Document of The World Bank

FOR OFFICIAL USE ONLY

Report No. 36127-GH

INTERNATIONAL DEVELOPMENT ASSOCIATION

AND

INTERNATIONAL FINANCE CORPORATION

COUNTRY ASSISTANCE STRATEGY PROGRESS REPORT

FOR

THE REPUBLIC OF GHANA

FOR THE PERIOD OF FY04-FY07

May 8,2006

Country Department 10 Africa Region

The International Finance Corporation Sub-Saharan Africa Department

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.

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AAA APRM APL ART BOG BPEMS CAGD CAS CEM CFAA CPAR CPIA CPR CWIQ DA DACF DFID DPs ECG EdSEP ESW EU FINSSP FSAP GAC GAS GCNet GDP GET Fund GPER GLSS GNI GoG GPRS GPS HIPC HIPC AAP IDA IMF IMR LIL MDAs MDBS MDG MDRI M&E MFI MMDAs MMR MOFEP

CURRENCY EQUIVALENTS Cedis

$ 9,073

- Currency Unit - Cedis - - us$o.oool US$l - -

FISCAL YEAR January 1 - December 3 1

ACRONYMS AND ABBREVIATIONS

Analytical and Advisory Activities Africa Peer Review Mechanism Adaptable Program Lending Anti-Retroviral Treatment Bank o f Ghana Budget and Public Expenditure Management System Controller and Accountant General Department Country Assistance Strategy Country Economic Memorandum Country Financial Accountability Assessment Country Procurement Assessment Report Country Policy and Institutional Assessment Country Program Review Core Welfare Indicators Questionnaire District Assembly District Assembly Common Fund Department for International Development of the United Kingdom Development Partners Electricity Company of Ghana Education Sector Project Economic and Sector Work European Union Financial Sector Strategic Plan Financial Sector Assessment Program Ghana Aids Commission Ghana Audit Service Ghana Community Network Gross Domestic Product Ghana Education Trust Fund Gross Primary Enrollment Rate Ghana Living Standards Survey Gross National Income Government o f Ghana Ghana Poverty Reduction Strategy Ghana Partnership Strategy Highly Indebted Poor Countries HIPC Expenditure Tracking Assessment and Action Plan International Development Association International Monetary Fund Infant Mortality Rate Learning and Innovation Loan Ministries, Departments and Agencies Multi-Donor Budgetary Support Millennium Development Goals Multilateral Debt Relief Initiative Monitoring and Evaluation Micro Finance Institutions Metropolitan, Municipal and District Assemblies Maternal Mortality Rate Ministry o f Finance and Economic Planning

MOH MTEF NDAP NDPC NETS NHIS PEM PER PETS PLWHA PPB PPMED PRGF PRSC PSIAs PSD PSRS PURC SEA SDR SWAP TA TOR TRC U5MR UNICEF VRA WAGP WAPP

Ministry o f Health Medium-term Expenditure Framework National Decentralization Action Plan National Development Planning Committee National Expenditure Tracking System National Health Insurance Scheme Public Expenditure Management Public Expenditure Review Public Expenditure Tracking Surveys People Living With HIV/AIDS Public Procurement Board Policy, Planning and Monitoring & Evaluation Department Poverty Reduction and Growth Facility Poverty Reduction Support Credit Poverty and Social Impact Analysis Private Sector Development Power Sector Reform Strategy Public Ut i l i t ies Regulatory Commission Strategy Environmental Assessment Special Drawing Rights Sector Wide Approach Technical Assistance Tema Oil Refinery Tender Review Committee Under 5 Mortality Rate United Nations Children’s Fund Volta River Authority West Africa Gas Pipeline West Africa Power Pool.

IDA IFC Vice President: Gobind T. Nankani, AFRVP Acting Vice President: Declan J Duff, CIOVP Country Director: Mats Karlsson, AFClO Director: Richard L. Ranken, CAFDR Task Team Leader: Malathi S. Jayawickrama, AFCGH Country Manager: Imoni Akpofure, CAFW2

TABLE OF CONTENTS

I . INTRODUCTION ............................................................................................................... 1

I1 . GHANA’S DEVELOPMENT GOALS AND THE RELEVANCE OF THE CAS ....... 1

A . B .

Ghana’s Progress towards the CAS Outcomes and Remaining Challenges ................... 2 The Bank’s Contribution to Ghana’s Development and the Relevance o f CAS ............ 5

I11 . BANK GROUP PROGRAM .............................................................................................. 8

A . Implementation Performance ......................................................................................... 8 B . Analytical and Advisory Activities (AAA) .................................................................... 9 C . IFC and MIGA Activities .............................................................................................. 10 D . Managing Risks ............................................................................................................ 11

I V . GPRS I1 AND THE FUTURE BANK PROGRAM ....................................................... 12

BOX

Box 1

Table 1 Table 2

Annex 1 Annex 2 Annex 3 Annex 4 Annex 5 Annex 6 Annex 7 Annex 8 Annex 9 Annex 10 Annex 11

The Multi-Donor Budget Support (MDBS) Program ......................................................... 6

TABLES

Ghana’s Progress under the CAS Pillars and Remaining Challenges ......................... 4 Total Bank Disbursements (US$m) in Calendar Years 2002-2005 ....................... 9

ANNEXES

Progress towards CAS Outcomes ............................................................................. 14 Planned and Actual Lending. FY04-07 ...................................................................... 19 The AAA Program. FY04-07 ..................................................................................... 20 Result-Focused CAS for Ghana ................................................................................. 21 Country Financing Parameters ................................................................................... 31 Fund Relations Note ................................................................................................... 32 Ghana at a glance ....................................................................................................... 34 Selected Indicators o f Bank Portfolio Performance and Management ...................... 36

Statement o f IFC’s - Held and Disbursed Portfolio ................................................... 38 Operations Portfolio (IBRD/IDA and Grants) ........................................................... 39

IBRD/IDA Program Summary ................................................................................... 37

MAP IBRD # 33411

1

COUNTRY ASSISTANCE STRATEGY PROGRESS REPORT FOR

THE REPUBLIC OF GHANA

I. INTRODUCTION

1. Strategy (CAS) on March 16,2004 (Report N o . 27838-GH). The CAS was designed to support the Ghana Poverty Reduction Strategy, 2003-2005 (GPRS), which was approved by Parliament in February 2003, and considered by the Boards o f the Bank and the Fund together with the Joint IDA-IMF Staff Assessment on M a y 8, 2003. The GPRS was formulated in 2001, against a backdrop o f deteriorating macroeconomic indicators. A major focus o f the GPRS, therefore, was to establish macroeconomic stability as a necessary condition for implementing sectoral policies to reduce the incidence o f poverty.

The Board o f Executive Directors discussed the FY04-07 Ghana Country Assistance

2. (2) increasing production and employment; (3) promoting human resource development; (4) implementing special programs for the vulnerable and excluded; and (5) ensuring good governance through accountability and transparency. Within these broad goals, the Bank Group founded i t s strategy on three pillars l inked to implementing the GPRS: (i) sustainable growth and jobs creation (GPRS pillars 1 and 2); (ii) human development and service provision (GPRS pillars 3 and 4); and (iii) governance and empowerment (GPRS pi l lar 5).

The GPRS was articulated around five pillars: (1) maintaining macroeconomic stability;

3. The next Ghana CAS wil l cover FY07-10. The one-year overlap i s due to the fact that the Bank has embarked on a Joint Assistance Strategy (JAS), which will cover the period 2007- 2010, and the Bank’s next CAS will derive f rom this strategy document, beginning with FY07. In October 2005, the Government submitted to Parliament i t s new program for economic and social development - the Growth and Poverty Reduction Strategy, 2006-2009 (GPRS II), which builds on Ghana’s recent success in achieving macroeconomic stability and GDP growth rates o f almost 6 percent. The Government’s goal in GPRS I1 i s to achieve middle-income status and the Mi l lennium Development Goals by 2015. In November 2005, GoG and i t s Development Partners held a Consultative Group (CG) Meeting, the f i rs t since April 2002. The C G agreed o n a new jo in t Ghana Partnership Strategy (GPS), which includes a prioritized Results Matr ix and a map o f Partners’ support to the outcomes in GPRS 11. An overview o f actual and projected disbursements further helps to align support with national strategies and the budget, laying the basis for more predictable funding. The CG also agreed on an Act ion Plan for Aid Effectiveness and Harmonization. In the future, annual CG meetings wil l be held in June to allow the Government to better plan the budget process. Development partners are n o w developing a Joint Assistance Strategy (JAS), to be completed by November 2006. The Bank Group’s next CAS wil l emerge f rom the JAS, and will be presented to the Board in early 2007.

4. period, the remaining challenges and implementation o f the Bank Group strategy. The report also presents how the Bank plans to adapt i t s program in the next year to meet Ghana’s future needs and opportunities, based on GPRS I1 and the evolving Ghana Partnership Strategy.

This Progress Report discusses Ghana’s achievements thus far during the FY04-07 CAS

11. GHANA’S DEVELOPMENT GOALS AND THE RELEVANCE OF THE CAS

5. Available information suggests that Ghana made reasonable progress towards i t s development

Bank funding to Ghana increased significantly during the GPRS period (2003-2005).

2

goals and outcomes supported under the three CAS pillars, but that there are several remaining challenges (Table 1). The Bank program introduced new instruments, in particular, the series o f Poverty Reduction Support Credits (PRSCs), starting in June 2003, which have been aligned with GPRS and budget priorities, and delivered Analytic and Advisory Activities (AAA) in key areas such as public financial management, telecommunications and natural resources. One shortcoming o f the CAS, however, i s i t s results framework (Annex 4), which includes outcomes that are not sufficiently l inked to the Bank’s program, and lacks adequate milestones to monitor progress. In preparation for the next CAS, the Bank team, working with the JAS partners and Government, will seek to refine the results framework o f the Ghana Partnership Strategy and the JAS. For the Bank’s CAS, the team will attempt to establish outcomes and milestones that are l inked to interventions under the Bank program, have a direct bearing o n GPRSII outcomes, and can be monitored to demonstrate the contribution o f the Bank-supported program towards Ghana’s development goals.

A. Ghana’s Progress towards the CAS Outcomes and Remaining Challenges

6. The central objective o f the GPRS, shared by the CAS, was to achieve a 5 percent annual GDP growth rate. This objective was achieved, based o n Government implementing policies that created macroeconomic stability, in particular through improved public expenditure management (PEM). Real GDP growth averaged 5.8 percent in 2004 and 2005, significantly higher than averages over the past decade. Improved P E M contributed to a decline in the overall fiscal deficit and in the public domestic debt to GDP ratio. This opened the space for lower domestic interest rates and a greater share o f credit to the private sector. Estimates suggest that credit available to the private sector increased f rom 50 percent o f total domestic credit at end-2004 to 55 percent in 2005, This was achieved in an environment where poverty-related expenditures increased from 6.5 percent at end-2003 to 8.2 percent at end-2005. As a result o f improved macroeconomic management and progress made in sectoral reforms, Ghana reached the HIPC Completion Point in July 2004. This paved the way for the country to benefit f rom the Multi lateral Debt Rel ief Initiative (MDRI).

7. long-standing issue. Petroleum prices have more than tripled as subsidies were cut, and the budget strengthened. The Government also developed a new strategy for power sector restructuring and launched i t s implementation to encourage efficiency and quality service delivery. However, in September 2005 the Government moved to order the Vol ta River authority (VRA) to resume electricity supply to the state-owned aluminum smelter, the Vol ta Aluminum Company (VALCO) at a price below cost (US cents 2.7 per kilowatt hour (kwh) compared to the average cost o f around U S cents 10 per kwh). This has placed the financial viabil ity o f VRA and, more broadly, the energy sector, at r isk.

A main pol icy measure was to liberalize and de-politicize petroleum prices, a

8. management and maintenance remain important sectoral challenges. In telecommunication, GoG has addressed some central pol icy and regulation issues that have allowed private sector mobile companies to raise telephone penetration f rom 3 percent in 2002 to 15 percent in 2005. Port and airport clearance has eased through computerization o f customs clearance. Automation o f the Registrar-General’s Department has improved direct business registration times, though the total number o f days required to register a new business remains high. Four new decentralized land registries were set up and should speed registration o f land titles outside Accra.

In roads, new investments have significantly eased transport bottlenecks, but

9 . remain in the areas o f diversification, increasing exports and private sector development.

Ghana’s business environment has seen some improvements, but several challenges

3

Government recognizes the need to harness potential sources o f growth, including tapping into the global knowledge economy. The relatively high cost o f fiber optics in Ghana has constrained the expansion o f existing companies and hampered the entry o f new companies into the Ghanaian market. The Bank’s e-Ghana project, planned for FY07, will support initiatives to implement the Government’s ICT-led development strategy.

10. In human development and service delivery, the GPRS aimed to: reduce the numbers living below the poverty line; achieve universal basic education; increase access to sustainable and safe water supply and environmental sanitation; combat HIV/AIDS; reduce chi ld mortality; and improve maternal health. The poverty headcount declined by about 7 percentage points between 1997 and 2003, to 35 percent in 2003.’ Most o f this reduction i s associated with the movement o f people f rom rural to urban areas. The poverty rates in rural areas have declined whi le those in urban areas have increased slightly. Poverty remains predominantly concentrated in the three deprived regions (Northern, Upper West, and Upper East).

11, improved, and enrollment grew faster in the deprived districts than in other districts. B o t h overall and girls’ primary completion rates increased substantially. Several reforms financed by the PRSC, such as the removal o f fees and the introduction o f capitation grants in deprived regions, most l ikely contributed to these improvements. In health, progress was varied. The H I V / A I D S prevalence among pregnant women declined from 3.6 percent in 2004 to 3.1 percent in early 2005, but there was litt le evidence o f reduced risk in high-prevalence areas. Access to quality obstetric care, as measured by the trend in supervised deliveries, also appears to have improved, although results are uneven at the regional level. The marginal improvement in the national rate o f supervised deliveries primarily reflects progress in the deprived regions, which were the f i rst to implement the programs for exceptions o f fees for maternal delivery. In contrast, several o f Ghana’s most affluent regions (the Western, Greater Accra and Ashanti) witnessed deteriorating rates o f supervised maternal deliveries. Although the proportion o f births attended by skilled personnel has increased, maternal mortality remains a concern.

Ghana has made progress in education. Access to primary and junior secondary schools

12. Survey (GDHS) indicates that both infant and chi ld mortality rates have increased by 12 and 3 percentage points, respectively, during the last five years. In addition (and also perhaps as a contributory factor to the rising chi ld mortality), there has been an increase in the proportion o f children underweight, f rom 25 percent to 35.8 percent between 1998 and 2003. The incidence o f chi ld malnutrition i s highest in the relatively food-rich areas o f Ashanti (46 percent), Western (36.9 percent) and in the capital region o f Accra (40.4 percent), while the more deprived northern regions seem better off, at least as far as chi ld nutrit ion i s concerned. This may be partly due to

Ghana’s chi ld health indicators are also worrisome. The Ghana Demographic and Health

’ Core Welfare Indicators Questionnaire (CWIQ) Survey, 2003.

4

Table 1: Ghana’s Progress under the CAS Pillars and Remaining Challenges

~

Governance and Empowerment 9. Improve abi l i ty o f Parliament and other institutions to per form oversight roles vis-A-vis the executive; improve capacity o f c i v i l society groups to monitor the Government and provide feedback o n policies and service delivery. 10. Strengthen transparency and accountability mechanisms; enhance efficiency o f publ ic services.

Outcomes the CAS expected to influence Sustainable Growth and Jobs Creation

1. Reduce dependence o n domestic borrowing by Government; effective public expenditure management (PEM); improve access and security to land, and legal, judicial, regulatory framework; reduce t ime and cost o f registering business; cost effective minimum infrastructure and services.

2. Divers i fy production base, increase incomes o f rura l communities; sustainable NRM and enhanced compliance with NRM policies; increase income potential f r o m ICT sectors.

Human Development and Service Delivery 3. Reduce proportion o f people l iv ing below the poverty line; increase access to safe and sustainable water supply and sanitation. 4. Increase basic literacy, access to basic education in deprived districts and for disabled. 5. Increased awareness creation for H IV /A IDS; maintain prevalence levels and make anti-retroviral treatment available. 6. Improve under-5 ch i ld nutrit ional status f r o m 25% (2002) to 20% (2007); improve community health status; decrease under-5 mortality. 7. Reduce ch i ld mortal i ty associated with malaria from4.4% (2002) to 3.5% (2007). 8. Improve access to essential quality obstetric care. C A S target for percentage o f supervised deliveries: 60% in 2007.

Ghana’s achievements and challenges in each area

Reduced domestic debt and fiscal deficit through effective P E M : Domestic debdGDP: 23.9% (2002), 15.2% (2004), and 11.4% (2005 estimate); fiscal deficidGDP: 4.4% (2003), 3.6% (2004), 2.6% (2005 estimate). Road services improved to meet C A S targets.

4chievements: B

B

Main Challenges: B

e

Increase Nontraditional Exports (NTEs), which f e l l short o f the target rate o f 10 percendyear. Fiscal deficits in the energy sector stemming f rom delays in adjusting electricity tariffs and continued power sales to VALCO at subsidized rates. (Described in paragraph 7.) Improve land accesdsecurity (four new land registries operational June 2005) and further reduce cost o f registering business.

Poverty levels reduced (40% in 1999 to 35% in 2003). CAS target i s 32% in 2007. Access to safe water improved in some areas. All gross enrollment rates (GERs) increased. Primary national GER: 85.7% (2002); 87.5% (2005) Girls’ GER: 82.2% (2002); 84.4% (2004); Deprived districts GER: 70.7% (2002), 80.1% (2004); Deprived districts girls’ GER: 65.5% (2002), 72% (2003). HIV prevalence o f pregnant women: 3.6% (2004), 3.1% in 2005; (CAS target i s to keep prevalence rates under 5%). Under-five malaria fatality was reduced to 2.8% (2004). The % o f supervised deliveries increased f r o m 52.1% (2003) to 54.2% (2005).

D

Achievements:

0

Main Challenges:

Achievements:

Improve nutrit ional status, which worsened to 29.2% (2004); Reverse the increase in under-five mortal i ty in several areas.

Parliamentary oversight improved. Public Accounts Committee (PAC) submits i t s report o n audits to the House within 12 months o f Auditor-General’s submission. Civil society has increased monitoring o f government policies and delivery at local government level, where C i v i l Service Organizations (CSOs) track H I P C and DACF expenditures. Government i s opening up expenditure information, which i s readily available o n the internet. Actions to strengthen P F M and budget execution: the Financial Administration A c t (FAA); the Internal Audit Agency A c t (IAA); and the Public Procurement A c t (PPA).

Main Challenges:

Advance decentralization agenda Proceed with public sector reforms.

5

the school-based and other nutrit ion programs in the deprived north o f Ghana. These factors point to ways o f addressing the problems o f child malnutrition and ultimately under-five mortality in achieving the relevant MDGs. The worsening nutrition indicators are a major underlying factor in the apparent rise in infant mortality.’

13. national water supply coverage was 56 percent (52 percent for rural/small town and 61 percent for urban water supply). In order to meet the GPRS targets, this will need to increase by about 3 percent annually. With respect to sanitation, coverage in 2004 was 35 percent (32 percent for rural/small towns and 40 percent in urban areas) and requires an annual increase o f 5 percent to meet GPRS targets. The Government’s contribution to the sector remains low, and i f this persists, Ghana will not achieve the MDGs in this area.

Access to safe water supply and sanitation i s l o w and requires scaling up. In 2004,

14. transparent, accountable, and inclusive state, and improving public sector management for better service delivery. GoG made significant progress in strengthening public financial management (PFM) by enacting the Financial Administration, Internal Audit Agency, and Public Procurement Acts, which upgraded the regulatory framework for public expenditure management. GoG also took measures to improve the scope, timing and quality o f reporting o n budget execution. Progress on decentralization and public sector reforms (PSR) has been slower than expected, but the Cabinet recently considered the GoG’s draft strategy and implementation plan for PSR, which i s supported by a new IDA credit, the Economic Management and Capacity Building project.

In governance and empowerment, the CAS supported the GPRS goals o f building a

B. The Bank’s Contribution to Ghana’s Development and the Relevance of the CAS

15. calendar years 2004 and 2005, total Bank disbursements o f US$297.2m and US$33 1.4m (including two PRSCs) accounted for 10.3 percent and 9.9 percent o f Ghana’s total government expenditures respectively (Table 2)’ Actual disbursements over FY04-06 total U S $ l .18 b i l l ion (including PRSC 4). The Bank has delivered the planned CAS program, with the exception o f one investment operation, the components o f which were incorporated into a new project (Section I11 A). The Bank’s Analytical and Advisory Activities, much o f which has been undertaken jo int ly with other partners, has provided the underpinning for several operations and has contributed to progress o n key pol icy reforms.

The Bank program has played a key role in financing Ghana’s progress. During the

16. Funding has been provided through three main clusters o f operations: the PRSCs, which are central to the CAS and represent about 40 percent o f total Bank lending over FY04-06; investment lending to complement the PRSCs, for capacity building in financial and public sector reform, education, health, community water, agriculture, private sector development, and infrastructure, which represents the largest share o f the Bank’s investment program (Le. transport, energy, urban water, environment and sanitation, and telecommunication).

17. The PRSC represents the Bank’s contribution to the Mult i -Donor Budgetary Support program, M D B S (Box 1). Annual PRSCs have assisted the Government in managing public finances for macroeconomic stability and poverty reduction by providing overall support to the budget, as wel l as funding for poverty reduction programs identified in the GPRS.

Demographic and Health Survey, Ghana, 2003, andPRSC 111, July 27, 2005. Table 2 gives disbursements by calendar year, corresponding to Ghana’s fiscal year (which i s the same as

8

the calendar year). Tota l government expenditures were 26584 t r i l l ion cedis in 2004 and 30713 t r i l l ion cedis in 2005. The exchange rate used i s US$1 = 9200 cedis.

6

Box 1. The Multi-Donor Budget Support (MDBS) Program

The MDBS program has been in operation in Ghana for three years, bringing together ten Development Partners that provide general budget support o f about US$300m annually to assist the Government’s efforts in implementing the GPRS. A joint Progress Assessment Framework (PAF), with triggers and benchmarks, provides a fully harmonized way o f tracking progress on action and outcomes. In June 2003, GoG and DPs signed a Framework Memorandum setting out the principles o f the program. Each year, the bilateral and EU partners agree on a technical annex on arrangements for a base and a performance tranche. The World Bank’s single tranche operation i s based on prior actions according to the PAF. The Bank has participated in the MDBS program through a series of three PRSCs, totaling US$375 million. A new series wi l l be started with PRSC4. The objective o f the program i s to provide more harmonized assistance to Ghana with a view to accelerating implementation o f the GPRS. DPs continue to work to improve coordination and harmonize systems to enhance the quality o f reporting, monitoring and assessment and to reduce transaction costs. The objective o f this post-structural adjustment approach to financing development i s based on improving the quality o f high-level dialogue on policy choice and implementation. Progress in economic performance and human development in Ghana i s critically linked to the effectiveness o f MDBS. An evaluation o f the PRSC1-3 series wi l l be prepared in FY07.

18. burden o f domestic debt and subsidies on petroleum consumption. I t also supported institutions providing the interface between the public and the private sectors in energy, trade facilitation, business registration, finance (including micro finance), agricultural development and natural resource management (NRM). In several areas, the Bank advanced the dialogue with Government through the PRSC. These included the energy and power sectors, where dialogue led to pr ic ing pol icy changes; NRM, where it sharpened the programmatic focus o f two operations (Agriculture Services Sub-sector Investment project (AgSSIP) and the Land Administration project) by elevating critical policy issues to the Cabinet level; and PSD, to advance the agenda to reduce the cost o f doing business. T w o PSD investment operations (the Public Enterprise and Privatization Technical Assistance project (PEPTA) and the Trade and Investment Gateway project) complemented the PRSCs. PEPTA financed the automation o f the Registrar General’s Department for business registration and contributed to reducing the number o f days taken for direct registration f rom 14 to 5. Funds under PEPTA were also used to clear the backlog o f court cases. In an effort to reduce the cost o f doing business, the Gateway project funded the automation clearance procedures at the main ports o f entry.

Under Pil lar 1, the PRSC supported reforms to underpin macro stability and reduce the

19. health sector operations, ensure appropriate expenditure allocation (level and structure), and address some o f the financing implications o f pol icy actions. In education, resources were increased to 53 deprived districts. This helped to eliminate school fees, introduce capitation grants for a l l pupils in public primary and junior secondary schools in al l 138 districts and also in public primary schools for the disabled, and expand teacher retention schemes. Capitation grants for the 2005-06 school year were paid in end-October 2005 according to the Ghana Education Service Guidelines. These initiatives appear to have contributed to higher enrollment rates. Government has updated enrollment rate targets, given the positive impact o f capitation grants o n enrollments. Girls’ primary enrollment rates are expected to reach the national overall enrollment rate for 2005-06, f rom much lower levels in 2004-05, whi le primary school enrollments in the deprived regions are expected to increase by around 5 percent o n average over the 2004-05 rates. The Bank i s also financing an Education Sector project (US$78m), which addresses equitable access to, and efficient delivery of, quality education services at basic and higher levels.

Under Pil lar 2, the PRSC helped to leverage the poverty emphasis o f the education and

7

20. identifying the poor for exemptions f rom fees and health insurance premia, expansion o f maternal delivery exemption in several regions, greater funding for exemptions, and presentation o f the legislative instrument for the National Health Insurance Scheme before Parliament. The Bank has disbursed the second Health Sector SWAP, which aims to improve the overall health status, and reduce geographical, socio-economic and gender inequalities in health outcomes. Future support to the sector will be through the MDBS, rather than through sector-wide operations. Other ongoing interventions include the recently approved Multi-Sector H N / A I D S project (MSHAP) (US$2Om), and PRSC-supported actions that focus on the level and structure o f public expenditure o n health. PRSC4 will include increased funds for financing health expenditures.

In health, the PRSCs supported the development and implementation o f a system for

21. The main lending instrument under Pillar 3 i s the PRSC, with i t s cross-cutting focus on public expenditure management, governance, public sector reform and decentralization. Ghana has made significant progress in strengthening governance and PFM. Whi le Ghana s t i l l faces challenges in i t s public finance systems, the core systems work reasonably well. K e y diagnostic pieces o n fiduciary arrangements - the External Review o f Public Financial Management (ERPFM; FY04, FY05 and FY06), the Country Financial Accountability Assessment (CFAA; FY04) and the Country Procurement Assessment Review (CPAR; FY03) - provided analytical underpinnings for support to strengthen these areas. In addition, the Economic Management and Capacity Building project (US$25m) aims to advance financial sector reforms, improve the efficiency o f public sector management and enhance the quality o f service delivery.

22. The Wor ld Bank Institute (WBI) activities have provided support to several areas under Pil lar 3. In FY04, WBI conducted a Capacity Enhancement Needs Assessment (CENA) for improving basic services delivery at the local level. The assessment identified the capacity and institutional weaknesses that constrain the delivery o f basic services at the local community level. Assessment outcomes are now being used to focus W B I ’ s support at the local level through various actions, namely: preparing a multi-year program to strengthen the adjudication capacity of traditional leaders so as to broaden access to justice; strengthening community radio as a way to better address the specific needs and strengthen the voice o f local populations; and designing a strategy for community participation for effective delivery o f education services in the context o f the Government’s decentralization policy. Other areas where WBI has planned programs include engagement with Parliament, media, in particular local radio, and distance learning.

23. The Government continues to seek support in the key areas identified in the CAS. Furthermore, Ghana’s economic turnaround offers the opportunity to strive for higher growth. The Budget Statement for 2006 projects GDP growth at 6 percent. In GPRS I1 and in the medium term Government has placed PSD in the forefront, with modernized agriculture, infrastructure, a competitive private sector, and emerging sectors, such as ICT and nontraditional exports, expected to drive the structural transformation and higher growth. Government has identif ied these areas as priorities for support. GPRS I1 also highlights promotion o f gender equity. Gender disparities seem to affect most facets - health, education, production, employment, and access to and control over land - and persistent regional gender differences were identified as key constraints to implementing the GPRS. Several Bank operations in education, health and rural finance address gender issues, and the upcoming e-Ghana project (FY07) includes incentives to encourage the participation o f women and indicators to measure progress. Overall, the Bank strategy in Ghana remains relevant; however, it will place greater emphasis o n accelerating the agenda for shared growth during the remainder o f the CAS period, t o address Ghana’s emerging opportunities.

8

111. BANK GROUP PROGRAM

A. Implementation Performance

24. constrained by performance o f the portfolio, which has not kept pace with the very favorable ratings o n pol icy and institutional performance (as measured by the Bank’s Country Policy and Institutional Assessment, CPIA). Planned lending in the CAS for FY04-06 was US$835m, and actual lending i s U S 9 1 6.9m, including three regional projects totaling US$107.9m (the HIV /A IDS Treatment Acceleration Program for US$14.9m, the West Afr ica Gas Pipeline (WAGP) project for US$8m, and the West Africa Power Pool (WAPP) APL I Phase 1 and 2 for US$40m and US$45m respectively), and three PRSCs totaling US$390m.4 The composition o f lending was close to the planned program (Annex 2). During FY04-06, nine investment operations were approved for a total o f US$4 19m, excluding a Natural Resource Management GEF for US$0.8m and the three regional projects. Eight investment operations, totaling US$202.6m closed during this same period. The follow-on project to Community Water and Sanitation was modified slightly f rom the original plan to allow al l community based activities to be organized under one project - Community Based Rural Development. As a result, the urban elements o f the original plan were consolidated into the Small Towns Water Supply and Sanitation project.

CAS implementation i s on track. The potential for higher lending levels has been

25. The portfolio (as o f April 7, 2006) includes 19 IDNGEF investment projects with a total commitment value o f U S $ l . 1 billion, o f which US$5 17.4 mi l l ion i s undisbursed. The disbursement ratio, which was 26.5,25.1 and 18.4 percent in FYO1, FY02 and FY03 increased to 25.7 in F Y 0 4 and 33.4 in FY05.’ Although disbursements f rom the investment portfolio have increased, as indicated in Table 2, implementation results have been mixed. T w o problem projects, Agricultural Services Sub-sector Investment Program (AgSSIP) and the Trade and Investment Gateway project, underwent restructuring to address impediments to implementation and to realign project objectives to current Government objectives and opportunities. As o f April 7, 2006, two projects were considered problem projects (Thermal Power (1994) for US$175.6m and Land Administration (2004) for US$20Sm). The Thermal Power project has experienced slow implementation and weak translation o f inputs into outcomes, but indications are that performance i s improving. Under Land Administration, several components are slow to generate outputs, and the M&E system i s not functional yet as baseline data have not yet been compiled. The portfolio has a third project that i s considered a potential problem project (Northern Savanna GEF (2002) for US$7.6m). These three projects place 18.5 percent o f total investment commitments at r i sk o f not achieving the development objectivesa6

26. The main portfolio implementation problems relate to procurement, measuring results, and timeliness o f delivery. Recognizing this, the Ministry o f Finance and Economic Planning (MOFEP) maintains a team o f desk officers for the Bank-supported portfolio, who participate in preparation and negotiations, and in the implementation phase o f projects. T h i s team follows up

~~

A third o f the total allocated for Ghana under the W A G P and the W A P P regional projects comes f rom Ghana’s IDA allocation and two-thirds come f r o m a regional pool. The W A P P APL-1 Phase 2 will be presented to the Board in June 2006.

the beginning o f the fiscal year, for investment operations.

development objectives, but have other risk factors historically associated with unsatisfactory outcomes. Projects at risk refer to the sum o f actual problem projects and potential problem projects.

The disbursement ratio i s the ratio o f disbursements during the fiscal year to the undisbursed balance at

Potential problem projects are projects that are rated satisfactory o n implementation progress and

9

Calendar Year Investment Budget Support 2002 99.8 - 2003 118.0 128.7 2004 169.7 127.5 2005 208.3 123.4

I 2002-2005 595.8 379.6

with Ministries and implementing agencies to resolve problems, accelerate processing, and ensure that actions are completed. The MOFEP Bank-desk and the portfolio quality team in the Ghana Country Of f ice meet periodically to identify projects in particular need o f attention. In addition

Total Disbursements 99.8

246.7 297.2 33 1.7 975.4

Table 2. Total Bank Disbursements (US%m) in Calendar Years 2002-2005

to these recurrent oversight processes, Government organized a Country Program Review (CPR) for the Bank-supported program in September 2005, and agreed on a CPR Act ion Plan. The Plan consists o f two to three key actions in three areas: systemic factors (such as ownership, incentives, and Bank flexibility); weaknesses in monitoring and evaluation (M&E); and procurement management. T o overcome the M&E issues, proposed actions include: during the Project Concept Note stage, identifying which GPRS and sector indicators to target at project preparation; at preparation stage, establishing baseline data and refining outcomes; and supporting M&E training in national institutions and among Bank Task Team Leaders. Other proposals include organization o f procurement clinics, formulation o f the Country Financing Parameters, and establishment o f IDA performance standards. The portfolio plays an important role in determining the results o f IDA’S contribution to the country’s development and also influences the level o f future flows to Ghana, as the percentage o f commitments at risk feeds directly into the Bank’s mechanism for IDA allocations across IDA-recipient countries.

B. Analytical and Advisory Activities (AAA)

27. The Bank’s program o f Analytical and Advisory Activities (AAA) has been instrumental in informing policies relating to governance and public financial management (PFM), the financial sector, energy, telecommunications and health insurance (Annex 3). The 2004 and 2005 External Review o f Public Financial Management (ERPFM) studies made a significant contribution to improving public expenditure management. The 2004 review focused on improving budget allocations to GPRS priority areas. The 2005 study reviewed the large gap between the budget as appropriated and the budget as spent, and the implementation o f the new legal framework for PFM. The 2005 review also found that the alignment o f the budget with the GPRS had improved since the 2004 review. The 2006 review wil l analyze if the positive trends were sustained in 2005 and will establish the baseline assessment o f Ghana’s PFM using the Public Expenditure and Financial Accountability (PEFA) Performance Measurement Framework for monitoring progress in the context o f GPRS 11. The Energy Policy AAA guided petroleum pricing, and the upcoming Energy Development and Access project (FY07) i s informed by findings f rom ongoing AAA o n energy pol icy in the urban and rural sectors. The study on National Health Insurance Implementation contributed to the introduction o f the national health insurance scheme.

28. o f the Bank AAA program in Ghana. The QAG Panel identified a l imi ted understanding o f the real sectors and the drivers o f growth as a major gap in the Bank’s AAA effort. QAG’s main recommendations include: (i) a thorough analysis o f the developments in key sub-sectors such as

In February 2006, the Bank’s Quality Assurance Group (QAG) completed an assessment

10

agriculture and manufacturing, through a series o f background papers and focused surveys; (ii) adequate resources to the Statistics Institute to complete the Living Standards Measurement Survey, which has been delayed; and (iii) analysis o f the incidence and efficiency o f public expenditure, as previous focus has been on expenditure systems and on including public expenditures within the budget system.

29. growth, the fo l lowing activities are underway. In January 2006, the Bank and Government held a high-level workshop in Accra to explore the opportunities for accelerating growth through a focus o n energy policy, improved infrastructure, a developed ICT sector, enhanced agricultural productivity and an improved business climate. Follow-up workshops will take place in May, complemented by consultations on two pieces o f Economic and Sector W o r k (ESW), Youth Employment and the Country Environmental Assessment, to deepen discussions within each o f these areas and to develop a consensus around the Government actions, the partner support, and the results expected in each sector. The conclusions o f this dialogue wil l feed into the Country Economic Memorandum (CEM), which i s planned for delivery in FY07 and will focus on growth issues. An Investment Climate Assessment (ICA) i s also under preparation. The in i t ia l findings indicate that Ghana’s level and growth rate o f exports o f manufactures, especially o f labor- intensive manufactures, are insufficient to achieve i t s growth objective o f middle income status by 2015. Firm-level findings are: labor market inflexibil i ty i s a major market barrier to the profitability o f exporting f irms; small f i r m s are constrained by l imited access to credit and insufficient demand; and access to domestic raw materials i s an issue for larger f i rms, while the costs o f domestic and imported raw materials hinder small firm growth. In addition to the workshops, the C E M and the ICA, current IFC and MIGA activities in Ghana will further in form the Government’s private sector development strategy. Finally, these growth-oriented pieces wil l be complemented by analysis o f urban policy, decentralization and health policy, as we l l as continued work on public financial management.

In order to deepen the Bank’s and Government’s understanding o f the constraints to

C. IFC and MIGA Activities

30. (ii) encouraging private sector involvement in the provision o f infrastructure; (iii) strengthening the domestic financial sector; (iv) supporting the development o f Small and Med ium Enterprises (SMEs); and (v) promoting non-traditional exports. IFC’s strategy i s aligned with C A S Pil lar 1 and IFC’s Strategic Initiative for Sub-Saharan Africa, which was approved by the Board in August 2003, F C has further strengthened i t s presence in Ghana with a resident Country Manager in Accra as o f February 2005, to cover investment and technical assistance (TA) activities in nine countries in the sub-region. In providing TA, the CAS envisaged that I F C would adopt a sector-wide approach, rather than firm-level interventions. IFC i s achieving this transition through the launch o f the Private Enterprise Partnership for Afr ica (PEP Africa) in July 2005. At least four PEP Afr ica programs have been initiated in Ghana during FY04-07: S M E Enterprise Development Initiative, Leasing Program, Housing Finance Program and Private Schools Support Program. I F C decided not to establish the proposed S M E Solutions Center in Ghana in favor o f focusing support o n existing SME-focused institutions.

IFC. IFC’s focus in Ghana continues to be on: (i) improving the investment climate;

3 1. strong pipeline for FY06-07 in the financial markets, infrastructure and mining sectors. IFC’s investment portfolio in Ghana amounts to US$49.7m as o f March 31,2006. IFC and the Bank have continued to work closely, especially in the energy sector, where the Bank Group has coordinated on the dialogue with G o G and DPs o n key sector reforms. IFC and IDA are also working closely on implementing the Micro, Small and Med ium Enterprise project (MSME)

In terms o f investments, IFC committed US$41 .lm in FY04-05 to two projects, and has a

11

operation and preparing the e-Ghana project. Under MSME, IFC will provide a partial credit guarantee and a line o f credit for participating banks. In addition, IFC staff has participated in and provided input to Bank missions in the agriculture, telecommunications, and the financial and energy sectors.

32. infrastructure, and o i l and gas sectors, with a total gross exposure o f US$174m and a net exposure ofUS$151,6m. MIGA’s activities focus on CAS Pillar 1. In FY05, MIGA underwrote the WAGP project jo in t ly with the Wor ld Bank (issuing US$75m o f coverage), involv ing the development o f a pipeline system to transport natural gas f rom Nigeria to Ghana, Togo and Benin. This wil l a l low cheaper natural gas to replace expensive alternate fuels. In June 2005, MIGA signed a US$110m guarantee in support o f the largest cellular telecom investor in Ghana. The pipeline for FY06 includes two projects in the finance and tourism sectors with potential coverage o f US$17m. Ghana i s a participant in the MIGA-Swiss Partnership (MSP), an investment facilitation program in four countries, co-funded by the Swiss government. Under the initiative, MIGA i s helping Ghana identify opportunities to better integrate into the international economy, with emphasis on opportunities generated by privileged trade access agreements with the EU and U S A . This information i s used to select target investment sectors. Ghana i s also in the MIGA’s Afr ica Enterprise Benchmarking program, which i s l inked to the ICA. The program benchmarks Ghana against African and other potential competitor countries as an investment location for a range o f industries, including apparel, textiles, call centers, tourism and agri- business. Based on the results, MIGA will assist Ghana’s investment intermediaries to address shortcomings and design outreach programs in Ghana’s competitive areas.

MIGA. MIGA’s current portfolio in Ghana consists o f two contracts o f guarantee in the

D. Managing Risks

33. fiscal excesses, and loss o f implementation time, if the incoming government needed to review ongoing programs; (ii) operational risks, with regard to delays in implementing reforms, particularly in the public sector and in decentralization, and the inappropriate choice o f instruments; (iii) external shocks and the fragile sub-region. The f i rst risk did not materialize. In fact, the Government set a precedent in macroeconomic management during an election year, the economy performed we l l in the post-election period, and the re-elected Government considered the Bank strategy to be s t i l l valid. Implementation accelerated, but was uneven, showing r isks to the achievement o f several project development objectives. Government undertook a Country Program Review (CPR) in September 2005 to address issues o f portfolio quality. With regard to implementing reforms in the public sector and advancing decentralization, the program has not been strong. PRSC4 emphasizes these two priority areas. The recently approved Economic Management and Capacity Building (EMCB) project i s designed to ensure broad ownership and an integrated, strategically managed approach to public sector reforms. The third risk, o f terms o f trade shocks, remains. However, the risk o f any shocks widening the external financing gap i s to some extent mitigated by the commitment f rom development partners that they wil l adjust the timing o f their disbursements to provide adequate financing, as long as the program remains sound. The flexibil i ty o f the PRSC i s also a mitigating factor.

The CAS identified three risks: (i) polit ical risks, particularly related to pre-electoral

34. A future risk to macroeconomic stability and the Bank program i s the quasi-fiscal deficits in the energy sector stemming f rom the sale o f power to Vol ta Aluminum Company (VALCO) at subsidized rates. Since VALCO came back into operation, in September 2005, an imbalance has emerged in the finances o f the Vol ta River Authority ( V U ) . VRA i s supplying energy to VALCO at 2.7 cents per lulowatt hour although i t s marginal cost o f generation i s around 10 cents per kilowatt hour. The impact o f this supply arrangement, together with deteriorating operational

12

performance and the non-adjustment o f tariffs to reflect costs could result in operating losses which could deplete cash reserves and precipitate a financial crisis in VRA. An additional r i s k associated with the energy sector i s the need to ensure that adequate generation capacity i s in place. Ghana also needs to take steps to unbundle the generation, transmission and distribution o f power.

IV. GPRS II AND THE FUTURE BANK PROGRAM

35. IMF. The objective o f GPRS I1 i s to attain middle income status by 2015, with an annual real GDP growth rate o f at least 6 percent. Higher growth rates are expected to result in positive social change and improvements in the quality o f l i fe for everyone. GPRS I1 builds o n the 2003-05 strategy, with emphasis on three pillars: (i) acceleratingprivate sector l ed growth and poverty reduction by assisting the private sector to grow and generate employment; (ii) investing in vigorous human resource development to ensure the development o f a knowledgeable, well-trained and disciplined labor force; and (iii) encouraging good governance and civic responsibility by empowering state and non-state entities to participate in the development process and collaborate in promoting peace and polit ical stability.

On February13,2006, Government submitted the full GPRS 11 to the Wor ld Bank and the

36. CAS period. Fol lowing the Multilateral Debt Rel ief Initiative (MDRI), Ghana’s debt indicators are projected to improve markedly, with the nominal debt stock fall ing f rom US$6.4 b i l l ion to US$1.5 bil l ion, meaning a decline in the debt to GDP ratio f rom 57 percent before the MDRI to 13 percent just after the MDRI. The debt rel ief provided by MDRI represents a net financial gain to Government in the form o f sharply reduced payments on multilateral obligations. However, the initiative has implications for Ghana’s future new IDA commitments, since a portion o f the country’s forgone IDA debt service in any given year wil l be deducted f rom i t s performance- based annual IDA allocation. As a result, Ghana’s new IDA commitments may decrease along with those o f other IDA MDRI recipients, and planning for the future IDA program will have to take this into consideration.

The Bank i s wel l placed to respond to GPRS I1 priorities during the remainder o f the

37. and wil l facilitate the implementation o f cross-cutting reforms to improve overall living conditions and support higher growth. In addition to PRSC4, which i s being presented in parallel with this report, subsequent PRSCs are planned as annual installments to the Multi Donor Budget Support program and will be timed to coordinate with Government’s budget cycle. Under Pil lar 1, PRSC4 (US$14Om) will support reforms to: diversify the financial sector; strengthen the business environment through the expansion o f energy supply services and the removal o f administrative barriers for businesses; and encourage the development o f extension services, especially for the poorer farmers. Under Pil lar 2, the credit will: help to broaden access in education and health services, especially in the deprived regions; develop a water sector investment program, to help improve health indicators; and contribute to a social protection strategy, to address emerging problems o f chi ld welfare in urban and peri-urban areas. Poverty and Social Impact Analysis (PSIA) findings wil l in form any modifications in the Bank’s strategy. Under Pil lar 3, PRSC4 will also support implementation o f the framework for decentralized delivery o f local public services, and GoG’s refocused PSR agenda, which i s in i t s init ial stages.

I t i s expected that the PRSC will remain an integral part o f the Bank’s support strategy,

38. Through analytical work and the PRSC series, the Bank has contributed to making Ghana’s budget the main tool to drive priority policies, which are then reflected in public expenditures. The Bank does not plan to finance separate education and health projects except in very specific high impact areas. However, the Bank expects the government’s total level o f

13

financing to the health sector through the M D B S and debt relief to be maintained. In response to Government requests, the health team also plans to develop a TA project for national health insurance to ensure a financially sound scheme and access to health services for the poor.

39. respond to GoG’s emphasis on the growth agenda. T w o projects that are under preparation are e-Ghana, and the Ghana Energy Development and Access Project (GEDAP). In October 2003, G o G adopted the I C T for Accelerated Development Policy (ICT4AD), fo l lowing extensive stakeholder consultations. The Policy identified telecom infrastructure as a prerequisite. GoG has revamped i t s telecommunications legislation and regulations, and initiated work with industry o n an e-legislation package, both o f which are key building blocks for an ICT-led growth strategy involv ing public-private partnerships. The e-Ghana project (US$40m) aims to support concrete initiatives to implement the Government ICT-led development strategy. In energy, consistent with the CAS, the Bank Group i s strategically complementing investment financing in the sector and assisting in knowledge transfer and technical assistance. The Ghana Energy Development and Access Project (GEDAP) (US$65m) will support the introduction o f cutting-edge knowledge products, especially in distribution and customer services; complement regional activities in the energy sector, including the W A G P and the WAPP; and leverage contemporary public-private financing instruments hitherto not commonly used in Africa, such as “carbon credit” financing o f loss reduction and efficiency improvements. Regional projects in the pipeline for FY07 are the Afr ica Regional Trade Facilitation Project 11, the West Afr ica Agricultural Productivity program, and the West Afr ica Road Transport project.

In addition to the planned support to the budget, the investment programs for FY07 also

40. Joint Assistance Strategy (JAS) that i s under preparation. The JAS will map partners’ response to the outcomes articulated in GPRS 11, and will also be aligned with the Ghana Partnership Strategy Results Matr ix in Annex 5. The process to formulate and agree on the Ghana JAS involves ten Development Partners, including Canada, Denmark, EC, France, Germany, Japan, The Netherlands, the United Kingdom, the United States, and the Bank. Within this group, the EC, UK, and the Wor ld Bank intend to develop a jo in t business plan for the next four years; other DPs wil l seek to graduate to a jo in t business plan over time as their own bilateral cycles allow. The JAS aims to better align D P country strategies with GPS priorities/objectives and improve delivery o f Off ic ia l Development Assistance (ODA) through a more effective division o f labor. I t also expects to reduce transactions costs for GoG, simplify aid management and improve the predictability o f ODA flows. G o G has been invited to be part o f the JAS preparatory meetings, though DPs are leading the process in Ghana. The results o f the JAS will reinforce the implementation o f the Harmonization and Aid Effectiveness Act ion Plan (agreed at the 2005 CG), which articulates DPs and GoG’s efforts to implement the Paris Declaration. The finalized 4-year JAS i s expected to be completed by end-2006. I t i s foreseen that the Board will discuss the FY07-10 CAS in early 2007.

As mentioned in Section I, the Bank Group’s next CAS (FY07-10) will emerge from the

14

Indicators to Track Implementation towards Expected CAS Outcomes

1. Domestic debt/GDP: reduce from 29% in 2002 to 14.8% in 2005 2. Total poverty-related non-salary expenditures: increase by 3% annually from 2002

3. Time to register lands: reduce from average o f 4 years to 4 months b y 2007 4. Backlog of pending civ i l cases: reduce from about 17,000 in 2002 to about 13,000 in 2007 5 . Complete business registration and approvals: reduce from 120 days to 30 days by 2007 6. Power distribution system losses: reduce from 26% to 15% (2007) 7. Shift in proportion o f Road Network classified as good (29%) fair (27%) poor (44%) in 2001to good (45%)fair (30%)poor (25%) in 2007 8. Call completion rate: increase from 85% in 2002 to 95% in 2006 9. Non-Traditional Exports (NTEs): annual increase in value o f at least lo%, from US$504.3m (2002) 10, Forest cover: expand from 20,000 hectares in 2002 to 80,000 hectares by end 2007 1 1. Increased access to internet services from 20,000 users in 2002 to 100,000 users in 2007

ANNEX 1: PROGRESS TOWARDS CAS OUTCOMES

Actuals to date

Domestic debt/GDP reduced: 23.9% (2002), 15.2% (2004), and 11.2% (2005 estimate) GDP growth averaged 5.6% (2003-05). As a share o f GDP, non wage poverty-related expenditures increased from 2% (2003) to 3.7% (2005). Reduced from about 4 years to 360 days as at 2004. Beneficiary analysis under way. Backlog reduced to 15,094 cases (2004) and 14,577 cases (2005). Reduced number o f days for business registration: 129 (2002), 85 (2004), 81 (end-2005). Power distribution system losses have reduced from 26.54% at end-2004 to 25.47% at end-2005. In 2004: % o f roads in good condition: 42.4

% o f roads in fair condition: 3 1.4 YO o f roads in poor condition: 26.2

No data available yet.

NTEs valued at US$588m at end 2005.

Forest cover expanded to 58,000 in 2004.

N o data available yet.

Pillar 1: Sustainable Growth and Jobs Creation

1. Under Pil lar 1, the CAS recognized that: (i) progress in macroeconomic stability and effective PEM; (ii) removing the constraints to private sector investment; and (iii) harnessing potential sources o f growth to generate new opportunities were essential. Ghana achieved the macroeconomic outcomes; however, progress was mixed in attaining PSD and sources o f growth outcomes (Annex Table 1.1). The time taken to complete business registration and approvals, register properties, and execute contracts remains relatively high. The C A S indicators to track improvements in the business climate were based on discussions between G o G and the Bank during preparation o f PRSC I in mid-2003. At the time, G o G was optimistic about resolving land issues that were to be addressed under the Land Administration Project o f July 2003. The ongoing Trade and Investment Gateway Project, to overcome hindrances to private sector development, also contributed to the high expectations. Progress in both areas, however, has been slow. Several indicators are diff icult to measure due to lack o f data, while others seem overly optimistic, for example, reducing the time to register lands from 4 years to 4 months. There i s also a need to distinguish between the times taken to register deeds versus titles. The former may have improved, with the establishment o f four land registries outside Accra that allow greater security in land transactions and increase the ability to post deed certificates as loan collaterals.

Annex Table 1.1: Pillar 1 Intermediate Indicators and Actuals

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2. Strategy target, to expand Ghana’s forest cover to 80,000 hectares by 2007. 58,000 hectares have been planted. In infrastructure, Ghana improved the quality o f the road network beyond the CAS targets for 2007. The Road Sector Development Program has contributed to strong j o b creation and local private sector participation in maintaining road infrastructure remains sound. Harmonization between DPs and the dialogue with GoG i s also strong in the roads sector. A series of studies that should influence institutional reforms in roads are underway. A poverty impact baseline study has also been initiated, and i t s indicators will need to be monitored o n a regular basis to assess the impact o f transport interventions on poverty. Progress has been slow in harnessing Ghana’s potential sources o f growth, including tapping into the global knowledge economy for economic diversification. The relatively high cost o f fiber optics in Ghana has constrained the expansion o f existing companies and the entry o f new companies into the Ghanaian market. The f i rs t ha l f o f the CAS period has nevertheless been used to lay the foundation for implementing an effective I C T strategy, which will be supported by the Bank’s e-Ghana Project in FY07.

In natural resource management, the CAS goal was the GPRS Plantation Development

Pillar 2: Human Development and Service Delivery

3. poverty line; (ii) achieving universal basic education; (iii) increasing access to sustainable and safe water supply and environmental sanitation; (iv) combating H N / A I D S ; (v) reducing chi ld mortality; and (vi) improving maternal health. The poverty headcount declined f rom 40 percent in 1999 to 35 percent in 2003 (Annex Table 1.2). Ghana should be able to achieve the CAS targets for quality universal basic education. Overall access to primary and junior secondary schools has increased. Deprived districts have indicated faster growth in enrollment than other district^.^ This can be attributed to the realization o f deprived district strategies. The introduction of capitation grants in l ieu o f fees, f irst in the 40 deprived districts in 2004, and extended to al l districts in 2005, i s likely to lead to even higher enrollment rates. Capitation grants disbursed directly to schools and the removal o f a l l school fees i s also l ikely to increase quality as wel l as access in 2006, as basic schools will n o w have fimding for routine maintenance and for procuring school supplies that are not provided by the Ministry o f Education. The target o f 93 percent in 2007 for girls’ GER in deprived districts could be achieved if these policies yield substantial increases in access.

This Pil lar supports the GPRS goals o f (i) reducing the numbers living below the

4. In health, HIV prevalence among pregnant women declined f rom 3.6 percent in 2004 to 3.1 percent in 2005. The health team recommends dropping the other two H I V / A I D S indicators in the CAS, and selecting one or two indicators f rom the l i s t o f key performance indicators that was widely discussed and approved as preparation o f the Multi-Sector H I V / A I D S project approved in November 2005. These cover the entire national response including Bank financing. For example, rather than counting the number o f people receiving Anti-retroviral (ARV), the next CAS could use the national indicator: the percentage o f people with advanced HIV infection receiving Anti-retroviral Treatment (ART) (3.2 percent in 2005). Also, instead o f the number o f programs for high-risk groups, a better indicator i s the percentage o f total national H I V / A I D S funds spent o n selected vulnerable groups, excluding ART. The indicator being used for orphans i s the ratio o f current school attendance among orphans to that among non-orphans aged 10-14 (0.80 in 2003).

’ Forty deprived districts were initially identified for direct support. The number o f deprived districts has been increased from 40 to 53 with GoG’s approval of additional districts. The number o f districts increased from 110 to 138 in 2005.

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10. Immunization coverage increased from 80% in 2002 to 90%

1 1. Reduction in number o f under-5 diarrhea-related and water borne mortality reported in health centers by 25% between 2002 to 2007 12. Under 5 malaria case fatality showing at malaria and in- patient reduced from 4.4% in 2002 to 3.5% in 2007 13. Proportion of births attended by skilled health personnel increases from 45% in 2003 to 60% in 2007

- by end o f 2007

Annex Table 1.2: Pillar 2 Intermediate Indicators and Actuals

Indicators to Track Implementation towards Expected CAS Outcomes

1. Proportion o f people l iving below the poverty line: reduce

water: 300,000 urban sanitation: 116,000

3. All districts have AIDS Committees and are receiving funding to implement district AIDS plans; HIV prevalence among pregnant women nationwide remains below 5% in 2006 4. 1,000 programs for high risk groups implemented by end 2007; All districts in Ghana carry out behavior change and orphan care activities 5. 21,000 additional PLWHAs are receiving ARV treatment annually by end 2007; 5,000 AIDS orphans supported annually by end 2007 6. Proportion o f pupils from 40 most deprived districts passing BECE Mathematics: increase from 49.9% in 2002 to 55% in 2007; passing BECE English: increase from 39.9% in 2002 to 55% in 2007

7. GER in 40 most deprived districts: increase from 70.7% in 2002 to 93.2% in 2007; Girls GER in deprived districts: increase from 65.5% in 2002 to 93.2% in 2007

8. From 2002 to 2007, Primary Completion Rate: increase from 65.6% to 79; Girls Primary Completion Rate: increase from 60.6% to 75.7%

9. Malnutrition rates o f children under five reduced from 25% in 2002 to 20% in 2007

Actuals to date

Poverty declined to 35% in 2003.

For rural water supply, a minimum o f 240,000 people have gained access to potable water, though this figure would ultimately be higher, as a result o f boreholes rolled over to the CBRDP. Construction o f water and sanitation facilities under the Small Towns Water Supply and the Urban Water project are just beginning. Indicator to change (see Annex paragraph 6 for alternative indicators) HIV prevalence among pregnant women nationwide: 3.6% in 2004. 3.1% in 2005. Indicator to change (see Annex paragraph 6 for alternative indicators)

Indicator to change (see Annex paragraph 6 for alternative indicators)

Proportion o f pupils from 40 (currently 53) deprived districts passing the BECE (aggregates 6 to 30 in al l subjects)-was 5 1.1% in 2004. Separate results are not currently available for Mathematics and Science. GER in 40 (currently 53) deprived districts increased to 80.1% in 2004. Girls GER in 40 (currently 53) deprived districts increased to 72% in 2003. Primary Completion Rate increased to 78.7% in 2004. Girls Primary Completion Rate increased to 75.9% in 2004. Malnutrition increased to 29.9% (2004)

DPT3: 75%; Measles: 78% (2004)

Under-5 Malaria mortality reduced to 2.8% (2004) Proportion o f births attended by skilled health personnel increased to 53.4% (2004)

17

5. mortality rates have increased by 12 and 3 percentage points, respectively, during the last f ive years. In addition (and also perhaps as a contributory factor to the rising chi ld mortality), there has been an increase in the proportion o f children underweight, f rom 25 percent t o 35.8 percent between 1998 and 2003. The incidence o f child malnutrition i s highest in the relatively food-rich areas o f Ashanti (46 percent), Western (36.9 percent) and in the capital region o f Accra (40.4 percent), whi le the more deprived northern regions seem better off, at least as far as ch i ld nutrit ion i s concerned. This may be partly due to the school-based and other nutrit ion programs in the deprived north o f Ghana. These factors point to ways o f addressing the problems o f chi ld malnutrit ion and ultimately under-five mortality in achieving the relevant MDGs. The worsening nutrit ion indicators are a major underlying factor in the apparent rise in infant mortality.8

The Ghana Demographic and Health Survey (GDHS) indicates that both infant and chi ld

6. Al though the proportion o f births attended by skilled personnel has increased, maternal mortality remains a concern. The Government i s tackling the MDG o f reducing maternal mortality by three-quarters, through a new policy o f exempting maternal deliveries for the most deprived regions. A recent review indicates that though funds to reimburse facilities for exempted deliveries were f lowing from District Assemblies to the health districts and individual facilities in most cases, i t was too early to assess any impact.

7. national water supply coverage was 56 percent (52 percent for r u r a h m a l l town and 61 percent for urban water supply). In order to meet the GPRS targets, this will need to increase by about 3 percent annually. With respect to sanitation, coverage in 2004 was 35 percent (32 percent for rural/small towns and 40 percent in urban areas) and requires an annual increase o f 5 percent to meet GPRS targets. The Government’s contribution to the sector remains low, and if this persists, Ghana will not achieve the MDGs in this area. The budgetary allocations do not reflect the priority the GPRS gives to the sector, or the fundamental consequences that safe water and sanitation have o n overall health and education outcomes.

Access to safe water supply and sanitation i s l o w and requires scaling up. In 2004,

Pillar 3: Governance and Empowerment

8. inclusive state, and improving public sector management for better service delivery (Annex Table 1.3). The Bank increased the pol icy dialogue o n P F M based on several pieces o f analytical work. The P F M system performance has improved since 2004. Ghana currently meets 8 o f the 16 expenditure management benchmarks, up f rom 7 in the 2004 HIPC AAP assessment, and 1 in 2001. Government took concrete actions to improve the transparency and accountability o f the executive. These improvements have come f rom enhanced budget coverage and budget execution, and timely fiscal reporting and external auditing o f public accounts. Budget coverage has been broadened to include more information on internally-generated funds and donor grants. Budget execution has been improved with cash and commitment controls yielding: (i) greater alignment between the expenditure outturns o f the largest spending ministries and the voted budget, and the country’s poverty reduction strategy; and (ii) more timely reconcili,ation between accounting transactions and banlung records. Ghana’s fiscal reporting continues to improve in timing and quality, and monthly budget execution reports reconciled with the Bank o f Ghana are being produced within 8 weeks after the end o f the month. External audit reports are n o w submitted within 12 months o f the closing o f the accounts. T h i s progress has been confirmed during the baseline assessment o f Ghana’s PFM-using the Public Expenditure and Financial

The CAS supported the Government’s goals o f building a transparent, accountable, and

* Demographic and Health Survey, Ghana, 2003, and PRSC 111, July 27,2005.

18

Accountability Performance Measurement Framework, which i s currently being finalized as part o f the 2006 ERPFM.

9. In publ ic sector reform (PSR), decades o f initiatives supported by donor funding have made l imi ted impact on the quality o f public service and the policy environment. The critical role o f government and stakeholder ownership i s perhaps the most important lesson learned in past reform initiatives. The OED report, “An Independent Review o f Wor ld Bank Support t o Capacity Building in Africa: The Case o f Ghana”, notes that 33 percent o f Bank investment lending in Ghana has been for improvements in public sector capacity, but that this has lacked a strategy and has not been integrated into sector programs. Government’s recent major initiative, after several years o f discussion, i s a major step forward, with a new Ministry for Public Sector Reform having presented a Government strategy, focusing on prioritized action in close cooperation with sector ministries. T h i s strategy i s supported by the recently approved Economic Management Capacity Building project (EMCB), as in integrated, strategically managed effort, rather than being sector-specific as in the past. The OED report indicates the lack o f broad consultation in the public service as a likely contributor to poor performance o f previous PSR projects. The EMCB’s primary underpinning i s the establishment o f national ownership, which i s reflected in both project design and the implementation arrangements. The latter (a multi-donor PSR pooled fund) allows PSR to be demand driven and to answer emerging reform opportunities. Progress on the Government’s decentralization agenda was also slow. The upcoming PRSC4 emphasizes these two areas. The planned e-Ghana project will a im to encourage public-private partnerships to r o l l out selected e-Government applications, building on the experience o f the customs automation system Ghana Community Network (GCNet), in order to: (i) overcome the l imi ted government resources available to modernize the public sector; and (ii) provide private sector expertise in rol l ing out IT systems.

19

Annex Tablel.3: Pillar 3 Intermediate Indicators and Actuals

Intermediate Indicators to Track Implementation towards Expected

CAS Outcomes 1. Regular and effective Parliamentary committee meetings

2. Access to information with respect to service users and citizenry, measured by surveys annually and published government information online 3, Citizens report cards implemented in 40 districts by end 2007

4. T w o tracking surveys to assess the impact o f corruption by 2007

5, Comprehensive HR Management Pol icy in place by end 2005; Client and staff surveys done by end 2005 6. Procurement institutions made operational as outl ined in Procurement L a w by end 2004

7 . Timely financial statements by Controller and Accountant General Department (CAGD) and audit reports (by Auditor General) produced

8. An efficient payro l l system in place by 2007; annual payrol l audit reports produced 9. At least 70 % o f publ ic servants in Policy, Planning and Monitoring & Evaluation Department (PPMED) trained o n pol icy management, budget management, monitoring and evaluation by end-07 10. Integrated planning and budgeting process at district level (at least 10 districts develop district composite budget for FY2005). Number o f functioning sub-district structures increased f rom 300 to 800 f rom 2004 to 2007 11. 85% o f DAs submit their monthly financial statements to Ministry o f Loca l Government within 4 weeks o f mon th ending

Actuals to date

On average, a total o f 5 meetings were held each month by the committees. Since 2004, the committees presented 113 reports to the house o f Parliament.

C iv i l society has increased monitoring o f government policies and delivery especially at local government level, where some CSOs are tracking H IPC and DACF allocations and expenditures. G o G i s opening up expenditure information, which i s readily available o n the internet. Training o n Citizen Report Cards (CRCs) conducted for NDPC staff f r o m July 26 - 30,2004. P i lo t o f CRCs in 4 districts look ing at 4 sectors (water, sanitation, health and primary education) in August'September 2004. CBRDP i s planning to conduct CRCs in selected districts this year. No tracking surveys were undertaken. G o G plans to undertake PETS in education and health sectors this year. As a first step, in April 2006, WBI w i l l train officials o f the Ministry o f Education, Ministry o f Finance and Economic Planning and the Ministry o f Health o n h o w to conduct PETS. No t yet achieved. The EMCB project that was approved by the Board in December 2005 would be a vehicle to launch this.

684 Entity Tender Committees and 109 Tender review Boards established. A comprehensive capacity building program under the Public Procurement Strategic Plan developed to train members o f the entity tender committees. By end Sept. 2005, about 55 % were established. Ac t i on p lan i s in place to complete process in 2006. CAGD monthly fiscal reports, reconciled with BOG, produced with no more than 8 weeks lag. CAG has submitted to Auditor General the Report and Financial Statements for the Consolidated Fund (CF) for 2003 and 2004, within legally established period (by end March, fo l lowing year). Auditor General has submitted to Parliament the 2004 Consolidated Fund Accounts in early December 2005. MoFEP i s implementing actions to make the Integrated Personal and Payrol l Database operational.

So far, training has been conducted for a l l PPMEDs o n strategic planning and budget management as part o f the annual budget preparation process.

Composite budgets p i l o t in 25 Distr ict Assemblies in 2005. G o G i s preparing a guideline for the rol lout o f the composite budgeting to a l l districts in 2007. As at December 2005, 408 sub-district structures are functioning. The C B R D project i s conducting training (on roles and responsibilities, development planning) for a l l area councils across the country. Th is wou ld help in the attainment o f this indicator.

As at December 3 1,2005,68% o f DAs have submitted financial returns to MLGRD within 4 weeks o f month ending. CBRD project wou ld conduct training for a l l DAs o n financial management including reporting to support the achievement o f t h i s indicator bv 2007

20

Community Water and Sanitation 2

Urban Water Restructuring

ANNEX 2: PLANNED AND ACTUAL LENDING, FY04-07

25 Small Town Water Supply and Sanitation 26

100 Urban Water 103

West Africa Gas Pipeline**

West Africa Power Pool APL-1 Phase 1**

Planned FY05

25 West Africa Gas Pipeline** 8

15 West Africa Power Pool APL-1 Phase I** 40

315 Actual FY05 23 7

* Projects were approved in a different fiscal year than planned in the CAS. ** Regional project. The total allocation to Ghana i s indicated. One third o f this amount comes from the country’s IDA allocation.

21

CEM on Growth, Poverty, Budgeting Energy Policy Note Energy Poverty and Social Impact Analysis Post FSAP Follow up FSAP UDdate

ANNEX 3: THE AAA PROGRAM, FYO4-07

FY04 FY05 FY04 FY04 FY04

I Lompierea or

National Health Insurance Implementation Country Financial Accountability Assessment Update Ghana Comorate Governance Assessment

1 AAA Planned under the CAS, FYO4-07

FY05 - FY04, FY06 (P) FY05

1 Completion dare (rj I completed I I

I f ( Y U 4 I I I

Accounting and Auditing Assessment Public Expenditure Review (PER) and PER Update

I FY04 I FY04, FY05, FY06 (P) I

1 Trade Studv I FY05 I I

Investment Climate Assessment

u B m

3

T

I

I I

I

I

h r- a

P B

cn N

0 m

31

.

ANNEX 5

Recurrent cost financing. Any limits that would apply to the overall amount o f recurrent expenditures that the Bank may finance.

GHANA: COUNTRY FINANCING PARAMETERS

Date: April 25,2006

The couqtry financing parameters for Ghana set out below have been approved by the Regional Vice President, Africa Region, and are being posted on the Bank’s internal website.

ITEM

Cost sharing. Limit on the proportion o f individual project costs that the Bank may finance

Local cost financing. A re the requirements o f IDA financing o f local expenditures met, namely that: (i) financing requirements for the country’s development program would exceed the public sector’s own resources (e.g., from taxation and other revenues) and expected domestic borrowing; (ii) financing o f foreign expenditures alone would not enable the Bank to adequately assist

taxes and duties that the Bank would not finance?

?arameter

Jp to 100%

\Jo country level limit

Yes

None

ZernarkVExplanation

2ounterpax-t funding wil l continue to be incouraged. The types o f projects which may le financed up to 100% include those related o community based programs, governance, :apacity-building, and biodiversity I intema- ional waters protection. Counterpart hnding vill be the rule in SWAPS and for projects :xecuted by entities with own sources o f ncome (eg, ports, power, water). tecurrent cost financing wil l be applied on a :ax-by-case basis, subject to project or ;ector-level assessment o f medium-tern ;ustainability. Projects that include financing ’or staf f costs wil l be accompanied by explicit 3greement that Government wil l assume the :ost ofpermanent positions after the Bank’s :onhibution to the project i s completed. ?erformance based incentive programs for :ivil servants may be financed, provided that iuch programs are part o f the government’s iublic sector reform program and are qplicable to all donor-funded programs. The requirements for local cost financing are met. The Bank may finance local costs in the proportion required by individual projects.

Taxes and duties are considered reasonable. Local tax regimes wi l l need to be monitored as decentralization progresses. IDA will consider whether taxes and duties constitute an excessively high share o f project costs.

32

ANNEX 6

Fund Relations N o t e

Press Release No. 05/145 June 21,2005

International Monetary Fund 700 19th Street, NW Washington, D.C. 20431 USA

IMF Executive Board Completes Third Review Under Ghana's PRGF Arrangement and Approves US$38.7 Million Disbursement

The Executive Board o f the International Monetary Fund (IMF) has completed the third review o f Ghana's economic performance under a Poverty Reduction and Growth Facil ity (PRGF) arrangement. The completion o f the review makes immediately available to Ghana an amount equivalent to SDR 26.4 m i l l i on (about US$38.7 mill ion) under the arrangement.

Ghana's three-year PRGF arrangement was approved on M a y 9,2003 (See Press Release No. 03/66) for SDR 184.5 m i l l i on (about US$271.3 million). So far, Ghana has drawn SDR 79.1 mi l l ion (about US$116.2 mi l l ion) under the arrangement.

In completing the review, the Executive Board also decided to extend the current PRGF arrangement to October 3 1, 2006 so that the sixth and final review and a l l disbursements under the arrangement could be completed. I t also decided to waive the nonobservance o f three quantitative and one structural performance criteria, as the authorities have since reviewed the factors that contributed to their nonobservance, and have put measures in place to ensure that they achieve the original program objectives.

Fol lowing the Executive Board's discussion o n Ghana's request, o n June 20,2005, Mr. Takatoshi Kato, Deputy Managing Director and Act ing Chair, stated:

"Economic performance continued to strengthen in Ghana during 2004, with growth exceeding earlier projections and a further buildup in gross international reserves. Strengthened pol icy implementation helped consolidate macroeconomic stability, supported by favorable external factors including higher- than-expected inflows from donors. Inflation declined by ha l f at the end o f 2004, but the recent deregulation o f petroleum product prices has led to a jump during the f i rst quarter o f this year.

"The execution o f fiscal policy improved in 2004, although there were some slippages. Total revenue relative to GDP reached i t s highest level yet, although this was not enough to offset unanticipated capital outlays, the increased subsidy for petroleum products as wor ld o i l prices rose, and an overrun in government wages. Consequently, the overall budget deficit narrowed but was s t i l l above the target for the year. Faster GDP growth helped reduce the ratio o f domestic debt to GDP, which i s the anchor o f the fiscal strategy.

"Monetary pol icy has remained firm, contributing to the decline o f inflation during 2004. The central bank i s to be commended for managing significant inf lows in a manner that balances monetary expansion and competitiveness. Also, the recent rapid buildup o f gross international reserves provides an important cushion against shocks.

"Structural reform has progressed, thereby enhancing the environment for private sector-led growth. Efforts to strengthen public expenditure and financial management are helping to improve the transparency, accountability, and efficiency o f the use o f public resources. Regulatory and legislative

33

changes and macroeconomic stability have helped strengthen the financial sector. The reform o f public enterprises i s ongoing, with full cost recovery for public ut i l i t ies.

"The government's decision to deregulate the petroleum sector and the adoption o f a new petroleum product pricing mechanism earlier this year were important achievements. The establishment o f an oversight body to monitor the application o f the mechanism i s also welcome, as this will ensure fair pr ic ing and provide safeguards against anti-competitive behavior. These measures will remove government involvement in product pricing, reduce the vulnerability o f the budget to wor ld o i l prices, and free up resources for growth enhancing and poverty reducing expenditures. I t will be important to ensure the automatic adjustment o f petroleum prices under the new mechanism.

"The reform o f the c iv i l service i s also welcome. Whi le this initiative i s pr imari ly aimed at improving the delivery o f public services, it should also lead to prospective fiscal savings, in particular, through a reduction o f c iv i l service wages relative to GDP. The demand for these savings to fund pr ior i ty expenditures i s very high.

"Debt rel ief under the enhanced Heavily Indebted Poor Countries (HIPC) Init iative has l ed to a substantial improvement in Ghana's debt-service indicators. Ghana's long-term debt sustainability i s vulnerable, however, to a sustained deterioration in key economic variables, and most importantly, to a significant reduction in grants as a source o f financing. Until conditions are more favorable and a longer track record of good macroeconomic performance i s established, Ghana should continue to re ly on concessional borrowing to finance development," Mr. Kat0 said.

The PRGF i s the IMF's concessional facility for low-income countries. PRGF-supported programs are based o n country-owned poverty reduction strategies adopted in a participatory process involv ing c iv i l society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This i s intended to ensure that each PRGF-supported program i s consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 %-year grace period on principal payments.

34

ANNEX 7

Ghana at a dance POVERTY and SOCIAL

2004 Population, mid-year (millions) GNI per capita (Atlas method, US$) GNI (Atlas method, US$ billions)

Average annual growth, 1998-04

Population (%) Labor force (%)

Most recent estimate (latest year available, 1998-04)

Poverty (% of population below national poverty line), 2003 Urban population (% of total population) Life expectancy at birth (years) Infant mortality (per 7,000 live births) Child malnutrition (% of children under 5) Access to an improved water source (% ofpopulation) Literacy (% of population age 15+) Gross primary enrollment (% of school-age population)

Male Female

KEY ECONOMIC RATIOS and LONG-TERM TRENDS

1984

GDP (US$ billions) Gross capital formation/GDP Exports of goods and sewiceslGDP Gross domestic savings/GDP Gross national savings/GDP

4.4 6.9 8.0 4.2 4.0

Current account balance (incl off transers)/GDP -0.9 Interest payments/GDP 1.5 Total debffGDP 44.4 Total debt service/exports 21.7 Present value of debUGDP Present value of debvexports

1984-94 1994-04 (average annual growth) GDP 4.7 4.4 GDP per capita 1.9 1.7 Exports of goods and services 9.3 6.0

Ghana

21 .o 400 8.3

2.6 2.2

35 46 58 57 25 73 76

87.5 89.8 84.4

1994

5.4 24.0 25.3 12.5 19.1

-4.7 2.2

99.5 25.8

2003

5.2 2.5 2.7

Sub- Saharan

Africa

719 600 432

2.2 1 .o

37 46

101

58 65 95

102 88

2003

7.6 22.9 40.3 11.0 24.6

1.7 1.0

91.5 5.2

42.9 104.8

2004

5.8 3.0 3.5

Low- income

2,338 510

1,184

1.8 2.1

31 58 79 44 75 61 94

101 88

2004

8.9 28.4 34.5

7.2 25.2

-4.0 1.3

79.6 5.6

28.3 64.0

2004-08

5.8 3.0 3.8

2/25/06

Development diamond'

Life expectancy 7-

GNI Gross per primaq capita enrollmeni

1 Access to improved water source

Ghana - ~ Low-income g r o w

Economic ratlos.

Trade

I

Indebtedness

Ghana Low-income group

I___

STRUCTURE of the ECONOMY

( X of GDP) Agriculture Industry

Services Manufacturing

492 378 106 249

402 373

Household final consumption expenditure 88.6 73.8 77.4 76.8 General gov't final consumption expenditure 7.3 13.7 11.5 16.0 Imports of goods and services 10.8 36.8 52.2 54.4 GCF -GDP - (average annual growth) Agriculture industry

Services

Household final consumption expenditure General gov't final consumption expenditure Gross capital formation Imports of goods and services

Manufacturing

1984-94

1.9 5.0 0.1 7.9

3.8 6.6 5.4 7.7

1994-04

4.2 4.6 4.0 4.6

6.4 5.1 2.4 6.3

2003 2004

5.2 7.5 0.7 5.1

-1.4 6.5 6.4 4.5

3.4 -16.4 7.2 15.9

24.1 12.5 7.7 4.5

Growth of exports and Imports (%) I 10

0

-10

-20

I -Exports -D' lrnports I Note: 2004 data are preliminary estimates

35

Ghana

PRICES and GOVERNMENT FINANCE

Domestic prices (% change) Consumer prices (annual average) implicit GDP deflator

Government finance (% of GDP, includes current grants) Current revenue Current budget balance Overall surDius/deficit

TRADE

(US$ millions) Total exports (fob)

Cocoa Timber Manufactures

Total imports (ciD Food Fuel and energy Capital goods

Export price index (2000=100) Import price index (2000=100) Terms of trade (2000=100)

BALANCE of PAYMENTS

(US$ millions) Exports of goods and services Imports of goods and services Resource balance

Net income Net current transfers

Current account balance

Financing items (net) Changes in net reserves

Memo: Remitances (private transfers, net)

EXTERNAL DEBT and RESOURCE FLOWS

(US$ millions) Total debt outstanding and disbursed

iBRD IDA

Total debt service IBRD IDA

Composition of net resource flows Official grants Official creditors Private creditors Foreign direct investment (net inflows) Portfolio equity (net inflows)

World Bank program Commitments Disbursements Principal repayments Net flows Interest payments Net transfers

1984

39.7 35.3

8.0 -0.6 -3.1

1984

567 382 21 53

677 102 177 224

60 91 66

1984

605 81 0

-205

-8 I 73

-39

76 -37

1984

1,959 101 186

133 15 2

103 38

5 2 0

121 56

9 47 8

39

1994

24.9 30.1

19.7 I .8

-1 1.5

1994

1,227 320 165 I09

1,736 260 188 842

86 105 82

1994

1,386 2,012 -626

-111 472

-255

41 8 -164

1994

5,416 70

2,094

364 20 21

218 247

58 233 557

88 178 20

158 21

138

2003

26.7 27.5

25.5 5.7

-4.4

2003

2,471 818 174 186

3,581 537 619

1,505

95 96 99

2003

3,074 3,979 -905

-1 65 1,194

127

552 -679

801

2003

6,976 4

3,950

192 2

73

267 303

13 75 0

279 246

46 200

29 171

2004

12.6 14.0

30.2 6.4

-3.6

2004

2,785 1,071

212 249

4,291 592 852

1,211

98 117 84

2004

3,058 5,053

-1,995

-72 1,831

-236

41 9 -1 83

1,287

2004

7,050 2

3,961

549 2

87

303 159

-1 01 69

0

296 56

240 33

207

Inflation ( O h ) I 40

99 00 01 02 03

-GDP deflator -CPI

Export and Import levels (US$ mill.) I 5,000

~4,000 1 I

O4 I 98 99 00 01 02 03

Exports rn Imports

Current account balance to GDP (Oh)

4 7 2 0 2 4 6 8

-10 . I2

:omposition of 2004 debt (US$ mill.)

G. 700 A. 2

B 3961

C 409

\ - IBRD 1 - IDA D -Other multilateral F . Private > - IMF G -Short-term

E - Bilateral

36

ANNEX 8

CAS Annex 8 2 - Ghana Selected Indicators* of Bank Portfolio Performance and Management

As Of Date 04/07/2006

Indicator 2003 2004 2005 2006 Portfolio Assessment

Average Implementation Period (years) 4.3 3.8 4.1 4.0 Percent of Problem Projects by Number 16.7 20.0 17.6 10.5 Percent of Problem Projects by Amount a, 10.3 12.2 28.2 17.3 Percent of Projects at Risk by Number a , d 16.7 26.7 17.6 15.8 Percent of Projects at Risk by Amount a, 10.3 17.9 28.2 18.5 Disbursement Ratio (YO) e 18.1 25.2 33.1 24.7 Portfolio Management

Supervision Resources (total US$) 1,538,;: 1,881,106 2,185,440 1,550,000 Average Supervision (US$/project) 69,900 76,800 109,300 91,688

Number of Projects Under Implementation a 18.0 15.0 17.0 19.0

CPPR during the year (yeslno) no no Yes

Memorandum Item Since FY 80 Last Five FYs

Proj Eva1 by OED by Amt (US$ millions) 4,034.2 1,150.8 Yo of OED Projects Rated U or HU by Number 33.3 36.8

Proj Eva1 by OED by Number 96 19

% of OED Projects Rated U or HU by Amt 28.8 32.8

a. As shown in the Annual Report on Portfolio Performance (except for current FY). b. Average age of projects in the Bank's country portfolio. c. Percent of projects rated U or HU on development objectives (DO) and/or implementation progress (IP). d. As defined under the Portfolio Improvement Program. e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the

beginning of the year: Investment projects only. * All indicators are for projects active.in the Porffolio, with the exception of Disbursement Ratio,

which includes all active projects as well as projects which exited during the fiscal year.

37

ANNEX 9

CAS Annex 83 - IBRDllDA Program Summary - Ghana As Of Date 04/07/2006

Proposed IBRDIIDA Base-Case Lending Program a

Fiscal year Proj ID Strategic Rewards b Implementation b

(H/M/L) Risks (H/M/L) US$(M)

2006 GH-PRSC 3 123.0 H L

2007

GH-€con Mgmt CB GH-MAP GH-MSME GH-PRSC 4 GH-WAPP APL-2 Phase 1 Result GH-Energy Dev &Access SIL (FY07)

GH-eGhana SIL Result

GH-PRSC 5

25.0 20.0 45.0

140.0 45.0

398.0 65.0

125.0 40.0

230.0

H H H

M L M

Overall 628.0

38

ANNEX 10

CAS Annex B8 (IFC) for Ghana

Ghana Statement o f IFC's

Held and Disbursed Portfolio As o f 4/27/2006

(In U S Dollars Millions)

Held Disbursed

FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic 1990 AAIL 0 2.55 0 0 0 2.55 0 0 1998 AEFNCS 1997 AEF PTS 1994 AEF Shangri-la 1996 AEF Tacks Farms 1989 C A L Bank L t d 200 1 Diamond Cement 2000 ELAC 1991 GHANAL 2005 Scancom 2005 School Fin Facil

0 0 0.53 0 0 0 0.53 0 0 0 0.31 0 0 0 0.31 0

0.93 0 0 0 0.93 0 0 0 0.43 0 0 0 0.37 0 0 0

0 0.87 0 0 0 0.87 0 0 0 0 0 2.75 0 0 0 2.75

0 0.10 0 0 0 0.1 0 0 0 0 0 0.22 0 0 0 0.22

40 0 0 0 20 0 0 0 0 0 0 1.04 0 0 0 0

Total Portfolio: 44.1 3.74 0.84 1.04 24.05 3.74 0.84 0

ea 0 r

v) c

8 e n P i3

.-

0

a

z s P '9' n

e

- 0 m w 3 W N h

.d a .- C

I m v)

KK ww aa hh uuPP ll aa tt ee aa uu

AAkk ww

aapp

ii mm-- TT

oogg

ooRR

aann

ggee

ss

Mount AfadjatoMount Afadjato(880 m) (880 m)

U P P E R W E S TU P P E R W E S T

B R O N G - A H A F O B R O N G - A H A F O

A S H A N T IA S H A N T I

W E S T E R NW E S T E R N

C E N T R A LC E N T R A L

E A S T E R NE A S T E R N

V O LV O L TT A A

U P P E R E A S TU P P E R E A S T

N O RN O R T H E R NT H E R N

GREAGREATERTERACCRAACCRATTemaema

WinnebaWinneba

EnchiEnchi

KadeKade

PresteaPrestea

TTwifo Prasowifo Praso

TTarkwaarkwa

OdaOdaDunkwaDunkwa

KpanduKpandu

KrokosueKrokosue

DiasoDiaso

BibianiBibiani

GoasoGoaso

TTechimanechiman

YYejieji

KwadwokuromKwadwokurom

DambaiDambai

NakpayiliNakpayili

YYendiendi

GushieguGushiegu

WWalewalealewale

WWalewaleTalewaleTumuumu

NakpanduriNakpanduri

HamaleHamale

BoleBole

SawlaSawla

FufulsuFufulsu

AtebubuAtebubu

JemaJema

KintampoKintampo

MakongoMakongo

SalagaSalaga

AgogoAgogo

BerekumBerekum

NavrongoNavrongo

ObuasiObuasi

HoHo

WWaa

KumasiKumasi

TTamaleamale

SunyaniSunyani

KoforiduaKoforidua

BolgatangaBolgatanga

U P P E R W E S T

B R O N G - A H A F O

A S H A N T I

W E S T E R N

C E N T R A L

E A S T E R N

V O L T A

U P P E R E A S T

N O R T H E R N

GREATERACCRA

Takoradi

Newtown

Tema

Winneba

Axim

Enchi

Kade

Prestea

Aflao

Twifo Praso

Tarkwa

OdaDunkwa

Kpandu

Krokosue

Diaso

Bibiani

Goaso

Techiman

Yeji

Kwadwokurom

Dambai

Nakpayili

Yendi

Gushiegu

Walewale

WalewaleTumu

Nakpanduri

Hamale

Bole

Sawla

Fufulsu

Atebubu

Jema

Kintampo

Makongo

Salaga

Agogo

Berekum

Navrongo

Obuasi

Ho

Wa

Kumasi

Tamale

Sekondi

Sunyani

Koforidua

Cape Coast

Bolgatanga

ACCRA

TOGO

BENIN

CÔTED'IVOIRE

BURKINA FASO

White Volta

Kolpawn

Daka

Oti

PruTain

Bi

a

Tano

Pra

Anum

Afram

Volta

Birim

Ank

ob

ra

Bla

ckVo

lta

BlackVolta

Gul f of G uinea

LakeVolta

To Porto-Novo

To Abomey

To Sokodé

To Djougou

To Dapaong

To Tenkodogo

To Bobo-

Diolasso

To Ferkéssédougou

To Bouna

To A

gbov

ille

To A

bidj

an

To Djougou

K w a h uP l a t e a u

Ak w

ap

i m- T

og

oR

an

ge

s

Mount Afadjato(880 m)

6°N

8°N

10°N

6°N

8°N

10°N

2°W

2°E

0°

2°W 2°E0°

GHANA

0 20 40 60

0 20 40 60 Miles

80 Kilometers

IBRD 33411

SEPTEMBER 2004

GHANASELECTED CITIES AND TOWNS

REGION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

REGION BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endorsemen t or a c c e p t a n c e o f s u c h boundaries.