Ghana has evolved into a stable and mature democracy throughout the last two decades. The country continues to show good performance on democratic governance, arising from strong multi-party political system, growing media pluralism and strong civil society activism. The most recent elections were held in December 2012 with the Electoral Commission declaring the candidate for the National Democratic Congress (NDC) party, the incumbent President John Mahama, as the winner with 50.7% of the vote. NDC also won a parliamentary majority. However, the presidential election result was contested in the courts by the main opposition New Patriotic Party (NPP). The election results were upheld in August 2013, after an eight-month battle in the Supreme Court of Ghana.
On press freedom, Ghana progressed from 41st to 30th position out of 179 countries and 3rd in Africa according to the ‘Reporters Without Borders’ 2013 Press Freedom Index report. The 2012 report of the World Wide Governance Indicators places Ghana between the 50th and 60th percentile on political stability, government effectiveness, and regulatory quality, rule of law, control of corruption and voice and accountability. This performance reflects the positive effects of an improving environment for democratic governance, coupled with a gradual improvement in the effectiveness of public institutions and persistent economic growth, resulting in Ghana attaining a lower middle income status.
The country’s economy grew ahead of the average for the Africa region, with gross domestic product (GDP) growth at 15% in 2011 and 7.9% in 2012, prompted by strong cocoa production, construction and transport, continued increased gold output and the commercialization of oil. Inflation eased to 8.8% in 2012 on the back of declining food price inflation, but producer price inflation was at 17%.
Between 2009-2012, Foreign Direct Investment (FDI) flowed in to the tune of US$3 billion per year. The current account deficit averaged at about 8.6% of GDP between 2008 and 2010, but rose to 9.2% of GDP in 2011 and increased further in 2012 to 12.2% of GDP.
Recent Economic Developments
The Ghanaian economy is expected to expand rapidly in the second half of 2013 to enable Ghana reach the projected GDP growth for the year. This growth is bench marked on continued growth of the service sector, improved energy supply and higher oil production. In the medium term, real GDP growth is expected to remain high as Ghana explores its new oil fields. The Ghana Statistical Service projected growth to reach 7.4% by the end of 2013.
Inflation is expected to remain on the upper side of the Central Bank range of 9-11%, due to energy price increases that have been postponed. Potential risks to inflation include an expansionary fiscal stance fueled by the payment of 2013 salary adjustment, adjustment of utility and petroleum prices and rising prices of imports due to the higher import levies. In the medium term, inflation is projected to moderate below 8% annually.
The potential risk to the fiscal target of 9% of GDP includes the existing high wage bill and outstanding fiscal commitments. The government faces the challenge of stepping up the implementation of the 2013 revenue measures while minimizing unbudgeted expenditures for the rest of the year. The Ghanaian government has agreed on a 10% base pay increase for all public servants. According to officially published data, the fiscal deficit reached 4.4% of GDP, compared to 5.4% in 2012, mainly on the account of non-payment of statutory expenditures of about 1.3%. Fiscal pressures will continue mounting in the economy due to a 10% retroactive rise in public sector wages (Ghs859 million) that needs to be paid and increasing interest cost. The government financed its fiscal deficit mainly from domestic sources (76% of total).
In July, 2013 Ghana issued its second 10-year Eurobond of US$1billion on the international capital market to support its development programme. The coupon rate was 7.825% and a yield of 8%. Gross International reserves are expected to improve in the second half of the year, mainly by the $1billion Eurobond issued in July, 2013 and the COCOBOD syndicated loan which is expected in the last quarter of the year. The reduction of the outflow of short term capital is expected to continue for the rest of 2013. In the medium term, international reserves are projected to increase beyond three months of imports of goods and services annually.
Consumer price inflation reached 11.8% in July 2013, mainly due to the adjustment in petroleum prices, demand pressure resulting from the fiscal expansion, and seasonal effects of crop production on domestic food prices. Half year broad money (M2+) growth moderated from 34.2% in June 2012 to 14.2% driven by a sharp decline in growth of foreign currency deposits to 1.8% from 47.3% in June 2012. The net foreign assets of the central bank expanded from US$2.4 billion in June 2012 to US$2.6 billion mainly on the account of reclassification of items to include Ghana petroleum funds.
The Cedi weakened on the interbank trading market in the first half of 2013. On average, the cedi depreciated against the dollar and euro by 3.4% and 6.6% respectively by half year. This compares with depreciation of 17.2% and 12.6% against the dollar and euro by June 2012.
Last updated October 2013
A new World Bank Group Country Partnership Strategy (CPS) was endorsed by the Bank in September 2013. The objective of the Ghana Country Partnership Strategy FY13-FY16 is to assist government to sustain economic growth, accelerate poverty reduction and enhance shared prosperity in a sustainable manner. The CPS seeks to support Ghana to consolidate its transition to lower middle income status, address sources of inequality, and help pave the way to access to International Bank for Reconstruction and Development (IBRD). The CPS program is based on three pillars; improving economic institutions, improving competitiveness and job creation, and protecting the poor and vulnerable. In turn, these pillars are anchored in the Ghana Shared Growth Development Agenda pillars of competitiveness and employment, vulnerability and resilience, and governance and public sector capacity, which together reflect the Ghanaian government’s strategic goals of diversifying the economy and sustaining high rates of growth, reducing poverty and inequality in access to basic services and opportunities, and strengthening governance while mitigating and managing risks. The CPS is also aligned with the compact between the government and its development partners.
The total World Bank Group exposure is approximately US$3.49 billion. The current portfolio consists of US$2.26 billion of credits and grants from the International Development Association (IDA), US$309 million from the Multilateral Investment Guarantee Agency (MIGA), and committed exposure in Ghana is US$871 million from the International Finance Corporation (IFC) or US$925 million including B-loan and syndicated loan exposures. Disbursed and outstanding exposure in Ghana is US$535 million from the IFC or US$590 million including B-loan and syndicated loan exposures. Close coordination between the members of the World Bank Group (WBG) will be essential in delivering the agreed CPS program to achieve reductions in extreme poverty and enhance shared prosperity during the next four years.
The strategy incorporates a substantial current IDA portfolio consisting of 25 operations during the CPS period for a total commitment of US$1.5 billion in addition to eight regional operations with an additional net commitment of US$752 million. The investment operations are in infrastructure, human development and competitiveness. Infrastructure accounts for approximately 56% of net commitments and investments with a focus on trunk, urban and feeder roads, urban and rural water and sanitation, and energy. Human development represents 9% of net commitments and is concentrated in support for the national social protection network, the modernization of the National Health Insurance Authority, and the strengthening of vocational training.
Ghana is an important stakeholder in the regional projects. Ghana is an essential part of six regional projects in West Africa, in transport, energy, agriculture and trade, for a total amount of about US$750 million in commitments. In transport, two regional corridors are being supported jointly with other donors, the Abidjan Lagos corridor along the coast, and the Bamako Ouagadougou Tema corridor. In energy, Ghana is an essential player for the West Africa Power Pool which has laid out a power transmission grid that interconnects the region. In agriculture, the West Africa Agricultural Productivity Program is disseminating innovative approaches to local crops. Also shared with the other members is part of the West Africa Regional Fisheries Project. Going forward, the key area of engagement on the regional agenda for Ghana is trade and the elimination of non-tariff barriers in intra-ECOWAS trade, particularly in agriculture, manufacturing and services.
Ghana is a leader in the Aid Effectiveness agenda. The government and its development partners renewed their partnership under the Compact for 2012-2021, as an effort to reduce the transaction cost of everyone while delivering aid. For budget support, there is a Multi-Donor Budget Support (MDBS) group that coordinates the matrix of policy action among all development partners. The budget support provided accounts for about 25% of aid currently but as high as 40% in recent years. The coordination architecture for budget support is complex and intensive in transactions (about 37 active sector and thematic working groups, a multi-donor budget support group pulling the work of the working groups into a common matrix, a Heads of Missions group who provides political guidance, a Heads of Cooperation who provides operational guidance on priorities and trade-offs, and the MDBS which focuses on budget support. The number of players in this structure is large - about eight donor organizations as well as most government ministries participate in this process. Leveraging the strong complementarities within the World Bank Group to support Ghana to achieve and sustain more inclusive growth is essential. Aid dependency is relatively diminishing in Ghana and will likely continue to decline. But the need to mobilize increasing volumes of non-concessional financing for infrastructure and to mobilize domestic and external private investment capital and expertise to propel economic growth and diversification will take on increased importance. At the same time the role of development partners, including the World Bank Group, in helping Ghana expand and strengthen social service delivery and strengthen institutional capacity to manage the economy and safeguard against risks and shocks will continue to be critical. IDA, IBRD, IFC, and MIGA are ideally placed to work together to support Ghana in this respect with concessional IDA resources to be targeted primarily towards activities with high social returns, while resources from IFC and MIGA will be targeting more commercially viable activities.
In fiscal year 2014, the Bank intends to deliver projects to address the country’s competitiveness challenges, a financial sector reform program, the continuation of the support to the National Health Insurance, modernization of government systems under the Information and Communications Technology (ICT) for transformation, and a program to help deal with issues of youth employment.
As of end-May 2013 Ghana has 59 trust funds, 66% of the currently active trust funds are Bank-executed, the majority of which are funding analytical work, IFC advisory services and, in some cases, supervision of major programmatic trust funds. Major programmatic trust funds going into the CPS period include multi-donor trust funds for energy, education, fisheries, land, transport, and the REDD.
MIGA currently supports five active projects in Ghana (power, manufacturing, telecoms, water and sanitation and oil and gas) with total net exposure of US$309 million from MIGA. The power sector project guarantees a loan provided by Société Générale Canada Branch (SGCB) to the government to finance the completion of the Takoradi 3 Power Plant which will expand the existing Takoradi T1/T2 power plant complex in the Ghanaian district of Sharma Ahanta facility. The expansion of the Takoradi 3 Power Plant will allow it to feed more electricity to Ghana’s national grid, allowing broader and more reliable access to power. Efforts to bolster the energy sector are essential to avoid blackouts, such as the ones Ghana experienced in 2008. As such the project fits into the government’s power sector plans, which specifically seek to increase installed capacity from 2000 megawatts to 5000 megawatts and enable Ghana to become a net exporter of electricity to neighboring countries by 2015. MIGA’s support for the project is also aligned with the World Bank Group’s Country Partnership Strategy for Ghana, which urges the strengthening and expansion of the country’s power generation and distribution systems The manufacturing project supports the establishment of a greenfield company, Takoradi Renewable Energy Ltd. in Ghana, that will produce biomass from rubber trees in plantations in the country's western region. The woodchips produced from the trees will be exported through the Takoradi port to European markets for biomass power generation. The project is expected to benefit the local community by providing about 70 additional jobs and alleviating primary forest deforestation. In addition, the introduction of biomass to Ghana's economy will introduce new business opportunities. The project also facilitates the replanting and rehabilitation of rubber trees, thereby improving the sector's sustainability. MIGA's support is aligned with the first pillar of the CPS, which calls for raising private sector competitiveness through engagements in private and financial sector development, modernization of agriculture, sustainable natural resource management, and investment in infrastructure. The project was underwritten through MIGA's Small Investment Program. The telecoms project, underwritten in 2005, provided insurance coverage for a US$110 million equity investment into Scancom Ltd. of Ghana by Investcom Holding S.A. of Luxembourg for the expansion and upgrade of Scancom’s network in Ghana, with the goal of increasing population coverage and alleviating network congestion. The project is expected to provide positive development impact through increased coverage and more affordable rates that also facilitate small business development, as entrepreneurs gain access to a critical communications medium as well as direct impact through the creation of create additional jobs and opportunities for professional development.
MIGA currently supports the construction and operation of a seawater desalination plant in Accra by Befesa Desalination Developments Ghana Ltd. which aims to improve the security and quality of the water supply in the Teshie-Nungua area of the city. MIGA is currently considering two new projects to support access to water and sanitation, consistent with the government’s strategies and priorities.
The Gas and Oil Capacity Building Project, also underwritten in 2005, guarantees the equity investments in the West African Gas Pipeline Company Limited, covering a portion of Ghana’s contractual obligations for the West African Gas Pipeline Project. The project is expected to supply cheaper, cleaner energy and improve the reliability of energy systems in Ghana, Benin, and Togo, thus lowering the cost of power and improving the competitiveness of goods and services. Moreover, this project supports ongoing efforts to increase economic integration in West Africa and was the first in the region to develop regional exports of natural gas. The Multilateral Investment Guarantee Agency (MIGA) guarantee is accompanied by an International Development Association (IDA) partial risk guarantee to the West African Gas Pipeline Company for US$50 million in respect to Ghana’s obligation to make certain payments. In addition, MIGA currently has proposed two new projects in the oil and gas and the water sectors for FY13.
IFC Country Strategy and Operations
The International Finance Corporation (IFC) in Ghana has a strategy in place that seeks to increase competitiveness of the private sector, and committed exposure is US$871 million for IFC's own account, or US$925 million including B-loan and syndicated loan exposures. Disbursed and outstanding exposure in Ghana is US$535 million for IFC's own account, or US$590 million including B-loan and syndicated loan exposures. The investments and advisory services include infrastructure services, such as power, water and sanitation, financial sector, small and medium enterprise (SME) access to finance, and it also includes the development of commercial agriculture. It also has investments in the real sectors, such as manufacturing, tourism, mining, and health and education. It also includes investments that have a positive effect on the climate change agenda.
Last updated October 2013
The recently completed Country Assistance Strategy Completion Report assesses the progress that the World Bank assistance to Ghana in the financial years from FY08-FY12. Progress towards the FY08-FY11 Country Assistance Strategy (CAS) outcomes has largely been positive, the most important is the achievement of macroeconomic stability, for instance has – with the rebased gross domestic product (GDP), non-oil GDP fiscal deficit (cash basis, before arrears) been reduced from 8% of GDP in 2008, to 4% in 2009 and finally to 2.4% in 2011. Advances were also seen in agriculture through Agricultural Development Policy lending. In agricultural crop production where the yield in key staples increased substantially: maize: from 1.50 to 1.89 mt/ha (26%) rice: from 2.00 to 2.71 mt/ha (36%) sorghum: from 0.98 to 1.28 mt/ha (31%) millet: from 0.83 to 1.24 (49%) cassava: from 12.20 to 15.43 mt/ha (26%). Application of fiscal models in the natural resources governance sector has allowed modification of the method of calculating royalties and removal of certain allowable deductions for the mining companies, and has given support to proposals to revise regulations, including an increase from three% to five% royalty payments.
Through the Land Administration Project, the turn-around time for land title registration has been reduced from more than six months to 2.5 months. In energy supply, the national electrification rate increased from 58% in 2011 to 66%. In health, the infection rate of infants born to HIV-infected mothers was reduced from 30% in 2004 to 5.2% in 2011.
In primary education, completion rate increased from 83.2% in 2009 to 91.6% in 2011, but quality remains low. The improvements in access to education across the country have been supported by the World Bank-financed Ghana Partnership for Education project. The Council for Technical and Vocational Education and Training (COTVET) was established to improve skills from workers on a demand driven basis with support from the Ghana Skills and Technology Development Project.
Under the Ghana Social Opportunities Project, the Livelihood Empowerment Against Poverty Program (LEAP) targeting system was put in place to reach out to the extreme poor.
There has been significant progress in the Information and Communications Technology (ICT) sector. The combined efforts of government’s proactive policy and regulatory interventions, support from the World Bank Group and other development partners, and highly competitive private sector is translating into increased investment, impressive telephone penetration rate of over 80% in July 2011 (from 60% in 2010 and less than three% in 2003), over 50% decrease in local and international call rates, and a threefold reduction in internet access prices from US$3 to less than US$1/hr. ICT jobs increased 53% to 5,000. The e-Ghana project is contributing to these achievements by supporting critical applications, skills development, and regulatory institutions.
Weaker progress was registered in private sector development, transport, sanitation, and public sector reform. For instance, the ratio of (credit of the private sector) and credit to the private sector and claims on government, including claims on public sector enterprises and cocoa financing) reached 55% and fell short of the target of 70%. In transport, as an example, the percentage of road in good condition (International Roughness Index (IRI) <4.5) on the Tema – Ouagadougou portion of Corridor increased from 50% to 55% but the target was set at 80%. In sanitation, approximately 50,000 people were provided with sanitation facilities but the target was set at 100,000 people. Also the targets in public sector reform on improved consolidation and comprehensiveness of reliable government fiscal reports, based on GFSM2001 reporting standards, for quality economic decision making was not met and in the related sector of evidence-based policy-making was not met, i.e. Annual Progress Reports (APRs) were not available for all sectors with gender disaggregation of key indicators by 2012.
Overall, out of a total of the 54 indicators selected to measure progress towards achieving the CAS objectives, 61% show good progress (partially achieved), with 44% of the indicators having reached their target.