The World Bank in Ghana

Ghana sits on the Atlantic Ocean and borders Togo, Cote d'Ivoire, and Burkina Faso. Its population is about 29.6 million (2018). In the past two decades, it has taken major strides towards democracy under a multi-party system, with its independent judiciary winning public trust. Ghana consistently ranks in the top three African countries for freedom of speech and press.

President Akufo-Addo has faced a much more challenging environment during his second term He is left with 14 months to the end of term of his government, since he is term-limited he will not be running for Office again. The ruling NPP faces a tough challenge towards reelection, because of the country's ongoing economic struggles. The success of President Akufo-Addo's second term will depend on his government’s ability towards leading Ghana on the path of debt sustainability and reaching an agreement with external creditors on external debt restructuring under the IMF program.

Recent economic developments 

Ghana’s economy entered a full-blown macroeconomic crisis in 2022 on the back of pre-existing imbalances and external shocks. Large financing needs and tightening financing conditions exacerbated debt sustainability concerns, shutting-off Ghana from the international market. Large capital outflows combined with monetary policy tightening in advanced economies put significant pressure on the exchange rate, together with monetary financing of the budget deficit, resulting in high inflation. These developments interrupted the post COVID-19 recovery of the economy as GDP growth declined from 5.1% in 2021 to 3.1% in 2022. The 2022 fiscal deficit was well above target at 11.8%. Public debt rose from 79.6% in 2021 to over 90% of GDP in 2022, as debt service-to-revenue reached 117.6%.

To help restore macroeconomic stability, Ghana has secured a three-year IMF Extended Credit Facility (ECF) program of about $3 billion and has embarked on a comprehensive debt restructuring. The authorities have committed to a frontloaded fiscal consolidation while pursuing a tighter monetary policy, complemented by structural reforms in the areas of tax policy, revenue administration, and public financial management, as well as steps to address weaknesses in the energy and cocoa sectors. The government has completed a Domestic Debt Exchange Programme (DDEP), implemented an external debt repayments standstill, and sought official debt restructuring under the Common Framework.

In the first half of 2023, GDP growth rebounded to 3.2% on the back of strong growth in services (6.3%) and agriculture (6.2%). On the other hand, the industrial sector contracted by 2.2% as all industry sub-sectors (oil and gas, manufacturing, water and sewerage, and construction) shrank, except for mining and quarrying. 

First half 2023 data indicates that fiscal balance improved to a deficit of 0.8% of GDP while the primary balance (commitment basis) recorded a surplus of 1.1% of GDP.

Inflation which has been driven by food prices, remained elevated at 40.1% in August 2023.

Poverty has worsened. The “international poverty” rate is estimated at 27% in 2022, an increase of 2.2% points since 2021. Ghanaian households have been under pressure from high inflation and slowing economic growth.  

Outlook

Growth is expected to slow further to 1.5% in 2023 and remain muted in 2024 at 2.8%, before returning toward its potential. The ongoing fiscal consolidation, corrective monetary policies, high inflation, interest rates, and macroeconomic uncertainties will keep private consumption and investment low. This will result in muted non-extractive growth but extractives growth is expected to be robust in the medium term thanks to new gold mines and a recovery in small-scale mining. The balance of payments is expected to continue to deteriorate in 2023, on the back of continued capital outflows, before recovering in the medium-term.

Poverty is projected to worsen between now and 2025, increasing to nearly 34% (international poverty line) by 2025, consistent with a muted outlook on growth in services and agriculture and rising prices which are outpacing the income growth of those at the bottom of the distribution. Despite considerable inflation in the country, its minimum wage has only increased by 10% – insufficient given the pace of inflation.

Risks and Challenges

Risks to the outlook include financial sector stress following the DDEP, contingent liabilities in the energy and cocoa sector, domestic policy slippages with the 2024 elections being a particular risk, delays in external debt restructuring, commodity price and other external shocks, and sharper-than-expected monetary policy tightening in advanced economies.

Last Updated: Oct 04, 2023

The Ghana Country Partnership Framework (CPF) for FY22-26 seeks to support the government in managing the impact of the COVID-19 crisis through preserving critical human capital and capabilities while taking the opportunity to build back better for a dynamic and diversified economy, creating job opportunities for a greener, more resilient, and inclusive society. The three focus areas are: (i) Enhancing Conditions for Private Sector Development with Quality Job Growth; (ii) Improving Inclusive Service Delivery; and (iii) Promoting Sustainable Resilient Development. Digital transformation is a cross cutting theme.

The World Bank portfolio commitment is $4.3 billion, covering 20 national projects (IDA), and 5 regional operations ($660 million). The World Bank committed a record $1.736 billion to Ghana over the 2-year IDA19 cycle including $931 million across eight operations in FY22. This included $391 million in COVID-19 support. In FY22 the program delivered three large Programs for Results (PforRs) operations in public financial management, health, and additional financing to Secondary Cities; one regional project (Gulf of Guinea Northern Regions Social Cohesion) which was approved in March 2022. In FY23, three Projects and two additional financing were approved for a total commitment of $800 million: West Africa Food System Resilient Program Phase 2; West Africa Coastal Areas Resilience Investment Project 2, Ghana Safety Net Project phase 2 additional financing Greater Accra Resilient and Integrated Development.

International Finance Corporation (IFC) Country Strategy and Operations

As of March 2023, IFC’s investment portfolio in Ghana was $448 million in financing and $12.5 million in advisory services, spanning sectors such as agribusiness, education, energy, financial services, health, manufacturing, real estate, transport, and tourism. In addition, IFC has provided technical assistance to improve the investment climate and trade logistics in Ghana. Under IFC’s current strategy for supporting Ghana’s economic growth and resilience, priority sectors are agribusiness, export-oriented manufacturing, and access to finance for micro, small, and medium enterprises. The most recent transactions include an investment in LMI Holdings to support the installation of a rooftop solar plant and water treatment facility in the Tema and Dawa industrial zones.

Multilateral Investment Guarantee Agency (MIGA) Operations

MIGA’s mandate is to promote cross-border investment in developing countries by providing guarantees, political risk insurance and credit enhancement, to investors and lenders. MIGA currently insures four active projects in Ghana, supporting power, telecoms, clean water, and oil and gas supply, with total active gross exposure of $448.2 million.

Last Updated: Oct 04, 2023

In response to the slowing economic growth, widening inequality, and deepening poverty, the Government of Ghana (GoG) established and progressively expanded its safety nets programs. It also invested in systems reforms to strengthen efficiency, transparency, and objectivity of social protection delivery and increased financing to the sector over time. Building on this increasing political will, the Ghana Productive Safety Net Project (GPSNP), contributed to attaining Ghana’s goals for poverty alleviation by strengthening safety net systems that improve the productivity of the poor and improving access to livelihood opportunities and access to basic services. This included: more than 167,000 beneficiaries through a Labor-Intensive Public Works program (LIPW); 346,000 households through a Livelihood Empowerment Against Poverty (LEAP) cash transfer program, and additional support through the Productive Inclusion program.

Beneficiaries were selected from the poorest districts and communities using the most updated data available from the Ghana Statistical Service.

In 2015, the Government launched the Ghana National Household Registry (GNHR) to improve the targeting of social protection programs and rolled out electronic payment systems. It also piloted a Productive Inclusion program to provide sustainable livelihood opportunities and help beneficiaries to graduate from cash transfers. Under the GPSNP the percentage of beneficiaries who initiated or expanded a household enterprise through the productive inclusion program was 89.3 %, surpassing the target of 70 %. The average annual earnings of unskilled workers in the short-term labor-intensive public works (LIPW) were 1078.56 cedi, surpassing the target of 600. The percentage of respondents reporting that assets created through LIPW improved their livelihoods was 99.5 %, against a target of 70 %. The percentage of beneficiaries who are identified as extremely poor according to targeting criteria was 77.1 %, against a target of 70 %.

The Greater Accra Metropolitan Area (GAMA) Water and Sanitation project has increased access to household sanitation by supporting the construction of 33,000 household toilets to serve over 332,456 people as of April 2022. It has also under its institutional sanitation component supported the construction of 398 new sanitation facilities and rehabilitated 105 (in 260 different schools) providing 232,000 school pupils with improved sanitation facilities. The project helped provide access to improved water supply to more than 368,000 people through 281 km of distribution pipelines and delivered 10,200 new service connections. 51,5 % of Project beneficiaries are women.

The now closed Ghana Commercial Agricultural Project (GCAP) which was to improve agricultural productivity and production of smallholder and nucleus farms has benefited 14,264 farmers of which 4,876 are women. The project helped them surpass the target for yield of maize, rice (under rainfed conditions) and soya in the Savannah Accelerated Development Authority (SADA) zone. GCAP successfully rehabilitated, modernized, and expanded the three irrigation schemes and brought in commercial partners to work with smallholder farmers in the project regions to produce rice, maize, and vegetables all-year round and reduce dependence on rain-fed agriculture. The rehabilitation of the Tono Irrigation Scheme made available 2,490 hectares for cultivation twice a year. At the Kpong Irrigation Scheme which had about 1,000 hectares of irrigated land cultivated under GCAP, the rehabilitation increased the irrigable land size to approximately 2,000 hectares. 

The eTransform project supports digital entrepreneurship program through three tech hubs—the Ghana Tech Lab, the Ghana Innovation Hub in Accra, and the Kumasi Business Incubator in Kumasi. To date, they have helped boost entrepreneurial skills for over 11,000 young people. In total, 49 startups have been formed, and more than 1,200 businesses have been supported through access to workspace, mentoring and training. The Ghana Tech Lab alone has trained more than 5,400 youth in digital skills—half of whom are female. Over 18,000 youth have been trained at the tech hubs; out of which 51.8% are females. 3582 jobs have been created out which 55,4% are females. The establishment of operational infrastructure and support for Cyber Security Authority contributed to Ghana obtaining a higher score (86.69%) and ranking in the 2020 Global Cybersecurity Index ranking Ghana 3rd in Africa. Under the e-Justice component Case management system has been automated at 51 High Courts in Accra. Over 61000 cases have been processed through the system. The project has contributed to the reduction of average days to process a birth certificate from 15 days to 7 days, it has also helped in the reduction of average days to process a company registration from 4 days to 2 days and increased the number of e-services available to the public from 8 to 16.

Last Updated: Oct 04, 2023

The World Bank country program in Ghana was coordinated with other development partners through the preparation of the Systematic Country Diagnostic (SCD) and of the Country Partnership Framework. The consultations brought together partners in civil society, development partners, academia, the private sector, and government. The WBG is working closely with other partners to offer coordinated support to the Government in the recovery from the downturn. The Bank is also coordinating support on macroeconomic management and debt sustainability with the current IMF’s ECF program including through a Development Policy Operation (DPO) which is in preparation. It actively engages with other development partners in dialogue and coordination around emerging topics and participates in several thematic working groups with the government and other Development Partners (DPs) in key sectors including health, education, social protection, climate change and energy.

Last Updated: Oct 04, 2023