Ghana

Accra

key figures• Land area, thousands of km2 239 • Population, thousands (2005) 22 113• GDP per capita, $ PPP valuation (2005) 2 248• Life expectancy (2000-2005) 56.7• Illiteracy rate (2005) 23

African Economic Outlook 2005-2006 www.oecd.org/dev/publications/africanoutlook

GhanaAll tables and graphs in this section are available in Excel format at:

http://dx.doi.org/10.1787/181581784855

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THE GHANAIAN ECONOMY IS REAPING the benefitsof macroeconomic and structural reforms and nearlyfifteen years of political stability. Strong domesticrevenue mobilisation, prudent expendituremanagement, and debt relief granted under the HeavilyIndebted Poor Countries (HIPC) debt reductionprogramme, along with recent debt reduction promisesby the G8, have improved the government’s fiscalposition. At the same time, credible monetary policyhas eased inflationary expectations, brought downthe cost of borrowing and provided stability in theforeign exchange market. This improvingmacroeconomic stance has contributed to a recentupsurge in economic growth, with real GDP growthreaching an estimated 5.9 per cent in 2005, up fromthe average annual rate of 5.5 per cent realised during2000-04. Growth is projected to increase to about6.1 per cent in 2007.

Economic growth has been led by agriculture,notably three consecutive bumper cocoa crops resultingfrom both favourable weather and improving policies.This strong growth performance has enabled Ghana

to accelerate implementation of its poverty reductionstrategy. Moving forward, aggressive structural reforms,particularly in the financialsector have put the economyon course to stimulate domesticentrepreneurship and attractgreater foreign investment inthe coming years.

Nonetheless, Ghana mustincrease its economic growthsubstantially if it is to generate adequate employmentgrowth, further reduce poverty and attain middle-income status over the next decade. To do so, Ghanamust improve its transport infrastructure, especiallythe road network. Currently, less than 50 per cent ofthe country’s roads are in good condition, and therailway network is almost non-functional. Theseinfrastructural deficiencies constitute a majorimpediment to private sector development and increasedforeign investment. Perceptions that corruption isincreasing also pose a threat to continued growth andrequire attention from the government.

The steady growth from prudent macroeconomic policies, structural reforms and strong agricultural performance needs to increase substantially to generate employment and further reduce poverty.

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Figure 1 - Real GDP Growth and Per Capita GDP($ PPP at current prices)

Source: IMF and domestic authorities’ data; estimates (e) and projections (p) based on authors’ calculations.

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Recent Economic Developments

Ghana’s economic growth record over the past twodecades has been among the strongest in Africa ataround 4.5 per cent annually. Growth accelerated toabout 5.3 per cent in 2000-03, rose further to 5.8 percent in 2004 and to an estimated 5.9 per cent in 2005.Growth is expected to remain strong at about 6 per centin both 2006 and 2007.

Recent growth has been driven largely by theagricultural sector, the largest sector of the economyaccounting for nearly half of total GDP and about60 per cent of total employment. The sector grew by7.5 per cent in 2004 and was estimated to have expandedby 6.5 per cent in 2005. Favourable weather has beenthe main factor behind the rise in agricultural output.However, higher producer prices and greater use offarm machinery and irrigation were also important.

Rising cocoa production has underpinned thegrowth in agricultural output. Cocoa production roseby nearly 30 per cent in 2004 yielding a record cropof 736 911 tonnes in the 2003/04 crop season. Cocoaoutput decreased somewhat to 583 109 tonnes in the2004/05 crop season which nonetheless represented astrong performance by historical standards. The strongcocoa output in 2004 and 2005 owed much to improvedcrop management and to the mass spraying of cocoafarms under the government’s Cocoa and Pests ControlProgramme, which aims to control capsid pest andblack pod disease. The gradual increase in the domesticproducer price of cocoa, which is now nearly 70 percent of the world price, has also provided a majorincentive to the country’s smallholder cocoa farmers.However, due to declining world prices of cocoa since2003, even maintaining guaranteed payment levelswill be a challenge.

Cocoa and other crops, especially oil palm, cassava,sorghum and millet have benefitted from the“Presidential Special Initiatives”, which aims tomodernise Ghanaian agriculture through thedissemination of better farming practices, the provisionof irrigation facilities, and distribution of improvedvarieties of seeds and fertilisers. As part of the second

Ghanaian Poverty Reduction Strategy (GPRS II), thegovernment plans to expand these initiatives in 2006through measures to enhance access to credit andagricultural inputs and by increasing availability ofextension services.

Nonetheless, the agricultural sector faces majorstructural problems. For example, it is estimated thatonly 5 per cent of irrigable land in Ghana is actuallyirrigated; and extension services are so limited thateach technical officer is responsible for helping nearly2 000 farmers. Moreover, 40 per cent of all agriculturaloutput is wasted annually due to inadequate storagefacilities, marketing chains and poor infrastructure.

Although the industrial sector has continued toshow signs of recovery, industrial production is notgrowing rapidly enough to attain the government’sobjective of an industrial sector that accounts for about37 per cent of GDP by 2010. In order to achieve thisobjective, industry would have to grow at an annualrate of at least 12 per cent. In 2004, industrial outputgrew by 5.1 per cent and accounted for 21.5 per centof total GDP. This share was estimated to have risento 23.9 per cent in 2005 following estimated growthof 5.6 per cent.

Manufacturing, the largest component of industrialoutput, has grown more slowly than the rest of theeconomy since 2002. In 2004, the manufacturing sub-sector’s growth rate stood at 4.6 per cent, almost thesame level as in the preceding two years. In 2005,manufacturing output was estimated to have expandedby about 5 per cent. The mining and quarrying sub-sectors have also grown a little more slowly than theeconomy as a whole, with the growth rate slowingfrom 4.7 per cent in 2003 to 4.5 per cent in 2004 andan estimated 3 per cent in 2005. The only industryexperiencing faster growth is cocoa processing. As a resultof new foreign investment in processing plants, thevolume of cocoa processed domestically is expected torise to 250 000 tonnes by 2007 from just 70 000 tonnesin 2005.

Industrial output has remained concentrated on afew capital-intensive products: petroleum and oil

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refining, non-ferrous base metals, cement, and other non-metallic mineral products. The government’s recentindustrial diversification and growth strategy targetedtextile and information and communication technology(ICT) industries but these efforts have largely failed.Some had hoped for a revival of the local textile industryas Ghanaians return to traditional forms of dress usingthe kente and adinkra designs. However, the localindustry, relying on antiquated machinery and producing

low volumes, has continued to decline in the face of cheapimports of textiles and second-hand clothing.

Accelerated industrial growth requires assistanceto small- and medium-sized enterprises, notablyregarding access to credit, more reliable and cheapertelecommunications and electric power, improvedtransportation and other public services, and reducedcorruption.

Agriculture and livestock

Cocoa production and marketing

Other agriculture

Manufacturing Mining and quarrying

Wholesale and restaurants

Government services

Other services

Other industry

27%

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4.7%

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Figure 2 - GDP by Sector in 2004 (percentage)

Source: Authors’ estimates based on domestic authorities’ data.

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Other services

Government services

Wholesale and restaurants

Other industry

Manufacturing

Mining and quarrying

Other agriculture

Cocoa production and marketing

Agriculture and livestock

Figure 3 - Sectoral Contribution to GDP Growth in 2004 (percentage)

Source: Authors’ estimates based on domestic authorities’ data.

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In 2005, the service sector grew at an estimated rateof 5.4 per cent. Social services, especially educationand health, were boosted by the Ghana EducationTrust Fund (GET Fund) and funds released by HIPCdebt relief. Financial services also expanded with theopening of new banks and introduction of new financialservices. The establishment in 2003 of the Kofi AnnanCenter of Excellence and the extension of ICT facilitiesto schools and colleges in the country by Ghana Telecomcontributed to the expansion in telecommunications.Growth in mobile telecommunications was particularlystrong in 2005, due to an expansion of services byMillicom and Scancom. These activities havecontributed to an increase in tele-density (telephonesper 100 persons) from about 5.2 per cent in 2003 to6.6 per cent in 2004.The number of phone lines morethan doubled from about 650 000 in 2002 to over1.3 million in 2004.

Tourism continues to boom, and the sector is nowGhana’s third largest foreign exchange earner. Thenumber of visitors to the country has maintained anupward trend since 2000 with an increase in arrivalsof 11 per cent in 2004 and an estimated increase of10 per cent in 2005. Tourist receipts also increasedsharply, by nearly 17 per cent in 2004 followed by a

further increase of 16 per cent in 2005. The increasein tourism has been driven by the increased promotionof individual and conference tourism, and by improvedsecurity, especially around the airport and the maintourist attractions. The increased number of flightsinto Ghana by several international airlines is both acause and an effect of this tourism boom. Nonetheless,the majority of tourists continue to be Ghanaianexpatriates.

These developments in various economic sectorsalso reflected, and sometimes contributed to, an increasein the growth rate of total investment in 2004, whichwas sustained in 2005. In particular, private investmentgrew strongly in 2004 and 2005, suggesting that theprivate sector was beginning to play its designated roleas an engine of growth. Private capital formation isprojected to remain strong in 2006 and 2007 asconfidence in the economy grows on the back of thegovernment’s prudent macroeconomic policies andpolitical stability of the country. Similarly, thegovernment’s expansionary fiscal stance has been reflectedin rising public investment, although in 2004 and 2005much of this investment continued to be financed byforeign savings. The economy is expected to maintaina similar structure of aggregate demand in 2006 and 2007.

Table 1 - Demand Composition (percentage of GDP)

Source: IMF and domestic authorities’ data; estimates (e) and projections (p) based on authors’ calculations.

1997 2002 2003 2004 2005(e) 2006(p) 2007(p)

Gross capital formation 24.8 19.7 22.9 27.9 30.2 30.9 31.7Public 12.5 6.1 8.9 11.9 12.4 12.7 13.1Private 12.3 13.6 14.0 16.0 17.8 18.2 18.6

Consumption 95.8 92.7 89.1 92.8 94.7 95.3 94.2Public 15.1 17.6 17.7 16.0 16.7 17.0 16.6Private 80.7 75.1 71.4 76.8 78.1 78.3 77.5

External sector -20.6 -12.4 -12.1 -20.7 -24.9 -26.2 -25.9Exports 32.4 42.5 40.7 37.0 33.3 29.6 26.7Imports -53.0 -54.9 -52.7 -57.7 -58.2 -55.8 -52.5

Macroeconomic Policies

Fiscal Policy

Ghana’s recent macroeconomic policy has focusedon achieving stability as a prerequisite for the HIPC

completion point in 2004 and beyond. Within thiscontext, the main goal of the government’s fiscal policyhas been to reduce the ratio of domestic debt to GDPby reducing net domestic borrowing through controllingthe fiscal deficit, as well as extending the maturity ofoutstanding debt.

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The policies have been largely successful insofar asthe domestic debt to the GDP ratio fell from about21 per cent in 2004 to 19.3 per cent in 2005. Moreover,the ratio of domestic debt service to total revenue fellfrom 45.1 per cent in 2003 to 28.4 per cent in 2004and was estimated at 27 per cent in 2005.

The overall fiscal deficit, which fell from 3.3 percent of GDP in 2003 to 3.1 per cent in 2004, isestimated to have risen to 4.4 per cent in 2005. Theoverall fiscal deficit is projected to deteriorate furtherin 2006 and 2007 as the government maintains anexpansionary fiscal stance.

Increasing revenues remains a key objective of fiscalpolicy. Improved tax administration, as well as newtaxes, led to an increase in the fiscal revenue to GDPratio from 20.2 per cent in 2003 to 22.3 per cent in2004 and an estimated 22.4 per cent in 2005. Startingin 2004, fiscal agencies were allowed to retain 3 per centof revenue collected to meet their administrative costs;this measure appeared to yield the desired results as allagencies exceeded their targets. The National HealthInsurance Levy, implemented in 2004, is estimated toyield revenue of about 1 per cent of GDP annually.

Despite these advances, the tax base remains too narrow,with a high dependence on petroleum taxes, and foreignaid remains a large source of funding for the government.

Government expenditure has increased in step withrevenues, preserving fiscal stability. Total expenditurerose to 33.3 per cent of GDP in 2004 and to anestimated 34.3 per cent of GDP in 2005 from 28.8 percent of GDP in 2003. The government has attemptedto improve control of expenditures through a numberof legislative measures enacted in 2004. These includedthe Financial Administration Act, the Internal AuditAct and the Procurement Law, which provided clearerprocedures on expenditure management within thepublic sector. The 2005 National Petroleum AuthorityAct mandated that the National Petroleum Authority(NPA) bring domestic petroleum prices closer to worldprices, thereby eliminating government subsidies onpetroleum products estimated at 2.3 per cent of GDP.Reductions in market interest rates on debt instrumentscontributed to lower debt-service payments. Continuedcontrol of expenditures is threatened in the near term,however, by a rising public sector wage bill andincreasing political pressures as the 2008 generalelections approach.

Table 2 - Public Finances (percentage of GDP)

Source: Authors’ estimates (e) and projections (p) based on domestic authorities’ data.

1997 2002 2003 2004 2005(e) 2006(p) 2007(p)

Total Revenue and grants 18.7 21.1 25.5 30.1 29.9 29.7 29.4Tax revenue 14.7 17.5 20.2 22.3 22.4 22.5 22.5Grants 1.4 3.1 4.7 6.4 6.0 5.7 5.4

Total expenditure and net lending 29.0 26.1 28.8 33.3 34.3 34.3 33.9Current expenditure 16.5 20.0 19.8 20.9 21.4 21.1 20.4

Excluding interest 10.3 13.8 13.7 16.6 17.5 17.9 17.7Wages and salaries 5.3 8.5 8.4 8.7 8.8 8.9 8.6Interest on public debt 6.3 6.1 6.2 4.3 3.9 3.2 2.6

Capital expenditure 12.4 6.1 8.9 12.4 12.9 13.2 13.6

Primary balance -4.0 1.2 2.9 1.2 -0.4 -1.3 -2.0Overall balance -10.3 -5.0 -3.3 -3.1 -4.4 -4.6 -4.6

Monetary Policy

Ghana’s monetary policy remains focused onbringing inflation down to single digits and limitingexchange-rate volatility. In recent years, the growth of

monetary aggregates has remained consistent with thegovernment’s targets. The annual growth in broadmoney (M2) slowed from 35.8 per cent in 2003 to26.6 per cent in 2004 and to 19.1 per cent bySeptember 2005. The continued slowdown in the

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expansion of monetary aggregates accommodated lowermoney demand following the introduction of 2- and3-year Bank of Ghana bonds.

Inflation remained stable despite a nearly 50 percent increase in petroleum prices in early 2005 and afurther 5 per cent increase late in the year. However,these petroleum price increases prevented thegovernment from achieving its target of single-digitinflation. The rate of inflation stood at 12.6 per centin 2004 and is estimated to have remained very similarin 2005. Inflation is projected to ease in 2006 and2007 as prudent monetary management continues.

The easing of inflationary expectations and decliningpublic sector borrowing has led to a continued declinein interest rates. In the face of the fall in inflation in2004 and relative exchange-rate stability, the Bank ofGhana cautiously lowered its policy rate from 20 percent in February 2004 to 15.5 per cent inNovember 2005. Short-term rates have declinedcorrespondingly, with the yield on 91-day Treasury billfalling from 36 per cent in June 2003 to 18 per centin May 2004. By the end of September 2005, the ratehad dropped further to 13.34 per cent. Althoughdeclining much faster than deposit rates, lending ratesremained high at 27.75 at the end of September 2005.

Ghana operates a managed floating exchange-rateregime, with interventions from the central bank limitedto smoothing short-term fluctuations in the foreignexchange market. Higher levels of remittances, steadydonor inflows and stronger earnings from cocoa helpedto offset the effects of higher oil prices on the currentaccount balance, with the cedi consequently depreciatingonly slightly in 2004 and 2005 by 2.2 per cent and2.1 per cent respectively. This recent stability stands incontrast to the extreme volatility seen in the past,particularly the sharp depreciation of 57 per cent in 2000.

External Position

The government’s development strategy relies onexport growth and increasing inward direct investment.In this vein, in early 2005 the government launchedthe National Trade Policy, which aims to enhance

Ghana’s international competitiveness and secure greatermarket access for Ghana’s products. In particular, thepolicy seeks to promote regional integration withinthe Economic Community of West African States(ECOWAS) through the harmonisation and reductionof tariffs and non-tariff barriers to trade. The governmentalso finished planning the Trade Sector Support Program(TSSP) in 2005. The TSSP aims to facilitate thedevelopment of commercially-viable domestic andexport-oriented enterprises, especially in rural areas. Inline with the government’s renewed determination tomake the private sector the engine of growth in theeconomy, this programme may be given the necessarypush to succeed.

Ghana’s trade and current account deficits bothwidened in 2004 and 2005, exerting some downwardpressure on GDP growth. The trade deficit rose from10.3 per cent of GDP in 2003 to 17.1 per cent in2004 and is estimated at 20.6 per cent in 2005. Indollar terms, total imports rose by 32.9 per cent in2004 and by a further 31.9 per cent in 2005 mainlydue to rising crude oil prices. Export earnings (also indollar terms) rose more slowly by 8.7 per cent in 2004and are estimated to have increased by 4 per cent in2005 primarily due to increases in the main traditionalexports (cocoa, gold and timber products). There hasbeen little success in export diversification, as notedearlier. As a result, exports are projected to stagnate,contributing to a continuing widening of the tradedeficit in 2006 and 2007.

Despite the large increase in the trade deficit, strongaid and capital inflows allowed Ghana to record anoverall balance of payments surplus in 2005 of $86.7 million following the small deficit of$10.5 million in the preceding year. Consequently,Ghana’s international reserves increased to $1.6 billionat the end of 2005, equivalent to three months importsof goods and services.

Ghana’s total external debt stood at $6.4 billion atthe end of 2004, a fall of about 20 per cent from thelevel at the end of 2003. Multilateral creditors accountedfor about 88.6 per cent of the total debt, while bilateralcreditors (Paris Club and non-Paris Club) accounted

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for about 8.4 per cent, and private creditors accountedfor 3 per cent. Ghana’s total debt as a percentage of GDPhas fallen sharply from a peak of 119 per cent in 2001to 72.5 per cent in 2004 due to both debt relief andeconomic growth. The debt service ratio was estimatedat about 8 per cent in 2004, down from 11.7 per centin 2001.

Ghana reached its completion point in the HIPCdebt relief programme in July 2004. The country hasnow also completed the negotiations for debt reliefwith bilateral creditors required for its implementationand received a number of commitments of additionalbilateral and multilateral debt cancellations. With theHIPC debt cancellations and the recent promise made

Table 3 - Current Account (percentage of GDP)

Source: Authors’ estimates (e) and projections (p) based on domestic authorities’ data.

1997 2002 2003 2004 2005(e) 2006(p) 2007(p)

Trade balance -17.9 -11.2 -10.3 -17.1 -20.6 -21.7 -21.3Exports of goods (f.o.b.) 26.3 32.7 32.4 31.4 28.7 25.6 23.0Imports of goods (f.o.b.) -44.2 -43.9 -42.7 -48.5 -49.3 -47.3 -44.3

Services -2.7 -1.1 -2.2 -4.4Factor income -1.9 -2.8 -1.4 -1.9Current transfers 8.1 14.6 15.7 20.6

Current account balance -14.4 -0.5 1.7 -2.7

at the Gleneagles G-8 summit to cancel Ghana’sremaining debt, the government expects the country’soutstanding foreign debt to fall further to $2.1 billionin 2010. As part of its debt management strategy, thegovernment maintains a policy of contracting newloans with a minimum grant element of 35 per cent.

Structural Issues

Ghana’s overall strategy relies on the private sectoras the engine of growth, driven by increasing domesticand foreign investment. To this end, the government’sstructural policies continue to focus on four main areas:

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Figure 4 - Stock of Total External Debt (percentage of GNI)and Debt Service (percentage of exports of goods and services)

Source: World Bank.

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i) reforming the public sector; ii) improving the enablingenvironment for the private sector; iii) streamliningregulations and building capacity in the financial sector;and iv) improving the country’s infrastructure.

In an effort to give further impetus to the publicsector reform process, the government appointed aMinister of State responsible for public sector reformsin 2005. Subsequently, the government has outlineda comprehensive work programme for the reform ofthe public sector and submitted reform legislation toParliament, the Sub-vented Agencies Reform Bill(SARB).

The government has approved a new nationalmedium-term private sector strategy for 2005-09 andan Action Plan to facilitate private-sector development.It seeks to promote development by reducing the risksand cost of doing business in Ghana and therebyincreasing both local and foreign investments.

Privatisation is another component of thegovernment’s strategy for boosting private investment.In 2005, the government moved towards granting aconcession for the operation of the railroad system,described in more detail later. Privatisation of the urbanwater system is also moving forward in Ghana, despitesome intense opposition.

Ghana appears poised to attract more foreigninvestment in natural resources, notably in gold,bauxite, cocoa and timber. The recent rise ininternational gold prices, which is expected to persist,has renewed the interest of international miningcorporations in the country’s gold. The NewmontMining Corporation, the world’s largest gold producer,has submitted a proposal to develop two new open pitdeposits in the next few years, with an investment ofnearly $2 billion. The government also bought intothe Volta Aluminium Company (VALCO) in 2005.The government hopes that, as an equity partner, itcan attract new private investors to help developGhana’s vast bauxite deposits.

Financial sector reforms are another key componentof the government’s efforts to promote private sector

development. Following the passage of the Banking Actin 2003, which strengthened the supervisory powersof the Bank of Ghana, in 2004 the governmentintroduced the new Companies Code and set upcommercial courts to facilitate business conflictresolution. Also in 2004, the government introducednew insurance regulations, measures to combat moneylaundering and agencies to disseminate creditinformation with the goal of enhancing the credibilityof the financial system.

In 2005, the government focused on encouragingthe financial sector to shift away from lending to thegovernment in favour of commercial lending thatwill support economic development. To this end, themonetary authorities introduced several changesdesigned to reduce the costs of financialintermediation. First, the government significantlyreduced bank reserve requirements. Second, thegovernment introduced the Real Time GrossSettlement System (RTGS), which provides a standardplatform for electronic payments at the retail level.Third, the government established a central securitydepository system that provides an electronic registryfor holdings of government securities and equitiesand enables secondary market trading.

A new foreign exchange bill was also drafted in2005 to be presented to parliament in early 2006. Thisbill is expected to clarify regulations on foreign exchangetransactions and on convertibility of the currency.

Transport Infrastructure

Improving transport infrastructure remains a focalpoint of Ghana’s development agenda. The governmenthas three main goals in this regard. First, it hopes thatexpanded infrastructure will help to reduce poverty byimproving access to markets and to other economicand social infrastructures, particularly in ruralcommunities where about 60 per cent of the populationlives. Second, it expects that improvements in transportinfrastructure will help bridge the north-southdevelopment divide of the country. Third, thegovernment hopes to promote economic integrationin West Africa by constructing roads and rail links to

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its neighbours. In this regard, it has been proposed toexpand Ghana’s existing rail network from southernGhana to northern Ghana as a first step in linking thecountry to Burkina Faso, Mali and Niger. Similarproposals to link Ghana to Côte d’Ivoire and Togo byrail are also under consideration.

Road transport accounts for about 98 per cent offreight moved in the country. The road network coversabout 50 000 km. The country has two main ports atTema and Takoradi. There is also a more limited porton Lake Volta handling inland water transport. Anadditional inland port at Boankra in the Ashanti regionis under development. Accra’s international airportserves a growing number of international airlines andfour other regional airports. The railway system inGhana consists of a triangular network, confined to thesouthern half of the country, connecting Accra, Kumasiand Sekondi-Takoradi with a total track length of about1 300 km. Most of this existing infrastructure is inpoor condition. As a result, the government has focusedits efforts on rebuilding these existing networks.

Ghana’s road system has been gradually improving.According to the government’s assessment, theconditions of the country’s roads improved from23 per cent “good”, 27 per cent “fair” and 50 per cent“poor” in 2001 to 40 per cent “good”, 30 per cent“fair” and 30 per cent “poor” in 2004. Thegovernment aims to increase the fraction of roadsrated “good” to 60 per cent by 2009. In order toreach this target, the government would need torefurbish about 5 000 km of roads per year, far abovethe current rate of 1 500 km per year. In addition,the civil conflict in Côte d’Ivoire has increased theimportance of Ghana as a transit corridor forneighbouring land-locked countries, notably BurkinaFaso and Mali. The increased traffic is likely toexacerbate wear and tear on Ghana’s road system. Inparticular, many trucks carrying this surge of cargohave been violating the axle-load restrictions.

Rehabilitation work is also ongoing on the railnetwork, which is largely non-operational at present.With assistance from the World Bank, the governmenthas initiated a programme to privatise the whole rail

system, and in 2005 it invited bids to operate thelines under a concession arrangement. KotokaInternational Airport serving Accra has beentransformed into a modern airport, with the goal ofmaking Ghana the business hub of the sub-region. Theports have also seen important upgrades. A newcontainer terminal has been constructed at the TemaPort. Meanwhile, dredging and rehabilitation workcontinues at the Takoradi Port. These projects haveimproved services and shortened waiting times forshipment and clearing of goods.

Lack of financing remains a major constraint inupgrading transport infrastructure. Financing for theroad network comes from three main sources: thegovernment, road users and foreign donors. Untilrecently, the government has been the largest source offunding for road construction and maintenance. Since1985, the government has used tolls to raise funds forroad maintenance and, since 1996, it has expanded therevenue stream through fuel levies, vehicle registrationfees and road-use fees. Concessional loans fromdevelopment partners have recently covered over 70 percent of road construction expenditures. Majorcontributors have included the World Bank, the AfricanDevelopment Bank, the International DevelopmentAssociation, the governments of Germany and Japan,the Saudi Fund for Development and the Arab Bankfor Economic Development in Africa (BADEA). Thegovernment will face a critical financing gap whenWorld Bank support for the road constructionprogramme ends in 2006.

Financing in the rail and marine sectors has alsotraditionally come from a mixture of external,government and private sources, with the World Bankbeing the major external source of funds for railrehabilitation. Since 2000, the government has alsocollaborated with multinational mining companies,especially in bauxite and manganese to maintainvulnerable sections of the railway network. Financingof infrastructure in the aviation sector has comepredominantly through private loans. Ghana alsocollects fees from operating the regional air trafficcontrol system, which covers all flights over Ghana, Togoand Benin for flights at altitudes above 23 000 ft.

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Political and Social Context

With four elections since 1992 and a successfultransfer of power from an incumbent administrationthrough the ballot box in 2000, Ghana remains a rareexample of a maturing democratic culture in WestAfrica, where many countries have experienced civilwars, coups or lasting incumbent rule. December 2004saw another round of successful presidential andparliamentary elections. The elections returned theruling New Patriotic Party (NPP) government to power.

Governance appears to have improved in 2004with the enactment of the Freedom of InformationBill and the Whistle Blowers Bill, both aimed atenhancing individual freedoms and bolstering civilsociety. The government also demonstrated itscommitment to democratic principles by volunteeringto be the first country to face scrutiny under the NEPADPeer Review Mechanism in May 2004. Nonetheless,substantial governance problems remain. WhileTransparency International rates Ghana as one of theleast corrupt countries in Africa, Ghana’s corruptionperception rating has slipped back to levels seen whenthe NPP first came to office in 2000. In particular,increasing decentralisation in service delivery has helpedto create additional opportunities for corruption.

Ghana’s consistent growth of about 5 per cent perannum for the last 15 years has resulted in one of thefastest rates of poverty reduction in Africa. Acute poverty– income of less than $1 a day – has fallen from about51 per cent in the early 1990s to 35 per cent in 2004.Most poverty is still rural, although available figuresindicate a slight increase in poverty in urban areas,from 8 to 9 per cent in 2004. Nutrition indicators forurban children have also deteriorated. Relentlessurbanisation is shifting the pattern of poverty. Urbanyouth face the most difficulty as Ghana struggles tocreate formal sector jobs and provide services for thegrowing urban population. A disturbing dimension ofthe youth unemployment problem is the growingjoblessness among university and other tertiarygraduates, whose numbers exceed available vacancies,and who often appear to lack the skills that potentialemployers are seeking. Unemployment rates are also high

among the graduates of the middle and junior secondaryschools (JSS), also apparently because these schoolsfail to provide marketable skills.

The government is seeking to increase access toeducation, improve the quality of education, and raisegender parity in schools. In its Education StrategicPlan, the government is providing free and compulsorybasic education, defined as primary school and JuniorSecondary School (JSS). Also, in 2004 the governmentintroduced the Capitation Grant Scheme that providesfor expanded services. The scheme was first introducedto 53 deprived districts but, since September 2005,has been extended to all public primary and JSS schoolsin the country. These programmes contributed toraising the primary school enrolment ratio from 86.1 percent in 2003/2004 to 87.5 per cent in 2004/2005.Gross enrolment at the JSS level, however, is lessimpressive. Moreover, students are performing poorlyin basic subjects at the JSS Basic Education CertificateExaminations. In 2004, 41 per cent of all pupils failedin mathematics and science.

Government efforts to improve health care deliveryappear to have improved both access to health carefacilities and the quality of care. Government initiativeshave particularly focused on expanding access to qualityhealth care among Ghana’s poor. In 2004, theCommunity Health Planning and Services programmewas extended to four deprived regions. Further, in2004 the government provided 15 new health centresand 3 district hospitals as part of its goal to have ahospital in each district of the country. In the comingyears, the government’s main vehicle for improvinghealth care delivery will be the National HealthInsurance Scheme which will increase funding for thehealth sector. The Scheme is financed using 2.5 per centof workers’ social security contributions. The Schemewas piloted in 45 districts in 2004. Also in 2004, thegovernment began a subsidised anti-retroviral (ARV)treatment for those afflicted with HIV/AIDS.

Despite these advances, obstacles remain. Theexodus of health personnel to developed countriescontinues to be a major problem. Available informationindicated that Ghana lost over 30 per cent of its trained

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health personnel between 1993 and 2003. Additionally,progress in public health is severely limited byshortcomings in water infrastructure. In 2004, only half

of the country’s rural population and 60-70 per centof city dwellers had access to safe water.

.