.

17. Financial Sector. In July 2003 a joint IMF-Bank mission carried out a mission to update the 2000–2001 FSAP. The FSAP Update confirmed some progress in the financial sector associated to improved macro-economic stability, emphasized the diversity of financial institutions compared to the overall small size of Ghana’s financial sector, and acknowledged the existence of strong international connections and local skills able to compete on equal terms with international institutions. Despite this potential, the Update concluded that the financial sector is held back by an overall weak financial intermediation compared to other Sub-Saharan African countries due to various key problem areas such as inefficiencies of the dominant Ghana Commercial Bank (GCB) contributing to a lack of competition and innovation, the crowding out of the private sector, lack of long-term capital available due to poor allocation of pension resources, continued lack of level playing field for providers of financial services, and the need of further implementation of the legislative agenda. Several of the FSAP Update recommendations will be dealt with by the Government’s comprehensive Financial Sector Strategic Plan (FINSSP), recently approved. The PRSC supports implementation of key actions envisaged by the FINSSP, which could also possibly be supported by a Bank investment credit. In December 2003, the IMF published the Financial System and Stability Assessment.

Financial Relations with the World Bank Group

(Active Portfolio, as of April 30, 2004, in millions of US dollars)

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Source: World Bank

Undisbursed amounts are greater than IDA credit amounts due to exchange rate fluctuations.

Grant.

Grant element amounts to US$33 million.

For additional information, please contact Michael Diliberti, Acting Country Program Coordinator, (x38766) or Marcelo Andrade, Senior Country Economist, (x38378).

APPENDIX IV Ghana: Statistical Issues

There are notable deficiencies in the quality and timeliness of core surveillance data reported by Ghana. In general, statistical information from official sources is not disseminated to the public on a timely basis. The reporting of data to the Fund for purposes of publication in the International Financial Statistics has improved, but data on international transactions still show a lag of about four to five months. The Quarterly Economic Bulletin of the Bank of Ghana is now published more regularly, but the data show lags of up to six months. The Ghana Statistical Service (GSS) publishes the Quarterly Digest of Statistics with even longer lags. The government has agreed to take steps to ensure that both quarterly bulletins are published regularly, with a lag of not more than 60 days. The staff has encouraged the authorities to make this information available on the government and the Bank of Ghana web sites. The authorities also intend to participate in the GDDS, and in May 2004 an STA mission visited Accra to develop the initial GDDS metadata. Areas where improvements need to be made are identified below.

Prices

31. In order to review the problems in the compilation of price statistics and national accounts, a peripatetic advisor has been assigned to Ghana and three other African countries. The advisor conducted assessment and follow-up missions to Ghana in 2001–03 and finalized a work plan with the GSS, which is the agency responsible for compiling price statistics and national accounts statistics. Progress has been made on implementing the work plan, and it is now expected that revisions to the Consumer Price Index and GDP (by type of activity at current and constant prices) will be completed by later this year, and will published in early 2005.

32. A computational error has been made in the published CPI from 1999 onward. Changes for missing data have been effectively entered as no change, a feature that persisted even when price data once again became available. As a result, the rate of inflation may be significantly understated in the 1999–2001 period in particular, with the error declining in the most recent period. Because inflation is a major benchmark indicator for monetary policy and performance under Ghana’s Fund-supported program, it is an urgent matter that the timetable to correct and publish a revised CPI be accelerated and given the highest priority. Work is also underway to rebase the CPI to 1998, using the fourth Ghana Living Standard Survey (GLSS4). Preliminary analysis reveals that the basket of consumer goods has not changed significantly since the last rebasing.

National accounts

33. Nominal GDP may be seriously underestimated. Ghana’s GDP is estimated using a value added approach, multiplying volumes by the observed movement in different market prices, including the CPI index. The expected underestimation of the CPI index, therefore, affects nominal GDP. Priority must be given to the revision of national accounts data once the CPI index has been revised.

34. The GSS is currently using 1993 as the base year for its national accounts data. There are breaks in the national accounts series between 1992 and 1993, as data before 1993 have not been revised. Since revisions to GDP are now expected to cover only 2000–02, there will be a need to splice the new and old GDP series. A re-based national accounts series should be completed later this year, and published in early 2005.

35. A comprehensive overhaul of the basic sources of national accounts data is also needed, as existing sector surveys are outdated. An earlier review of the GDP compilations led to a number of recommendations: (i) private household expenditure should be estimated independently using detailed information from the household expenditure surveys; (ii) total consumption should be split into private and government consumption, deflating the former by the CPI and the latter by a price index for government output; and (iii) the constant price estimates for gross fixed capital formation in machinery and equipment should be calculated by deflating current price estimates by the relevant import unit values of that particular type of imported good. In addition, the calculation of construction investment should be replaced by more recent base-year data.

36. The investment to GDP ratio was revised downward significantly after consultations with the staff mission in March 2001. According to previous data, gross fixed capital formation measured in current prices increased from about 20 percent of GDP in 1995 to 30 percent in 1996 and 35 percent in 1999. Gross fixed capital formation remained in the range of 20 to 25 percent of GDP after the revisions. Data compiled by the Ghana Investment Promotion Council show a decline of foreign direct investments (a subcomponent of capital formation) during 1999–2001.

Labor statistics

37. The paucity of labor statistics is a cause for concern. Wage statistics are almost nonexistent, although some wage indicators are available from the Social Security National Insurance Trust (SSNIT). The Ministry of Employment has been receiving technical assistance from the United Nations Development Program and the International Labor Organization in the design and compilation of labor statistics.

Public finance

38. Steps were taken in 2001–02 to improve Ghana’s fiscal data. The Controller Accountant General’s Department (CAGD) currently compiles monthly budget implementation reports, but the data are available with long lags and many factors undermine their reliability. There are, for example, discrepancies in the data reported by the CAGD and the BOG, although these have narrowed in recent months. Above-the-line data from the CAGD are narrower in coverage than below-the-line BOG data. The lack of comprehensive and timely reconciliation of monthly treasury data with bank accounts undermines the reliability of the data. To address the shortcomings, the government has formed a committee to define the nature of “broad” and “narrow” government; moved to a system of immediate booking for so-called direct debits and more frequent reporting of government account balances; and rolled out and begun testing a new automated Budget and Public Expenditure Management System (BPEMS) in two key ministries, with plans to extend the system to four other ministries next year.

39. There are also problems of data comprehensiveness and arrears. The CAGD and the BOG miss a substantial part of central government spending, like donor flows disbursed directly to ministries, internally generated funds, and expenditures undertaken by extra-budgetary funds. The authorities continue to experience difficulties in adapting their systems to properly record and control payment commitments and arrears for on-budget flows, although a new commitment control system is planned for extension in all ministries in the last quarter of 2003.

40. Central government fiscal developments are primarily monitored from below-the-line BOG data. As no comprehensive audited accounts have been published during the last few years, above-the-line fiscal aggregates are monitored by a combination of cash-flow data from the BOG and various identifiable components of revenue and expenditure provided by the Ministry of Finance (MOF) and the CAGD. The BOG produces revenue, debt service, and domestic financing data. The Aid and Debt Management Unit (in the MOF) provides external debt data and information on foreign project loan and grant disbursements. The CAGD provides the data on noninterest recurrent expenditure and domestically financed capital expenditures.

41. Comprehensive solutions to some of the data problems may have to await the full implementation of the new BPEMS system and incorporation of Fund technical advice. Various missions from FAD have suggested a number of short-term, temporary solutions aimed at alleviating current data quality problems. A long-term advisor from FAD has been working on public expenditure and debt management issues in the Ministry of Finance since August, 2001. Earlier this year, a joint Bank/Fund mission assessed progress on monitoring poverty-related spending through the Heavily Indebted Poor Countries (HIPC) Assessments and Actions Plans (AAP), and a fiscal Report on Observance of Standards and Codes (ROSC) was undertaken.

42. The coverage and timeliness of the data reported for publication in the Government Finance Statistics Yearbook (GFSY) are seriously deficient. The latest available data relate to the fiscal year ended December 31, 1993. The authorities reported fiscal data for the 1996 GFSY, but the data could not be published, as they were not sufficiently detailed to allow conversion to the government finance statistics format. No monthly or quarterly data are reported for publication in IFS.

Monetary statistics and international reserves

43. A STA monetary and financial statistics mission in 2000 proposed a plan of action to address the classification by residency of foreign-currency-denominated deposits in commercial banks and the proper treatment of repurchase agreements between the BOG and the commercial banks. As a result, gross foreign reserves, net international reserves, and net foreign assets were redefined. Reporting according to the new definitions started in 2001.

44. Ghana’s monetary and international reserve data were significantly revised in early 2002, and are now based on a detailed mapping and automated software system that extracts the data directly from the BOG’s underlying financial accounts. Fund staff were informed in October 2001 that the BOG had revised the reported series on reserve money upward, beginning in November 1999. The previous under recording reflected adjustments to data on currency in circulation. Two TA missions in November and December 2001 examined and recompiled the reserve money data and encountered considerable difficulty in reconciling previously reported data on BOG net credit to government and net foreign assets with the underlying financial accounts; these difficulties were traced to accrual and other adjustments made. The missions concluded that most adjustments were not well founded, and together the BOG and the Fund staff agreed that the most reliable source for monetary data and international reserve data would be the BOG’s unadjusted financial accounts.

45. A July 2002 STA mission confirmed that the bridge table used to automatically generate data on central bank monetary variables and international reserves from BOG’s underlying financial accounts was complete and reliable. The BOG currently reports the data monthly with a lag of four to six weeks. In light of changes in the structure of government accounts at the BOG associated with the introduction of BPEMS, BOG staff in mid-2003 began constructing and testing a more detailed automated bridge table for government accounts to facilitate reconciliation and tracking of the budget. Subsequent STA missions detected shortcomings in the quality of data submitted by commercial banks, especially in the treatment of foreign-currency-denominated assets and liabilities, and in the reporting of government securities. The mission drafted a new report form for commercial banks, which was adopted beginning with data published for July 2003. BOG reports data from the commercial banks with a lag of eight to ten weeks.

Debt statistics

46. The responsibility for external debt recording and payment is divided among three independent agencies. The MOF, through its Aid and Debt Management Unit (ADMU), maintains the external debt database, and it is responsible for recording debtpayment obligations, issuing payment requests, and tracking HIPC debt relief. The CAGD confirms the legality of the payment and authorizes the release of public funds and is responsible for accounting of debt payments and rendering reports to parliament. The BOG is the payment agent for the government and verifies payments made to ADMU and CAGD.

47. A FAD technical assistance mission in 2001 concluded that the three institutions involved needed to improve the transparency and accountability of external debt management. The authorities should i) develop a unique computerized database that is available to all the relevant institutions; ii) formalize procedures used for settlement of debt payments (including obtaining debt notification by donors, delegating signing authorities by officials within the relevant organizations, and creating registers tracing the movement of documents required to effect external debt-payment transactions); and iii) improve the analytical content and timeliness of data, which are not reported on a periodic basis at present.

48. To enable systematic comparison of the budget, the balance of payments, and the BOG cash-flow data, the authorities should clearly identify the various government subsectors for which data are reported and prepare a clear classification of financing, as well as debt data, both guaranteed and non-guaranteed.

Trade and balance of payments statistics

49. Since 1982, the Research Department of the Bank of Ghana (BOG) has primary responsibility for the compilation and presentation of the balance of payments statistics. The main data sources are the Customs Excise and Preventive Service (CEPS), administrative data (government ministries and departments within BOG), commercial banks and the Ghana Statistical Service (GSS). In addition, the BOG carriers out simple financial surveys on other corporate entities that are involved in transactions with nonresidents. Data are compiled using the framework of the Balance of Payments Manual, Fifth Edition (BPM5).

50. Currently, the GSS is not publishing timely monthly trade statistics, although the data are available from the Customs Excise and Preventive Service (CEPS). The staff has recommended that the GSS collaborate with the CEPS to process customs data within six weeks and collaborate with the Ministry of Trade and Industry (MOT) and the BOG to identify and to reduce the discrepancies in trade statistics and to ensure that imports into bonded warehouses are not double counted. Data collection procedures of the CEPS need to be improved, and there is also room for improving trade volume data collected by the CEPS through customs invoices, which would help the GSS to develop meaningful import and export unit values. The staff has also recommended that the GSS and the MOT seek the cooperation of VALCO in reconciling discrepancies in aluminum exports data.

51. The staff has recommended that GSS develop export unit values for major export commodities, such as gold and cocoa. A high coverage of the country’s export bundle can be obtained by including just three major exports—cocoa, gold, and unwrought aluminum. In contrast, the deflation of imports is likely to involve an iterative procedure in order to strike a balance between coverage of the index and its stability, owing to the heterogeneity of the basket.

52. In mid-2003, Ghana began producing quarterly balance of payments data. Further effort is needed to implement recommendations of a technical assistance mission on balance of payments statistics in 2000, which found that improvements in the quality of these statistics would necessitate the introduction of surveys of key establishments, the training of staff in the Balance of Payment Unit of the BOG, improved collaboration among the various government agencies responsible for data collection, and additional computer resources. In addition, the introduction of surveys of various travel agents and tour operators is needed to improve the quality of the information in the balance of payment services account. Ghana only reports annual data to STA. Although the latest available data refer to 2002, their quality is questionable. There are no data available for Portfolio Investment flows in the financial account, even though Ghana reports substantial amounts under income on portfolio investment in the current account.

53. The BOG has been unable to expand sufficiently the coverage of foreign direct investment flows into Ghana mainly because commercial banks do not report such flows. Moreover, survey data collected by the Ghana Investment Promotion Center (GIPC), as required under the 1994 GIPC Act, are thought to miss an important portion of foreign direct investment (FDI) flows. The technical assistance mission suggested that BOG work closely with the GIPC and the Attorney General’s Office to improve the quality of FDI data obtained from the survey of these establishments.

APPENDIX V

Ghana: Core Statistical Indicators

(As of May 19, 2004)

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Both gross official reserves and net international reserves reported each month with lag of 4 to 6 weeks.

Central government.

Monthly data reported infrequently.

D=daily; W=weekly; M=monthly; Q=quarterly, A=annually; and V=infrequently.

C=cable or facsimile; E=electronic data transfer; M=mail; R=provided to Resident Representative; and V=staff visits.

APPENDIX VI

Work Program

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1

The disbursement following completion of the first review in December 2003 has since been deemed noncomplying, due to nonobservance of a prior action on alignment of water tariffs with the automatic pricing formula. This matter will be brought to the Executive Board before the request for the third disbursement under the PRGF arrangement.

2

In the 2002/03 crop season, cocoa production reached 497,000 metric tons, and through April of this year, production from the main crop (October-May) had already reached that level. With continuing good weather, output from the light crop (May-June) could bring total production for the 2003/04 campaign to more than 600,000 metric tons.

3

The float for 2003 was about ¢ 322 billion (0.4 percent of GDP), which included delayed payments of subsidies to TOR and for other goods and services.

4

The yield on 91-day treasury bills declined to 18 percent in May 2004, from 36 percent in mid-2003, while the Bank of Ghana’s prime rate was reduced to 18.5 percent from 27.5 percent over the same period.

5

Indeed, the HIPC Assessment and Action Plan (HIPC-AAP) follow-up determined that Ghana’s capacity to track poverty-related expenditures has improved, with 7 of the 16 benchmarks now being met, compared with only 1 out of 15 earlier (Table 7). The initial action plan was drawn up in 2001, and contained 15 indicators; a 16th indicator, procurement, has been added to the set of benchmarks. The Fund’s recent Report on the Observance of Standards and Codes (forthcoming) also presents a favorable view of the authorities’ overall efforts in improving fiscal data, although scope for improvement remains.

6

In September 2004, the bank’s board is expected to approve a share flotation on the stock exchange to inject new capital, scheduled for early 2005, and advisers on a management contract for the bank are expected to be appointed in July 2004, leading to a competitive tender by mid-2005.

7

Since this security brings TOR’s net debt to the banking system back to the programmed path, the staff is recommending a waiver for the nonobservance of the quantitative performance criterion.

8

The project to re-estimate the consumer price index and re-base the national accounts, with assistance from an STA advisor, has taken longer than expected, but it is hoped that the work will be completed this year, and the new data published in early 2005.

9

The program’s formulas called for average increases at end-January of around 9 percent for petroleum, 2 percent for electricity tariffs, and 1 percent for water tariffs.

10

The program assumed that the contribution from hydro in the generation of electricity would not exceed 50 percent of total electricity generated. (A higher proportion of hydro in the generation mix lowers the cost of producing electricity). Since the actual hydro contribution in the fourth quarter of 2003 and first quarter of 2004 exceeded 70 percent, the PURC considered it prudent to assume a hydro contribution of 60 percent for the January and April 2004 calculations. There will be an opportunity to reconsider how this crucial parameter is projected when the PURC reviews the design of the utility tariff formulas in late 2004 or early 2005.

11

See the accompanying paper, Joint Staff Assessment of the Poverty Reduction Strategy Paper Annual Progress Report, EBD/04/60, June 9, 2004.

12

The budget also includes an allocation equivalent to US$25.6 million for the Electoral Commission to cover the cost of the 2004 elections, of which about 40 percent is being provided by donors.

13

The staff agreed that it would be appropriate to exclude from the targeted debt stock at end-2004 the special bonds issued recently for recapitalization of GCB and the BOG, since these recapitalizations took place earlier than expected. The target for the domestic debt-GDP ratio at end-2005, however, is in line with the original program including the recapitalization bonds (see Table 4). The fiscal program incorporates the interest costs of both recapitalizations.

14

To estimate the subsidy cost, the projection assumes: unchanged pump prices for the rest of the year; world oil prices in line with (March 2004) World Economic Outlook projections; nominal exchange rate movements in line with purchasing power parity; and a pattern of petroleum consumption in line with last year.

15

The NHIL is a 2 ½ percent tax on value-added, and will be collected by the VAT Service.

16

The legislative instrument becomes effective automatically 21 sitting days after being submitted to parliament. A two-thirds majority in parliament would be required to block it.

17

The scope for additional spending consistent with the program’s medium-term debt reduction targets is shown in Table 4 as “contingency,” and rises to almost 1 percent of GDP by 2006. Ghana’s progress towards meeting the MDGs is detailed in Chapter 9 of the Annual Progress Report of the GPRS.

18

While only a handful of African countries have adopted this regime (see Box 3), it appears to have worked well where it has been tried.

19

It is envisaged that the oversight body and the OMCs would also periodically review the parameters of the formula, which could be modified by mutual consent.

20

Accordingly, the third review has been rescheduled to May 2005, and disbursements for the remainder of the arrangement rephased (Table 8). In due course, this rephasing will require an extension of the arrangement period.

21

This process began in April 2004 with the first competitive tender for imports of premium gasoline. Whereas TOR had to rely on GCB and the central bank for financing its imports, the successful bidder in the tender (a large private OMC) arranged financing from a syndicate of local banks.

22

In addition to the 9 percent primary reserve requirement, commercial banks are required to hold at least 20 percent of their deposits in treasury bills and 15 percent in inflation-indexed government bonds.

23

The credit information legislation should pave the way for creation of a credit reference industry in Ghana, the absence of which is frequently cited as impeding small and medium-sized enterprises’ access to credit.

24

While Ghana is a signatory to the agreements on the planned West African Monetary Zone, including a provision that seeks to limit exchange rate fluctuations within a prescribed band, the authorities stated that they viewed this band as purely indicative.

25

The World Bank’s “Doing Business in Ghana” project recently concluded that since 2002, the time to start a business had fallen from 129 to 85 days, and the licensing fees and associated costs to start a business had also been reduced.

26

In NPV terms, there is an increase in the debt-to-export ratio shown in Table 3, compared with the previous projection (IMF Country Report No./03/395), as a result of the decline in the discount rate and nominal exchange rate depreciation.

27

(A) The term “debt” has the meaning set forth in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt (Decision No. 12274-(00/85) August 24, 2000). This includes overdrafts on accounts with correspondent banks. (B) Excluded from this performance criterion are normal import-related credits, pre-export financing credits of public enterprises, cocoa loans collateralized by cocoa contracts, and individual leases with a value of less than US$100,000. Also excluded are obligations that may be established at the conclusion of negotiations with a foreign shareholder in Ghana Telecom relating to a US$50 million payment made by the shareholder to the Government of Ghana in 2000, and a loan (not exceeding US$60 million) that may be contracted to securitize future reimbursements from the United Nations in connection with Ghana’s participation in UN peacekeeping operations.

28

(A) This performance criterion applies not only to debt as defined in point No. 9 of the Guidelines on Performance Criteria with Respect to Foreign Debt (Decision No. 12274-(00/85) August 24, 2000) but also to commitments contracted or guaranteed for which value has not been received. (B) Excluded from this performance criterion are: individual leases with a value of less than US$100,000; debts with a grant element equivalent to 35 percent or more, calculated using currency-specific discount rates based on OECD commercial interest reference rates; a loan (not exceeding US$60 million) that may be contracted to securitize future reimbursements from the United Nations in connection with Ghana’s participation in UN peacekeeping operations; and loans or purchases from the IMF. The grant element of each loan will be assessed only with regard to (i) the interest rate and repayment schedule of the loan and (ii) any grants or other concessional loans provided by a foreign official entity in connection with the loan in question. Loans provided by a private entity will not be considered concessional unless accompanied by a grant or grant element provided by a foreign official entity equal to at least 35 percent of the combined loan.

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Cover IMF Staff Country Reports
Ghana: Second Review Under the Poverty Reduction and Growth Facility and Request for Waiver of Nonobservance of Performance Criteria
Author:
International Monetary Fund
Volume/Issue:
Volume 2004: Issue 210
Publisher:
International Monetary Fund
ISBN:
9781451814897
ISSN:
1934-7685
Pages:
103
DOI:
https://doi.org/10.5089/9781451814897.002
  • Figure 1.
    View in gallery
    Figure 1.

    Ghana: Bank of Ghana’s Index of Economic Activity, February 2000-December 2003 1/

  • Figure 2.
    View in gallery
    Figure 2.

    Ghana: Consumer Price Inflation (total, food, and nonfood), June 1999-April 2004

    (Twelve-months percent change)

  • Figure 3.
    View in gallery
    Figure 3.

    Ghana: Nominal and Effective Exchange Rates, January 1991-March 2004

  • Figure 4.
    View in gallery
    Figure 4.

    Ghana: Main External Indicators, 1996-2008

  • Figure 5.
    View in gallery
    Figure 5.

    Ghana: Central Government Finances, 1996-2008

    (In percent of GDP)

  • Figure 6.
    View in gallery
    Figure 6.

    Ghana: Reserve Money and Components 1998:Q4-2004:Q4

    (In billions of cedis)

  • Figure 7.
    View in gallery
    Figure 7.

    Ghana: Treasury Bill Rates and Open Market Operations, January 1997-April 2004

  • Figure 8.
    View in gallery
    Figure 8.

    Ghana: Terms of Trade and the Real Effective Exchange Rate, 1990-2004

    (Index, 1995 = 100)

Figure 1.

Ghana: Bank of Ghana’s Index of Economic Activity, February 2000-December 2003 1/
Figure 2.

Ghana: Consumer Price Inflation (total, food, and nonfood), June 1999-April 2004

(Twelve-months percent change)
Figure 3.

Ghana: Nominal and Effective Exchange Rates, January 1991-March 2004
Figure 4.

Ghana: Main External Indicators, 1996-2008
Figure 5.

Ghana: Central Government Finances, 1996-2008

(In percent of GDP)
Figure 6.

Ghana: Reserve Money and Components 1998:Q4-2004:Q4

(In billions of cedis)
Figure 7.

Ghana: Treasury Bill Rates and Open Market Operations, January 1997-April 2004
Figure 8.

Ghana: Terms of Trade and the Real Effective Exchange Rate, 1990-2004

(Index, 1995 = 100)