86579

               International Bank for Reconstruction and Development
                        International Development Association
                           International Finance Corporation
                      Multilateral Investment Guarantee Agency

                                  FOR OFFICIAL USE ONLY
                                      CONFIDENTIAL
                                                                     EDS2000-66
                                                                    March 30, 2000
                                                                     09:48:10 AM


Statement by Khalid M. Al-Saad
Date of Meeting: March 30, 2000

                     GHANA: Country Assistance Strategy and Urban V Project


                                                                               4

We had the pleasure to hear from Ghana’s ministerial economic team of their
Government’s strategy, commitment and efforts to reduce poverty during a
Committee of the Whole meeting last March 23. We appreciate and commend
the authorities’ resolve to integrate its strategy for poverty reduction with the
proposed Bank CAS under consideration.

Macroeconomic stabilization and adjustment reforms is a long and painful
process, requiring government commitment and public consensus. When
Management designs a Bank CAS in response to the legitimate needs of a
country to enable its government to pursue its development objectives, we urge
staff to give priority consideration to economic sectors and activities which are
prerequisites to growth and poverty reduction, and should be the major pillars of
this Bank’s CAS.

Having read the CAS document with interest, I would like to make a few
comments and raise the following questions:

1.    We express our concern over the projected growth target of 8 percent
annually, which is ambitious. Given the physical and institutional constraints in
Ghana, a high external debt and rising domestic debt, low level of official
reserves, deteriorating terms of trade, the fluctuation of international prices of
cocoa, gold and imported oil, high rate of poverty, and against all these odds we
believe that the Government of Ghana should be more realistic in its forecasts.
This wishful high growth rate target of 8 percent annually will raise citizens’
expectations and lately disappointment and frustration if this target is not
achieved. Moreover, could staff tell me what are the sources of this targeted
growth rate? What are the growth sectors in Ghana’s economy?

2.     If growth in Ghana is to be pro-poor, the performance of agriculture must
improve by increasing productivity in food crops and expanding opportunities
in commercial crops. Though the Bank has been active in agriculture for many
years, yet progress has fallen short of the goals, and agricultural growth has not
accelerated enough to raise consumption appreciably in some regions and
among crop farmers. Therefore, Bank’s assistance should target to increase
agricultural productivity and diversification, rural extension and access of rural
poor to efficient rural infrastructure, microfinance as a major conduit for
poverty reduction in rural areas. Despite the fact that agriculture contribed 36%
of GDP in 1999, I have not seen any elaboration on the status of the agricultural
sector in this CAS document as it was reported in the last CAS document. What
is being done among donors in the agricultural and water sectors?

3.     What I find missing in this CAS document is the treatment of the banking
sector, and how safe and sound is it. Is there a good bank supervision and
regulation regime in force? What is the financial status of state owned banks?
Moreover, could staff tell us what is being done so far to finalize the proposed
Rural Finance Project, which aims at to strengthen rural banks? How much is
the government crowding out the private sector through its rising domestic
borrowing, which explains the shrinking role of IFC and MIGA in Ghana.


4.     Another sector which this CAS does not elaborate on is the industry and
manufacturing sector. I have not seen much reference to this sector, how many
are employed, whether there are current activities or future projects proposed
for this sector which contributed 34.3% of GDP in 1999.
5.     Building-up and developing a local managerial and implementation
capacity is a priority requirement for any successful reform program. In this
regard, intensifying and expanding demand-driven programs in vocational
training and managerial skills would be a logical and needed component in
every investment project.

6.     We hope to see that, through CDF-aid coordination objective, a well
defined division of labor among various donors active in Ghana and in
particular African Development Bank and United States AID.

7.     Finally, we find the proposed Urban V Project to be an integral part of the
Bank’s CAS for Ghana, and responds to the legitimate needs and development
objectives of the Government. We hope this first APL and the subsequent series
of APLs will serve the under-served secondary towns and provide some basic
infrastructure services to the participating communities.

In conclusion, we support the CAS and the proposed loan.