Documentof The World Bank FOROFFICIAL USEONLY ReportNo. 35767-GH THE REPUBLIC OF GHANA JOINT IDA-IMFSTAFF ADVISORY NOTE OF THE GROWTH AND POVERTY REDUCTION STRATEGY AND 2004 ANNUAL PROGRESSREPORT APRIL 21,2006 This document has a restricteddistribution and may be usedby recipients only inthe performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization. INTERNATIONAL DEVELOPMENT ASSOCIATION AND INTERNATIONAL MONETARY FUND GHANA Growth and PovertyReductionStrategy Joint StaffAdvisoryNote Prepared by the Staffs o f the InternationalDevelopment Association (IDA) andthe International Monetary Fund(IMF) Approved by Gobind Nankani (IDA) and Saul Lizondo and Adrienne Cheasty (IMF) April 21,2006 I. Overview 1. The Growth and Poverty ReductionStrategy(GPRS 11) for the period2006-09, preparedby the Governmentof Ghana, buildson lessonslearnedduringthe 2003-05 Ghana PovertyReductionStrategy (GPRS I)implementation.These lessons are documented inthe 2004Annual Progress Report (APR)o fGPRS I. Joint StaffAdvisoryNote (JSAN) This summarizes staffs' review o f the GPRS I1and the 2004 APR and provides advice on key priorities for strengthening the updated strategy and promoting its effective implementation. After the overview, the JSAN discusses poverty trends and the GPRS I1macroeconomic policies, strategic pillars, and monitoring and evaluation. This is followed by a summary o f the main conclusions and issues for discussion. 2. The GPRS I1was preparedin a participatorymanner,andbuilds on extensive consultations at bothnational and district level with a broad range o f stakeholders, including representatives from Parliament, Government, private sector, think tanks, development partners, trade unions, and civil society organizations.' Following submission to Parliament inOctober 2005, the strategy was presented to a Consultative Group (CG) meeting heldinAccra in ' GPRS I1preparationwas launchedinSeptember 2004, involving five Cross-SectoralPlanning Groups composed by state and non-stateactors. Draft zero was completed inMarch 2005. Preparationof 2004 APR of GPRS I overlappedwith that o f the GPRS 11. document has a restricted distribution and maybe usedbyrecipients only inthe performance of their official duties. Its contents maynot otherwise be disclosedwithout World Bankauthorization. FOROFFICIAL USE ONLY November 2005. The C G laidthe foundation for a Ghana Partnership Strategy to support implementation o f the GPRS I1and outlined expected assistance from development partners. The C Gmeeting provided the occasion to develop a more prioritized Results Matrix which has served to begin the process o f operationalizingthe GPRS 11.The comments received from the above consultations were considered inthe finalization o fthe GPRS 11.Inaddition, civil society i s encouraged to play a strategic and continuous role inmonitoring and evaluating the progress. 3. The GPRSI1is anchoredon three strategic pillars privatesector competitiveness, - humanresourcedevelopment,andgood governance andcivic responsibility - andupdates the strategylaidout in the GPRS I.The GPRS I1summarizes developments during theperiod o f the GPRS I, reaffirms the need to sustain gains made inmacroeconomic stability, and states as its key goal the acceleration o f growth to enable Ghana to achieve middle income level by 2015. The strategy buildson policy documents o fvarious sectors and seeks to achieve targets set out in theNew Partnership for Africa's Development (NEPAD) andthe MillenniumDevelopment Goals (MDGs). 4. Staffswelcome the strengthenedfocus on growthandthe priority attachedto structuraltransformationstatedinthe GPRS 11.However, the broadpolicy framework needs to be translated into a set o ftime-bound andmonitorable actions and results with an appropriate pro-poor focus. Inparticular, the document should have addressed how to better use the GPRS I1 as an overarching framework and how to embedthe GPRS I1into annual budget preparation and the medium-term expenditure framework. 5. While the GPRS I1seeks to ensure consistency betweensectoralstrategies, treatment of different sectors is unevenand does notreflecttheir relativeimportanceinthe economy andthe complexityof issuesto betackled.For example, public sector and energy reforms - long-term challenges key to unleash the country's growth potential - received as much attention inthe strategy as other sectors that weigh less inthe economy. Another key factor o f success in achieving the country's medium- and long-term development goals - the creation o f an enabling environment for private sector-led and shared growth - received limited attention, and there i s lack o f clarity about the role o fthe government inachieving this objective. Inaddition, further improvements couldbemadeto define intermediatetargets whose achievement could facilitate attainment o f the MDGs, as well as indicators and targets that appropriately capture disparities by social group, gender, and region. Staffs recommendthat, improved prioritization, sequencing, and results orientation o fthe GPRS I1form part o f upcoming APRs. 11. PovertyTrends 6. Povertycontinuesto decline, falling from around42 percentin 1997 to 35 percentin 2003. As notedinthe 2004 APR, findings o fthe 1997 and 2003 Core Welfare Indicator Questionnaire (CWIQ) were usedto describe poverty trends.' Duringthat period, the reduction inpoverty was mostly dueto acceleration ineconomic growth, althoughreductionininequality Usinghouseholdassets ownershipdata from two CWIQ surveys, asset-basedpovertyindiceshavebeenestimated by the World Bank staff. - 4 - also contributed. A substantial part o f the gains was associated with the movement o fpeople from rural to urban areas. Important regional and socioeconomic disparities persist. Poverty remains predominantly rural and the incidence i s higher inthe Northern, Upper West, andUpper East regions. The coastal belt remains relatively better off than the savanna, although there are pockets o f poverty inthe coastal areas. Poverty i s less prevalent inmore educated households, families involved in activities other than agriculture, and smaller families. Poverty i s more prevalent among families headedby someone that i s unemployed,those inunpaid domestdactivities, and families that do not possess land. 7. Staffs concur with the assessment that Ghana is very likely to halve the poverty rate by 2015, and recommend continued focus on reducing regional and socioeconomic disparities. The GPRS I1presents a limitedpoverty diagnostic and might have usefully presented a strategy to tackle acknowledged challenges posed by disparities by social group, gender andregion. The 2003 CWIQ, the 2003 Ghana Demographic Health Survey, andthe Poverty and Social Impact Assessments have been underused.The availability o f a poverty map, as well as the education andhealth maps, implies that geographic targeting could have been utilized, including at the district level. FutureAPRs should strive to fill this gap. As stated inthe 2004 APR, trends inpovertyreduction are not necessarily linear as they are influencedby shocks, policy reversals and unforeseen circumstances. To translate the GPRS I1objectives into prioritized actions, the authorities should draw on the next Ghana Living Standards Survey (GLSS 5). Staffs believe that it will be important to analyze recent trends and determinants o f national and regional poverty and inequality, and to carefully examine the extent to which data from GLSS 5 confirm the above described asset-basedpoverty developments. The GLSS 5 field work i s being carried out, and timely availability o f its preliminaryresults (expected in December 2006) wouldbe important. Plannedcollaborative analytical work by the government and development partners will provide useful insights inthis regard. 111. Macroeconomic Policies 8. The GPRS I1indicates that accelerated economic growth coincided with macroeconomic stabilization under the GPRS I(2003-05). Growth averaged 5.6 percent, rising from 4 percent a year during2000-02; end-period inflation was nearly halved to 14.3 percent from an average o f 24.3 percent during 2000-02; the cedi stabilized against the U.S. dollar; gross official international reserves were built up; andthe goal o fhalving the stock o f government domestic debt relative to GDP - a key anchor inthe fiscal program aimed at "crowding in" private sector access to financial resources - was achieved. Also, domestically- financedpublic spending on pro-poor basic services increased from 4.8 percent o f GDP in2002 to 8.2 percent in2005. 9. With the attainment of many of the GPRS Igoals, the main objective of the GPRS I1 i s appropriately geared toward accelerating private sector-led growth so as to double the size of the economy within the next decade. Toward this end, the strategy proposes specific goals for real growth inagriculture - the predominant sector that employs a significant portion of the population and the poor - industry, and services. To obtain the requiredgrowth rates, the GPRS I1aims to continue to providemacroeconomic stability with associated stable exchange - 5 - rate, single digit-inflation and low interest rates. While staffs deem the growth assumptions inthe GPRS I1as achievable, the strategy might usefullyhave presented a comprehensive macroeconomic framework, includingthe envisagedmonetary policy stance and balance o f payments outlook, consistent with the medium-termfiscal framework and growth assumptions set out inthe strategy. 10. Greater clarity of the linkbetweenthe GPRS11, the medium-termexpenditure framework(MTEF) andthe annualbudgets interms of allocationof funds would also - - be importantin future budgetstatements.Also, the costing o fthe GPRS I1by objectives and activities should be clearly linked to the MTEF and the annual budgetsto improve effectiveness and efficiency o f public spending. Staffs recommend that this approach be adopted starting with the budget for 2007. 11, Recently,a high-levelGovernment-WorldBankconsultationon growth identified priorityareas for achievingthe GPRS I1goals. These includemaintaining a stable and competitive exchange rate, improving the business environment, enhancing the provision o f infrastructure services, enhancing the efficiency inthe use o fpublic resources, and strengthening the link betweenpublic sector wages and productivity. Plannedanalytical work to further detail public actions to step up growth shouldbe carried out jointly by the government anddonors. 12. The GPRSI1states explicitlythat current andpledgedresources are notsufficient to finance the entire developmentplan.The authorities expect that the overall fundinggap of US$l.8 billion for the GPRS I1will be filled by (i) measures to cut non-priority expenses and create space for essential expenditure, given the limited scope to further increase the already high domestic revenue relative to GDP; (ii) cancellation (including the Multilateral Debt Relief debt Initiative); (iii) scaling up o f concessional assistance, including disbursementsunder the U.S. MillenniumChallenge Account; and (iv) accessing international capital markets. Staffs are satisfied that the fiscal framework presented inthe GPRS I1costing proposal i s consistent with maintaining macroeconomic stability. As new resources become available, it would be necessary to re-designthe macroeconomic framework inthe context o f ensuringstability, and efficient and transparent use of all resources. However, the GPRS I1shouldhave usefully set out specific policies to ensure long-term debt sustainability, strengthen the debt management capacity; improve the composition of expenditure to provide fiscal space for pro-poor and pro-growth spendings; prioritize expenditure to ensure value for money by subjecting all investment projects to a cost-benefit analysis; and modify foreign-financed projects using the evidence-based decision making framework identified inthe strategy. Also, it would have been helpful ifthe GPRS I1costing includedall envisagedmedium-term public investment (including that of public enterprises). - 6 - IV. Strategic Pillars PRIVATESECTORCOMPETITIVENESS 13. The GPRS I1rightly emphasizes private sector-led growth as key to broadening the country's economic base and achievingthe structural transformation required for expanding and diversifying exports. Ghana has maintained robust and broad-based economic growth inthe recent period, much o f it drivenby improvements inthe macroeconomic framework, gains from structuralreforms, aid, remittances and favorable world market conditions. However, the country's economic structure remains virtually stagnant with the share o f agriculture, industry, and exports inthe economy broadly unchanged. Inaddition, the relative skills o f the labor force have not improved significantly. 14. Removing constraints to raising agricultural productivity and expanding the private sector, along with formal job creation, continue to be challenges. Attainment o f the accelerated growth anticipatedinthe GPRS I1hinges on modernizing agriculture and increasing productivity inthe sector. This would require considerable strengtheningo f the infrastructure support services. However, the government should buttress this strategy by implementing measures to remove identified constraints. Inthis regard, accelerating reform o f land administration would facilitate its use as collateral, giventhe slow progress reported inthe 2004 APR. Lowering transaction costs requires stronger efforts to (i) the time to register reduce property and to start new busine~ses,~ strengthen thejudiciary for commercial dispute (ii) resolution, and (iii) expedite export and import procedures. Expanding access to cost-effective infrastructure services calls for shifting more resources to operations and maintenance o f infrastructure services, ensuring financial viability o f infrastructure enterprises - many o f them utilities - and actively leveraging private sector investment.The findings o f the Investment Climate Assessment, the Doing Business Survey 2005, the current IFC and MIGA activities with the Ghana InvestmentPromotion Center and the African Enterprise Benchmarking program, as well as other analytical work and donor support provide a platform to support achievement o f tangible progress. 15. A strengthenedfinancial sector is also critical to achieving the development goals. This mighthave been discussed more completely inthe strategy. Although commercialbank measured by the ratio o fbanking assets to GDP - remains low compared to other sub-Saharan lendingrates are falling, interest rate spreads remainvery high, and financial intermediation- as African countries. Meanwhile, the policies under the Financial Sector Strategic Plan aimed at strengtheningthe banking sector, the backbone o f Ghana's financial system, shouldbepursued vigorously. Interms o fprioritizing GPRS I1objectives inthe financial sector, up-front emphasis on establishing the environment for sound micro-credit to the poor, passing legislation to establish credit rating agencies, and maintainingthe fiscal anchor aimed at reducing public domestic debt might have been set out more clearly inthe strategy. Also, monetary policy can The time to start new business has declined from 129 days in2002 to 81 days by end-2005. It is still high compared to about 38 days in South Africa, Tanzania and Uganda. - 7 - contribute inmaintaining financial stability. Inthis regard, it might beuseful to advance a proper sequence o f changes inthe use o fmonetary policy instrumentsto facilitate liquidity management as recommended by the recent IMFtechnical assistance. 16. The GPRS I1rightly emphasizes the need for greater attention to environmental protection and natural resource management. Recent estimates o f the cost o f natural resource depletionpoint to annual losses equivalent to about 4.5 percent o f GDP, putting growth sustainability at risk. Staffs urge the government to identify measures on the basis o f existing analytical work and the ongoing Country Environment Analysis, which will propose possible solutions to address failures inthe areas o f land, forestry, miningand urban environment that are causing the current degradation. These measures should include strengtheningthe role o fmarket incentives and local communities innatural resource management, and increasing the capacity o f key regulatory agencies to enforce environmental legislation. HUMAN RESOURCE DEVELOPMENT 17. Inrecent years, encouragingprogress has been made in expanding access to education and health services. Gross primary enrollment rates are rising at national levels, reaching 87 percent bymid-2005 from 81 percent two years earlier. The gender parity index i s narrowing, although the 2005 MDGo f equality may not have beenachieved. Supervised maternal deliveries rose slightly at national level, almost 2 percentage points to about 54 percent from 2002 to 2005. Other keyhealthindicators have shown little improvement. Inboth gross primary enrollment and supervised maternal deliveries, marked improvements occurred inthe three relatively deprived regions (Northern, Upper East andUpper West). The HIV/AIDS prevalence rate among pregnant woman fell slightly to 3.1 percent in2005 from 3.6 percent in 2003. 18. These favorable developments in human resources are reportedly associated with better targeting of the poor. This i s particularly so with respect to the elimination o f government-controlled fees, introduction o f capitation grants for basic education students, and funding for maternal delivery exemptions. However, giventhe 2004 APR findings that quality o f service delivery inthe social sectors remains problematic, the GPRS I1could have usefully detailedmeasures to address the challenges ahead. The need to combat malaria features more prominently inGPRS 11, which i s appropriate given its economic impact. Staffs recommend that the government ensures the adequacy o f resources for the medium- to long-term objectives for education and health services, highlightingthose areas deemed critical for accelerating progress towards the MDGs.Furthermore, stronger consideration should be givento issues o f efficiency and geographic targeting. Inthis regard, staffs encourage the government to use public expenditure tracking surveys to assess resources that are actually delivered to front-line primary services (schools and health units).Also, the financial integrityand soundness o f the recently established National Health Insurance Scheme should be ensured because o f its orientation to the poor and vulnerable. - 8 - 19. Staffswelcome that humanresourcedevelopmentconstitutesthe focalpointof the GPRS 11, andthat the strategy emphasizes educationof girls andis underpinnedby the goalof attainingthe MDGs.Achieving this pillar's goals requires greater intersectoral coordination within the government. Strengtheningthe links betweenintervention inthe health and water sectors i s key inreducingthe incidence o fwater-born diseases, such as guinea-worm infections. Also, strengtheningthe links between health and nutrition interventions i s critical in reversing the recent worsening o f the infant and under 5 mortality rates (child malnutrition was reported as accounting for up to 60 percent o f the cases o f child mortality). Staffs encourage the Government to develop andpilot cross-sector coordination processes to improve monitoring and evaluationwithin these sectors and at the national level. Staffs also consider important that intermediate targets be defined to facilitate attainment o f this pillar's long-term objectives, including those related to progress towards the MDGs. Such targets should help track developments by social group, gender, and geographic area. GOODGOVERNANCE AND CIVICRESPONSIBILITY 20. Overall, progress in governancehasbeen mixed,despite clear steps in selected areas, Progress inpublic sector reform and on the decentralization agenda has been slow, and staffs concur that implementationo frecently approved reformprograms should be accelerated to improve productivity o f the public sector and empower local authorities. Although surveys to assess the impact of corruption have yet to proceed, the government i s preparing legislation to support increased accountability, including for Freedom o f Information and Whistle Blower Protection. Other progress under GPRS Iincluded passing the Financial Administration, the Public Procurement and the Internal Audit Agency Acts to modernize the country's public financial management (PFM) regulatory framework. An ongoing baseline assessment o f Ghana's Framework - shows that the systems improved inrecent years and are working reasonably well. PFM - usingthe Public Expenditure andFinancial Accountability Performance Measurement Furtherprogress is neededinthe areas o fbudgetpreparationandreporting, procurement monitoring and transparency, internal audit processes, and debt management. Also, staffs attach importance to strong implementation o fthe Government's short andmedium-term action plan for PFM. Staffs support the government's strategy to promote an accountable state, with improved capacity to engage the private sector and civil society inthe achievement o f the country's development goals. 21. Ghanahasvolunteeredto subscribeto the AfricanPeerReviewMechanism (APRM) underthe NEPADinitiative.The final report was reviewed at the African Union Summit inFebruary2006. Staffs recommendbetter alignment o fpriority actions inthe areao f governance o fthe GPRS I1with those to be implementedas part o f the "Program o f Action" o f the APRM. Inthis regard, particular attention should be attached to actions to make further progress inthe fight against corruption. V. Monitoringand Evaluation 22. Buildingon the experienceof implementingthe GPRS I,the updatedstrategy aims at further strengtheningthe nationalmonitoringandevaluation(M&E) system. The GPRS - 9 - I1also includes measures to address the severe institutional andtechnical capacity constraints identified inthe 2004 APR. Staffs recognize the challenges o f constructing an M&E database - such as Ghana Info - and consider the reinforcement o f the capacities o f the Ghana statistical services as important for the achievement o fthe medium-termgoal o fpromoting evidence-based decision-making. 23. The GPRS I1would have benefitedwith the inclusionof outcomes andprogress indicatorsin the policymatrix. Staffs welcome the government intentionto publishthese inan updated GPRS I1M&E plan. Staffs recommend that the updated M&E planbe completed shortly and focused on GPRS I1agreed priorities to informpolicy implementation and to allow continued preparation o f very informative APRs. I t i s encouraging that the strategy envisages widening the M&E process to include increased involvement o f civil society organizations and expanded access to information at decentralized levels. VI. Conclusions andIssuesfor Discussion 24. Bank and Fundstaffs believethat the GPRS I1outlinesa comprehensiveframework for growth andpoverty reductionin Ghana.The strategy builds on experience gained during GPRS I,and the emphasis on accelerated growth is appropriate givenprogress made towards macroeconomic stability and access to basic social services. 25. The GPRSI1would have benefitedfrom analyzingthe risks to the strategy. These risks include: (i)inability to implementplaned structural reforms, such as those inthe area o f land administration, energy sector and natural resource management, leading to a substantial deterioration inthe current fiscal stance; (ii) developments or increasing regional instability - and domestic factors - such as losses from exogenous shocks - such as adverse terms o f trade quasi-fiscal activities o fparastatals - that could weaken the macro-financial context; and (iii) fiduciary weaknesses and capacity limitations that may limit the impact o f the strategy. It would be important that the upcoming APRs analyze these risks to the GPRS I1and outline measures to mitigate them. 26. Lookingahead, the staffs consider that further work is needfor strengtheningthe implementationof the GPRS 11.Priority areas are: (i) presenting and adhering to, a comprehensive macroeconomic framework that is consistent with the medium-termfiscal framework and growth assumptions set out inthe strategy; (ii) strengtheningthe link betweenthe GPRS 11, the medium-termexpenditure framework and the annual budgets; (iii) deepeningthe strategy by prioritizing public actions neededto accelerate pro-poor and private-sector led growth; (iv) ensuring the adequacy o fresources for the medium- to long-term objectives for education and health services; and (v) strengthening the anticorruption agenda and its alignment with the "Program o fAction" o fthe APRM. 27. In consideringthe GPRSI1and associatedJSAN, ExecutiveDirectorsmaywishto focus on the followingissues: - 10- 0 Do Directors agree with the areas identified by staffs as priorities for strengthening the implementation o f the GPRS II? 0 Do Directors agree that the implementation of the GPRS I1would benefit from outlining measures to deal with identified risks? REPUBLIC OF GHANA GROWTHAND POVERTY REDUCTION STRATEGY (GPRS11) (2006 2009) - NOVEMBER,2005 NATIONAL DEVELOPMENT PLANNING COMMISSION PREFACE EconomicDevelopmentandPovertyReductioninGhana Widening Opportunities, New Strategic Choices 1. With this 2005 version of Ghana's Poverty Reduction Strategy papers, the nation i s called upon to define anew the programmes of National Development that it wishes to pursue insupport of its current social and .political aspirations. The turn-around in Ghana's economic fortunes which has come about with the new century, offers the opportunity to achieve faster the existing goals of development policy, or to enlarge them or to do both. But the march of history and ideas also moves us to consider whether entirely new goals have come within our grasp, or that our priorities should be substantially re-ordered. 2. The previous strategy paper GPRS I,issuedin 2003, reflected a policy framework that was directed primarily towards the attainment of the anti-poverty objectives of the UN's Millennium Development Goals (MDGs). The present paper, GPRS 11, i s intended to introduce a shift of strategic focus, even though many of the actual programmes which will be implemented under it between 2006 and 2009 will be in the same areas. The central goal of the new policy is to accelerate the growth of the economy so that Ghana can achieve middle-income status within a measurable planning period. It i s necessary to place such a far-reaching change in the focus of development policy into a perspective of Ghana's economic history which i s much longer than the recent past when we began writing periodic policy papers of this sort. 3. Ghana i s already on course to meet the targets of the MDGs, and acceleration of economic growth will permit us to implement them even more fully. For instance, in the case of basic education for all, government has undertaken not only to meet the numerical targets of the MDGs but also to put the lost quality back into the basic education that is offered to children in deprived and rural areas. Aside from this, government has gone beyond the MDGs and set educational targets that are more related to the manpower needs of a future middle-income Ghana than simply to the fundamental human right of our children to receive at least a basic-level of education from the society. (This i s discussed more fully below). A Tradition of High Expectations 4. The post-war Gold Coast, 1945-1957, was a model colony of the BritishEmpire, endowed with a relatively advanced network of infrastructure and social service institutions in health and education. These facilities had been financed with the proceeds of a previous cocoa boom in the 1920s. Indeed, that boom had been so remunerative that Governor Gordon Guggisberg had felt emboldened to write a long-term development plan, the first in the history of the colony, with considerable assurance that it would be successfully financed and implemented. The 1930s global depression and the disruption of exports during the Second World War marked a decade-long pause i inthe economic progress of the colony. 5. But the British Government had made arrangements for the continuing purchase of the cocoa crop throughout the war years while opportunities for spendingthose earnings were restricted by war-time rationing. The result was that by 1945 the Gold Coast emerged as one of the biggest holders of reserves inthe Sterling Area system, with assets of a value which today would put Ghana inthe position of an oil-exporting country. 6. It was against this background of accumulated national savings that the colony was able to finance a university for itself as early as 1947, and nationalist leaders were able to set their sights equally high in every aspect of development planning. By the time Dr. Nkrumah was deposed in 1966 he had placed social aspirations such as free education and public health, mass housing and municipal transport, firmly onto the development agenda of the new Ghana. In the field of infrastructure he had already delivered such impressive monuments as the new harbour and industrial city of Tema, the Volta River power system, and even a concrete motorway to link Accra and Tema. An incipient industrialisation was also being simultaneously financed from public coffers by the time he left. 7. Side by side with this 20-year transformation of Ghana's social and economic infrastructure, an explosive population boom had got underway, fuelled by the classic rural-urban drift of younger people. All these costs of social change were being paid for out of the profits from a long cyclical boom in the cocoa industry, a guaranteed bullion gold price, and a newly emerging timber export business. The haunting question in economic policy-making was what would happen to all this if the cocoa bubble were to burst. EconomicStructure and the Sustainability of Development 8. And that was precisely what it did: in 1965/66 when, saturated by Ghana's own success in raising the volume of cocoa production to a then-record level of 550, 000 tons, the market collapsed and the vulnerability of a mono-crop economy was starkly exposed. Since then, the economic fortunes of this country have shown a highly unstable pattern of cyclical fluctuation, depending on the ups and downs in the markets for the triad of primary products - cocoa, timber and gold - upon which, even now, the economy depends so completely. Economic security and steady progress in national development have constantly eluded us. In the forty years since the days of Nkrumah, economic policy-making in Ghana has had to contend with a popular sense of grievance over an arrested national development which i s still blocked by an unfair international trading system. 9. The need for a rapid and radical transformation of the structure of Ghana's internal production and foreign trade i s one of the most widely-shared beliefs among intelligent laymen, who must own and support this GPRS I1 programme, as well as the professional and political lenders. In the face of the widening development opportunities offered by the rehabilitated Ghana economy of 2005, this universal ideology informs the decision to re-focus policy in this GPRS II. The nation must now aim for strategic objectives beyond the minimal goals of poverty reduction as envisaged under GPRS I,even though faster growth and structural diversification will themselves ii provide the resources to more than meet the MDGobjectives of GPRS I.It i s essential for Ghana to dialogue freely with its development partners on these political / ideological issues so that the implementation o f GPRS I1i s not obstructed by hidden political reservations. 10. In the early 1960s, the supply of educated manpower and the availability of industrial development credits from both sides in the global cold war had enabled the Government of Dr. Nkrumah to develop serious ambitions for the industrialisation of the country in order to correct its structural lop-sidedness. For various reasons, among them principally deficiencies in managerial capacity in state-owned industries and errors in technological choices, together with the cyclical fluctuations of Ghana's export earnings, that incipient reform of the structure of Ghana's economy has yielded meagre returns. But almost unanimously Ghanaians believe that the road to economic emancipation lies through diversifying away from the cocoa-gold-timber structure and adding an element of industrialisation, technology and high productivity to the pattern of Ghana's economy. GPRS I1aims to set Ghana on that road. Political Stability and National Development 11. To compound the difficulties of remoulding the economy, and driving it to serve the rising needs of a rapidly growing population, Ghana proceeded, during the period after we had exhausted our financial reserves under Dr. Nkrumah, to saddle itself with the additional handicap of political instability and a long-range deterioration in the standards of governance. Against that background, not only did the volume of new investment continue to stagnate or even decline, but the maintenance of existing assets was systematically neglected. And capital flight rather than capital inflow became the normal condition in Ghana's balance of payments picture. 12. Unsurprisingly, by the time that a semblance of democratic governance was restored under the 1992 Constitution, average productivity, and hence the real incomes of all classes of Ghanaian citizens, had fallen to very low levels. Duringthe 198Os, the Multilateral Financial Institutions in Washington had guided Ghana into adopting successive programmes of "Structural Adjustment'' supported with substantial amounts of credit. But the composition of internal production and external trade remained largely unchanged. For twenty years no new industrial enterprise of any size was established in Ghana, and the farming community adopted no new major crop to add to the list of exports or the staples of domestic consumption. 13. And the restoration of competitive democratic politics inthe 1990s seemedparadoxically to work against economic stabilisation. At each of the elections in 1992, 1996, and 2000, an incipient stabilisation of the fiscal and monetary environment suffered a relapse. And in the latter years inflation and exchange rate deterioration seemed to spin out of control. It says a great deal for the growing robustness of the economy and its management that for the elections of 2004 Ghana was able to avoid the recurrence of that 4-yearly syndrome financial dislocation. ... 111 F r o m the Economics of Reconstruction to the Economics of Growth 14. At the nadir of economic stress in 2000 - 2001 the government was compelled to seek relief from the unsustainable burden of debt servicing, and other elements of external imbalance, which were fuelling an oppressive combination of inflation and stagnation. In return for the reliefs then granted, the association of Ghana's creditors required of us the adoption of "safety net" budgetary policies by government, plus a monetary regime that was principally aimed at fighting inflation. Thus, the framework of policy which was formally agreed with Ghana's creditors prescribed on the one hand a defensive and protective bias of national development expenditures infavour of building up the basic social services and securing the welfare of the most handicapped and excluded elements of society. On the other hand, it also prescribed a sharp overall redistribution of public financial resources in favour of the lower segments of income-earners. 15. The Millennium Development Goals had been adopted at the UN at the turn of the century to help Third World countries construct a dyke wall against the flood of rising impoverishment which could have sucked so many Third World citizens into permanent depths of poverty. Ghana subscribed voluntarily to the MDGs at the UN as a member of the general comity of nations. But under the HIPC compact these MDGs were transformed into the mandatory framework of domestic economic policy inreturn for the grant of debt relief. 16. In the past four years, the policies and instruments of defensive economic strategy under Structural Adjustment and HIPC have finally begun to produce a measure of economic stability and steadily improving social equality. Inflation has come under control despite the challenges of soaring energy prices and incidences of low rainfall / poor grain crops. The value of the Cedi has steadied on the exchanges, and has even begun to appreciate against some major currencies. 17. The proportionate allocation of budgetary resources to basic pro-poor services, such as primary education, water supply and public health, has continued to grow. Pernicious indicators of unacceptable deprivation in some comers of the social structure, such as low school enrolment in the rural and savannah areas, and high drop-out rates for the girl school-child, are being overcome. This year 2005 Ghana is embarking on the ambitious project of a Universal Health Insurance System, financed out of general taxes as well as beneficiary contributions, in order to protect all citizens against preventable and manageable diseases such as malaria, tuberculosis and HIV/AIDS. The indicators in other areas such as maternal and infant mortality and provision of clean water supply all seem set on a steady curve of improvement. Thus, at the beginning of this planning period 2006 -2009 both macro-economic stability and the pursuit of basic MDGs seem to have become securely entrenched. The nation can now move on with assurance from the economics of reconstruction and rehabilitation to the economics of accelerated growth. Setting New Targets of Development 18. During the 40 years of Ghana's meandering in the economic wilderness, the world has of course not stood still. Today, comparing the economic status of Ghana with that of similar third world countries which have managed their affairs with greater maturity and skill, our people feels i v themselves left unacceptably far behind in the natural development stakes. Korea, Taiwan, Malaysia, Botswana, Kenya, Mauritius, Seychelles, Jamaica, Tunisia, Morocco, even the desert- bound Namibia -- all of which had comparable, sometimes lower, levels of per capita production than Ghana at the beginning 50 years ago -- now have considerably higher levels of per capita income. The brightest stars of contemporary economic development, India and China, were prey to recurrent mass famine at the time when Ghana was reasonably well-fed and liberally provided with social services. 19. It is in the light of these comparisons that the discerning Ghanaian electorate feels compelled to raise its sights from the minimal ambitions of preventing gross poverty and distress, and instead aim at sharing in the commonly observed standards of living in the early 2000-Global Economy. With the present instalment of strategising in development policy, government is offering leadership for the nation to embark on the quest for that higher destiny. This is to be done by achieving the status of a middle-income economy. Accordingly, even though the present document i s the second in the series of "poverty reduction" programmes, its strategic focus i s being steered in a significantly different direction. Government believes that with the platform of macro- economic stability and international credits-worthiness that has been achieved, it i s now appropriate for Ghana to aim for the attainment of middle-income status inthe medium-term. 20. The average intelligent citizen need not concern himself with the technical definition of economic concepts like "per capita GDP" and "middle-income country" in order to be able to take part in the public debate on the management of the nation's economy in which the Government i s hereby inviting every citizen to participate through the publication of this document. Towards Middle-Income Status 21. The internationally accepted definition of a middle-income country i s highly elastic, ranging from the lower limits of an average income of $750 per capita per annum (as measured by the prevailing methods of calculation) to as much as $3,000 per head per annum. In the current 2005 practice of the World Bank, countries are categorised into two classes: those which are considered wealthy enough and therefore have to borrow on the quasi-commercial terms of the Bank itself, and on the other hand those lower income countries which are permitted to borrow on the concessionary terms of the Bank's IDA, soft-window, branch. 22. Leaving aside certain technical overlaps, the World Bank's cut-off line between poorer - IDA and middle income - IBRD borrowers currently translates into countries with per capita national income above $2,000 per annum and those with less. In other words, the World Bank continues to support many countries in the lower segments of middle-income status with concessionary development loans even though they have passed the conventional threshold of middle-income status. On this scale, Ghana will be already on the fringes of stable middle-income status when we move to the level of $1,000 per capita per annum, and would be comfortably installed among the majority of progressive developing countries when our per capita income has risen above $1,500 per annum. V 23. In setting our economic growth targets the important thing is to ensure that the nation will be moving forward at a fast enough pace that, even with our still rapidly rising population, would allow majority of Ghanaians to see that their real standard of living -- their access to better food, housing, clothing, water, education, health, transport facilities - have become significantly better every few years when they look back. Too often, the technical numbers get in the way of such intelligent assessment. People live well or poorly not in proportion to "GDP growth rates" or $X per head per annum, but in relation to their access to these tangible goods and services. 24. With this present instalment of the NDPC's development strategy document we have symbolically changed the name of the programme from the "Ghana Poverty Reduction Strategy" (GPRS I)to the Growth and Poverty Reduction Strategy (GPRS 11) -- the same initials, GPRS, but with a fundamentally different focus and content. This i s not simply a matter of acronyms, but of basic intent and policy. Human Resource Development: The Focal Point of Strategy 25. The educational sector reform policy of government most sharply illustrates the intended change in strategic focus between GPRS Iand GPRS II.The objectives of the UN's MDG compact, which are reflected in the original poverty reduction proposals of GPRS I,included raising the access of all the nation's children and youth to a defined minimum of basic education, unhampered by the particular economic circumstances of their parents or guardians. 26. In an educational programme which was simply focussed on poverty reduction, the standard way to meet this target was to improve and equalise access to a six-year basic education for all children up to the age of around 12 years. In Ghana's GPRS I1 it has been decided to eventually make school attendance obligatory for all children for 11years -- from 4 to 15-- including two years of Kindergarten, and three years of Junior High School with a genuine secondary school content. The plan also includes improving the physical environment of schooling, and assuring the quality standards, especially in basic numeracy and literacy. Inthe last four years, Government has already built nearly 4,000 units of new primary / JSS school blocks, and rehabilitated thousands of older ones including the raising of all teacher training colleges to diploma-awarding institutions, and the retraining of Cert A, Cert B and many thousands of untrained teachers, thanks in part to the technological opportunities of distance-learning School. The levels of teacher education are being rapidly improved; Curricula are being reshaped at every level so as to raise the standard targets of educational attainment for the bulk of Ghana's youth and to bring them eventually up to standards around the world. 27. The reason for going so far beyond the internationally covenanted obligations in the provision of universal basic education as simply our children's human right i s that government has absorbed the most important lesson of contemporary economic history. The lesson i s that the single most crucial key to the attainment of economic success i s the educational quality of a nation's work force. Government has accordingly decided that Ghana must nurture a workforce which i s equipped with more than the basic levels of educational attainment, as defined in the MDG goals. vi This is so in order to support an economy which can then realistically aim to achieve rapid progress inthe income status of its citizens. 28. In particular, the long-neglected areas of technical and vocational training for youngsters from 15 to 18 years, and a structured system of apprenticeship to cater for the even larger numbers who under a basic MDG programme would not go through any formal training beyond the age of 12 years, are to be brought into much sharper focus. Besides, Government i s determined that Ghana should go after the proven benefits that early childhood education confers, so that the entire working force i s much more open to the absorption of modem high-productivity, high income technology. 29. The logic and the evidence in favour of the ambitious goals in educational development are totally irresistible. But the strategy will be very expensive to pursue. Even though the eventual costhenefit ratio undoubtedly speaks for its adoption, the process of moving from where we are today to where we want to be tomorrow, i s bound to be very painful, costly and turbulent. 30. In our evolving relations with those countries and institutions which are our developing partners, there i s no more crucial area than this in which we should be calling on them to supplement the meagre financial resources that the economy of Ghana can generate itself, to support the government's new educational programme. Fortunately, in the most recent reassessmentsof donor country policies towards the development programmes of countries such as Ghana, and especially in the lead-up to the Gleneagles Summit of the G8 in July 2005, it has been recognised that the absorption and application of a great deal more science and technology than i s presently deployed i s a critical ingredient for successful growth inthe third world. And that means a much better educated workforce inplace of the old concepts of cheap, sweatshop labour. 31. Fortunately, many donor countries and agencies have now reconsidered their attitudes towards tertiary education, and the promotion of science and technology in third world countries. 32. When out-dooring the strategic objectives of the new Government inhis State-of-the-Nation address to Parliament on 23`d January 2005, President J. A Kufour placed in the number one position "the development of Ghana's human resources". That should unambiguously settle the issue of priorities inthe nation's development plans for the next four years. 33. There i s one aspect of Human Resources Development to which the Government has paid particular attention, for very good reasons. And that i s the development of a public service that can be relied on to manage the nation's business with efficiency and dispatch. The groundwork has been laid and, with the help of our development partners we expect to deepen the reforms so that the public sector becomes once again the icon by which Ghana was judged for many years. 34. Inthe area of improving the social and living conditions of Ghanaians another example can be cited to illustrate the change of strategic focus which i s being introduced as between GPRS Iand GPRS 11. In the first four years after the government established for the first time a dedicated Cabinet-level ministry to look after Women and Children's Affairs, the nation can proudly record the rescuing and rehabilitation of more than 3,000 `street children', including many young girls, vii who had been living and sleeping rough in Ghana's principal cities. In the new phase of social policy under GPRS 11, however, Government i s moving beyond that. By launching in September 2005 the first mass housing project for working family people that has been attempted in Accra for the past 25 years, government has raised the focus and standards in the field of the provision of shelter by many notches beyond the rescuing of homeless youth under GPRS I. The Modernisation of Agriculture and Strengtheningof Infrastructure 35. The ensuing pages of this GPRS I1document contain exhaustive details of programmes for the rationalisation and modernisation of Ghana's agriculture and agro-based/processing industry. The majority of Ghana's working population continues to depend upon farming activities for their livelihood, and typically they cultivate small acreages. It stands to reason therefore that no significant progress can be made in raising the average real incomes of Ghanaians as a whole without significant improvements in the productivity of the small-scale farmer and farm labourer. The means for securing such increases in productivity range from improving the complement of equipment and tools with which the small-scale woman farmer earns her living, through many intermediate stages of applying scientific and technological improvements to the farming practices of medium-scale agriculturists, and going up to the most sophisticated systems of irrigation, high value horticultural production, and scientific fish farming. 36. These processes of agricultural modernisation constitute the second most important leg of the strategic priorities that have been established under GPRS 11. It has the potential of yielding benefits, in terms of accelerating overall growth rates, in a much shorter timeframe than the programs to be taken under the first strategic priority, which i s Human Resource Development. But in turn, long-range improvement in the productivity of farm work will depend upon success in the area of enhanced manpower training and the application of research, science and technology to agriculture. The two strategies must be intimately linked together. And indeed the strengthening of agricultural training institutions in the second cycle i s one of important innovations in the educational reformpolicy. 37. The problem of infrastructure development has always sat awkwardly with the overall strategic model of poverty reduction and the MDGs. Typically, Infrastructure development has two communications - tends to be very large in relation to the cost of the typical, individual project in characteristic features. First, the unit cost of projects - whether in energy, water, roads or agriculture, education or health, which are seen as the classical props for poverty alleviation and the fight against extreme deprivation. Secondly, the beneficiaries of many o f these infrastructure projects are as likely to be higher-income citizens and corporate enterprises as the lower-income and disadvantaged sectors who are the prime targets of the classic poverty reduction strategy, including the MDGmodel. 38. The role of investment in a development strategy which is firmly focussed on accelerating growth cannot be over-estimated. Government will continue to promote a financial sector that deepens the process of intermediation and promotes local savings, even as we look for external finance, especially foreign direct investment. The banks and other entities in the financial services viii sector have greater need than most other participants to make far-reaching changes both in the mind-set of their decision-makers and in their practices and policies in order to measure up to their responsibilities inbringing Ghana rapidly up to middle-income status. UnitingBehind Our NationalProgramme 39. A national development programme such as the GPRS I1 is more important for its implementation than for its technical or intellectual merits. The formulation of GPRS I1 commenced in 2004. This was at a time when the strategic direction was still dominated by the MDGgoals. The Government of Ghana, the principal executing departments, and Ghana's foreign partners were organised in a working consensus based on the implementation of the MDGs agenda. B y the time GPRS I1was finalised, Ghana's HIPC programme had come to an end, and the macro- economic rehabilitation of the economy, had been substantially accomplished. Government judged that a turning point in the nation's path of development had been reached whose consequences had to be taken on board in formulating a new national development programme. The Government itself had gone through far-reaching evolution in various aspects of its thinking on development policy reflecting also the evolving aspirations of the Ghanaian electorate and contemporary achievements of other countries with no greater development potential than Ghana. This i s a continuing process which hopefully will accelerate and deepen. But for administrative purposes it i s necessary at this stage to halt and try to systematise the present consensus, so that all partners can assess its financial implications and lay out the practical details of its implementation. 40. This first volume of the GPRS 11, covering the general policy framework of current thinking, will be accompanied by two volumes outlining how much it would cost and what specific projects and programmes it would take to realise those ideas. It i s emphasised that this i s a temporary stage of stock taking in a continuous evolution of public policy. Even while we are summarising the present set of conclusions, major new issues are arising, such as the connectivity between economic management in Ghana and the international capital market which must soon be called in to supplement the development resources of the nation in a substantial fashion. Preparations, which started with the acquisition of credit market ratings from international agencies, are afoot to float Government of Ghana instruments on the international market. 41. On the other hand, with the completion of the more rigid HIPC stage of Ghana's utilisation of IMF resources to the economic stabilisation programme, the modalities of policy dialogue with the Washington institutions have to be restructured. And the connection between development policy here and the exclusive pursuit of the MDGs has to go through a process of transition, taking into account also the outcome of the recent G8 Summit and any new institutional arrangements arising therefrom. Consultationand Participation 42. In the lead-up to preparing the present GPRS document, there has already been completed an extensive program of consultation with elements of civil society, economic interest groups and ix government agencies, all of which are needed to rally behind the programme in order to assure its success. Now that there i s a text, the dialogue with Ghana's development partners and professional groups will be particularly intensified. But inthe long runthe vast body of the citizenry must unite behind the programme if it i s to succeed, and in that process the content of the programme itself should be flexibly open to modification and improvement in response to the tides of responsible opinion. 43. This document therefore is presented very much as work-in-progress. Before the end of the year 2006, the consensus that has been reached on the "poverty reduction" subset of a larger national development agenda would be carried over into a new document that will be presented by government to Parliament and the people of Ghana as a Comprehensive Programme of National Development in accordance with the provisions of Article 36 (5) of the 1992 Constitution of Ghana. September, 2005 J. H.MENSAH Senior Minister & Chairman of the National Development Planning Commission X TABLE OF CONTENTS PREFACE.............................................................................................................................................. i TABLEOF CONTENTS..................................................................................................................... x i LIST OF TABLES AND FIGURES.................................................................................................. xvi LIST OF ACRONYMS..................................................................................................................... xvii .. EXECUTIVE SUMMARY................................................................................................................ xxi CHAPTER ONE: GPRS 11:OUTLINE OF CONTENTSAND POLICIES......................... :..............1 1.1 BACKGROUND......................................................................................................................... 1 1.2 REVIEW OF GPRS I................................................................................................................... 2 1.4 GROWTH AND POVERTY REDUCTION STRATEGY (GPRS 11)........................................ 4 1.4.1 Goal.................................................................................................................................. 5 1.4.2 Linkage to GPRS I........................................................................................................... 6 1.4.3 Ghana's Progress towards achievingthe Millennium DevelopmentGoals (MDGs) ......7 1.5 STRUCTURE OFPRESENTATIONOF GPRS I1..................................................................... 9 1.6 THE PROCESS OFPREPARINGGPRS I1................................................................................ 9 1.6.1 CompositionandTerms of Reference of Cross Sectoral PlanningGroups (CSPGs)................ 10 1.6.2 The Public ConsultationProcess................................................................................................ 11 1.7 THE GPRS COMMUNICATION PROGRAMME.................................................................. 12 CHAPTER TWO: MACROECONOMIC CONTEXT AND STRATEGIC DIRECTION ...............14 2.1 INTRODUCTION...................................................................................................................... 14 2.2 REVIEW OF MACROECONOMIC PERFORMANCE UNDERGPRS I.............................. 14 2.2.1 EconomicPerformanceby Sectors ................................................................................ 15 2.2.2 Growth Trends since the Inceptionof Market-Led.................................................................... 18 2.3 MACROECONOMIC POLICIES, STRATEGIES AND TARGETS FOR GPRS I1...............20 2.3.1 Growth Target for GPRS I1........................................................................................................ 20 2.3.2 Strategic Direction of GPRS I1............................................................................................... 22 2.3.3 Agriculture as Basis for Economic Growth and StructuralTransformation..................23 2.3.4 Weaknesses andThreats to an Agriculture-Led Strategy.............................................. 24 xi 2.3.5 Other Sectors.................................................................................................................. 26 CHAPTER THREE: PRIORITIES FORPRIVATESECTOR COMPETITIVENESS..................... 29 3.1 PRIVATESECTOR DEVELOPMENT...................................................................................... 29 3.1.1 Improve Ghana's access to global andregionalmarkets............................................... 30 3.1.2 Enhance efficiency and accessibilityto national markets.............................................. 30 3.2 IMPROVINGTHE BUSINESS AND INVESTMENT ENVIRONMENTFOR AGRICULTURE-LEDGROWTH............................................................................................ 31 3.2.1 Modernized Agriculture ................................................................................................. 31 3.2.2 Promoting Trade andIndustry ................................................................................................... 34 3.3 SUPPORT SERVICES .............................................................................................................. 35 3.3.1 Transportation................................................................................................................ 35 3.3.2 Energy............................................................................................................................ 36 3.3.3 Science and Technology ................................................................................................ 37 3.4 DEVELOPING ADDITIONAL SECTORS TO SUPPORTGROWTH................................... 37 3.4.1 Developing Informationand CommunicationTechnology (ICT) ................................. 37 3.4.2 Mining..................................................................................................................................... 38 3.4.3 Developingthe Tourism Sector for RevenueandEmploymentGeneration..................38 3.4.4 The Music and FilmIndustryfor Growth andJob Creation.......................................... 39 3.5 EMPLOYMENT GENERATIONAND IMPROVEMENTAND EXPANSION OF SAFETY NETS............................................................................................ 39 CHAPTER FOUR: HUMANRESOURCEDEVELOPMENT ......................................................... 41 4.1 INTRODUCTION ...................................................................................................................... 41 4.2 REVIEW OFHUMANRESOURCEDEVELOPMENT UNDERGPRS I............................. 41 4.3 EDUCATION. SKILLS. MANPOWER AND SPORTS DEVELOPMENT FOR ACCELERATED GROWTH .................................................................................................... 42 4.3.1 FormalEducation........................................................................................................... 42 4.3.2 Training and Skills Development................................................................................... 44 4.3.3 Sports Development....................................................................................................... 45 xii 4.4 IMPROVEDACCESS TO HEALTHCARE. MALARIA CONTROL AND PREVENTION OFHIVIAIDS ............................................................................................................................ 46 4.4.1 Improving Access to Health Care .................................................................................. 46 4.4.2 Malaria Control............................................................................................................. .`48 4.4.3 HIV/AIDS Prevention.................................................................................................... 49 4.5 POPULATIONMANAGEMENT............................................................................................. 50 4.6 SAFEWATER AND ENVIRONMENTAL SANITATION .................................................... 51 4.7 URBANDEVELOPMENT, HOUSINGAND SLUMUPGRADINGAJRBAN REGENERATION..................................................................................................................... 52 4.7.1 Housing.......................................................................................................................... 52 4.7.2 SlumUpgradingAJrbanRegeneration............................................................................ 53 4.8 SOCIAL POLICY FRAMEWORK FORMAINSTREAMINGTHE VULNERABLEAND EXCLUDED INHUMAN RESOURCEDEVELOPMENT .................................................... 53 4.8.1 IntegratedChild Development ....................................................................................... 54 4.8.2 Strengtheningthe Family ................................................................................................ 54 4.8.3 HIV/AIDS and Vulnerability andExclusion ................................................................. 55 4.8.4 CapacityDevelopmentin SocialWork andVolunteerism............................................ 55 4.8.5 Database onthe Vulnerable andExcludedGroups........................................................ 55 4.8.6 InstitutionalStrengthening, Linkagesand Coordination ............................................... 55 CHAPTER FIVE: GOOD GOVERNANCE AND CIVIC RESPONSIBILITY ................................ 57 5.1 INTRODUCTION................................................................................................................... 57 5.2 REVIEW OF GOVERNANCE UNDER GPRS I...................................................................... 57 5.2.1 Public Sector Reform.............................................................................................................. 57 5.2.2 Decentralisation....................................................................................................................... 58 . . 5.2.3 Security and Rule of Law........................................................................................................ 58 5.2 CHALLENGES TO GOVERNANCE.................................................................................... 59 5.3.1 Strengtheningthe process of democratization................................................................ 59 5.3.2 Improvingexistinginstitutional, legal and policy environment ..................................... 59 5.3.3 Evidence-based decision-makingand public dialogue................................................... 60 xiii 5.3.4 Ensuring gender equity ........................................................................................................... 60 5.3.5 Fostering greater civic responsibility...................................................................................... 60 5.3.6 InvolvingTraditional Authorities inDevelopment................................................................. 60 5.4 GOVERNANCE STRATEGIESINGPRS I1............................................................................ 61 5.5 POLITICAL GOVERNANCE................................................................................................ 61 5.5.1 StrengtheningParliament......................................................................................................... 61 5.5.2 EnhancingDecentralization............................................................................................ 62 5.5.3 ProtectingRights under the Rule of Law........................................................................ 62 5.5.4 EnsuringPublic Safety & Security ................................................................................. 63 5.5.6 Fighting Corruption andEconomicCrimes.................................................................... 64 5.5.7 EmpoweringWomen ...................................................................................................... 64 5.5.8 EnhancingDevelopment Communication............................................................................... 64 5.5.9 PromotingCivic Responsibility............................................................................................... 65 5.6 ECONOMIC GOVERNANCE....................:.. ............................................................................ 65 5.6.1 FiscalPolicy Management.............................................................................................. 65 5.6.2 ImprovingFiscalResourceMobilization........................................................................ 66 5.6.3 MonetaryPolicy Management........................................................................................ 66 5.6.4 InternationalTrade Management.................................................................................... 67 5.7 GOOD CORPORATEGOVERNANCE................................................................................... 67 5.8 PROMOTING EVIDENCE-BASEDDECISIONMAKING ................................................... 67 CHAPTER SIX: MONITORINGAND EVALUATION................................................................... 69 6.1 INTRODUCTION......................................................................................................................... 69 6.2 REVIEW OFM&ESYSTEM UNDERGPRS I.......................................................................... 69 6.2.1 Key Achievements................................................................................................................... 69 6.2.2 The Challenges......................................................................................................................... 70 6.3 STRENGTHENING THE M&ESYSTEM UNDER GPRS 11.................................................... 70 6.3.1 Reinforcinginstitutional arrangements........................................................................... 71 6.3.2 Strengtheningand effective coordinationof existingmechanisms................................. 71 6.3.3 Evolving an efficient system for evidence-based monitoring and evaluation: ...............71 xiv 6.3.4 Ensuringparticipatorymonitoringandevaluation........................................................... 72 CHAPTERSEVEN:FINANCING THE GPRS I1............................................................................. 73 7.1 The ResourceEnvelope................................................................................................................ 73 7.2 The ResourceGap........................................................................................................................ 75 APPENDICES..................................................................................................................................... 76 APPENDIX 1: Rankingof PovertyIncidenceby Regionandby Districts ................................... 76 APPENDIX 11: POLICY MATRIX................................................................................................ 78 APPENDIX I1A: PRIORITIESFORPRIVATESECTOR COMPETlTIVENESS......................... 78 APPENDIX I1B: HUMANDEVELOPMENTAND BASIC SERVICES..................................... 117 APPENDIX 1IC: GOOD GOVERNANCEAND CIVIC RESPONSIBILITY.............................. 133 xv LIST OF TABLES AND FIGURES Table. 1.1: Core Welfare liidicators................................................................................................... 4 Table 'I2: Ghana's Progress towards Achieving the Millennium Development Goals.................... 8 Table 1.3: 13 Selected Key Economic Indicators ................................................................................ Chronology of Activities ................................................................................................ Table 2.1: 15 Table 2.2: Structure of GDP by Kindof Economic Activity inPercentages.................................. Table 2.3: Projected Real GDP versus Actual Real GDP Growth Rates: 1995 - 2004.................. 17 GDPby Kindof Economic Activity: Growth Rates at Constant 1993 Prices...............16 Table 2.4: 19 Table 2.5: GDP growth Projections, (2006 -2009) ........................................................................ 27 Table 2.6: Historicaland Projected Growth Rates for GPRS I1(2006 - 2009) ............................... Gross Domestic Product by Kindof Economic Activity at Constant 1993 Prices 28 Table 7.1: Medium Term ExpenditureFramework - 2005-2009 .................................................... 74 Figure 2.1: GDP GrowthRates: 1984.2004 .................................................................................. 19 xvi LISTOFACRONYMS ADF African Development Foundation AGOA African Growth and Opportunity Act APR Annual Progress Report APRM Africa Peer Review Mechanism ASS1 Association of Small-scale Industries BAF Business Assistance Fund BOG Bank of Ghana CBO Community-Based Organizations CEPS Customs, Excise and Preventive Service CHPS Community-based Health Planning and Services CHRAJ Commission for HumanRights and Administrative Justice CPI Consumer Price Index CSIR Council For Scientific and Industrial Research csos Civil Society organizations CSPGs Cross-Sectoral Planning Groups CWSA Community Water and Sanitation Agency DFR Department of Feeder Road DMHIS District Mutual Health Insurance Scheme DPs DevelopmentPartners DSW Department of Social Welfare DUR Department of Urban Roads DVLA Driver's and Vehicle Licensing Authority EC Energy Commission ECG Electricity Corporation of Ghana ECOWAS Economic Community of West African States EDIF Export Development and Investment Fund EIC Extension Information Centers EPA Environmental Protection Agency FBOs Farmer Based Organizations FCUBE Free Compulsory Universal Basic Education FDI Foreign Direct Investment FDA Association of Women Lawyers FINSSP Financial Sector Strategic Plan FUSMED Fundfor Medium and Small-scale EnterprisesDevelopment GAEC Ghana Atomic Energy Commission GDP Gross Domestic Product xvii GEPC Ghana Export Promotion Council GES Ghana Education Service GFTZB Ghana Free Trade Zone Board GHAPOHA Ghana Ports and Harbours Authority GIPC Ghana Investment Promotion Centre GLSS Ghana Living Standard Survey GNCC Ghana National Commission on Culture GPRS Ghana Poverty Reduction Strategy GPRTU Ghana Private Road and Transport Union GSB Ghana Standards Board GSMF Ghana Social MarketingFoundation GTB Ghana Tourists Board HIPC Heavily Indebted Poor Country HW/AIDS Human Immunodeficiency VirdAcquired ImmuneDeficiency Syndrome HR Human Resource HRD Human Resource Development HSD Health Service Delivery ICT Information and Communication Technology IRS Internal Revenue Service mus Intermediate Technology Transfer Units JSS Junior Secondary School LPG LiquefiedPetroleumGas M C A MillenniumChallengeAccount MDAs Ministries, Departments and Agencies MDBS MultiDonor Budget Support MDGs MillenniumDevelopment Goals MLFM Ministry of Land, Forestry and Mines MLGRD Ministryof Local Government and RuralDevelopment MOT & MCC Ministry of Tourism and Modernizationof the Capital City MMYE Ministryof Manpower, Youth andEmployment MOCT Ministry of Communication and Technology MOE Ministry of Energy MES Ministryof Environment and Science MOFI Ministry of Fisheries MOFA Ministry of Food and Agriculture MOFEP Ministry of Finance and Economic Planning MOH Ministryof Health MOH-GHS Ministry of Health-Ghana Health Services M O I Ministry of Information MOJ Ministry of Justice xviii MOT1 Ministry of Trade and Industry MOWAC Ministry of Women and Children's Affairs MPHR Ministry of Ports, Harbours and Railways MPSD & PSI Ministry of Private Sector Development and Presidential Special Initiatives MRT Ministry of RoadTransport MSMEs Small and Medium Size Enterprises MTEF MediumTerm ExpenditureFramework M M T C Metro Mass Transit Company MTTU Motor Traffic and Transport Unit MWRWS Ministry of Water Resources, Works and Housing NACP National Aids Control Programme NADMO National Disaster Management Organization NBSSI National Board For Small Scale Industry N C A National Communication Authority NCCE National Commission on Civic Education NCWD National Commission on Women and Development NDPC National Development Planning Commission NED National Economic Dialogue NEPAD New Partnership for Africa's Development NGOs Non Governmental Organizations NHIC National Health Insurance Commission NHIS National Health Insurance Scheme NPA National PetroleumAuthority PEF Private Enterprise Foundation PLWHA People Living With HIV/AIDs PRSC Poverty Reduction Support Credit PSI President's Special Initiatives PSIA Poverty and Social Impact Analysis PURC Public Utility Regulatory Commission PWDs Persons With Disabilities RBM Roll Back Malaria SEA Strategic Environmental Assessment S&T Science and Technology SHEP Self-Help Electrification Programme SSNIT Social Security and National InsuranceTrust sss Senior Secondary School STDs Sexually Transmitted Diseases STEP Skill Training and Entrepreneurship Programme STIs Sexually Transmitted Infections TUC Trades Union Congress xix VLTC Volta LakeTransportCompany VRA Volta RiverAuthority WAJU Womenand JuvenileUnit WHO World HealthOrganization WTO World Trade Organization xx EXECUTIVESUMMARY 1.0 INTRODUCTION With the attainment of relative macroeconomic stability and modest economic growth under GPRS I, overarchinggoalofGhana'scurrentsocio-economicdevelopmentagendaistoattainmiddle the income status (with a per capita income of at least US$lOOO) by the year 2015 within a decentralized democratic environment. This i s to be complemented by the adoption of an overall social protection policy, aimed at empowering the vulnerable and excluded, especially women to contribute to and share in the benefits of growth of the economy, thus ensuring sustained poverty reduction However, there are two broad sets of constraints to achieving accelerated wealth creation and poverty reduction. These are the vulnerability of the economy due to the persistent reliance on the export earnings from a few primary commodities and the social structure which comprises a high proportion of children and youth with the attendant high dependency ratio, low level of literacy and skills, especially among women and the rural population. Accordingly, emphasis i s placed on changing the structure of the economy by developing the private sector, diversifying the export base and increasing agricultural productivity and rural incomes. While the GPRS Ifocused on poverty reduction programmes and projects, the emphasis of GPRS 11 i s on the implementation of growth-inducing policies and programmes which have the potential to support wealth creation and sustainable poverty reduction. GPRS I1 i s therefore anchored on pursuingthe following priorities: 0 continued macroeconomic stability accelerated private sector-led growth vigorous human resource development 0 good governance and civic responsibility 2.0 MACROECONOMIC POLICIES, STRATEGIES AND TARGETS The strategy is guided by the goal of doubling the size of the economy {in terms of real production} within the next decade, and bringing the per capita income of the average Ghanaian to middle income level by 2015. This i s expected to reflect in positive social change and improvement in the quality of life of the population. It i s in this regard that the growth targets are made taking cognizance of the corresponding objectives of NEPADand MDGs. The economic growth targets derived from the current level of development and the feasible expectations for the long term perspective of the economy are based on the following assumptions: The population growth rate will not exceed 2.6 per cent per annum, through the population xxi management policies and strategies outlined in the sections on human resources development (section 4.5). Continued macroeconomic stability, especially by containing inflation within single digit as from 2006, up from the rate of about 14.7 percent (August 2005). Accordingly, it i s expected that the average annual change inthe GDP deflator will not exceed 9 percent. A stable Cedi/ Dollar exchange rate with prudent management that will keep the Cedi depreciation below a 4 percent per annum ceiling. Reduced cost of investment loans as incentives for stimulating investment in support of private sector-led growth. This i s expected to be the dividend from sound macroeconomic management, and also reflect the reduction in risk factors that make loans to SMEs unattractive to banks. Containment of fiscal deficits and preventing them from being a major source of monetary instability and price inflation. Two years after gaining a very favourable rating from leading agencies, Ghana i s preparing to tap into the international capital market to supplement access to developmental resources. Prudent, debt management will entail taking into account the maturity profiles of debt against public sector borrowing requirements. An aggressive domestic revenue mobilization and its efficient use in driving the prioritized development targets. This i s to be attained through administrative measures and capacity enhancement of existing tax collection instrumentsand personnel. An efficient expenditure re-prioritization in favour of development expenditure and to ensure efficiency inthe use of public resources. Growth in aggregate investment, especially from packaged programmes such as the Millennium Challenge Account Compact with its integrated agro projects Within these general assumptions, it is targeted that the economy grows at an annual rate which will rise from 6 percent to 8 percent towards the realization of middle income status by 2015; but this must be firmly situated within the perspective of changingthe inherent structure of production. GPRS I1will therefore continue with the implementation of policies that will enhance and sustain the gains made inmacroeconomic stability under GPRS Iby ensuring: prudent fiscal policy management a monetary policy that i s flexible enough to respond to external shocks, promote growth and ensure price stability real interest rates that enhance effective mobilisation of savings and make credits affordable to the private sector relatively stable real exchange rates that promote international trade xxii 3.0 PRIVATE SECTOR COMPETITIVENESS Challengesto the Capacity of the PrivateSector The main challenge is to systematically address a number of structural constraints at the policy and institutional levels that hamper private-sector competitiveness in the agricultural sector in the medium term and inthe industrial and other sectors over the long term. Primary among these are: 0 complexity and non-transparency of regulations inadequate information on existing regulations 0 lack of access to finance, especially for small-scale women farmers 0 falling but still fairly high interest rates 0 weak and inadequate capacity within the public sector to formulate, implement, monitor and evaluate private sector policies that explicitly take into account the specific needs of enterprises (especially the interests of micro, small and medium scale enterprises) 0 weak commercial dispute resolution system insecurity and vulnerability inthe informal sector where the youth and women predominate 0 weak linkages betweenthe informal and formal sector activities lack of social protection for men and women in the informal sector weak institutional and regulatory framework for small business management. Additionally a number of technical constraints to agricultural development exist. These include: low crop yield and output due to low soil fertility and over-dependency on rainfall unsustainable agricultural practices including low exploitation of water for irrigation purposes low productivity and low disease-resistant breeds of livestock high incidence of livestock diseases and poor disease surveillance systems inappropriate husbandry practices inadequate infrastructure for aquaculture and low levels of fish production from existing water bodies limited value addition and highpost-harvest losses limited access to marketing centres due to poor conditions of the road network Policy Interventions The capacity of the private sector will be strengthened to effectively perform as the engine of growth and poverty reduction by improving Ghana's access to global and regional markets; enhancing the efficiency and accessibility of national markets; strengthening of firms' competency and capacity to operate effectively and efficiently; enhancing government capacity for private sector policy formulation, implementation, monitoring and evaluation; facilitating private sector access to capital; improving the institutional and legal bottlenecks; supporting adoption of technological innovation and entrepreneurship; enhancing the quality of public services and xxiii accelerating the development of other sectors that are strategic to the attainment of private sector- led growth. Accordingly, the following broad areas have been identified for priority interventions in the agricultural sector: reform to land acquisition and property rights accelerating the provision of irrigation infrastructure enhancing access to credit and inputsfor agriculture promoting selective crop development modernising livestock development improving access to mechanised agriculture increasing access to extension services 0 provision of infrastructure for aquaculture restoration of degraded land and environment Inline with the long term vision of developing an agro-based industrial economy, the interventions in agriculture will be complemented with appropriate interventions inthe trade and industry sector. The policy objectives and strategies outlined to achieve this include: ensure proper integration of the nation's production sectors into the domestic market promote agro-processing improve agricultural marketing 0 enhance access to export markets increase industrial output and improve the competitivenessof domestic industrial products facilitate the development of commercially viable export and domestic market oriented enterprises inthe rural areas 0 promote industrial sub-contracting and partnership exchange promote the development of the craft industry for export ensure the health, safety and economic interest of consumers Support Services: Strategic support services that would be developed to facilitate improved productivity in agriculture and agro-industry are transportation, energy, science and technology. The broad policy objectives here are to ensure the provision, expansion and maintenance of the appropriate transport infrastructure which strategically links the rural production and processing centres to the urban centres, while ensuring the provision of affordable and accessible transport system that recognises the needs of people with disabilities. Policy interventions within the energy sector will focus on ensuring increased access to alternatives forms of energy by the poor and vulnerable; modernisation and expansion of power infrastructure; improving the regulatory environment in the power sector, ensuring full cost recovery for power supply and delivery while protecting the poor; promoting productive and efficient use of energy and minimising the environmental impacts of energy supply and consumption through increased energy xxiv efficient technologies. The policy objective under Science and Technology i s therefore to promote the adoption of appropriate technologies, both local and foreign, with the capacity to improve productivity and efficiency in the agricultural, industrial and services sectors especially for small and medium-scale rural enterprises. Additional sectors to support acceleratedgrowth: Other sectors which are targeted for accelerated growth and development in view of their employment creation and income generation potentials include: mining (especially exploration and exploitation of the lesser developed minerals such as salt); Information and Communication Technology (ICT), tourism, music and film industry, as well as the development and production of commodities under the Special Initiatives for export including garments and textiles. Employment generation and imvroved safetv nets: The broad objective of employment creation will be to ensure that the benefits of accelerated growth impact positively on increasedjob opportunities for all. The attainment of this objective will significantly contribute to reducing poverty among the rural and urban poor. Strategies in this direction will include adoption of a national policy for enhancing productivity and income/wages with equal opportunities for men and women, ensuring the existence and implementation of a coherent employment policy for the youth, the vulnerable and excluded including people living with disabilities and adopting a policy for comprehensive and integrated employment monitoring and evaluation 4.0 HUMANRESOURCE DEVELOPMENT The main goal of Human Resource Development under GPRS I1i s to ensure the development of a knowledgeable, well-trained and disciplined labour force with the capacity to drive and sustain private sector-led growth. Policy Interventions The following broad policy areas have been identified to drive the development of the necessary human resources for accelerated economic growth: The promotion of formal education and training and skills development; improved access to health care; malaria control and HIV/AIDS prevention and treatment; access to safe water and adequate sanitation; housing and slum upgrading and population management. The strategy will also include a vigorous health education campaign on the adoption of healthy environmental practices and lifestyles. In addition relevant issues relating to vulnerability and exclusion will be mainstreamed in the human resource development strategy xxv Education Priority policy interventions that will deepen and sustain the progress made in the sector under GPRS Iand accelerate growth include the following: 0 increase access to and participation ineducation and training at all levels 0 bridge gender gaps in access to education in all districts improve the quality of teaching and learning; improve efficiency inthe delivery of education services promote science and technology education at all levels with particular attention to increased participation of girls. Training, skills and entrepreneurial development will be guided by the following priorities: 0 provision of skills and entrepreneurial training in a gender responsiveand equitable manner 0 promotion of dialogue betweenindustry and skills/professional training institutions to produce skilled labour required by industry 0 strengthening of and support HRtraining institutions 0 promotion of training inapprenticeship; promotion of the adoption of the National Youth Policy and enactment of the Disability Bill In order to accelerate access to quality health services, the health sector will continue to deepen efforts and focus on the three broad policy objectives. These are: bridge equity gap in access to quality health and nutrition services ensure sustainable financing arrangements that protect the poor enhance efficiency in service delivery In Ghana, malaria remains the leading cause of morbidity, accounting for about 40% of all out patients attendance. It i s also the leading cause of deaths, especially among children under five years old and pregnant women. Malaria i s more than a health issue as it adversely affects productivity in all sectors of the economy through workdays lost due to illness and the cost of treatment. The following priority interventions in the Roll Back Malaria (RBM) plan will be promoted and strengthened in GPRS 11: improve malaria case management; multiple prevention; improved partnership; and focused research. In addition to the malaria menace, HIV/AIDS pandemic at the prevalence rate of 3.4% has a negative impact on productivity, loss of productive assets, hightreatment costs and the break in the transfer of valuable livelihood knowledge from one generation to the next. To effectively address this issue, the following strategies will be adopted to prevent the spread of HIV/AIDS in order to keep the prevalence rate below 5%: reduce new HIV/STI transmission; reduce the impact of HIV/AIDS related vulnerability, morbidity and mortality; enhance the coordination and management of the national HIV/AIDS response. xxvi Safe water and environmental sanitation: The following priorities will guide the delivery of safe water and sanitation in the next four years: accelerate provision of safe water in rural and urban areas; accelerate the provision of adequate sanitation; improve environmental sanitation in urban and rural areas. Urban housing and slum upgrading: The ultimate goal of Shelter Policy i s to provide adequate and affordable stock of housing with the requisite infrastructure and basic services to satisfy the basic needs of the people. GPRS I1treats the provision of housing as a strategic area for stimulating economic growth while at the same time improving the livingconditions of Ghanaians. The very activity of providing housing contributes to economic growth through its multiplier effect on job creation and the local building material industry. Population management: Even though the population growth rate in Ghana has reduced from its previously high level of about 3% in 1994 to 2.7% in 2000, it continues to outstrip the provision of social services and infrastructure. The high fertility rate has also resulted in a youthful population with a high dependency ratio. The immediate challenge to human resources development under GPRS I1i s to formulate appropriate strategies to manage the population to ensure that population growth rate i s maintained at a level that will support economic growth and social development. Population management will be based on the following priorities: promote access to and utilization of family planning services educate the youth on sexual relationship, fertility regulation, adolescent health, marriage and child bearing promote sexual health, delayed marriage and child bearing promote compulsory education for children especially the girl-child up to secondary promote compulsory and universal birthregistration as a basic right and population management measure integrate population variables into the GPRS at the national, regional and district levels and improve population database for the GPRS promote the integration of HIV/AIDS into sexual and reproductive health programmes strengthen the multi-sectoral, multi-disciplinary institutional co-ordination, collaboration and networking for population management. Mainstreaming the Vulnerable and Excluded in Human Resource Development: Issues relating to vulnerability and exclusion have been mainstreamed in the GPRS 11. A comprehensive Social Policy Framework to update existing policies where necessary and provide guidelines for improved social development performance to bolster economic growth will be developed and adopted to strengthen the process of empowering the vulnerable and excluded to xxvii reduce their risks, protect their rights and enhance their contribution to national development. Priority policy issues to be resolved, besides education and health, include: integrated child development strengthening of the family HIV/AIDS 0 capacity development in social work and volunteerism; updating the database on vulnerable and excluded groups; and strengthening institutional linkages and better coordination. 5.0 GOOD GOVERNANCE AND SOCIAL RESPONSIBILITY The broad objective of good governance and civic responsibility i s to empower state and non-state entities to participate in the development process and to collaborate effectively in promoting peace and stability. Measures towards attaining this objective include the promotion of an effective, responsible and accountable state machinery with improved capacity to engage the productive private sector and civil society in formulating strategies for accelerated growth and poverty reduction. The priority areas for the promotion of political governance under GPRS Iincluded public sector reform, decentralisation, and security and rule of law. Although considerable progress was made in terms of these objectives under GPRS I, following still present challenges to good governance: the strengthening the process of democratisation further improving existing institutionalcapacities inthe legislative and policy environment strengthening the data management system to support evidence-based decision making ensuring gender equity integrating traditional authorities into formal institutional structure for governance fostering greater civic responsibility Strategies for Political Governance under the GPRS I1therefore include strengthening Parliament, enhancing decentralisation, protecting rights under rule of law, ensuring public safety and security, managing public policy, empowering women and the vulnerable group, enhancing development communication, ensuring good corporate governance, increasing access to information, and promoting civic responsibility. Priorities for enhancing Economic Governance under GPRS I1will focus on improved management of fiscal, monetary and international trade policies. Strategies for improved fiscal policy management will focus on public expenditure management, promoting effective debt management, and improving fiscal resource mobilization. Monetary Policy management will continue to focus on price and exchange rate stability. GPRS I1 will promote international trade by reducing the constraints associated with export and import procedures; minimizing the incidence of "dumping"; diversifying and increasing the export base, promoting new areas of competitive advantage, taking full advantage of Ghana's preferential access to international markets (AGOA, EU-ACP), engaging fully in multi-lateral trade negotiations, and xxviii establishment o f an effective information system to track and measure progress. 6.0 MONITORING AND EVALUATION The goal of the M&E System under GPRS I1 is to facilitate the tracking of progress and effectiveness as well as to identify bottlenecks associated with the implementation of the Strategy. The proposed system, which forms an integral part of the GPRS 11, will build on the progress made under GPRS Iand would involve the following key strategies: 0 reinforce institutional arrangements that can support and sustain monitoring and evaluation processes evolve an efficient system for evidence-based monitoring and evaluation strengthen and effectively coordinate existing mechanisms evolve an efficient system for generating relevant, reliable and timely quantitative and qualitative information manage an effective feedback mechanism that makes statistical information available inuseableform to government andcivil society ensure a holistic and participatory approach to M&E including consultative mechanisms such as the APRM Enhanced efforts to implement the M&E Plan will focus on strengthening institutional capacities to link M&E results to national policy and decision-making and budgeting. The outputs from the M&Eefforts will be documented and widely disseminated through the Annual Progress Reports 7.0 FINANCING THE GPRSI1 The estimated total resources required to finance the GPRS I1is $ 8.06 billion (2006-2009). These costs exclude wages and salaries and administrative expenses associated with project and programme implementation. They consist primarily of investment and service costs. As reflected in the macro-economic framework, the budgeted expenditures for investments and services over the same period only amount to $6.27 billion indicating an overall funding gap of $1.79 billion which i s expected to be filled by external inflows and resources from the capital market. External inflows are expected to be harnessed from HIPC savings, debt cancellation and Millennium Challenge Account to complement domestic resources. Given Ghana's favourable sovereign ratings, augmented by good governance, additional resources could be sourced from the international capital market. xxix CHAPTER ONE GPRS11:OUTLINE OF CONTENTSAND POLICIES 1.1 BACKGROUND Ghana's economy, which i s largely agro-based, has in the past been characterised by high rates of inflation, continuous depreciation of the cedi, dwindling foreign reserves, an excessive public debt burden and fluctuating growth. Extensive implementation of liberalization and adjustment policies in the 1980s produced some growth in services and mining but did little to induce and sustain growth in agriculture and manufacturing. Both growth and incomes remained stagnant, resulting in deepening poverty. Duringthe 1990s, the levels of public expenditure on social development programmes for poverty reduction such as health and education were at 2.0 percent and 2.8 percent of GDP respectively. These levels of spending were much lower than what prevailed in other African countries, constraining poverty reduction and effective social change and development. Although general poverty levels decreased in the 1990s, certain areas of Ghana experienced growing and deepening incidence of poverty, with evidence of intensification of vulnerability and exclusion' among certain social groups. This was particularly noticeable in the savannah and transitional zones in northern Ghana and in some coastal areas in the Central and Greater Accra regions. In the country as a whole, some large occupational groups such as small-scale food farmers, especially women, remained stuck below the poverty line, and the chances of survival of many children and youth remained precarious. The first programmes under the Ghana Poverty Reduction Strategy (GPRS I) were formulated against the backdrop of a general economic crisis in which virtually all of Ghana's key macro- economic indicators were spiralling out of control. The focus of that programme was accordingly to re-align the macroeconomic situation as a necessary condition for the implementation of sectoral policies specifically targeted towards reducing the incidence of poverty as observed in the 1990s. Inthe meantime Ghana had applied for debt relief under the HIPCinitiative, and had to observe the classical conditionality of that scheme, namely, that the savings from debt relief would be applied 'Defining Vulnerability and Exclusion Vulnerability is a state of deprivation based on poverty or lack of enjoyment of other rights and entitlements; it is therefore multi-dimensional. It leads to the exclusion of disadvantagedgroups of men, women and children and persons with disability from activeparticipation in the economic, political and social life of their society, leaving them with little or no defenceagainst exploitation andrisks. Definitionof Exclusion Invariably persistent vulnerability leads to exclusion. It can be looked at from social, economic,politicalor human ecological perspectives.Exclusion arising from such distinctive features may lead to the following conditions: Inability to participatein decisionmaking inpolitical, and socio-culturalaffairs Inability to compete or participateinan event due to discrimination 1 solely to "poverty alleviation" which in turn translated into the pursuit of the United Nations Millennium Development Goals. Indeed, the need to submit a PRSP was the immediate occasion for producing GPRS Iand subsequent versions were envisaged at fitting into the same trajectory of national development policy. At the onset, it became obvious that apart from HIPC savings, policies under GPRS had to address the issue of how to create wealth by restructuring the economy towards accelerated growth, so that the objectives o f poverty reduction and the protection of the vulnerable and excluded could be sustained. The principal social objectives that were added to these related to improved governance, including the decentralization of government and reform of the public services to partner the private sector in national economic development within a decentralized democratic environment. 1.2 REVIEW OF GPRSI For the three years under GPRS I, main thrust of the government's policy initiatives was aimed the at maintaining macroeconomic stability. This was achieved through prudent fiscal and monetary policies aimed at reducing inflation, driving interest rates down to levels conducive to increased investments but still attractive enough to mobilize savings, ensuring stable but yet competitive exchange rates, and maintaining a fiscally sustainable debt regime. Inthe real economy a moderate rate of economic growth was to be achieved through the creation of an enabling environment for improved agricultural productivity and private sector-led agro-industrial development. As a result of the availability of HIPC savings the manifestations, and at the same time the causes, of the deepest poverty were to be directly attacked through greater investments in health, education, safe water and sanitation. Feeder roads and other transport infrastructure could be financed to facilitate distribution of agricultural products and services in favour of the rural poor. The main political objective of the GPRS Iof ensuring that in the promotion and protection of civil liberties no Ghanaian was excluded from participating in decisions that affected their lives, has been pursued through HIPC supplementation of the resources available under the District Assemblies Common Fundand the Ghana EducationalTrust Fund. Considerable progress has been made towards achieving the objectives of GPRS I. The economy has been characterized by relative stability, with all the targeted macroeconomic indicators registering positive trends. Despite a series of major fuel price adjustments to absorb petroleum debt and respond to a fast-rising crude oil market, the overall consumer price index declined dramatically over the period, interest rates eventually fell and exchange rates stabilized. GDP grew at an average rate of 5 percent during the period, because it coincided with the dissemination of new high-productivity technologies in the all-important cocoa sector. As a result, unlike the classical pattern of sectoral contributions to growth in an emerging economy, Ghana's economic growth under GPRS I(2002 - 2004) was led by the agricultural sector with 6% average growth rate, followed by industryand services respectively with 5% and 4.7%. Generally in the social development circles there were increased expenditure outlays in support of the medium-term priorities of GPRS Iwith regard to special programmes targeted at the vulnerable and excluded. These included the rehabilitation of street children, increased access to legal aid 2 services for the poor, integration of Persons With Disabilities (PWDs) into mainstream production and employment, and increased access of economically marginalized women to credit through the establishment of the government's micro-credit scheme and the Women's Development Fund supported by the government of Japan. Despite these achievements, as was characteristic of the poverty reduction strategies sponsored by creditor institutions in that epoch, there was little room in the 2001 - 2005 programme for addressing issues, such as urbanisation, industrialisation, technical/vocational training, technology research and development - that must now engage greater attention inpolicy-making in Ghana as it aspires to join the ranks of the fast growing economies. GPRS Ihas a number of limitations and bottlenecks. These included service delivery constraints and the persistence of regional differences in the distribution of some key outcomes in the health and educational sectors. The educational sector continues to be confronted with insufficient progress in primary school enrolment as well as geographical and gender disparities. Inspite of the efforts made, gender disparities can be observed in all sectors including education, health, production, employment and access to and control over land. Economic policy and management under GPRS Ihas been criticised for concentrating on macroeconomic stability rather than providing a clear policy direction which recognises a stable macroeconomic environment as a platform upon which to generate economic growth as a means to poverty reduction. Another criticism relates to the ineffectiveness of the participatory process adopted during its preparation and the implication for national ownership. The inability to involve more districts and local communities, and the limited engagement of Parliament and the private sector, have been cited as weaknesses in the process. A further criticism i s the insufficiency of gender focus specification when addressing various poverty issues inthe diagnostic, in the thematic areas, and in the policy matrices, as well as inthe monitoring and evaluation framework. While taking note of the shortcomings of GPRS I,government has taken even more significant initiatives in basic components of a strategy for the short term protection and improvement of living standards and the longer-termemancipation of people from the stranglehold of inherited poverty. A National HealthInsurance System has been brought into effect in 2005 to guarantee every Ghanaian access to a professional health care from "cradle to grave" at affordable cost. In 2004 government promulgated an Educational ReformProgramme which does not only assure every young Ghanaian the right to free basic education as prescribed by the National Constitution and the UN's Millennium Development Goals, but will eventually give them the unrestricted opportunity to participate fully as members of a productive work force of a modernised, technological, and wealth- creating economy. 1.3 POVERTYSITUATION In formulating GPRS I,the incidence of poverty was analyzed and categorized on broad regional basis and this resulted in limitations in targeting poverty reduction interventions. However, further analysis of income poverty based on available data presents a clearer picture of poverty at district 3 level as depicted in Appendix 1. This has provided the basis for more direct targeting of poverty reduction measures under GPRS 11. Table 1.1 shows the movement of some of the core welfare indicators for periods 1998/99 and 2003. Table 1.1:CoreWelfare Indicators Source: CWIQ 1997& 2003 1.4 GROWTHAND POVERTYREDUCTIONSTRATEGY (GPRS11) The design and preparation of GPRS 11 (2006-2009) i s thus guided by practical lessons and experiences drawn from the preparation and implementation of GPRS I(2003-2005). However, going beyond these, the government and the nation itself have also adopted developmental goals and vision based on the proposition that Ghana has now positioned itself to attain the social and economic status of emerging middle income countries within the next decade. In place of the former Ghana Poverty Reduction Strategy (GPRS I), Government i s accordingly launching a new Growth and Poverty Reduction Strategy (GPRS I12006-2009). The change in name reflects the new direction of government policy which places more emphasis on growth. This document presents a set of coordinated national programme of social and economic development -- that set which illustrates how much a national programme can be purposefully steered to eliminate 4 the worst manifestations of poverty, social deprivation and economic injustice, from Ghanaian society. Essentially, it integrates the otherwise disparate development agenda and sectoral commitments that compete for inclusion in the annual national budget into one comprehensive development policy framework to serve the basic objective of guaranteeing every Ghanaian a decent livelihood, especially for the most vulnerable and deprived (who are disproportionately made up of women, children and unemployed youth). It incorporates the relevant development strategies/policy documents of all the various sectors such as the Basic Education Improvement Programme and the 2004 White Paper in Education Reform, the Private Sector Development Strategy, Ghana Trade Policy, the Food and Agricultural Sector Development Programme and the National Gender and Children's Policy. GPRS I1 also seeks to operationalise various international agreements which are relevant to the poverty reduction objectives and of which Ghana i s signatory. Principal among these are the MillenniumDevelopment Goals (MDGs), the New Partnership for African Development (NEPAD) and the African Peer Review Mechanism (APRM), the Convention on the Elimination of all forms of DiscriminationAgainst Women (CEDAW) and the African and Beijing Platforms for Action. I t i s also consistent with the relevant ongoing programmes which government i s pursuing with development partners. 1.4.1 Goal The overarching goal of Ghana's current socio-economic development agenda i s to attain middle income status (with a per capita income of at least US$lOOO) by the year 2015 within a decentralized, democratic environment. This i s to be complemented by the adoption of an overall social protection policy, aimed at empowering the vulnerable and excluded, especially women to contribute to and share in the benefits of growth of the economy, thus ensuring sustained poverty reduction. This document reviews GPRS I,analyses growth trends, and defines the strategic direction and interventions aimed at achieving the basic poverty reduction goals prescribed in the MDGs framework and, beyond that, bringing Ghana within the threshold of middle income countries. The technical computation of these goals in terms of the traditional indicators of "per capita gross national income" expressed in current United States dollars i s at present inhibitedby a number of professional constraints. First, greater portion of business in Ghana i s conducted using the national currency - the Cedi. In the recent period of extreme turbulence in the relative value of the Cedi against the Dollar, translating the value of the nation's entire production of goods and services into meaningful dollar terms i s obviously a difficult and controversial exercise. Besides that complication of the exchange rate, our economists have also to cope with the influence of domestic price changes, including periods of hyper-inflation, on the measurement of the value of Ghana's total economic output in real terms. A further difficulty i s posed by challenges to data inaccuracies relating to the conduct of ten-year national population census. The combined effect of the above factors i s that depending on the methodologies and assumptions 5 that have been employed by various agencies, estimates of the value of the productive work that i s averagely done by every living Ghanaian today in a year, range from US$380 per head on the current World Bank rankings, to US $430 according to some local experts and to US$480 per head according to some internationally reputed rating agencies. These figures will be refined and the differences narrowed down as a result of the professional advances that are envisaged in the technical standards of governance under GPRS 11. The contemporary debate on the status of national income or demographic statistics not withstanding, what matters i s that as a nation we are able to think through, agree upon and vigorously implement a realistic plan to bring about the vast improvements in our living standards such as are warranted by Ghana's own endowments of human and material resources backed by the technological possibilities of the world that we share. 1.4.2 Linkage to GPRSI With the attainment of relative macroeconomic stability under GPRS I, direction of GPRS I1is the to accelerate economic growth and poverty reduction by assisting the private sector as much as possible to create wealth and by shaping the acts and policies of government deliberately so as to generate the maximum opportunities for additional employment. However, there are two broad sets of constraints to achieving accelerated wealth creation and poverty reduction. The first i s the vulnerability of the economy due to the persistent reliance on the export earnings from a few primary commodities. The second is the social structure which comprises a high proportion of children and youth. The attendant high dependency ratio i s aggravated by the low level of literacy, working skills, and productivity especially among women and the rural population. Accordingly, emphasis in this GPRS I1 i s placed on measures to change the structure of the economy by developing the private sector, diversifying the export base and increasing agricultural productivity, processing and rural incomes. While the GPRS Ifocused on poverty reduction programmes and projects, the emphasis of GPRS 11 i s on growth-inducing policies and programmes as which have the potential to support wealth creation and poverty reduction. GPRS I1i s therefore anchored on pursuingthe following priorities: continued macroeconomic stability accelerated private sector-led growth vigorous human resource development good governance and civic responsibility Continued macroeconomic stability will be realized by ensuring prudent fiscal policy management, effective monetary policy, and a well-managed debt and international trade regime. I t i s accepted however that the highly reserved posture of macroeconomic policy which was appropriate to the convalescent economy under GPRS Ihas to be modified to meet the needs of a more expansionary thrust of policy under GPRS 11. The Bank of Ghana i s already leading the way by introducing 6 measures such as the reduction inbanks' reserve requirements and the lowering of the cost of credit to business on a broad front. But GPRS I1should make its greatest impact in the real economy of agricultural and industrial production. Accelerated growth will be achieved through the development of a vibrant private sector with adequate capacity to lead the growth of agriculture and other emerging sectors including ICT and tourism. After decades of development effort, some of the most basic advances in production technologies have eluded Ghana. We did not need to overcome the terrible scourge of mass famine, but Ghana today has not even achieved basic food security in its traditional staple diet. The peasant woman who feeds this country i s still usingthe same technology of cutlass and hoe which her grandmother usedto feed a population one-fifth the size of today's population. Ghana's timber industry i s yet to derive optimum value for the nation from the forest resources which are in the meantime being exploited to exhaustion. A significant portion of wood material ends up as off-cuts and sawdust because of low investment in the technology of timber utilisation. The emerging success in Ghana's textile industry has turned sour: the exportable surplus of cotton production has long disappeared, and now not only i s the textile weaving industry in a state of crisis but even printingon imported cloth seems to be losingits competitiveness. Overall, the contribution of modem industry to the modestly fast growth of the economy inthe most recent years has been unacceptably low, mirroring a relatively stagnant inflow of foreign direct investment. The years of GPRS I1should serve as a transition period when a basic platform of agro-industrial production and technology i s built up to match the successes that have been achieved in the area of macroeconomic reform. Vigorous human resource development, good governance and civic responsibility will be pursued both to support growth and as important developmental goals inthemselves. 1.4.3 Ghana's Progress towards achieving the MillenniumDevelopment Goals (MDGs) The MDGs span the critical development issues of poverty and hunger, education, health (especially child and maternal mortality), gender equality and women's empowerment, environmental sustainability and global partnership for development, and thus provide an important subsidiary framework for defining specific objectives for GPRS 11. Ghana has, since 2000 adopted the targets of the MDGs as the minimum requirements for socio- economic development and poverty reduction. Accordingly, Ghana began the monitoring of progress towards achieving the MDGs from 2002 even prior to the formal launching of GPRS I. The initial findings were that though some progress had been made, achieving the goals of the MDGs by 2015 would require additional effort particularly in the area of reducing maternal mortality. Since then government has focused on removing the constraints hindering the realization of the MDGs. Table 1.2 below shows the progress that Ghana has made towards achieving the Millennium Development Goals. Table 1.2: Ghana'sProgresstowardsAchievingtheMillenniumDevelopmentGoals Goals Will goalbe reached? from hunger data Universalprimaryeducation Probably I'otenndy Unlkely Lack of Fair Weak but Weak Achieve universal access to plltllar) data improving educanon b) 2015 Enderequality Lack of Elmmate gender dispari data otentia Under-fivemortality Probably Potentially Unlikely Lack of Sgamg Fair Weak but Weak Reduce under-five morthty by two-thuds data improving by 2015 HIV/AIDS & Malaria Probably Potentiallv Unlikely Lack of Strong Pair Weak but Weak Halt and reversethe spread of HIV/i\IDS data improving by 2015 Probably Potentially Untikely Lack of Strong Fair Weak but Weak data improving Deal comprehensively wi& debt and make debt sustainableinthe longterm Probably Potentially Unlikely Lack of Pair Weak but Weak improving Source: NDPC 2004 * Lackof dataimpliesinability to score appropriately 8 1.5 STRUCTUREOF PRESENTATIONOF GPRS I1 GPRS I1i s presented in two volumes; Volume I,which i s the policy framework of the Growth and Poverty Reduction Strategy analyses the macroeconomic context and the development policy choices that should be made to attain the goals of GPRS 11. It includes a policy matrix, which outlines issues, policy objectives, and strategies, and also identifies the agencies responsible for implementing each component of the strategy. Volume I1 i s a four-year framework of costed policies and strategies. This document i s organized into six chapters. Chapter 1 is the introduction which includes a discussion of recent experiences and future goals in national development, especially as they bear on the issues of poverty reduction. It also outlines the process of preparing the GPRS and the strategy for mass citizen involvement in the GPRS I1process in as much as there i s need to mobilise the whole body politic to assure its success. Chapter 2 presents the Macroeconomic Context and Policy choices, while Chapter 3 discusses the policies for Growth through Private Sector Development. Chapter 4 contains policies for Vigorous Human Resource Development, Chapter 5 deals with Good Governance and Civic Responsibility and, in Chapter 6 the plan for monitoring and evaluating the implementation of the GPRS I1 i s presented. Finally Chapter 7 presents the financing arrangements for the implementation of the GPRS 11. The GPRS I1document i s not designedto present a set of cut and dried policies and programmes. It rather represents a medium term framework which offers a platform for maximising social dialogue with civil society and development partners in order to arrive at the best long term solutions to national development challenges. The extensive process of consultation which has preceded this publication will be followed by a further and even more comprehensive programme of dialogue within the government itself, with Parliament, civil society, various interest groups, and development partners so that the crucial tasks of consolidation of policies and programmes under GPRS I1can be accomplished. During the period of excessive debt dependency, the management of the development dialogue has seemed to be a duet between the Government establishments and its multilateral and bilateral foreign creditors. The ordinary mass of the people, whose future and fortunes were being decided, had no part or opinion in the process. The inevitable result was that all those programmes achieved scant success - becausethere was an insufficient conviction of "ownership" among either the state or the non-state partners inthe implementation of the planned development programmes. The processesof consultation that have already been conducted inthe lead up to this publication are outlined below. 1.6 THE PROCESS OFPREPARINGGPRS I1 During the four year term of implementing this GPRS I1it i s imperative to institute procedures and relationships that will enhance the probability of attaining the objectives for national development and poverty reduction. The first requirement i s that Ghanaians themselves will own and drive 9 forward the process of development. Accordingly the preparation of GPRS I1has involved broad participation to ensure that diverse shades of opinion and experiences are reflected at all stages of the process. The planning process ..... began with the formation of technical working teams, known as Cross-Sectoral Planning Groups (CSPGs) organized around the five thematic areas of GPRS I, namely: Macroeconomic Stability Production and Gainful Employment Human Development and Provision of Basic Services Vulnerability and Exclusion and Good Governance These five CPSGs metamorphosed into three at the later stages of the process on the basis of the three priority areas of Government, namely Private Sector Competitiveness, Human Resource Development and Good Governance. 1.6.1 Composition and Terms of Referenceof Cross SectoralPlanningGroups (CSPGs) CSPGs were composed of state and non-state actors drawn from Ministries, Departments and Agencies (MDAs), Professional Bodies, Tertiary Institutions, Research Institutions and Think Tanks, Non-Governmental Organizations (NGO), Community-Based Organizations (CBO), Private Sector, Organised Groups and Associations (TUC, Federation for the Blind & Disabled etc), Specialized Institutions, outstanding individuals with expertise in relevant fields as well as Development Partners. Each CSPG was chaired by an individual selected by the group and was facilitated by a consultant who provided the technical backstopping and expertise, assisted by a research associate. Consistent with the MDGs requirement to ensure integration of environment in country's policies and programmes (MDG 7 - Target 9), the SEA team of EPA/NDPC was represented on each CSPG. Each CSPG formed a core working group who collated reports on deliberations of that particular CSPG and drafted the report of the CSPG. Coordination of the process was done by technical staff of the NDPC secretariat Issues relating to gender and the vulnerability and exclusion were mainstreamed into each of the thematic areas. The Broad Terms of Reference of each CSPG were to: . determine the programmes, policies and plans to be rolled over from GPRS Ito the updated GPRS 2006-2009 . review the policies, programmes and projects with a view to identifying any missing links, and propose new initiatives take into consideration recommendations from the Annual Progress Report (APR), the Poverty and Social Impact Analysis (PSIA), the Strategic Environmental Assessment (SEA), and other existing sector strategies and studies 10 ' . mainstream cross-cutting issues such as the environment, employment, ICT, disability, HIV/AIDS, and population into the thematic areas integrate international commitments such as the MDGs, the MillenniumChallenge Account '. (MCA) NEPAD, PRSC, and MDBS into the various thematic areas. identify national priorities for the theme under consideration develop relevant strategies for achieving the objectives inthe GPRS 11. 1.6.2 The PublicConsultationProcess The public consultations strategy for GPRS I1was aimed at consolidating the gains made in the dissemination o f GPRS Ithrough the use of vigorous print and electronic media campaigns as well as other communications media to achieve the twin objectives of creating awareness about the GPRS, and soliciting the views of a large segment of the Ghanaian population as input into the GPRS 11. The Strategic Objectivesfor Public Consultations Programme The strategic objectives for the public consultation programme were to: ... inform the public on the Government's Growth and Poverty Reduction Agenda highlight the new policy areas of GPRS I1for stakeholders solicit their views on priorities for GPRS 11, promote ownership of GPRS I1by all Ghanaians. ... From the Public Consultation Process, broad consensus was obtained on the following priorities which should drive the design and implementation of GPRS I1 private Sector Competitiveness human Resource Development good Governance and Civic Responsibility The policies and strategies related to the Vulnerable and Excluded were mainstreamed among other cross-cutting issues. Scope and Methodology for the Public Consultation Process The scope and method used for the public consultation process included: .'..National, Regional, District and community level workshops Use of the electronic media (radio and television) Public fora Focus group discussions 11 Groups Targeted in the ConsultationProcess .......Regional Ministers Student Unions Sector Ministers and their Deputies .. Women leaders/Coalition of Women's Sector Ministers and their deputies Groups and Women's organizations rn .. Council of State NGOs in Service Delivery and Religious Regional Coordinating Directors Bodies Regional Planning Coordinating Units NationalAssociation of Local Authorities ...... District Chief Executives Ghana Employers Association District Planning Coordinating Units Association of Ghana Industries District Assembly members 8 The Trades Union Congress Traditional Authorities Research Institutions and Policy Think Community Based Organizations Tanks Community Groups Parliament The Communications Media 1 Political parties Professional Bodies ....Development partners 1.7 THE GPRS COMMUNICATION PROGRAMME Feedback from the dissemination of the GPRS Iand the Annual Progress Reports as well as the public consultations have been integrated in GPRS 11. Communications under GPRS I1will be enhanced through the continued implementation of the Communications Strategy to deepen .. ownership and to ensure effective implementation, monitoring and evaluation of the strategy. The Communications Programme will focus on the following: development of popular versions of GPRS I1(inEnglish and major local languages) expansion of sales outlets of GPRS I1throughout the country extensive dissemination of GPRS I1 through a variety of media to targeted audiences outlined inthe Communications Strategy. forging and strengthening of strategic partnerships with state and non state actors for effective coordination of the dissemination of GPRS I1and its Annual Progress Reports, management of expectations and feedback for the policy review process, and deepening of development communications programmes and processes to foster the necessary attitudinal change insupport of growth and poverty reduction. 12 Table 1.3: Chronology of Activities - - ACI[VITY PARTICIPANTS )ATE 1. Formation and meetings of Cross Sectoral MDAs, CSOs, CBOs, NGOs, Private Sector, Planning Groups (CSPGs) ProfessionalAssociations,Tertiary & Research 1September 2004 - May Institutions, DevelopmentPartners,etc. LO05 2. Preparationof initial report for each CSPGcore working groups and consultants September - December - thematic area LO04 3. Firstreview and validation by Steering NDPC members December 2004 - Committee 4. Second validation and review by Steering NDPC members lanuary 2005 - Committee 5. Gender Mainstreaming stakeholder Gender focal persons inMDAs, DPs, Groups, February 2005 - workshop CSOs, NGOs - 6 Preparationof zero draft of GPRS I1 CSPG core groups and consultants March2005 7. Validation by Policy Managementteams of MDAs, DPs, Specialistsinstitutions and April 2005 - MDAs, DPs and Specialists individuals 8. Review of Gender input into thematic Gender ConsultativeGroups April -May 2005 - reports 9. Third review and validation by Steering NDPC members April 2005 - - 10 Ami1 2005 .....- --- 11. May -June 2005 labour unions, trade association, women's organisations,NGOs, etc and Traditional - authorities 11 Consultative workshop for Parliamentary Parliamentarysub-committeeson Finance and June 2005 - select committees PovertyReduction - 12. Training workshop for 2006 budget BudgetOfficers, Ministry of Finance 13. Policy review workshop with MTEFI Budgetofficers of MDAs - Budget Division 14. Fourth review and validation by Steering NDPC members June 2005 - Committee 15. Review and validation of Gender UNIFEM Mission July 2005 - mainstreaminginto draft GPRS I1 16. National level Consultations Student un ions, FBOs, Labour unions, Trade July - October2005 associations, Professionalassociations,National - Houseof Chiefs, Council of State, Media - 17. Consultative workshop GhanaFederationof the Disabled (GFD) July 2005 18 Fifthreview and validation by Steering NDPC members July 2005 - Committee 19 Review and validation by experts and Policy think thanks, ISSER, private consultants, August 2005 - private sector PEF, Financial institutions 19. Validation workshop for parliamentary Members of Parliamentary select committee on August 2005 - select Committee Poverty Reduction 20 Submissionof Final Draft to Cabinet Oversight, Financeand Economy Committees August 2005 - 21 April -November, 2005 - 22. Aug. 2005 -January 2006 - 23 September2005 - 24 September2005 - 25 October 2005 November2005 _. 26 CHAPTER TWO MACROECONOMICCONTEXT AND STRATEGICDIRECTION 2.1 INTRODUCTION This chapter sets the macroeconomic context and strategic direction for the implementation of GPRS I1 based on a review of the performance of the macro-economy in the recent past and identifies critical areas of intervention that would have maximum impact on accelerated growth and poverty reduction. 2.2 REVIEW OFMACROECONOMIC PERFORMANCEUNDER GPRSI The policy thrust of the macroeconomic framework under GPRS Iwas towards promoting macroeconomic stability for sustainable economic growth and poverty reduction. Substantial progress was made towards the realization of macroeconomic stability. Indicators point to a reduction of inflation (year on year), from 40.5 percent in December 2000 to 11.8 percent by December 2004. Interest rates fell and the prime rate was reduced from 24 percent in 2003 to 15.5 percent by the third quarter of 2005. This decline in the prime rate has been accompanied by consequential reduction in the rates on other money market instruments including the 9l-day treasury bill. The exchange rate was stable, depreciating at 2.2 percent against the dollar in 2004 as compared to 49.8 percent in 2000, the lowest since the foreign exchange market was liberalised. GDP grew at an average rate of 5 percent during the four-year period (2001-2004) compared with 4.1 percent in the preceding three years. This growth was led by the agricultural sector (5.5 percent), followed by industry (5.0 percent) and services (4.7 percent). Relative stability of the economy was achieved in spite of the fact that Ghana's mainexports, cocoa and gold, as well as its major import, crude oil, have been subject to the volatile movements in international commodity pricing. Table 2.1 shows trends in selected macroeconomic indicators for the 2001-2004 period. 14 Table 2.1: Selected Key Economic Indicators Selected Key Economic Indicator (%) 2001 2002 2003 2004 End-PeriodCPIInflationRate 21.3 15.2 23.6 11.8 NominalExchangerate of Depreciation($ /$) 3.7 15..9 4.9 2.2 Real Savings Rate of Interest -6.8 -2-2 -12.25 -2.81 Tax Revenue/GDP 17.2 18.2 20.2 21.8 BudgetDeficit ExcludingGrants/GDP 13.1 7.9 7.7 3.2 BOG Financingof Deficit/TaxRevenue 0.0 12.1 0.0 2.5 Gross InternationalReserves 1.2 2.7 4.2 3.9 GDP GrowthRate 4.2 4.5 5.2 5.8 2.2.1 Economic Performance by Sectors (i) Agriculture Tables 2.2 and 2.3 show the relative structure of Gross Domestic Product by economic activity between 2000 and 2004 (in percentages and growth rates at constant 1993 prices). Agriculture remains the largest contributor to GDP, followed by the services and industrial sectors respectively. Within the agricultural sector, the cocoa and forestry sub-sectors have made significant gains in relative shares, while the crops sub-sector has marginally lost share. In spite of the progress made in agriculture, the stagnation of technologies and in some areas the wide gender inequalities in access to and control over land and agricultural inputs, including extension services, as well as adverse environmental factors such as climate variability and landsoil degradation, continue to be challenges posed to the growth potential of the agricultural sector. (ii) Zndustry The industrial sector exhibited low performance, against the projected targets in GPRS I. Despite the overall poor performance of the sector, the construction, miningand quarrying sub-sectors made significant strides. This was the result of increased investments, especially in the roads and real estates sub-sectors of the economy where funding support from both local financial markets and remittances as well as Government and donor sources were available. Growth in the mining sub-sector, particularly gold, was largely due to substantial infusion of capital from both local and external sources aided by the stable environment created by the institution of 15 policies that have insulated earnings and costs from foreign exchange controls. The manufacturing sub-sector continued to decline due largely to high costs of production and the influx of cheaper imports. While the liberalization of trade has increased access to imported inputs, weak enforcement of laws and regulations at the nation's entry points has resulted in increasingly unfair trade practices. As a result, locally manufactured products have become increasingly uncompetitive, both in terms of price and quality. (iii) Services The services sector also contributed to the modest gains in GDP growth. This sector i s driven by the wholesale and retail trade, as well as restaurants and hotels sub-sectors, which together accounts for about 60 percent of the contribution of all services to total production inthe economy. Table 2.2: Structure of GDPby Kindof Economic Activity inPercentages Economic Sector 2000 2001 I 2002 2003 2004 Agriculture II35.27 II 35.24 I 35.15 II36.38 I137.94 Industry I 25.40 I 25.22 I 25.28 I 25.10 I 24.74 Net Indirect Taxes 10.51 10.38 10.36 9.14 8.66 GDP InPurchasersValue 100.00 100.00 100.00 100.00 100 16 Table 2.3: GDP by Kindof Economic Activity: Growth Rates at Constant 1993 Prices Industry I 3.8 I 2.9 I 47 I 5.1 I 5.1 Mining& Quarrying 1.5 -1.6 4.5 4.7 4.5 Manufacturing. 1I 3.8 II 3.7 II 4.8 1I 4.6 I1 4.6 Construction I 5.1 I 4.8 I 5 I 6.1 I 6.6 Services I 5.4 I 5.1 I 4.7 I 4.7 I 4.7 Net Indirect Taxes 5 5.4 4.3 4.4 4.3 GDP InPurchasersValue 3.7 4.2 4.5 5.2 5.8 Source: Ghana Statistical Service Although the financial services sub-sector made significant gains between 2001-2004, this did not impact sufficiently on the agricultural and manufacturing sectors. Generally the financial institutions have considered local manufacturing and agricultural enterprises as risky undertakings; this is of particular concernbecauseof the adverse effect on small-scalefarmers, especially women, who constitute the majority of the rural poor. On the other hand, the bulk of bank credit has been channelled to commercial activities, especially those involving import trade, at the expense of those sectors which could potentially serve as growth points to lead the required accelerated growth2. To ensure the availability of credit to the potential growth points of the economy, government has 'The most recent trend however indicates that credit to the manufacturing sector is on the increase. A number of banks are now setting up specialized SMEunits to coordinate financial support to local industry and agriculture. 17 established special institutions such as Export Development and Investment Fund (EDIF), the Presidential Special Initiatives (PSIS), the Micro Credit Unit and the Women's Development Fund (WDF) to support financially marginalized enterprises. Although these schemes are yet to show fully their potential impact on overall economic growth, they indicate the fact that institutional credit i s not sufficiently available to most micro, small and medium scale enterprises in Ghana, particularly those that involve women and the ruralpopulation. 2.2.2 Growth Trends since the Inception of Market-Led Development Strategy Figure 2.1 shows real GDP growth rates for the period 1984-2004 following the inception of market-led development strategy in 1983. For the period 2002-2004 under GPRS I,the annual average growth rate of real GDP was 5.2 per cent. This i s a marked improvement on the historical trend, and equal only to the average of the period 1984-1992. Table 2.4 shows government's targeted real GDP growth rates against realized rates between 1995 and 2004. The trend in real GDP growth rates shows marked shortfalls between the targets and performance from 1995 till 2000. Between 2001 and 2004, actual real GDP growth rates either equaled or exceeded the targets. In 2004, the target was 5.2 percent while the actual growth rate was 5.8 percent, the most impressive performance since the 8.6 percent real GDP growth rate recorded in 1984. This indicates apotential for achieving higher rates inGDP growth. From these analyses, the following observations are made: the higheconomic growth rates was led by the agricultural sector under GPRS I. within the Agricultural sector cocoa was the dominant contributor to growth while other branches remained relatively stagnant. overall, the basic structure of the economy has not changed and Ghana's economy i s still fragile and vulnerable to external shocks the level of growth which occurred has not been sufficiently high enough to support a mark reduction of poverty the growth points of the various sectors of the economy do not have effective inter- sectoral linkages within the domestic economy. In particular, the agriculture- industry - consumer value chain remains weak and has not generated much opportunity for additional employment. cocoa, forestry, mining, wholesale and retail trading, and hotels/tourism, which have been the principal growth points in the economy are largely linked to the external sector, and are subject to potential risks and shocks arising from international price movement. it can however be argued, in retrospect, that the growth targets for 2001-2004 have not been ambitious enough when measured against the 4.8 per cent annual average already been attained in the 1984-2004period as a whole. These observations inform the formulation of macroeconomic policies and growth strategies for GPRS 11. 18 Figure 2.1: GDP GrowthRates: 1984 2004 - Source: Budget Statement and Economic Policy Statement, Various Years Table 2.4: Projected Real GDP versus Actual Real GDP Growth Rates: 1995 2004 - lYeX 1 Projected Real GDP Actual Real GDP Growth Difference Between Target 1 Rate 1Estimate And Actual 1996 5 4.6 -0.4 1997 5.5 4.2 -1.3 1998 5.6 4.7 -0.9 1999 5.5 4.4 -1-1 2000 5 3.7 -2.3 2001 I 4 4.2 0.2 2002 4.5 4.5 0 2003 4.7 5.2 0.5 2004 5.2 5.8 0.6 19 2.3 MACROECONOMIC POLICIES,STRATEGIES AND TARGETS FOR GPRS I1 2.3.1 Growth Target for GPRS I1 GPRS I1is guided by the overall objective of doubling the size of the Ghana economy (interms of real production) within the next decade, and bringingthe per capita income of the average Ghanaian to middle income level by 2015. This is expected to reflect in positive social change and improvement in the quality of life for all. It i s in this regard that the growth targets are made taking cognizance of the corresponding objectives of NEPAD and MDGs, all of which specify some qualitative indices. These qualitative improvements are the really important objectives of the process of national development for the enhancement of human welfare and are the real substance of development policy. As a guide to target setting, the current World Bank practice draws the line for concessionary IDA- lending, which i s for the benefit of "low-income" countries at US$965 per capita per annum. Above that level (with a few marginal exceptions) countries are regarded as "middle-income" and only eligible to borrow from the Bank on IBRD terms which are only a modification of the terms of credit on the private capital markets. On the World Bank scale Ghana i s today rated at a level of $380, which reveals the challenging gap which must be overcome in attaining middle income status. In developmental terms, middle income countries are characterized not only by the relatively high dollar value of their production, but also the following attributes: i. achievedinternationalcompetitiveness inoneormultipleaspectsoftheglobal trade inindustrial or service products ii. supportedbyasignificant levelof"scientific autonomy" whichisreflectedin their application of science and technology in their production processes and their ownership of intellectual property iii. attainmentofcriticalmassineconomicpropulsion,withhighratesofdomestic savings and investments, and the ability to tap into the worldwide pools of equity and loan capital A narrow definition of our growth targets for the GPRS 11period i s 6 - 8% GDP per annum, but this must be firmly situated within the perspective of changing the inherent structure of production andjoining the march of technological progress. Assumptions The economic growth targets derived from the current level of development and the feasible expectations inthe long term perspective of the economy are based on the following assumptions: the population growth rate will not exceed 2.6 per cent per annum, through the population management policies and strategies outlined in the sections on human resources 20 development macroeconomic stability, especially by containing inflation within single digit as from 2006 from the current rate of about 14.7 percent (August 2005). Accordingly, it i s expected that the average annual change inthe GDP deflator will not exceed 9 percent a stable Cedi/ Dollar exchange rate with prudent management that will keep the Cedi depreciation below a 4 percent per annum ceiling reduced cost of investment loans as incentives for stimulating investment in support of private sector-led growth. This i s expected to be the dividend from sound macroeconomic management, and also reflect the reduction in risk factors that make loans to SMEs unattractive to banks containment of fiscal deficits and preventing them from being a major source of monetary instability and price inflation. Two years after gaining a very favourable rating from leading agencies, Ghana i s preparing to tap into the international capital market to supplement access to developmental resources. Prudent, debt management will entail taking into account the maturity profiles of debt against public sector borrowing requirements an aggressive domestic revenue mobilization and its efficient use in driving the prioritized development targets. This i s to be attained through administrative measures and enhancing the capacity of existing tax collection instruments and personnel an efficient expenditure re-prioritization in favour of development expenditure and to ensure efficiency in the use of public resources growth in aggregate investment, especially from packaged programmes such as the MillenniumChallenge Account Compact with its integrated agro-based projects The strategies for realizing these macroeconomic assumptions are outlined in section 5.6 Targets Within the parameters of these general assumptions, it i s targeted that the economy grows at an annual rate which will rise from 6 percent to 8 percent towards the realization of middle income status by 2015 (Table 2.5 & 2.6). The narrow definition of our growth targets for the GPRS I1must be firmly situated within the perspective of changing the inherent structure of production and joining the march of technological progress. Compared to the realized average growth rate of 4.9 percent for the period 2001-2004, the targeted average growth rate of 6 to 8 percent and the sub-sectoral growth rates that could lead to middle income status pose a challenge to Ghanaians. These targeted growth rates are achievable with the 21 right macroeconomic policies, incentive structures and the input requirementsto support the private sector as the engine of wealth creation and poverty reduction. Above all, whether Ghana realises the higher or only the lower ends of her growth potential will depend on two factors, namely, i. the implementation of a broad-based human resource development strategy including the measures envisaged in both the education and public sector reform programmes. ii. openingofthechannelsbetweenGhanaandtheglobalcapitalmarketssothatboth loanable funds, and equity investment which carries in its train the skills of management, science and technology, will flow more freely into the economy. 2.3.2 Strategic Direction of GPRS I1 Accelerated growth of the economy will result from continued macroeconomic stability, a vibrant private sector, vigorous human resource development underpinned by deepening good governance and civic responsibility. GPRS I1will continue with the implementation of policies that will enhance and sustain the gains made in macroeconomic stability under GPRS Iby ensuring: 0 prudent fiscal policy management a monetary policy that i s flexible enough to respond to external shocks, promote growth and ensure price stability real interest rates that enhance effective mobilisation of savings and make credits affordable to the private sector relatively stable real exchange rates that promote international trade GPRS I1will further address the structural constraints at the policy and institutional levels that impede increased productivity, adoption of technology and competitiveness of the private sector in relation to agriculture, industry and service sectors. This will empower the private sector to effectively play its role as the engine of wealth creation and poverty reduction. Although the implementation of the proposed macroeconomic measures will contribute to achieving the growth targets it i s recognised that their impact on various groups may not be at the same level. To improve upon macroeconomic policy design, poverty and social impact analysis (PSIA) will be conducted to asses the impact of policies on the poor. All impact analysis will contain a gender dimension. While projections of sectoral contributions to GDP generally assume that natural assets will continue to contribute significantly to economic growth, an ongoing study to determine the costs of degradation of 22 some renewable natural resources in relation to GDP points to the fact that the country may be losing about US$475 million annually which is approximately 5.5% of GDP. There is the therefore need to recognise the problem and initiate steps to reverse this trend in order to sustain the agriculture-led acceleratedgrowth strategy envisagedinthis framework. 2.3.3 Agriculture as Basis for Economic Growth and Structural Transformation Economic growth and structural transformation i s to be propelled by the agricultural sector in order to maximize the benefits of accelerated growth. The emphasis on agriculture-led growth strategy i s predicated on a number of factors. First,agriculture is the highest contributor to GDP and provides employment for over 60 percent of the population. Consequently growth in the sector will impact directly on growth of the economy as well as employment. Conversely, the economy cannot make overall progress unless the mass of small-scale food producers achieve significant improvement in their productivity through increased investment and changes in technology. Secondly, the bulk of the poor, especially women, are engaged in agriculture - food crops, livestock and fisheries. Therefore accelerated development in agriculture will have direct benefit on poverty reduction inthe villages and help to slow-down the rural-urban drift. Thirdly, increased productivity in agriculture will ensure food security and contribute immensely to health and well being of the population. Fourthly, modernized agriculture will also prepare the ground for structural transformation between agriculture and industry. The demands of the markets for agricultural produce in whose production Ghana has comparative advantage entail the achievement of additional steps: the occurrence of volume and quality, packaging and conservation, marketing and delivery. Only through these can Ghana's farmers realize higher incomes from both local and foreign sources Fifth, while the rural areas can be expected to lose population share to urban areas as part of the long-range perspective of economic growth, a pressing social problem of Ghana today i s the acute shortage of employment opportunities for the youth. Given the pervasive shortage of capital the quickest route to the solution of a problem that cannot wait i s to absorb a maximum number of these in higher productivity and higher income farmingpursuits. Thus inthe next few years the growth of the economy is planned to be led by the agricultural sector, which will provide the necessary inputs for a vibrant agro-processing industrial sector in the medium to long term. The security of Ghana's domestic food supply i s itself yet to be attained. But in addition, the areas of Ghana's comparative advantage in agricultural production should be enhanced and transformed into competitive advantage inthe sub-regional and more distant markets. For agriculture to lead growth in the short term, the economy must diversify into other crops apart from the traditional cocoa, especially cereals and other cash crops for export markets including 23 mangoes, papaya, pineapples, cashew nuts and vegetables. Cocoa will still be significant in the economy for decades yet to come. The recent spurt in Ghana's cocoa production, arising in part from the rapid adoption of improved technology by the farmers, illustrates the developmental potential of our cocoa entrepreneurs, land and workers. Besides, new scientific evidence on the nutritional and healthproperties of cocoa, present opportunities which Ghana should prepare herself to exploit. Nevertheless, more attention has to be given to these other crops. The decline in Ghana's fisheries which still provides the major part of the national protein intake has to be reversed by increased investments in aqua-culture among other technological improvements. All these will contribute to the structural transformation of the economy, but more importantly the objective i s to target the bulk of the poor farmers who are in the non-cocoa sectors of agriculture, and thereby realize better shared growth. Given the immensity of Ghana's underutilized resources available for agriculture - land, sunlight, water and able-bodied youth - some of these targets in the diversification of agriculture could be rapidly implemented. The urgency of this i s reinforced by the need to develop mechanisms to absorb the shocks arising from variability in the world pricing mechanism, especially of raw material and petroleum. I ~ Box 2.1: Converting Comparative Advantage inCrop Production into Competitive Advantage Ghana has demonstrated that it can convert its comparative advantage into strong competitive advantage in crop production, especially as regards cashew nuts, mangoes, pineapple, papaya and vegetables. For instance in the 2005 Budget it was announced that in order to improve crop production, the Ministry of Food And Agriculture provided farmers with improved seeds and planting materials under the 5 Donor Assisted projects, currently being implemented in the crop sub-sector. About 9,000 plantlets of the MD2 pineapple cultivars were distributed to farmers to help Ghanaian farmers compete in the new popular MD2 variety of pineapple, which has gained European market share. Similarly, a total o f 23 tonnes of improved cashew seeds were distributed to farmers. These will go to boost Ghana's crop production for exports. Indications are that papaya is another excellent crop for Ghana's competitive potential. Europe is currently importing approximately 40,000 tons of golden papaya per year and Brazil supplies 9 percent of this market. Market trends show that these 40,000 tons will increase to about 100,000 tons in the next five years which i s worth hundreds of millions of dollars. The potential to capture a sizeable portion of the market exist. Not only i s Ghana closer to Europe than Brazil, but has sweeter golden specie of papaya and can therefore focus on the European market. Ghana can convert its comparative advantage into competitive advantage through improved shipment, compliance with GhanaGap, large-scale irrigation production, and infrastructure development to enhance supply chain etc. and capture a significant portion of the European market for papaya. 2.3.4 Weaknesses and Threats to an Agriculture-Led Strategy A number of factors limit optimal production in agriculture, especially production of crops, livestock and fisheries. Agriculture as a whole will always be dependent on natural conditions. Rainfall i s unreliable with regard to its onset, duration, intensity and amount, and can disrupt food crop production. The failure of development policy over decades i s that Ghana has not 24 implemented accessible and easily affordable technologies to overcome these deficits. Ghana i s not in the Sahel zone. There is no shortage of rain volumes even in the driest savannah for abundant and secure food production year after year. What i s lacking i s a systematic policy to conserve and utilise ample rainfall in all parts of the country. Some efforts in this direction have been frustrated by the choice of inappropriate technology. The example of Burkina Faso shows that simpler and cheaper technologies for the harvesting and use of our rain water endowments could yield Ghana immense benefits in agricultural productivity and poverty reduction. Additional risks in an agriculture-based strategy include bushfires, post harvest losses and uncertainties, storage, transportation and marketing problems. An equally important constraint i s the dearth of affordable credit in agriculture. Even in the flagship of the cocoa sector, the only credit that was ever available from the organised bank in the system was via the short-term seasonal credit of the foreign buying companies. Food crops still do not have adequate marketing and financial support. For the producers, this makes crop farming a high-risk enterprise and in a vicious circular relationship, it also makes a high-risk field for its traders and bankers. Strenuous government intervention i s the only way to break the cycle and attenuate the risks on both sides so that the private sector moves in our present development paradigm can successfully perform their roles in moving Ghana's agriculture forward. Variability in the natural conditions also adversely affect the livestock and fisheries sub-sectors in ways similar to that of crop farming. Under the GPRS I1many interventions have to be carried out at public expense to overcome the disabilities that hinders growth. Consequently, in order to achieve accelerated growth in Ghana's agriculture a number of key interventions will be initiated to support agricultural productivity. These include strategic research and development activities, appropriate financing for the sector, value addition and improved marketing, efficient organization of production, and enhanced capacity of producers. Inthe area of crop production inparticular, the following measures will be pursued: ensure women's access to and control over land and agricultural inputs, including extension services promote and support large scale farming and nucleus out-grower schemes for production of targetedselected crops enhance the productivity of small scale farmers by securing their access to extension, storage, price stability, credit, markets and land. Women small holder producers of food crops will be given needed impetus to improve their livelihood and assisted to benefit from the potential positive effects of linkages between agriculture, industry and exports develop and use improved seeddplanting materials intensify research-extension-farmer linkages to ensure that technologies are developed and disseminatedappropriately to meet world-wide market standards promote and support the use of weights and measures as well as grades and standards in the marketing of commodities so as to enhance commercial efficiency strengthen farmer-based organizations, with full participation of women farmers, to enhance access to credit and other services. The emasculation of the Ghana Cooperative movement, which had previously attained a pre-eminent position in cocoa marketing and the national 25 savings 0 improve storage/warehousing and distribution network, including refrigerated transport systems and cold storagefacilities at the ports 0 improve rural infrastructural network, particularly road-rail linkages promote the culture of community-based irrigation in order to move agriculture from reliance on the vagaries of the weather to a more scientifically managedsystems of assuring water 0 improve data collection, collation, analysis and dissemination of results within the industry. For completeness of the strategy, attention will be paid to cross-cutting issues such as gender, environment, human resource development and capacity building to complement and reinforce production and increased productivity for accelerated growth. Accordingly, the next chapter focuses on the issues and policies that will enhance private sector competitiveness to deliver growth, reduce poverty and improve overall quality of life. 2.3.5 Other Sectors Although the growth process under GPRS I1i s expected to be propelled by the agricultural sector, attention will also be given to some strategic sectors that have long-term growth potentials. These include tourism, ICT, light industrialization based on textiles, garments and value addition to metallic and non-metallic minerals. Presently, most of these activities are gradually being developed within the framework of the selected Special Initiatives. 26 I 1I 1 m m N CHAPTER THREE PRIORITIESFORPRIVATE SECTOR COMPETITIVENESS 3.1 PRIVATE SECTORDEVELOPMENT The objective of GPRS I1i s to achieve accelerated growth through modernised agriculture, led by a vibrant and competitive private sector. The challenge to the attainment of this objective i s to how to systematically address the structural constraints at the policy and institutional levels that hamper private-sector competitiveness in agriculture in the medium term and in the industrial and other sectors over the long term. Box 3.1: Overview of the private sector under GPRS I(2002 2004) - Among the key strategies of the GPRS I(2003-2005) was to strengthen the private sector and enhance its capacity to function as the engine of growth and prosperity. The policy focus then was on developing a vibrant private sector in the medium-term through the following measures: Facilitating private sector access to long term finance at affordable rates; Reducing institutional and legal bottlenecks to private sector development; and Promoting opportunities of modern entrepreneurship, especially among the youth, women and the vulnerable groups. To improve access and increase volume of credit at affordable prices and to increasesources of long-term funding for micro, small and medium enterprises Government in 2003 facilitated private sector access to credit sourced from the African Development Foundation (ADF), an Italian Credit facility of 10,000,000 Euros and a $17 million facility from the SOFITEL BANK of the USA. The Ministry of Private Sector Development and PSI also establishedan Institutional and Legal Reform Division solely dedicated to reducing bottlenecks to private sector development as well as facilitating the collaboration between the public and private sector towards the drafting of a number of reform bills (including the Companies Code, the Insolvency Bill, Money Laundering Bill and Insurance Bill). A network infrastructure with appropriate software has been installed at the Registrar-General's Department to enable the registration and retrieval of business names to be conducted electronically. These initiatives notwithstanding, a number of critical issues still remain that require some urgent attention. Primary among them are: complex and non-transparentexisting regulations, lack of access to finance, especially for women; falling but still fairly high interest rates; weak capacity of the government establishment to formulate, implement, monitor and evaluate private sector development; lack of focus of policies that explicitly take into address the specific needs of enterprises, especially the interests of micro, small and medium scale enterprises; Weak commercial dispute resolution system; insecurity and vulnerability in the informal sector where the youth and women predominate; weak linkages between the informal sector and the formal sector activities; lack of social protection for men and women in the informal sector; and weak institutional and regulatory framework for small business administration. Key policies identified to address these constraints (Box 3.1) are the following: improving Ghana's access to global and regional markets; enhancing the efficiency and accessibility of national markets; strengthening o f firms' competency and capacity to operate effectively and efficiently; enhancing government capacity for private sector policy formulation, implementation, and monitoring and evaluation; facilitate private sector access to capital; facilitate the removal o f institutional and legal bottlenecks; facilitate innovation and entrepreneurship; improve the provision of public services; and accelerate the development o f strategic sectors. These priority interventions are mutually re-enforcing and some o f the strategies for the various interventions are elaborated below. 29 3.1.1 Improve Ghana's access to globaland regionalmarkets T o improve Ghana's access to global and regional markets, it i s envisaged that the National Trade Policy which seeks to promote the integration of Ghana into global and regional markets will be fully implemented. Also the recommendations from the review o f existing institutions responsible for providing quality standards and services to the private sector, such as Ghana Standards Board, Food and Drugs Board, and the Plant Protection and Regulatory Services will be implementedfully. Given Ghana's limited access to the global market, the objective of government's export promotion drive will target the implementation of sector-specific measures to support strategic exports, focusing initially on the President's Special Initiatives (PSI), as well as supporting local companies to participate in foreign and domestic trade shows, fairs and exhibitions. With a relatively weak private sector and low technological development, foreign private capital will be critical to the economic transformation o f Ghana. To attract foreign investment, will require taking bold actions aimed at ensuring good governance, improving infrastructural development, accelerating judicial reforms, expanding trade and investment promotion, etc. 3.1.2 Enhance efficiency and accessibilityto national markets To ensure efficient and accessible national markets that support widespread private sector- led growth, the focus o f policy i s to address constraints relating to the macroeconomic environment, financial sector, public sector, contract enforcemenddebt recovery, and land acquisition and property rights. Macroeconomic Environment: In order to improve the macroeconomic environment for growth, the challenge is to encourage dialogue among stakeholders on key macroeconomic issues through constant dissemination of a pre-budget discussion paper highlighting key macroeconomic issues for private sector development, forming a budget working group with a broad range of private sector stakeholders, and periodic benchmarking of Ghana's macroeconomic policy environment. Financial Sector Reform: To ensure that the financial sector responds effectively to the needs o f the private sector, financial sector reforms will be deepen. This will include the continuous implementation, monitoring and evaluation o f the Financial Sector Strategic Plan (FINSSP), in addition to identifying and agreeing on a small number o f key private sector development targets within the FINSSP. In particular efforts will be made to ensure that the urban and rural poor who form important components o f the private sector are not squeezed out. Public Sector Reform: The policy priorities under public sector reforms will include: (i) ensuring private sector development i s mainstreamed within the Public Sector Reform programme; (ii) development of pro-business tools within the Public Sector Reform Programme, including: service-focused training programmes for public servants; (iii) development o f pro-business `Customer Charters' and anti-corruption action plans for key private sector-related MDAs; 30 (iv) conducting a fundamental review o f tax policy and administration in relation to micro and small enterprises; and (v) development o f a regulatory impact assessment methodology for all proposednew laws and regulations with significant private sector impact. Contract enforcement /debt recovery: To ensure that the country has an effective legal system that supports the rapid private sector growth envisaged in the framework, the following policy priorities will be given the much needed attention; (i)improve access to justice for businesses - especially micro and small businesses and enhance the mechanism for alternative dispute resolution within the context o f the on-going Judicial Sector Reform Programme; and (ii) monitor and evaluate the level of access to justice for businesses in Ghana focusing on micro, small and medium size enterprises (MSMEs). 3.2 IMPROVING THE BUSINESS AND INVESTMENT ENVIRONMENT FOR AGRICULTURE-LEDGROWTH 3.2.1 ModernizedAgriculture Achievement o f the overall goal of GPRS I1requires agriculture to continue to grow at the rate o f 6% per annum over the next 4 years, with crops and livestock leading the growth at an average annual growth rate o f about 6%, followed by forestry and logging, and fisheries at the rates of 5.1% and 4.8% per annum respectively. The cocoa sub-sector i s expected to remain robust in support o f the other sub-sectors. Box 3.2: Overview of the Agriculture sector (2003 2004)- Agriculture plays important roles in the socioeconomic development of Ghana. I t contributes to insuring food security, provides raw materials for local industries, generates foreign exchange, and provides employment and incomes for most of the population (especially those living in the rural areas), thereby contributing to poverty reduction. Since the implementation of GPRS I(2003-2005) some progress has been achieved in agriculture. Out of the twelve indicators monitored for the sector, seven recorded impressive progressover the period of implementation, with four of them exceeding their targets. Areas of noticeable progress were farmer access to mechanized tillage, access to processing equipment, area under fish farming, number of hatcheries constructed and reduction in post harvest losses. Farmer access to mechanized tillage increased from 5% in 2002 to 12% in 2004 as against the target of 15%, while access to processing equipment increased from 24% in 2003 to 42% in 2004 thereby exceeding the target of 30%. Area under fish farming exceeded its target of 450 hectares, recording 112.3 hectares for functional fish ponds, and 2480.8 hectares for reservoirs during the same period. In the case of post harvest losses, cereal losses achieved its intended target of 1520% and perishables managed a moderate achievementof 33-35%, falling short of the target of 1520%. These notwithstanding, a number of important outstanding issues need to be resolved within the agriculture sector. The tractor to farmer ratio still remains low at 1:120,000, the extension officer farmer ratio was at 1:1,400 by the end of 2004 falling short of the 1: 1200 target, access to harvesters was at 2% falling short of the 5% target and quantity of fish produced per unit area of pond per cycle stood at 2.5 tonshdyr (not different from the 2002 and 2003 figures). Further constraints to the sector's capacity include: low crop yield and output due to low soil fertility and over- dependency on rainfall; unsustainable agricultural practices; low exploitation of ground water for irrigation purposes; lack of access to credit, especially of small-scale women farmers; low productivity and low resistance breeds of livestock; and high incidence of animal diseases and poor disease surveillance systems. Others are inappropriate husbandry practices and low level of dairy production; inadequate/poor aquaculture infrastructure and low level of fish production from water bodies; limited value addition and high post-harvest losses; and limited access to marketingcentres due to poor road network 31 There are a number of critical issues that must be addressed to achieve the ultimate aim o f a competitive private sector that supports accelerated growth, particularly based on agriculture. The following broad areas have been earmarked for priority interventions: reform to land acquisition and property rights accelerating the provision of irrigation infrastructure enhancing access to credit and inputs for agriculture promotingselective crop development modemising livestock development improvingaccess to mechanisedagriculture increasing access to extension services provision o f infrastructure for aquaculture restorationo f degraded environment The strategies for these various interventions are elaborated below: Reform to land acquisitionandproperty rights: Existing variations in access and control over land in different communities will be re- examined to promote easy access and ensure equity to all, especially to usufructory holdings in addition to improving the system of land registration to protect the interests of small holders. Furthermore, the establishment of agri-business zones and land banks will be promoted. The Land Administration Project will be reviewed to recognise the importance o f property rights to MSMEs and the Land Title Registration Law o f 1985 will be enforced as a means of ensuring security of tenure of small land holders, especially women and the youth. Accelerating theprovision of irrigation infrastructure: Inthe past, a lot more emphasis was placed on the development of large dams to the neglect of small scale interventions such as dug-outs, hand-pump systems, valley bottom schemes, etc, which have the potential to reach smallholder farmers and are best suited for certain geographical areas. The focus o f policy under the GPRS I1i s to target the rehabilitation, expansion and promotion of the use of the existing irrigation facilities and infrastructure; along with interventions to promote the development o f small-scale community based valley-bottom irrigation schemes; ground water development and exploitation for irrigation purposes; and the promotion of hand-fix pumps for irrigation purposes. It i s expected that these interventions will bring more land under cultivation, generate quick supply responses and benefit the poor in the rural areas. Access to credit and inputsfor agriculture: Recognising the reluctance of the formal sector to lend to risky sectors such as agriculture, special interventions will be initiated to improve access to affordable credit by farmers with special emphasis on increasing the proportion o f women that can gain access to credit; and promote and support the establishment of farmer-based organizations to enhance access to group credit and other crucial inputsand services. Selective CropDevelopment: The focus will be on promoting and supporting the development o f key selected crops with proven potential to contribute significantly to domestic food security, agro industry and export. This will be facilitated through updating existing technological packages and 32 promoting environmentally sustainable cropping practices in agro-forestry, land and water management. Some of the key initiatives will include: developing and multiplying new and improved seeds, promoting soil fertility management systems and ensuring the integration o f pest and disease management system. LivestockDevelopment: The emphasis in livestock development will be to ensure the provision o f improved breeds of animals, institute animal feed quality control system, improve animal husbandry practices and promote efficient veterinary public health system. Agriculture Mechanisation: Whilst promoting increased mechanisation in large scale agriculture, emphasis will also be given to the development and use of small-scale technologies that target smallholder farmers, especially women, in the areas o f tillage, storage and processing such as bullock ploughs. Access to extensionservices: Inseeking to expand the coverage and effectiveness of extension services in general, special attention will be given to commodities targeted to lead accelerated growth in the sector. This will increase the proportion of both men and women farmers that are reached particularly in the transition and savannah zones. In addition Extension Information Centres (EIC) will be established. Provision of infrastructurefor aquaculture: To reduce overdependence on marine fisheries which has proven to be increasingly unsustainable, there i s the need to scale up investments in inland fisheries, especially aquaculture. Some of the key interventions include: development of aquaculture infrastructure including fish hatcheries; promotion o f private investment in aquaculture; utilization o f irrigation systems and other impounded reservoirs for aquaculture. These will be supported by research and development aimed at promoting modern technological packages in support of aquaculture. Restoration of degraded environment: A major impediment to increased productivity and sustainability in agriculture i s the environmental degradation associated with traditional farming practices. To minimize the impact o f environmental degradation, and in line with MDG 7, the intended interventions are aimed at restoring the degraded natural resources especially water and land, ensuring sustainable use o f natural resources for economic growth, and protecting and conserving unique habitats, natural treasures and bio-diversity. To achieve these objectives, the strategies will include the following: Environment: (i)initiate measures to stem land degradation and towards regulating the impact o f climate variabilitykhange; (ii) promote an efficient and accessible industrial and domestic waste management system that deals with the plastic menace and promotes composting; (iii)promote integrated ecosystem management as well as human centred biodiversity conservation initiatives; and (iv) promote the use o f environmentally friendly technologies and practices. Others include enacting relevant environmental laws to protect the environment at all times, as well as ensuring the enforcement of the existing 33 environmental laws; and development of multi-agency approach to enhance resource management and the environment Lands and forestrv: (i) encourage reforestation of degraded forest and off-reserve areas; (ii)promote the development and use of alternative wood products, as well as plantation/woodlot development among communities; (iii)manage and enhance Ghana's land and permanent estate of forest and wildlife protected areas; (iv) ensure that socio- economic activities are consistent with sound land administration practices; (v) develop a sustainable strategy for forest and wildlife to support eco-tourism and generate foreign exchange. Fisheries: (i)ensure adequate scientific data for precautionary approach to fisheries management; (ii)establishment of co-management mechanisms for fisheries resources management; (iii) control of fishing effort; (iv) enhance fisheries resource of water bodies; (v) develop multi-agency approach to enhance resource management and the environment; and (vi) support effective monitoring, control and surveillance (MCS) system to ensure compliance with laws and regulations on fisheries. 3.2.2 PromotingTradeand Industry In line with the long term vision of developing an agro-based industrial economy, the interventions in agriculture will be complemented with appropriate interventions in the Trade and Industry sector. Within the strategic growth framework, the broad industrial sector i s expected to grow at the rate of 6% per annum over the next four years, with the construction sub-sector leading the growth with 7.1% average annual growth rate. The manufacturing sub-sector i s expected to make a strong showing with the mining and quarrying sub-sectors growing at 6.6% and 4.4% average annual growth rates respectively, due to the coming into operation of the integrated aluminium project. The wholesale and retail sub-sector i s expected to grow at an average rate of 6% over the same period. The broad policy objectives and strategies outlined to achieve these include: Ensure proper integration of the nation's production sectors into the domestic market: identify and promote opportunities for economically beneficial linkages along production and supply chains in new and existing productive sectors; and promote credit catalysts and rural service centres where larger traders and associations can access credit and on-lend to small traders and small farmers. Increased Agro-processing: promote and support the processing, preservation and utilization of crops, animal and fish products; develop and promote the use o f standardized packaging materials and institutionalize the use of weights and measures; facilitate establishment o f small-scale agro-processing industries for export; promote the establishment of fish storage facilities, including community level facilities; and facilitate the establishment o f small-scale fish processing industries. Agricultural Marketing: development of farmer based organizations (FBO) capable of securing fair prices for products; encourage the setting up o f satellite markets in urban centres to provide outlets for rural farmers to dispose off their products; encourage the private sector to set-up produce buying companies; and promote and support product development and cold chain establishment. Enhance access to export markets: provide concessionary export finance facilities to exporters; promote competition in airport cargo handling; encourage private sector 34 investment in construction and operation of cold chain facilities from production point to the port; facilitate the provision by private sector of well organised container terminals with security, equipment, effective operators and computerised tracking; improve the multi- lateral trading environment by fully participating in negotiations and rule setting in multi- lateral trading fora to ensure that Ghana's national interests are secured; create a fair, transparent and equitable trade regime; and facilitate trade through Ghana's borders to reduce costs and improve ease o f trade Increase industrial output and improve the competitiveness of domestic industrial products: mobilize domestic and international resources for production of value-added products; enhance accessibility to productive infrastructure (Le. road, water, telecommunication, electricity, etc); promote efficient management practices in production systems; promote the use o f local products and services in government procurement; actively promote made in Ghana products within domestic and international markets; ensure the removal of technical barriers in the way o f key current and potential export products; and assist exporters to comply with international standards required by selected export markets Other policy interventions include: facilitate the development o f commercially viable export and domestic market oriented enterprises in the rural areas; promote industrial sub- contracting and partnership exchange through a mechanism for large companies to outsource their non-core activities to SMEs and identify areas o f interface and linkages between large and small scale enterprises; and promote the development o f the craft industry, targeting those with potential for export. Ensure the health, safety and economic interest of consumers: ensure the enforcement of legislation that prevents the sale of unsafe and poor quality goods on the local market; strengthen the regulatory and enforcement framework for protection o f economic rights of consumers; develop and implement national consumer awareness programmes; encourage formation o f consumer association; and ensure representation o f consumers on relevant nationalbodies These set o f policies provide clear guidelines for the implementation o f the government's domestic and international trade policy, while ensuring a consistent and stable policy environment within which the private sector and consumers can operate effectively. It i s expected that greater emphasis on these policy areas will bring about increased competitiveness of producers in local and international markets. 3.3 SUPPORTSERVICES Strategic support sectors that would be developed to facilitate improved productivity in agriculture and agro-industry include: 3.3.1 Transportation Road especially, rail and water transport are by far the principal forms o f transport in Ghana. However exports o f fruits and vegetables are mainly by air transport. Improving overall road maintenance, and rehabilitating farm-to-market roads, bridges and ferries would lower transportation costs and integrate rural economies with the urban economy. It would also lengthen vehicle life, reduce transportation costs and save foreign exchange in 35 fuel and spare parts imports, and generate savings in travel time. The broad policy objectives therefore include: ensure the provision, expansion and maintenance o f transport infrastructure o f all kinds; and ensure provision of affordable and accessible transport system that recognises the needs of people with disabilities. A single Ministry o f Transport will promote synergy and enhance planning and operations. Some o f the strategies proposed to achieve these stated objectives are: increase spatial access to markets through improvements in farm-to-markets roads; rehabilitate or accelerate the development o f one major road linking rural and urban markets in every region; continue to develop and rehabilitate major highways in the country; provide adequate and modem railway terminals and platforms; promote the development of a well integrated and modem rail track system; maintain and provide efficient and modem ports and harbours infrastructure across the country; and construct three major highways to connect trans- ECOWAS Highway. Other strategies include promoting the adoption of Intermediate Means of Transport (IMT), encouraging general aviation and aviation support services such as the use o f micro light aircraft in agriculture, passenger transport and health delivery, and the promoting sub- regional transport systems including air transport that ensures efficient movement o f goods and persons across borders. Achieving these objectives also requires an efficient institutional and regulatory framework. Subsequently the following strategies will be pursued: promote road, rail, air and river transport safety and traffic management scheme to reduce accidents; promote effective and sustainable maintenance of the road system (through the decentralization programme); promote private sector involvement in the financing, construction and maintenance o f road, and rails, as well as provide entry point and terminal services; strengthen local capacity in both consulting and construction services and government capacity in the road, rail, air and marine sector; promote private participation in the investment and management o f aviation infrastructure and equipment; promote high safety, security and environmental standards in the aviation industry; restructure the Ghana Civil Aviation to play its core role as an independent regulator of the aviation industry; strengthen and enforce the existing regulatory and institutional framework for efficient ports, rail, air and water transport system. 3.3.2 Energy To support a growing agro-industrial and services sector, as well as the needs o f households, the policy thrust for the sector i s set within the context o f ensuring a reliable supply of high quality energy services. The broad policy interventions outlined to achieve this overall goal include: ensure increasedaccess to modem forms of energy to the poor and vulnerable; modemise and expand power infrastructure; improve the regulatory environment in the power sector, ensure full cost recovery for power supply and delivery while protecting the poor; and ensure productive and efficient use of energy and minimise the environmental impacts of energy supply and consumption through increased energy efficient technologies. Other policy objectives include: promote and encourage private sector participation in the energy sector; diversify the national energy mix by implementing programmes to support renewable energy sources in Ghana (Le. hydro, wind, solar PV etc.). 36 3.3.3 Science and Technology The major goal of National Science and Technology (S&T) Policy i s to establish an efficient research system which contributes to national development objectives. Promotion of a science and technology culture at all levels of the society and the mastery o f known and mature technologies and their application in agriculture and industry will accelerate economic growth and social transformation. Science and technology policy objective will therefore be to: promote the adoption of appropriate technologies, both local and foreign, with the capacity to improve productivity and efficiency in the agricultural, industrial and services sectors especially for micro, small and medium rural enterprises; promote research and development in all sectors of the economy; build relevant linkages between research and production to ensure that research outputs are utilised; provide institutional and regulatory framework to promote the development of science and technology. 3.4 DEVELOPINGADDITIONAL SECTORS TO SUPPORT GROWTH In addition to the focus on developing the agro-industrial and support sectors, there are other sectors which will be targeted for development particularly in view o f their employment creation and income generation potentials. These include: mining (especially exploration and exploitation of the lesser developed minerals such as salt) and value addition to traditional minerals; Information and Communication Technology (ICT); tourism; music and film industry; as well as the development and production o f commodities under the Special Initiatives for export including garments and textiles. 3.4.1 DevelopingInformation and Communication Technology (ICT) The implementation of an Information and Communication Technology (ICT) Strategy or "Connectivity Agenda", will be another priority in diversification o f the economy. It will be a pivotal tool to improve governance, accountability and transparency, develop human resource potential, and strengthen national unity. ICT will facilitate e-transactions; increase public sector efficiency and transparency; and grant citizens access to public services by making them available online (e-government). Through outreach programmes, ICT will enable low-income individuals to gain access to the internet. It will also promote e-exports such as out-sourcing, and data processing (see Box 3.3), encourage economic diversification and create new jobs, particularly for women and the youth; and establish network connectivity to lower unit costs and increase benefits from network externalities. To take advantage o f the opportunities in this sector, Government will partner the private sector to increase coverage o f telephones particularly in rural and peri-urban communities; improve the quality o f telephone service; establish national network o f internet backbone/broadband; implement National e-governance programme; implement National Electronic Security system; promote and support e-commerce to facilitate trade and commerce in the economy; implement National ICT strategy in Agriculture, Health and the Music industry; and source FDI and local investment to promote the development and marketing o f hardware and suitable software. Other interventions that will be implemented include: provide telephone coverage to all public schools and communities in Ghana; provide internet access to all districts with a model Senior Secondary School; ensure that I C T i s made a core subject o f all post-basic educational institutions including universities teacher training colleges; promote in-service ICT training for teachers; and encourage small companies to make use o f services/assets 37 made available by the national internet backbone. Box 3.3: Potentials of ICT as major source of income and employment generation When ACSBPS introduced its data-entry operations in Ghana in May 2000, it brought more computers into one site than had existed anywhere else in Ghana. It also successfully introduced an entirely new kindof occupation, new methods of working, and a new system of piece-ratepayment which hadfailed in other industries where it was introduced previously. Injust a year of activity, the firm grew from 30 to 700 employees. The system works as follows: the headquarters of ACSBPS, based in the United States, electronically sends scanned medical claim forms to Ghana, where over 700 clerks then input data by hand from the scanned images. This has raised the salary and status of data entry clerks who now typically earn between $100and $200 per month, in a country where the local average income is close to $32 per month. Of significance is that 95 per cent of the staff is female. Other ripple effects include outsourcing of services, including transport, security, catering and training, as well as buying its computer hardware from local vendors, The firm plans to expand: to open another three sites and employ another 3,000 employees. One concern is its ability to find skilled labour, and to this end, it aims to tap into the student population of local universities and polytechnics. It has already developed an arrangement with Ghanaian secretarial colleges, teaching students to use its software. 3.4.2 Mining In addition to the exploitation of the traditional minerals such as gold and diamonds, a policy to promote value addition to other mineral resources including bauxite and limestone, and also the exploitation o f lesser known minerals such as salt will be promoted. In the process, efforts will be made to control illicit activities and deleterious effects of mining; sustain the mining sector through continuous exploration, exploitation and management o f mineral resources; improve the environmental and natural resources management for health and safety; promote collaborative management of mineral resources; and promote the use o f international best practices to enhance the competitiveness of the miningsector as a whole. 3.4.3 Developing the Tourism Sector for Revenue and Employment Generation Tourism i s a young but expanding industry in Ghana. It currently accounts for almost 4 percent of GDP, and at the current annual growth rate o f 12 per cent, tourism has the potential of becoming Ghana's main foreign exchange earner. Ghana's comparative advantage in this sector includes historical, cultural and archaeological sites that attract regional and international tourists (including African-Americans interested in Ghana's history with respect to slavery). Potential also exists for ecotourism. Recent indication that the new Ministry o f Tourism will preserve important national sites reinforces this sector's potential for investment. However, there are major constraints to be overcome, including Ghana's lack o f adequate infrastructure, marketing, and health and safety-related services and others that are important for tourists, such as tourist police and loss-recovery facilities. Tourism's infrastructure i s weak, with few world-class hotels and almost no tourist-related services. Within this context government will develop plans and strategies aimed at harnessing the potentials of the sector towards the provision o f employment and incomes, while ensuring the preservation o f the nation's culture and sustainable management o f the environment. The broad policy thrust shall, therefore, be "to realise thepotentials of the sector by making Ghana a competitive and quality tourism destination whilst preserving the country's cultural, historical and environmental heritage". Key policy interventions and strategies 38 expected to be pursued over the period will include: Promote tourism as a major source of domestic revenue: market Ghana as a competitive tourist destination; design programmes to reduce the credit constraint of operators in the tourism sector with particular focus on women entrepreneurs; enhance tourism services and standards through inspection, licensing and classification of formal and informal tourism establishments; and enhance human resource capacity of skilled and unskilled personnel in the hospitality industry. Promote domestic tourism tofoster national cohesion as well as redistribution of income: This will involve vigorous promotion of domestic tourism to encourage Ghanaians to appreciate and preserve their national heritage and create wealth in the communities. Promote sustainable and responsible tourism in such a way to preserve historical, cultural and natural heritage: develop sustainable ecotourism, culture and historical sites; promote sustainable development and management of coastal lands; and enforce measures to reduce waste and antisocial behaviours and practices arising from tourist activities. Promote crafts industry for tourist trade and export: provide opportunities and technical assistance for micro-enterprises o f rural and urban crafts procurers and improve the quality and marketing o f their products for the tourist industry and export. 3.4.4 The Musicand FilmIndustryfor GrowthandJob Creation The music and film industry i s fast-growing with unlimited potential. As one o f Ghana's most significant pioneer industries, the music and film industry i s a powerful means o f enhancing the country's identity and distinctiveness, while simultaneously creating employment, developing human skills and generating social capital and cohesion. However, like any Ghanaian industry, it i s infused with the perennial problems o f lack of access to finance, limited application of modern technology, lack of effective laws and regulations to protect intellectual property rights, low level o f awareness on intellectual property rights, lack of enforcement and supervision of laws and regulations, and inadequate export promotion services. One of the most devastating aspects of this legacy i s that local music and films industry i s not developing as fast as it should. Towards this end the policy objectives proposed under the GPRS I1to promote the industry to support tourism as well as make it a growth point for job and wealth creation include: provide the right legal and regulatory framework for promoting the music and films industry; promote the use of ICT and support of Multimedia Technology in the industry; support the development o f both human and institutional capacity for the industry. The specific interventions to achieve these objectives have been outlined in the Policy matrix (Appendix IA). 3.5 EMPLOYMENT GENERATIONAND IMPROVEMENT AND EXPANSION OF SAFETYNETS GPRS I1 will pursue an employment-centred cross-sectoral development strategy for accelerated growth and poverty reduction. This i s to ensure that employment expands along with production and that the benefits of growth are widely shared through better job 39 opportunities and improvedenhanced incomes for poverty reduction. The broad employment sector objective will be to ensure an adequate, well regulated, stable labour market to support accelerated growth. Pursuant to this strategic orientation, the National Employment Policy will address objectives for youth employment, labour market information, industry-based skills training, local economic development to support the large and growing informal economy, and also improvements in productivity ad incomes. A cross-sectoral approach to employment policy implementation will underpin the overall national strategy. The strategy also entails initiatives for social protection, social dialogue, and social inclusion, especially, o f the disabled, women and aged. The policy measures will enhance productivity and income/wage, with equal opportunities for men and women in all sectors of the economy, including the informal economy, ensure the effective implementation o f a coherent employment policy on the youth, women, the vulnerable and excluded; and a comprehensive and integrated employment creation, monitoring and evaluation system. Consistent with the Gender and Children's Policy, the Draft National Youth Policy, the Draft National Disability Policy, and Draft National Ageing Policy, a comprehensive Social Protection Framework will cover the vulnerable and excluded in society. It will promote conditional and unconditionalcash transfer systems and other support to displaced workers, while they seek employment, pregnant and lactating women, and provide target subsidies to the elderly, pensioners, smallholder farmers and people with disabilities. The Social Protection Strategy will also expand the coverage of the school feeding programme, and facilitate access to micro-credit for small scale informal operators. Government will facilitate the enhanced capacity of the relevant agencies, including the Ministry of Manpower Youth and Employment and its departments and agencies with a focus on the Department of Social Welfare to carry out their statutory functions effectively and responsibly. In addition, the social partners, relevant civil society and non- governmental organizations will be encouraged to play a strategic role in complementing government's employment and social protection efforts. The Ministry o f Manpower, Youth and Employment will establish an effective system to coordinate and monitor these efforts and activities to ensure efficiency within the economy, as well as equitable benefits to targeted beneficiaries. 40 CHAPTER FOUR HUMANRESOURCEDEVELOPMENT 4.1 INTRODUCTION The development o f the human resources of the country i s one of the three key pillars of the GPRS 11. The main goal i s to ensure the development of a knowledgeable, well-trained, disciplined and healthy population with the capacity to drive and sustain the private sector- led growth strategy. An essential component of the strategy i s to ensure the right to basic social services such as health care, safe drinking water and sanitation and decent housing that improve the well being o f all Ghanaians. An equally important aspect o f the human resource development strategy i s to ensure the protection o f the rights of the vulnerable members of society, especially children, women, people with disabilities, the elderly and rural communities. 4.2 REVIEW OF HUMANRESOURCEDEVELOPMENTUNDERGPRS I Under GPRS Ia number o f measures were instituted in the medium-term to enhance the environment for sustainable human resource development. These included enhancing access to education; reducing gender disparities in education; and improving skills through training. In the health and other sectors priority measures focused on enhancing access to and delivery o f quality health services; increasing access to safe drinking water and adequate environmental sanitation; population management; and controlling the HIV/AIDS epidemic. Key achievements are as summarized in box 4.1 below. Box 4.1: Situational analysis of HumanResource Development under GPRS I Considerable progress has been made towards the attainment of the objectives of Human Development under GPRS I.In education, enrolment rates have increased in primary, JSS and the post-basic sub-sectors. Gender Parity Index (GPI) and survival and completion rates have also all improved at the national level. Enrolment rates in the deprived districts and three northern regions have also shown marked improvements, generally above the national growth rate, albeit from low levels. Inaddition facilities at both secondary and tertiary levels haveexperienced rapid expansion. In the health sector, most of the indicators show that considerable progress has been made in improving the health status of the Ghanaian. For instance life expectancy at birth has increased form 58% in 1998 to 60% in 2003. On the other hand infant and childhood mortality have worsen, increasing from 57% to 64% over the same period. Limited access to safe water remains a perennial problem in many Ghanaian communities. Currently about 63% of urban dwellers and 46.4% of rural dwellers have access to safe water. Many rural communities continue to rely on ponds and streams as their main source of water, resulting in undue exposure to guinea worm, bilharzia and other water-borne diseases. Although considerably better than rural water supply, urban water supply is generally less than satisfactory, especially in slums and other high population density areas where the capacity of water supply infrastructurehas beenoverstretched. The provision of adequate sewage and sanitation facilities i s less than adequate. Households with access to adequate toilet facility (flushhentilated improved pit), for example, i s very low. Proper disposal of solid waste i s also a major problem in peri-urban and urban communities as health hazards are created by urban drains, which are often, choked with refuse and stagnant water. From the fore-going review, it i s evident that there are still a number of policy issues that need to be addressed a comprehensive human resource development effort. Consequently the following broad policy areas have been identified as priorities for the development of the requisite human resources for accelerated economic growth: education, training and 41 skills development; access to health care and adequate nutrition, malaria control and HIV/AIDS prevention and treatment; access to safe water and adequate sanitation; housing and slum upgrading; and population management. The strategy will also include the promotion o f vigorous health education campaign on the adoption of healthy environmental practices and lifestyles. In addition, outstanding issues relating to vulnerability and social exclusion will be mainstreamed into the human resource development strategy. 4.3 EDUCATION, SKILLS,MANPOWER AND SPORTS DEVELOPMENTFOR ACCELERATED GROWTH In the broad education sector a holistic package of interventions have been identified as priorities for attaining a middle income country with a minimum per capita income of US$lOOO by 2015. The strategy begins with early childhood development (0 - 8years) where the critical foundations are laid for psycho-social, emotional, and intellectual development. Initiatives that will give the best start in life for every Ghanaian child will be pursued. This will include measures that will strengthen the family, other caregivers and early childhood development programmes. 4.3.1 FormalEducation The basic education sub-sector i s the next major building block for the development of human resources for accelerated growth. The policy issuedgaps in this sub-sector that need to be addressed include: inadequate progress in school enrolments; persistent geographical and gender disparities in access to education; less than satisfactory quality education; inadequate technical and vocational skills and I C T training. Box 4.2: EducationReformPolicy The Education Reform Policy is aimed at addressing the weaknesses of the current educational system with a view to making it more responsiveto current challenges. Specifically the policy addresses issues pertaining to the developmentand delivery of education, accessto different levels of the education ladder, Information and Communication Technology (ICT), distance education, professional development and the managementand financing of education. The essentialelements of the reform include, among others, the following: re-structuring of the current Basic Education Systemto provide universal compulsory basic education comprising of 2 years of Kindergarten, 6 years of Primary, 3 years of Junior High and then 4 years of Senior High. emphasis on Technical, Agricultural and Vocational education as credible alternatives to general education for the majority of youth, especially for the 15 to 19year bracket. formalization of community-based apprenticeshiphkills training to offer opportunity for those who drop out of school to acquire proficiency in marketable skills improving Teacher Education, including teacher development at all levels of education improving institutions that provide education for children with special needs The policy-relatedissues in the secondary education sub-sector are: equitable distribution o f well-equipped secondary schools; well-trained and motivated teachers; and inability to absorb the majority of pupils who complete the compulsory basic education programme. At the tertiary level the critical policy issues relate to: inadequate physical infrastructure to absorb the growing number o f young adults who seek admission to tertiary institutions; and insufficient numbers of qualified and well motivated academic staff. The new Educational 42 Sector Reform Programme introduced in 2004 aims at addressing these issues, particularly inthe basic and secondary education sub-sectors. Priority policy interventions in the education sector that will deepen and sustain the progress made in education under GPRS Iand accelerate growth include the following: (i) increase access to and participation in education and training at all levels; (ii) bridge gender gaps in access to education in all districts; (iii)improve quality o f teaching and learning; (iv) improve efficiency in the delivery of education services (v) promote science and technology education at all levels with particular attention to increased participationo f girls. Increasing access to andparticipation in educationand training: At the basic level, policy measures include: expand pre-school access in all basic schools to give every child a good start in learning; accelerate the rehabilitation/development o f basic school infrastructure (with water and toilet facilities) particularly in most deprived districts; remove barriers to primary school entry and retention; shift the burden o f payment for education services away from poorer families o f children at the lower levels (especially the girl-child); facilitate the implementation o f the capitation grant in all public primary schools; expand the ongoing school feeding programme to all poor districts; ensure that buildingsand other physical infrastructure in schools are made accessible to the people with disabilities; adopt targeted programmes to improve access in underserved areas; improve the provision o f JSS workshops in basic schools; enact laws that support implementation o f FCUBE; and expand non-formal education in partnership with community groups, NGOs and privateproviders. At the senior secondary school level, strategies will focus on: accelerate the implementation of the programme to upgrade one secondary school to "model secondary school" status in each district in order to address the issue o f geographical disparities in access to quality secondary education; rehabilitate/develop physical infrastructure, provision o f libraries and equipping science laboratories in other schools in the districts. In co-educational institutions, steps will be taken to ensure equitable access to facilities and opportunities for both boys and girls. Strategies to improve and extend technical and vocational education and training include: establishment of a National Council for Technical and Vocational Education; ensure the relevance and coverage of vocational and technical training; (allowing for the diversification of vocational and technical curriculum e.g. to include agriculture and business studies); facilitate functional linkage between training institutions and industry; support private-public partnership in the management o f vocational and technical schools; promote entrepreneurship among the youth. At the tertiary level, on-going programmes for enhancing infrastructuraldevelopment inthe universities and polytechnics will be expanded to provide essential facilities like libraries, lecture halls, laboratories, workshops, equipment, and residential accommodation. A National Policy on Distance Education will be adopted and distance education centres established in all regions o f the country. Bridging gender gap in access to education: Strategies towards attaining gender parity in access to education and meeting the objectives of MDG 3 will include provision of incentiveshcholarship schemes to increase girls enrolment, retention and completion, particularly in the deprived areas; and sensitising parents and communities on the importance o f girls' education. 43 Improving the quality of teachingand learning: To improve the quality o f basic education, the strategy will focus on: introduce programme of national education quality assessment: expand teacher retention schemes; ensure teacher development (including upgrading and equipping Teacher Training Colleges to offer diploma courses), ensure deployment of teachers, particularly to more remote and rural areas; (iv) strengthen the supervision of teachers; provide incentive schemes for teachers especially female teachers who serve as role models, in deprived areas; ensure timely distribution o f teaching and learning materials, including textbooks; improve the teaching o f science, technology and mathematics in all basic schools; and develop and promote the use o f ICT in schools and institutions of higher learning. Improving the quality and efliciency in the delivey of education services: The strategy to improve the quality and efficiency in the delivery o f education services will include: strengthen and improve educational planning and management; promote and support private sector participation in education; strengthen monitoring and evaluation framework and reporting channels; strengthen institutional arrangement for enhancing the role of CBO, CSO in advocacy, monitoring and evaluation. Promoting of science and technology education at all levels: Improvements in production techniques for more efficient production of larger quantities and high quality goods and services in the growth sectors require workers with modern scientific knowledge and ICT culture. Strategies to achieve this objective include providing incentive schemes to attract more teachers into the teaching of science and ICT; support science and research institutions; provide incentives to attract science students; increase fundingfor research and technology development including ICT; and support private sector initiatives in science and education. 4.3.2 Trainingand Skills Development Outside the formal education system, many young people lack the requisite skills and entrepreneurial know-how to access jobs in the labour market, thus making them vulnerable in their livelihoods and subject to exploitation including the worst forms of child labour. Groups of young people requiring support most in this regard include: young persons 15 years and above who never went to school or who drop out o f primary school and JSS; those who have completed JSS and SSS but are unemployed due to poor qualityhelevance o f education received; young people who have acquired some skills but need retraining especially in good management practices to enhance their access to the labour market; and young persons with disabilities. Skills and entrepreneurial development will be guided by the following priorities: (i) provide skills and entrepreneurial training in a gender responsive and equitable manner; (ii) promote dialogue between industry and skills/professional training institutions to produce skilled labour required by industry; (iii)strengthen and support HR training institutions; (iv) promote apprenticeship training; (v) promote the adoption o f the National Youth Policy and enactment o f the Disability Bill. Provide skill and entrepreneurial training: In order to provide skill and entrepreneurial training the following strategies will be adopted: train unemployed in competency-based, demand-driven skills, including the STEP programme; promote and establish production units in all vocational training centres; set standards for vocational training and entrepreneurial development; intensify co-operative 44 education and its practice in collaboration with stakeholders; revamp the Factories Inspectorate Division to intensify health and safety education at the workplace and training institutions; expand training infrastructure for skills upgrading; improve management skills and business efficiency; promote training o f people with disability and; implement National apprenticeship programme. Promote dialogue between industry and skills/professional training institutions to produce skilled labour required by industry: The strategy i s to promote dialogue between industry and skills/professional training institutions to produce demand driven skilled labour and establish effective collaboration between HR institutions and industry. Strengthen and support HR Training Institutions: The strategy to strengthen and support HR training institutions will include the following: assist HR institutions to develop new syllabi/curricula to meet requirements o f industry and employees as well as persons preferring self-employment; conduct training needs assessment: provide logistical support. 4.3.3 Sports Development Sports enhance one's personal abilities, general health, self-esteem while contributing to socio-economic development including improving public health and social cohesion. On the global level, sports foster friendship, cooperation and understanding between nations. In relation to the sport for excellence and sports for development and peace policies, priority interventions to support growth and poverty reduction will: build coalition and partnership in sports development; promote national integration and unity through sports; and promote international friendship, solidarity and cooperation. Building coalition and partnership in sports development: Strategies will include strengthening the capacities o f the national sports institutions and organisations and enhancing the involvement o f corporate bodies and individuals in sports promotion and development. Promoting national integration and unity: Adequate and appropriate sports and recreational facilities will be provided at local, district, regional and national levels, ensuring availability and affordability o f sports equipment, promoting the production o f local sports equipment, building the capacity of community sports clubs, amateur and professional clubs and fitness clubs and motivating and encouraging sports talents to achieve full potential. Promoting international friendship, solidarity and cooperation: Strengthening international friendship, solidarity and cooperation to achieve growth and poverty reduction will be promoted by establishing linkages and partnership with countries and international sport agencies committed to the development o f sports, thereby enhancing i t s potential contribution to national development objectives. 45 4.4 IMPROVED ACCESS TO HEALTHCARE,MALARIA CONTROLAND PREVENTION OFHIV/AIDS 4.4.1 Improving Access to HealthCare Generally the health status of Ghanaians has improved over the years. However there exist marked differences in some health indicators among the different geographical regions and socio-economic groupings. These variations in health status are in part due to differential access to quality health care. Despite the considerable investments in the provision o f health care facilities, a significant proportion o f the people lack access to quality health services. The main constraining factors affecting access to health care include geographical, financial barriers, service delivery and broad socio-cultural barriers including gender. Factors contributing to poor geographical access include low capital investment in health facilities, poor feeder road systems in the country, poor location o f facilities and lack of communication facilities. Service delivery barriers that have constrained access to quality health care include organizational and management constraints; weak support systems such as transportation and equipment for service delivery; human resource constraints. The exodus of critical health professionals in recent years i s undermining efforts to improve access. The `Cash and Carry System' o f paying for health care at the point o f service i s a key financial barrier to health care access for the poor. To remove the financial barrier to health services, the government initiated the National Health Insurance Scheme in 2001 aimed at abolishing this system and limiting out o f pocket cash payment at the point of service delivery (see Box 4.3). The scheme makes provision for the poorest and most vulnerable Deople to be identified and exempted from making financial contributions to the system. Box 4.3: National Health Insurance Scheme The National Health Insurance was initiated to address the problem of financial barrier to health care posed by the `Cash and Carry System' which requires out-of-pocket payment for health care at the point o f service delivery. The National Health Insurance Act (2004), Act 650, has been enacted and a Legislative instrument, LI 809, has also been passed to provide operational and administrative guidelines for its implementation. A Ministerial Oversight Committee has been formed. A National Health Insurance Council is inplace. District Mutual Health Insurance Schemes (DMHIS) serve as vehicles for delivering pro-poor policy to the underprivileged segment of society. All districts have been provided with an average o f $250 million each as start-up capital for the establishment of a DMHIS. So far 123 district schemes have been set up out o f a total of the 138 districts and personnel to serve as District Scheme Managers have been recruited. Currently a minimum benefit package covers about 95% of diseases in Ghana. Some o f the diseases covered are malaria, diarrhoea, upper respiratory tract infections, skin diseases, tuberculosis, asthma and hypertension. Challenges to the successful implementation o f the NHIS are (a) how to increase enrolment o f members into the district schemes and the NHIC plans to intensify education to improve this. (b) Costing o f various types o f services at the different health delivery points in order to fix tariffs / fees with health-care providers. The Ministries of Health, Local Government & Rural Development and Information as well as the NHIC need to intensify work in order to make this important national programme succeed. The strategy for improved health care in Ghana under GPRS I,envisaged increasing total health expenditure as percentage o f the total government expenditure from about 5% in 46 2000 to about 7% in 2004 and 7.5% in 2005. This increased expenditure, which was likely to guarantee a per capita health expenditure equivalent to $10, i s too low to bring Ghana anywhere near the internationally recommended levels of about $30-40 per capita expenditure necessary to cover the costs o f a basic minimum package of preventive and curative services. The Ghana, Macroeconomic and Health Initiative (GMHI) report recommends in the short term increasing government spending on health for the 2003 to 2007 financial years to the level that would raise the contacts for preventive and curative care from 0.34-0.44 OPD visits/ per-capitdyear to 0.75 OPD visitskapitdyear or raising the health expenditure per capita per year to around $20 by 2007. In order to accelerate access to quality health services, the health sector will continue to deepen efforts and focus on the three broad policy objectives: (i)bridge equity gap in access to quality health and nutrition services; (ii)ensure sustainable financing arrangements that protect the poor; (iii) enhance efficiency in service delivery. Bridging Equity Gap in Access to Quality Health and Nutrition Services: Strategies to be implemented under this policy objective include: develop "close to client' services to the poor; develop resource allocation criteria and a facility distribution plan to improve targeting o f poor groups and geographical areas; redistribute health workers in favour o f deprived areas; provide outreach services and clinics in deprived rural and peri- urban areas; improve Community-based Health Planning and Services (CHPS); develop and implement high impact yielding strategies for U 5 M & MM and malnutrition; including scaling-up the successful Accelerated Child Survival and Development (ACSD) interventions; develop at least one fully functioning and well equipped hospital in each district; eradicate guinea worm and intensify implementation o f DOTS strategy o f the National Tuberculosis programme; improve access to reproductive health services by reducing unmet needs of family planning; improve essential obstetric care to reduce maternal mortality; and improve availability and access to essential and affordable drugs on sustainable basis. Ensuring Sustainable Financing Arrangements that Protect the Poor: Strategies under this objective include: accelerate the implementation o f the National Health Insurance Scheme including the exemption policy through guided introduction of District mutual health insurance schemes, fix low acceptable levels of payment for the poor. The exemption policy will be strengthened to enhance access of poor and vulnerable groups to healthcare by improving the eligibility criteria, procedures, public awareness and responsiveness of the health service facilities. StrengtheningEfficiency in ServiceDelivery: Strategies to strengthen efficiency in service delivery will include: expand pre-service health training institution facilities to increase intakes of trainees; providing incentive schemes to support the retention and redistribution o f trained health personnel; decentralize human resource management to the regional level; strengthening systems for accountability in health service delivery; collaborate with informal health service providers, expand community-based health service delivery; improve the quality of traditional health service delivery system; accelerate the provision o f staff accommodation at all levels; improve data collection in Epidemic Prevention and Care; strengthen M&Eo f services; clarifying roles of MOH-GHS and District Assemblies in health service delivery (HSD); enhance linkages between public, private and NGOs, collaborating with other MDAs like Ghana Aids Commission, National Population Council, Ministry o f Education, Ministry o f Food and Agriculture and the Community Water and Sanitation Agency in service delivery. 47 4.4.2 Malaria Control Malaria in Ghana i s the single most important cause of mortality especially among children under five years and pregnant women. In 2002, for instance, malaria was estimated to account for 44.5% o f all outpatient illnesses, 36.9% of all admissions and 13.2% o f all deaths in health facilities in Ghana. The disease i s responsible for a substantial number of miscarriages and low birth weight babies among pregnant women. Among this group, malaria accounts for 13.8% of OPD attendance, 10.6% o f admissions and 9.4% of deaths. Around 800,000 children under the age of five die from malaria in Africa every year, making this disease one of the major causes of infant andjuvenile mortality. Apart from the health consequences o f malaria, it puts a heavy burden on economic development. It i s estimated that a single bout of malaria costs a sum equivalent to over 10 working days in Africa. In Ghana malaria accounts for significant portion o f the disease burden, causing about 10.6% of lost Disability Adjusted Life Years (DALY) and costing an equivalent of about 3% o f GDP annually in economic burden. Hence the need to prioritize the control o f malaria under the health sector interventions o f GPRS 11. Box 4.4 :Government Effort at Controlling Malaria Intensive government efforts at controlling malaria in Ghana dates back to 1957 when a malaria control unit within the MOH was establishedin the Volta Region in collaboration with WHO to train personnel in geographical reconnaissance, malariometric and entomological surveys, and to conduct trials of indoor residual insecticide application in the control of adult mosquito population. Ghana followed-up this in 1961 with the creation of a National Malaria Services when the country adopted the global Malaria Eradication Programme, which used residual spraying and larvicides to control malaria parasites. The programme had to be discontinued in 1967 due to technical and financial reasons. In 1992, the country launched a 5-year (1993-1997) National Malaria Control Action Plan with the focus on capacity building for improved disease management in health facilities. Drawing on past experiences and lessons, an accelerated malaria control programme piloted in30 districts, was launched in 1997, again with a focus on case management. Since 1998 Ghana has committed itself to the Roll Back Malaria (RBM)Initiative of WHO, which builds on the Global Malaria Strategy with a focus on Africa. The goal of the Roll Back Malaria Initiative i s to halve the world's malaria burden by 2010. Consequently the country drew up a 'Medium Term Strategic Plan for Malaria Control in Ghana' (1998-2002), which sought to improve the coverage of malaria control activity by adopting an inter-sectoral approach involving other government sectors and partnership with the private sector and the community3.I t has also committed itself to the Abuja Declaration on Roll Back Malaria in Africa, which similarly seeks to achieve specific targets on malaria prevention and control with time limits. The Ministry of Health produced a Roll Back Malaria (RBM) Strategic Plan in 2000 with the overall goal of facilitating human resource development by reducing the malaria disease burden, The RBM i s in line with the objectives of MDG 6. The following priority interventions in the RBM plan will be promoted and strengthened in GPRS 11: improve malaria case management; multiple prevention; improved partnership; and focused research. Improving Malaria Case Management: Primary interventions include ensuring early case recognition, ensuring appropriate response and referral and improving access to services. Enhancing Multiple Prevention: Preventive strategies include: promote use o f insecticide treated bednets, especially by Ministry of Health 1998. Strategic Plan (June 1998), Government of Ghana. 48 children and pregnant women; encourage drainage, mosquito proofing and general sanitation; promote limited application of indoor and outdoor residual spraying; and promote chemoprophylaxis for pregnant women. Improving Partnership: The strategy to achieve this objective i s to create and sustain partnerships for malaria control through close collaboration between departments and programmes in the health sector, partnerships between government sectors and partnerships with NGOs, private sector, informal sector, communities and traditional healers. Focused Research: The objective of this component of RBM is to ensure that efforts to roll back malaria are supported and well informed by well researched information to guide policy decisions and monitor progress and outcomes of key interventions. This will be achieved by increasing availability o f funds for research; focused research agenda and improved dissemination and utilization of results; and capacity development for research. 4.4.3 HIV/AIDS Prevention Inaddition to the malaria menace, HIV/AIDS pandemic at the prevalence rate of 3.4% has a negative impact on productivity. It results in loss o f productive assets, high treatment .costs and the break in the transfer of valuable livelihood knowledge from one generation to the next. The following strategies will be adopted to prevent the spread o f HIV/AIDS in order to keep the prevalence rate below 5%: reduce new HIV/STI transmission; reduce the impact o f HIV/AIDS related vulnerability, morbidity and mortality; and enhance the coordination and management o f the national HIV/AIDS response. Reduce new HIV/STI transmission: The objective of reducingnew infections will be achieved by intensifying behaviour change strategies, especially for high risk groups; preventing mother-to child transmissions; ensuring safe blood and blood products transfusion; improve HIV/AIDS/STI management; promoting safe sex practices; increase access to voluntary counselling and testing, condoms, and integrated youth friendly services; develop national behaviour change communication strategy, advocate for elimination of negative socio-cultural practices, address gender based vulnerability including violence, coercion and marginalization, strengthen links between HIV preventionprogrammes and reproductive health and information services. Reduce the impact of HIV/AIDS related vulnerability, morbidity and mortality: Policy measures with respect to this objective include: enhance service delivery; promote strategies to reduce stigma and discrimination, rapid scale-up o f comprehensive care including antiretroviral therapy to all who need it; effectively standardize the utilization o f useful traditional and alternative medicine for the provision o f long-term care; ensure supportive environment for persons infected or affected by HIV/AIDS; ensure safety o f orphans and vulnerable children; strengthen linkages between institutional care and community/home based care; increase assess to basic package o f services for PLWHA. Enhance the managementof the national HIV/AIDS response: Policy measures for achieving this objective will include: strengthen the capacity and core functions o f the Ghana AIDS Commission; enhance the existing favourable, socio-political and 49 policy environment; promote a multi-sectoral and multi-disciplinary approach in the formulation and implementation o f HN/AlDS/STDs policies and programmes at national, region and district levels, building capacity o f weak frontline institutions; develop and implement clear strategies for research, monitoring and evaluation; mobilize resources to meet the increasing demand of new and diversified programmes 4.5 POPULATION MANAGEMENT Population growth has strong linkages with economic growth and sustainable social development. Population growth increases the quantity of labour without necessarily improving its quality. Hence, population growth rates above 2 percent have been found to be counterproductive to growth. Even though the population growth rate in Ghana has reduced from its high level of about 3% in 1994to 2.7% in 2000, it continues to outstrip the provision of social services and infrastructure. The high fertility rate has also resulted in a youthful population with a high dependency ratio. The immediate challenge for human resources development i s to formulate appropriate strategies to manage the population to ensure that population growth rate i s maintained at a level that will support economic growth and social development. Population management will be based on the following priorities: promote access to and utilization of family planning services; educate the youth on sexual relationship, fertility regulation, adolescent health, marriage and child bearing; promote sexual health, delayed marriage and child bearing; promote compulsory education for children especially the girl- child up to secondary; promote compulsory and universal birth registration as a basic right and population management measure; integrate population variables into the GPRS at the national, regional and district levels and improve population database for the GPRS; promote the integration of HIV/AIDS into Sexual and Reproductive Health programmes; and strengthen the multi-sectoral, multi-disciplinary institutional co-ordination collaboration and networking for population management. Promote access to and utilization of family planning sewice: The strategies which will be implemented under this policy objective include: decentralize counselling services; strengthen the family planning component o f maternal health delivery; and promote the sale o f contraceptives through community agents, including maternity homes and field agents. Research will be undertaken on traditional practices and belief systems which inhibit contraceptive use followed by appropriate action. Educate theyouth on sexual relationship,fertility regulation, adolescenthealth, marriage and child bearing: The strategies which will be implemented will include: promote family planning/RH education into formal and informal and out o f school training programmes to prepare the youth for responsible parenthood; scale up effective implementation of the Adolescent Reproductive HealthPolicy. Promote the integration of HIV/AIDS into Sexual and Reproductive Health programmes, delayed marriage and child bearing: Strategies to promote sexual health, delay marriage and childbearing, include: ensure availability of and accessibility to family planning services to all who seek such services including youth-friend1y services; educate and motivate the population at community levels on health, social and demographic values of family planning; promote formal education of girls as well as adult education and functional literacy with bias towards the maintenance of family values, reproductive health, population and development interrelation; conduct 50 research into socio-cultural practices that promote early marriage, betrothal, early sexual behaviour and take appropriate social and legal action. Promote compulsory education for children especially the girl-child up to secondary level: The strategy will focus on programmes that encourage girls to stay in school up to at least the secondary level, improve school enrolment rate and reduce the highdrop out rate. Promote compulsoryand universalbirth registration: The issue o f birth registration was not addressedin the first GPRS. GPRS I1recognises birth registration as in an important population management issue as well as the fundamental right of the child as a citizen. The implementation of the existing policy and programme will be accelerated to achieve universal coverage o f 100% by 2009 from the current level o f 50%. Strengthening the multi-agency Co-ordinationfor Population Management: The policy interventions in this regard will include: build the capacity o f the National Population Council and partner agencies for the integration o f population concerns in the GPRS; provide technical leadership to co-ordinate population activities at all levels; and develop appropriate advocacy strategies for populationmanagement. 4.6 SAFE WATER AND ENVIRONMENTAL SANITATION Improving access to potable water and sanitation i s critical to achieving favourable health outcomes, which in turn facilitate economic growth and sustained poverty reduction. In particular improvement in access to safe water enhances school attendance, reduces women's workload and frees them to participate effectively in economic empowerment and governance activities. On the other hand, adequate sewerage and sanitation facilities are important for environmental cleanliness and prevention of many infectious diseases such as diarrhoea and dysentery. There are several on-going investments in safe water provision through the rehabilitation and expansion o f water systems for both rural and urban communities. There i s the need to accelerate these interventions. The following priorities will guide the delivery o f safe water and sanitation in the next four years: accelerate provision o f safe water in rural and urban areas; accelerate the provision o f adequate sanitation; and improve environmental sanitation inurban and rural areas. Accelerate theprovision of safe water in rural and urban areas: Rural: Policy interventions to accelerate the provision o f safe water in the rural areas will include: provide new investments in rural water, especially in guinea worm endemic areas; strengthen the management of on-going investments in deprived regions; ensure timely disbursement o f recurrent budget to Community, Water and Sanitation Agency (CWSA); ensure timely disbursement of the District Assembly Common Fund; strengthen public- private and NGO partnerships in water provision; improve community owned and managed water supply systems; provide for in the building code an enactment requiring all building plans to include rain harvesting facilities, provide check-dams (dug out) to harvest rainwater for agricultural purposes, strengthen human resource capacity in water and to disseminate information on safe water. 51 Urban: Strategies to accelerate the provision o f safe water in the urban areas will include the following: establish regional offices of Public Utilities and Regulatory Commission; mobilize new investments for urban water systems; extend distribution networks especially to low income consumers; strengthen the management of Ghana Water Company to enhance service delivery; assess lifeline tariff for poor urban households; provide stand- pipes for the poor; provide, in the building code, an enactment requiring all building plans to include rain harvesting facilities; support the introduction of private sector into management and operation of the water supply systems under management andor lease contract arrangement and to disseminate information on safe water . Accelerate theprovision of adequate sanitation: Strategies to accelerate the provision of adequate sanitation consists o f promote the construction and use o f domestic latrines; improve the treatment and disposal of waste in major towns and cities; enforce laws on the provision of sanitation facilities by landlords; promote widespread use of simplified sewerage systems in poor areas; improve the management of urban sewerage systems; improve household and institutional sanitation including schools; rationalize and update District Assembly bye-laws on safe management of liquid and solid waste at the household level; integrate hygiene education into water and sanitation delivery. Improve environmental sanitation: Interventions that will be implemented to improve environmental sanitation will involve: promote physical planning in both urban and rural areas, including the acquisition of land for the treatment and disposal of solid waste in major towns and cities; establish water and sanitation boards in small towns; support public-private partnership in solid waste management; and build the capacity of District Assemblies to better manage environmental sanitation. 4.7 URBAN DEVELOPMENT, HOUSING AND SLUM UPGRADINGKJRBAN REGENERATION 4.7.1 Housing Access to adequate housing, safe water and sanitation facilities, i s an important ingredient in efforts to improve the health outcomes and livelihood o f Ghanaians. Current estimate of housing needs by the Ministry of Works and Housing indicate that the country needs at least seventy thousand (70,000) housing units annually. Presently, the national supply i s about 35% of this figure. Lack of sufficient housing units in the urban areas has contributed to overcrowding, development o f illegal structures, children and young people living in the streets and undue pressure on the already limited water and sanitation facilities. GPRS I1treats housing provision as a strategic area for stimulating economic growth while at the same time improving the living conditions o f Ghanaians. The very activity of providing housing contributes to economic growth through multiplier effect of housing construction on the economy. It i s estimated that for every ten thousand dollars (US$lO,OOO) spent on housing construction more than seven (7) jobs are created in related industries and enterprises. Government i s in the process o f reviewing the National Shelter Policy, with the ultimate goal o f providing adequate and affordable housing with requisite infrastructure and basic services to satisfy the needs o f the people. 52 4.7.2 Slum UpgradinwrbanRegeneration The growing incidence of slum development in Ghana has been the result o f rural-urban migration, limited supply of land, and regulatory frameworks that are, at best, indifferent and hostile to the needs of the poor. In 2001, the number of people living in slums in Ghanaian cities was estimated to be 4,993,000 and growing at a rate of 1.8% per annum. The slum areas are very pronounced in Accra, Kumasi, Sekondi-Takoradi, Tema and Tamale with growing incidence in the secondary cities of Cape Coast, Koforidua, Sunyani, H o and Bolgatanga. Priority strategies for housing and slum upgrading are as follows: strengthen the physical planning o f urban settlements and ensure the enforcement o f planning regulations and implementation of planning schemes; upgrade basic services in the urban areas; promote adequate supply of safe and affordable shelter; improve housing conditions in rural areas and low-income urban areas; facilitate adequate housing finance for all income groups; and) develop and promote the use of local building materials. Promote Urban Infrastructure development andprovision of basic Services: The strategies to address urban infrastructure development and provision o f basic services will include: provide and implement strategic/development plans for urban centres, enforce rules on land use plans; co-ordinate all aspects o f town development; facilitate publidprivate partnerships in the development of urban infrastructure; provide basic urban services; foster the growth o f settlements which can support rural transformation; improve infrastructure facilities in slum areas and restrict the formation of new slums; ensure efficient and effective management of flood control and drainage systems; and promote and facilitate private sector participationin flood control systems and coastal protection. Increase access to safe and affordable shelter: In order to increase access to safe and affordable shelter the following interventions will be pursued: streamline and improve land acquisition procedures; encourage mortgage financing by financial institutions to provide varied ending and savings services to house owners, would-be house owners and housing developers; facilitate private sector involvement in the provision of rental accommodation in urban centres; ensure that all houses have adequate facilities, which are friendly to persons living with disability and located in healthy environment, and promote the manufacturing and use o f local building materials and appropriate technologies in housing. 4.8 SOCIAL POLICY FRAMEWORK FOR MAINSTREAMING THE VULNERABLEAND EXCLUDEDINHUMANRESOURCEDEVELOPMENT A significant proportion of Ghanaians including children, unemployed youth, women, persons with disabilities and the elderly either do not reach their full human potential or cannot contribute effectively to economic growth and sustainable social development due to vulnerability and exclusion. Their needs cut across many sectors and their human resource development requires a coherent and integrated Social Policy Framework and an overarching Social Protection Strategy. Several relevant social policies already exist including, the Early Childhood Care and Development (ECD) Policy, Gender and Children's Policy, Education Reform Policy, Health Reform Policy, Draft National Disability Policy, National Population Policy, Draft Youth Policy and Draft National Ageing Policy. A Draft Social Protection Strategy to cover the needs especially o f the vulnerable and excluded has also been prepared. These would form the basis o f the overall 53 Social Development Policy Framework. Issues of vulnerability and exclusion have been mainstreamed in the GPRS 11. A comprehensive Social Policy Framework to update existing policies where necessary and provide guidelines for improved social development performance to bolster economic growth will be developed and adopted to strengthen the process of empowering the vulnerable and excluded to reduce their risks, protect their rights and enhance their contribution to national development Critical policy issues to be addressed in GPRS 11, besides education and health, include: integrated child development; strengthening of the family; HIV/AIDS; capacity development in social work and volunteerism; database on vulnerable and excluded groups; and institutional strengthening, linkages and coordination. 4.8.1 IntegratedChildDevelopment As noted earlier, human capital formation starts from early childhood. Studies worldwide also show that investments in holistic early childhood care and development for children before birth to 8 years old covering care, infant stimulation, social and cognitive development, health, nutrition and early learning yield the highest rate of return o f any child development activity at later stages in the life cycle. The returns are both in cost savings in fighting later poor health, malnutrition, poor cognitive and learning outcomes, school drop out etc and in positive human development, equality, poverty reduction and economic growth. Hence vigorous efforts will be made to implement the ECD policy to ensure that Ghanaian children receive the best possible care and start in life to guarantee their survival in a knowledge-based world. This will also ensure the reduction in the time burden of women and girls. Priority attention will also be given to: child protection issues including intensified special programmes to eliminate the worst forms of child labour and child trafficking, child abuse, commercial sex exploitation of children and streetism; protect orphans and vulnerable children (OVC) and children in conflict with the law; enact the Disability, Human Trafficking and Domestic Violence Bills. The National Commission on Children and Development under M O W A C will be strengthened to harmonise and coordinate policies and activities of child development across sectors. 4.8.2 Strengtheningthe Family Family values are under threat as cases o f neglect and abuse o f spouses and children increase and there i s emerging dislocation of youth and parental authority and guidance, Trends in increasing single parent and female headed households indicate stresses on family members especially children. This i s worsened by the fact that the family as an institution receives little or no attention from both public and private sector agencies. Departments and civil society organisations that traditionally address issues of family welfare have been quite weak and of limited effectiveness. Policy measures to alleviate the situation include: multifaceted support to build family capacity to provide for and care for its members according to their particular needs as girls, boys, women, men and the elderly taking into account peculiar social norms and practices; parenting and family life education through multimedia channels, civil society groups and trades associations; strengthen intersectoral collaboration among MMDAs and with NGOs. 54 4.8.3 HIV/AIDS and Vulnerability and Exclusion HIV/AIDS presents a rapidly emerging challenge to social security in Ghana. There should be an explicit strategy to harmonise efforts of public and private agencies in the campaign for behaviour change, as a means of reducing the potential impact o f HIV/AIDS on vulnerability and exclusion. At the same time, the campaign against stigma and other forms of discrimination, as well as advocacy for treatment should be seen as parts o f the effort to reduce vulnerability. 4.8.4 Capacity Development in Social Work and Volunteerism There i s a serious human capacity limitation in this area. Programmes to equip social services practitioners and new entrants with the necessary skills and at varying levels of expertise should be pursued. Existing training facilities at post secondary and tertiary levels need to be strengthened to support schools for PWDs, care programmes and skills training programmes. In addition, a more professional approach to the management o f volunteerism should be introduced to encourage Ghanaians to give their time and resources towards the care and empowerment of vulnerable and excluded groups. Non-diploma short courses can be used to provide hands-on training in some cases. Community based support networks present an opportunity for such capacity building initiatives. 4.8.5 Database on the Vulnerable and Excluded Groups A simple but efficient data management system will be put in place to draw social sector data into a common database that can be analysed by the Ghana Statistical Service (GSS) and presented as national statistics on the vulnerable and excluded. MMDAs should collaborate with the GSS, national research institutes, and NGOs on needed research and in- depth studies ensuring that data collected are disaggregated by age, gender and geographical location. The database will facilitate and sharpen programme design, targeting, mainstreaming and monitoring and evaluation o f vulnerability and exclusion inthe country, 4.8.6 Institutional Strengthening, Linkages and Coordination Major problems plaguing the design and implementation o f social development programmes to address vulnerability are inadequate institutional framework, capacity and poor coordination. Four sector ministries have been identified as social sector ministries including MMYE, MOES, M O H and MOWAC. The Department o f Community Development of the MLGRD provides assistance. Other agencies providing specialised but related support include CHRAJ, WAJU and the Legal Aid Board. Then there are numerous NGOs, CBOs and civil society organisations giving attention, care and support. The programmes of all these agencies and organisations often overlap leading to duplication and fragmentation of efforts. Compounding the problem i s the absence o f an overall Social Policy Framework to guide agency contributions and coordination Policy measures to address this situation include: strengthen the technical capacity o f key agencies such as the Department of Social Welfare, Department of Community Development, WAJU and CHRAJ; provide adequate human and financial resources to these and other agencies to effectively meet the needs o f the vulnerable and excluded; promote 55 greater linkages, complementarities and coordination among the agencies and organisations to maximize their ability to improve the lives and empower the vulnerable and excluded groups in the society. 56 CHAPTER FIVE GOOD GOVERNANCEAND CIVIC RESPONSIBILITY 5.1 INTRODUCTION The broad objective of good governance and civic responsibility i s to empower state and non-state entities to participate in the development process and to collaborate in promoting peace and stability in the body politic. Deepening the practice of good governance and promoting civic responsibility i s one of the three areas o f priority under GPRS 11. The strategy to achieve this objective i s to promote effective, responsible and accountable state machinery with improved capacity to engage the productive private sector and civil society in formulating policies and strategies for accelerated growth and poverty reduction and in the implementation monitoring and evaluation. As part of the strategy for ensuring good governance, Ghana was one of the first countries to subscribe to the African Peer Review Mechanism (APRM) under the NEPAD initiative (See Box 5.1). Box 5.1 African Peer Review Mechanism The African Peer Review Mechanism (APRM), which is an initiative of the New Partnership of African Development (NEPAD), is a mutually agreed upon instrument which membersof the African Union (AU) have voluntary acceded to as part of an African self-monitoring mechanism. The primary purpose of the APRM i s to foster the adoption of policies, standards and practices that will lead to political stability, high economic growth, sustainable development and accelerated sub-regional and continental economic integration. This i s expected to be achieved through the sharing of experiences and reinforcing successful and best practices, including identifyingdeficiencies and assessingthe needs for capacity building. In line with the initiative, Ghana completed its first country self-assessment process in February 2005. Subsequently, the assessment has been reviewedby the group of African eminent persons. Preparation of the final report on the independentcountry review i s inprogress. Since the major objective of the APRM i s to promote the use of a participatory monitoring and evaluation instrument for tracking deficiencies and weaknesses identified in the national self assessment report, the outcome of the report will influence the implementationof policies formulated under GPRS 11. 5.2 REVIEW OF GOVERNANCEUNDERGPRS I The priority areas for good governance under GPRS Iincluded public sector reform, decentralisation, and security and rule of law. Some o f the significant achievements are presented below. 5.2.1 Public Sector Reform As part of the Public Sector Reform Programme, Government introduced programmes aimed at adjusting central government structures and organisations to make them more efficient, effective, and private sector-friendly. Public Financial Management Law, namely, the Financial Administration Act, 2003, (Act 654), The Internal Audit Agency Act, 2003 (Act 658) and the Public Procurement Act, 2003, (Act 663), have been enacted to regulate the utilization of public funds. In addition new approaches in the scope, timing and quality of reporting on budget management have been introduced. Many other state and non-state institutions4 that have oversight responsibility for public resources are being strengthened. Fast track courts are being computerised and Parliament i s being assisted with capacity building and other resources. Also key staff o f the Judicial Service has acquired skills in Performance Management, Alternative Dispute Resolution, Court Automation, Case Management and Change Management. Outside government, civil society groups such as the Ghana Anti-Corruption Coalition gained increased capacity to discharge its anti corruption advocacy. The monitoring and evaluation of policy implementation in general has improved. The National Development Planning Commission has undertaken reviews of the implementation of GPRS and has issued three Annual Progress Reports (2002, 2003 and 2004). The dissemination of the APRs has improved public understanding of the GPRS and helped to secure public interest and ownership in monitoring the implementation of the strategy. 5.2.2 Decentralisation In the area of decentralisation, greater fiscal, administrative and political empowerment at the sub-national levels has occurred through a number o f policy initiatives. The District Assembly Common Fund (DACF), H P C and other grant transfers are now regular sources of revenue for district development programmes. To enhance the capacity of the District Assemblies to deliver on their mandate, a number of far-reaching policy initiatives have been introduced, among which are: the preparation of the National Decentralization Action Plan (NDAP); the establishment of Presidential Advisory Committee on Decentralization; the passage o f the Local Government Service Bill into an Act; and the piloting of the cost-saving composite budgeting system in three districts. In line with the goal of bringing democracy closer to the citizens and deepening good governance, 28 new District Assemblies have been created bringing the total to 138. There i s growing collaboration between civil society groups and District Assemblies in managing district development programmes. 5.2.3 Security and Rule of Law Considerable resources have been released for the empowerment of all law enforcement agencies and this has contributed in no small measure to the prevailing peace and security in Ghana. Support to the security agencies including police service has enabled it to recruit additional officers, increase its equipment and logistical base, improve policing techniques, improve crime response rate and create neighbourhood watch committees as a complement to its work. Data shows a declining trend in the crime rate, which has further helped to maintain the current state of peace and security in the country. To promote safety and security o f women and children, the Women and Juvenile Unit (WAJU) of the Police service i s These include Parliament, the Judicial Service, the Controller and Accountant General Department, the Audit Service and the Ghana Anti-Corruption Coalition 58 expanding its presence beyond the regional capitals. At the broader level the objective of deepening the rule of law through a more robust administration of justice has led to the provision of increased support to the Ministry o f Justice and Attorney General's Department, to enable it organise legal aid clinics, and expedite action on the handling of cases in court, especially for the poor and disadvantaged. Additionally the work of the other key governance institutions including the National Commission on Civic Education and Parliament has registered positive growth. These institutions have mounted educational campaigns on civic responsibilities and on government policies. Through the repeal of prohibitive pieces of legislation, the role o f the media in enhancing information dissemination has been greatly enhanced. 5.2 CHALLENGES TO GOVERNANCE Despite these achievements the following areas still present challenges for good governance which need to be addressed under GPRS 11: 0 strengthening the process of democratisation 0 improving existing institutional, legislative and policy environment evidence-based decision making ensuring gender equity 0 fostering greater civic responsibility 0 integratingtraditional authorities into formal institutional structures for governance. 5.3.1 Strengthening the process of democratization A major challenge to governance is the need to strengthen the process of democratisation. The focus i s on creating space for increased citizen participation in local governance through an effective decentralisation programme, promoting the growth o f strong governance institutions and integrating traditional authorities, the private sector and civil society into formal national governance structures and empowering them through information. 5.3.2 Improvingexistinginstitutional, legal and policy environment The shift in emphasis o f national policy towards accelerated economic growth presents another challenge to good governance, which involves the principles o f transparency and accountability. For example there i s the need for deliberate attempts at restoring public confidence in the banking system in order to raise the level o f savings which i s a prerequisite for increasedlocal investments. Of equal importance i s the need to secure individual and corporate property rights. Appropriate policies and legislation that protect property rights, promote fidelity to contractual agreements and boost investor confidence need to be introduced or enforced where they already exist, as part of the broad governance strategy. These principles should be reflected at all levels in the management of fiscal policy, monetary policy and international trade, all o f which have a strong bearing on the quest to achieve efficiency in public resource use, restrain inflationary pressures and increase the international competitiveness of the economy. 59 5.3.3 Evidence-based decision-makingand public dialogue Although in recent years there has been some progress towards improving the quality and availability of statistics, there i s still a long way to go to ensure that sufficient high-quality statistics and other information are produced and disseminated routinely and on a timely basis. Definite measures are needed to stem the loss of institutional capacity, in terms o f both human resource and essential tools that have hampered the ability o f the national statistical system to support government's development efforts. The capacity of the statistical system, encompassing all data generating MDAs and civil society should be enhanced to promote evidence-based governance in the public and private sectors and strengthen the government's ability to prescribe appropriate policies and assess policy effectiveness in critical areas, including macroeconomic policy, population management, gender equity, among others, in order to accelerate growth and poverty reduction. 5.3.4 Ensuring gender equity The pursuit of gender equity i s universally recognized as a basic prerequisite o f good governance. Existing constitutional guarantees of fundamental rights and freedom provide legal backing for the protection o f rights of all citizens, including women and children. However, Ghana i s yet to attain the standards set by the international community as far as incorporating gender considerations into governance policies and programmes are concerned. A more daunting challenge in this regard i s ensuring that these constitutional and legal provisions are practised. 5.3.5 Fostering greater civic responsibility One o f the main consequences o f protracted periods of bad governance has been the eroding of public confidence in the institutions o f state and a general lapse into apathetic, undisciplined and complacent attitudes on the part of many citizens. Personal interests and goals override public interests, often with negative outcomes in the use o f time and financial resources o f the state. This has undermined productivity and created hindrances to rapid economic growth. GPRS 11 proposes strategies to encourage active engagement o f the citizenry in the process o f national development within an environment that promotes responsible and disciplined civic behaviour. The strategies focus on education and dialogue, strengthening of law enforcement and exposure to systems that gradually lead to attitudinal change for the better. 5.3.6 Involving Traditional Authorities inDevelopment Provisions in the 1992 Constitution exclude chiefs from active involvement in partisan politics. Chiefs have also not been given any formal representation in the local government structure beyond discretionary participation in the district assemblies deliberation. These have not held back the role o f chiefs as catalysts of development within and beyond their immediate communities. Reports of poor quality o f service provision by local government administration and by external contractors within the jurisdiction of chiefs, have led to less efficient use of public resources. As part of the process o f generating social accountability and achieving better development effectiveness, involving chiefs in formal development structures i s becoming an unavoidable imperative. The challenge remains as to the nature of the integration and levels at which such integration should be done. An equally engaging 60 challenge i s whether to keep the institution outside the formal structures and channel some resources directly to chiefs to support their development efforts. 5.4 GOVERNANCESTRATEGIES INGPRS I1 The emphasis o f GPRS I1 on accelerated economic growth calls for a corresponding realignment of the governance benchmarks. The appropriate policies and pieces o f legislation that protect property rights, reduce the fear and aversion to savings, promote fidelity to contractual agreements and boost investor confidence, will be introduced or enforced where they already exist as part of the broad governance strategy. Additionally, the nature and processes of managing fiscal policy, monetary policy and international trade have strong bearing on the quest to achieve efficiency in public resource use, restrain inflationary pressures and increase international competitiveness of the economy. In order to facilitate implementation in the medium term the main governance policy objectives under GPRS I1 are prioritised under four broad headings. These are political governance, economic governance, corporate governance and evidence-based decision making. 5.5 POLITICAL GOVERNANCE Given the advances made in the practice o f good governance and the challenges noted above, the need to consolidate and expand democratic practices has become a critical imperative. Key policy priorities in governance have been identified to include: strengthening parliament, enhancing decentralisation, protecting rights under rule of law, ensuring public safety and security, managing public policy, empowering women and vulnerable groups, enhancing development communication, ensuring good corporate governance, increasing access to information, and promoting civic responsibility. The policy priorities are discussed below. 5.5.1 StrengtheningParliament The effectiveness of parliament has been constrained due to the fusion o f functions of the arms o f government leading to role conflicts for certain members o f the legislature who concurrently hold ministerial responsibilities within the Executive. Resource disparity also appears to be undermining the roles o f different arms of government, particularly Parliament. To minimize the effect of conflict of roles and the risks associated with the fusion o f functions of the arms of government, a review of constitutional power relations and the channeling of increased resources to parliament are proposed. A constitutional review commission will be established with a mandate to examine and make recommendations on among others, the issues o f ... maximum number of ministers that can be appointed and by the Executive maximum number of ministers that can be appointed from the membership o f Parliament the perceived/apparent conflict o f interest in the discharge o f the dual roles o f the Ministerfor Justice and Attorney General the nature and processes of Assets Declaration by public office holders 61 the age of retirement for public service office holders 0 the maximum number ofjudges appointed to the Supreme Court entrenched provisions in the Constitution 0 election of District Chief Executives 5.5.2 EnhancingDecentralization A number of implementation difficulties have emerged since the introduction of the District Assembly concept as the core of the decentralization policy in 1988. The main constraints identified under the decentralization process include absence of a shared conceptual and political understanding across government and civil society regarding the overall pace and direction of decentralization and a general inconsistency between the legal framework for decentralization and the local government reform initiative. The strategy to enhance decentralization includes improving administrative, political and fiscal decentralization. With respect to administrative decentralization, a key policy objective is to strengthen the capacity of Metropolitanh4unicipalDistrict Assemblies (MMDAs) for accountable, efficient, effective performance and service delivery. A complementary objective i s to institutionalize district level planning and budgetingusing a participatory approach. In this regard steps will be taken to accelerate the establishment o f the Local Government Service. Promoting citizen participation in local governance will necessarily involve accelerating the devolution o f political power to the districts and sub-district structures. In the area of development planning and monitoring, GPRS I1 recognizes that implementation and monitoring o f policies and strategies i s a shared responsibility between sub-national level institutions and agencies, and those at the national level. Existing practices have been highly centralised and supply driven. Programmes will be introduced to strengthen the ownership and involvement of regional and district authorities in the GPRS I1process. In addition, social accountability will be strengthened to improve the environment for citizen involvement in the development process. Regional and District Development Monitoring Groups will be adequately empowered to participate effectively in monitoring the implementationof the GPRS. Progress towards the implementation of fiscal decentralization remains slow as MDAs still retain large fiscal decision-making powers at the expense of the MMDAs. This i s largely due to the absence o f the appropriate legal framework to support fiscal decentralization. Equally worrying i s the issue o f the low revenue generating capacity o f most MMDAs.The programme to implement the recently reviewed Financial Memoranda for MMDAs offers a good opportunity to improve revenue mobilization and utilization by MMDAs.Appropriate strategies are proposed in the Policy Matrix in the Appendix I. 5.5.3 ProtectingRightsunder the Ruleof Law There i s the need to promote and protect economic, social, cultural, civil and political rights as enshrined in the constitution and all international human rights instruments to which Ghana i s signatory. The quality o f the administration o f justice i s central to securing these rights. The major difficulties associated with the administration of justice in Ghana can be categorised into two, namely judicial and attitudinal. Those that can be traced to the judiciary include delays and costs in administration o fjustice resulting in lack o f confidence 62 in the judiciary, and inaccessibility of justice and legal institutions. Key attitudinal issues relate to poor compliance with rules, regulations and procedures and weak enforcement o f existing rules, regulations and procedures. The strategies for addressing these constraints are detailed in the Policy Matrix inAppendix IA. 5.5.4 EnsuringPublicSafety & Security A secure and safe country enables individuals to pursue their economic activities without fear. The disruptive effects of civil strife and external aggression threaten the practice o f good governance. Cases o f states that are becoming gradually dysfunctional and on the brink of total collapse are evident in Africa. Forestalling such disruptions is critical for growth and poverty reduction. These considerations are instrumental in identifying public safety and security as an important policy priority. This policy priority addresses issues related to ensuring citizen safety, internal security and territorial integrity and covers immigration, control of narcotics and small arms. Increasing national capacity to assure safety of life and property including as well as strategic national installations from man-made and natural disasters i s an imperative. This i s to be achieved through institutionalization of early warning systems and promoting disaster management consciousness at all levels, including effective sharing o f information among public safety and security institutions. 5.5.5 Public Policy ManagementandPublicSector Reform Addressing the challenge of public policy management requires a multifaceted approach. The strategy proposed will among others seek to promote the participation o f people of all political persuasions, state and non-state actors including traditional authorities in the design and implementation o f national development agenda. Traditional rulers for example would be encouraged to make inputs at the district, regional and national levels. This i s aimed at promoting ownership and achieving national consensus, thereby assuring policy sustainability without disruption occasioned by changes in political administration. Additionally, the strategy seeks to reduce overlapping functions in MDAs and promote adequate and formalized public - civic society interface through the on-going Public Sector Reform programmes. These include interventions in the area o f (i)reform of pay policy implementation and the evolution of efficient performance management and evaluation system in the public and civil service; (ii)institution o f systems o f reward for efficient performance and penalties for inefficiencies; and (iii) institutionalization o f ethics training at all levels of the public service to promote transparency and accountability and reduce corruption. These will be augmented by institutionalization and internalization of policy formulation, planning and programming, compilation o f relevant data, and a well coordinated Monitoring and Evaluation System at all levels. An ultimate aim of improving public policy management i s to achieve sustainable development, which i s in line with MDG 7 i.e. mainstreaming o f sustainable development principles into national policies and programmes. The evidence in Ghana suggests inconsistencies in the consideration o f the environment in the public policy process. The strategy i s to ensure that sustainable development principles are institutionalized and mainstreamed by subjecting the public policy formulation process to Strategic 63 Environmental Assessment (SEA). Public policy i s effective if i t i s evidence-driven. The GPRS I1will promote evidence-based decision-making through strengthening of institutions that have the responsibility to generate the appropriate data and information on policy implementation in a timely and a more proactive manner. 5.5.6 FightingCorruptionandEconomic Crimes The government policy on corruption, over the past years has been focused on eliminating malfeasance in public administration, especially those that relate to fraudulent payments and wages. The CHRAJ, SFO, the Audit Service and the Controller and Accountant-General's Department were all supported to perform their statutory duties. Other complementary measures that were taken included; the introduction and stern application o f criminal law, promotion o f civic education, promotion of the National Integrity Initiative (as a local chapter o f Transparency International), and the creation of the Ghana Anti-Corruption Coalition. The Office of Accountability was created in 2003 as an internal corrective body under the Presidency, with the responsibility for identifying and dealing with issues relating to corruption within the Executive. The incidence o f corruption and economic crimes still remains a challenge to good governance. To address this problem, GPRS I1 proposes a three-pronged approach; (i) reducing opportunities for rent-seeking, (ii) strengthening the capacity of the anti-corruption institutions and the law enforcement agencies; and (iii)encouraging civil society organizations, including the media to play their role effectively. Specific strategies to achieve these objectives are outlined in the attached matrix. 5.5.7 EmpoweringWomen Disparities among women and men are being reduced as a result of specific interventions at all levels of the economic, political, social and cultural structures. Despite progress made to broaden the space for women in politics and decision-making, a lot more needs to be done. Among the interventions to address the imbalance i s the reform of outmoded customs that violate women's rights. The active participation of traditional authorities in this respect cannot be over-emphasized. There i s also the need for mainstreaming gender into policy formulation and budgeting processes, supported with proper documentation and analysis o f the patterns and magnitude o f sex-differentials in key indicators. Existing gaps in the legal framework that limit the opportunities of women to participate in public decision-making on an equitable basis will be closed. The systematic compilation, analysis and dissemination of gender disaggregated statistics on all aspects of life - social, economic and political, i s essential for effective targeting o f programme interventions. 5.5.8 EnhancingDevelopmentCommunication The lack of a coherent communications strategy has been identified as one of the major limitations of GPRS I. The main challenges therefore are the management o f information both quantitative and qualitative - interhntra institutional frameworks and the lack o f adequate database for 64 planning. The key strategy i s to ensure implementation of existing communication strategies at all levels while promoting the development of modern information management system including e-governance and the application of ICT in the information flow. Strategies to strengthen the critical role of the media in enhancing development communication will be promoted. 5.5.9 PromotingCivic Responsibility Civic responsibility involves understanding what it takes to be a good citizen, as well as acceptable attitudes and behaviour within the society and at workplaces that promote sustainable national development. The increasing over-dependence on government by communities for the provision of all basic necessities of life undermines ownership, maintenance and the sense of civic responsibility for sustaining development initiatives. Over the years, state and non-state institutions have played various advocacy roles in integrating civic responsibility in the body politic; however a lot remains to be done with respect to indiscipline and disregard for laws, poor work ethics and attitudes, irresponsible conduct o f adults and lack of a sense of patriotism. To address these issues a number of strategies both at the formal and the informal level will be pursued. In the public domain, rules and regulations will be enforced systematically in all spheres, including school, workplaces, on the streets, in religious institutions, etc. Also measures will be instituted to reward responsible behaviour. Institutions including National Commission for Civic Education will be strengthened to pursue advocacy roles in this regard. The return o f society to traditional values of neighbourly conduct, respect for authority, honesty and integrity, will be pursued through the full implementation o f Ghana Cultural policy. In addition the formal and informal institutions of socialization and learning will be supported to perform their roles as channels of change. At the community level, traditional authorities would be empowered to actively participate in ensuring responsible civic behaviour. Additionally, civic education materials taught in basic schools will be expanded to include civic responsibilities. Partnership with the public media will be strengthened to promote civic responsible behaviour. 5.6 ECONOMIC GOVERNANCE Lessons learnt from the implementation of GPRS Ipoint to the attainment o f generally positive targeted economic indicators. However there i s the need to sustain these gains, while introducing new initiatives where necessary to support accelerated growth and poverty reduction. The priorities for enhancing Economic Governance under GPRS I1 will focus on Fiscal Policy Management, Monetary Policy Management and InternationalTrade Management. 5.6.1 Fiscal Policy Management Ongoing initiatives elaborated in GPRS Iwill be enhanced. The strategies will focus on improving public expenditure management, promoting effective debt management, and improving fiscal resource mobilization. 65 Improving Public Expenditure Management: Efforts will be intensified to further improve public expenditure management started under the GPRS Isuch as the adoption of computerised accounting and financial management systems. The MTEFand PUFMARPinitiatives will be reviewed and refinanced with a view to further strengthening its implementation. The BPEMS will also be fully implemented. Other strategies will include developing a more effective mechanism for data collection, commitment control and procurement, transparency in the use o f special statutory funds, enforcing budget controls on the State Owned Enterprises (SOEs) and strengthening payroll management. Promoting Effective Debt Management: Considerable success has been achieved in restructuring and reducing the domestic debt stock, The domestic debt management efforts will be continued to further reduce and stabilise the domestic debt to stem the increase in interest payments and achieve the desired decline in real interest rates. This requires more effective mechanisms to monitor the debt stock, restructure the domestic debt to ensure a greater balance between short and long-term debt instruments re-direct more resources to reduce the size of the domestic debt and limit domestic borrowing. 5.6.2 Improving Fiscal Resource Mobilization Achieving higher levels o f growth and poverty reduction requires increasing revenue generating capacities to finance and sustain the growth and poverty reduction efforts. The strategies include: minimize revenue leakages in all revenue collection agencies; review and revise existing taxes, fees and user charges; strengthen the capacities o f revenue collecting agencies; and strengthening the District Assemblies for improved tax collection. 5.6.3 Monetary Policy Management Monetary policy management will continue to focus on price and exchange rate stability. This is to further reduce inflation, minimise exchange rate fluctuations and promote the efficient operation of the banking and credit systems. The Bank o f Ghana will work to remove the inefficiencies in the management of the financial sector in order to allow for a well functioning sector which impacts positively on growth and poverty reduction. Government in pursuit o f monetary policy will continue to use open market operations and adjustments in the prime rate to achieve its objectives. The thrust o f monetary policy will be on market-oriented policy measures that will allow for smooth functioning o f the financial system, in addition to creating a more diversified financial sector and improved access to financial services. The effective functioning o f the Monetary Policy Committee (MPC) will be ensured to: achieve price and exchange rate stability; improve liquidity management; establish an efficient inter-bank foreign exchange market; and improve the institutional, legal and regulatory framework for monetary management. In addition the establishment of a central securities depository for government securities, enactment o f long-term savings law for private pension and housing schemes, and improvement in the administrative framework for micro finance will be central to monetary policy. 66 Given the growing importance of foreign remittances in the Ghanaian economy, policies aimed at reducing the cost of remittances (both implicit and explicit) as well as those aimed at channelling remittances through the formal sector will be pursued. 5.6.4 InternationalTrade Management The main governance issues underlying international trade management within the framework o f trade liberalization are related to international treaties, agreements, market access, trade barriers, dumping, among others. A comprehensive Trade Policy has been developed for Ghana that provides guidelines for the implementation of government's domestic and international trade agenda. The policy i s set within the context o f Ghana's long-term strategic vision of achieving middle-income status by 2015 and also becoming a leading agro-industrial country. The fundamental principle underlying the Trade Policy i s the recognition o f the private sector as the engine o f growth with government providing a trade-enabling environment to actively stimulate private sector initiatives. GPRS I1will promote the elimination of constraints to international trade including: reduce the administrative bottlenecks associated with the export and import processes; minimize the incidence o f "dumping"; diversify and increase the export base; promote new areas o f competitive advantage; continue to take full advantage o f preferential access to markets (AGOA, EU-ACP); engage fully in multi-lateral trade negotiations; and set up information system to track and measure progress in these areas. 5.7 GOOD CORPORATEGOVERNANCE The quality of corporate governance practices has a direct impact on accelerated growth and poverty reduction. The recent events leading to business failures around the world and the misapplication o f public funds in Ghana have reinforced the need for effective corporate governance. The strategic direction in this regard will be to: promote an enabling environment and effective regulatory framework for corporate management; ensure that corporations act as good corporate citizens with regard to human rights, social responsibility and environmental sustainability; promote the adoption o f codes o f good business ethics in achieving the objectives o f the organization; ensure that corporations treat all their stakeholders in a fair and just manner, and; provide for accountability of corporations and directors. 5.8 PROMOTINGEVIDENCE-BASEDDECISION MAKING Availability o f relevant and timely statistics i s critical to enabling conditions for policy development and assessment that allow for measuring inputs, outcomes, and impacts. Relevant, reliable statistics convey the clearest message with regards to policy intention, evidence-based outcome, effectiveness, and accountability o f the government. They are also the most effective means to empower and facilitate the public's participation in the national development process, and ensure transparency and accountability, including policy dialogue, policy formulation, monitoring of implementation, and evaluation of the outcomes. A major challenge to strengthening the data base for policy formulation and decision- making i s how to shift from the existing practise o f usinga fragmented set o f uncoordinated 67 statistical programmes to a national statistical system with coherent and integrated activities, and harmonized methodologies. This will ensure that consistent definitions are used and comparable statistics are produced and disseminated. Strategies to address this issue will include strengthening of the national statistical system to generate good-quality and consistent data on the key areas of the GPRS 11, including in particular, the development of economic indicators. Among the activities to upgrade the performance of the national statistical system and ensure transparency and accountability are: rationalizing the production o f data within the statistical system, defining the roles and mandates of the various data producing institutions, adopting common definitions, methods and classifications; a review o f the Statistical Law and adoption o f a statistical master plan; and application o f international standards and good practices system-wide, including the United Nations Principles for Official Statistics and the IMF's General Data DisseminationStandards. 68 CHAPTERSIX MONITORINGAND EVALUATION 6.1 INTRODUCTION Monitoring and Evaluation (M&E) has served as an essential management tool in the GPRS I,andwillprovideanadditionalimpetusbothinthepursuitofpolicy,programmeand project effectiveness and to ensure accountability, responsiveness and transparency in the allocation o f resources in GPRS 11. 6.2 REVIEW OF M&E SYSTEMUNDER GPRS I A comprehensive GPRS Monitoring and Evaluation Plan was formulated to support the implementation of GPRS I. Key policy initiatives under the plan included the following; development o f institutional framework for coordinating the system, including analysis and mode o f reportingon the progress on GPRS implementationto different stakeholders, including Government, civil society and development partners establishment of monitoring indicators against GPRS baselines and core targets 0 establishment of special indicators to facilitate the tracking of the HIPC, Millennium Development Goals (MDGs), and the Medium terms priorities. 0 studies to enhance the knowledge and data base for the conduct o f objective impact analysis o f GPRS (Le. PSIAs). 0 plans for dissemination and a communication strategy were adopted, based on sound understanding o f the key stakeholders, the information they required from the monitoring and evaluation system, how best to communicate with them, and what range and style o f outputs should be produced. 0 wider stakeholder participation (government, parliament, NGOs, CSOs, private sector) in monitoring progress o f the GPRS was agreed in the Monitoring and Evaluation Plan 6.2.1 Key Achievements M&E Institutional Arrangements: The following groups were established to support the implementation of the GPRS IMonitoring and Evaluation Plan: (i) The National Intra- Agency Poverty Monitoring Groups (NIPMG) chaired by representatives of MDAs (ii) GPRS DisseminationCommittee; and (iii) PSIA Technical and Advisory Committees. The Five NPMG based on the GPRS Ithematic areas have been established at the national level. These groups are inter-sectoral and include both governmental and non-governmental representatives selected for their expertise in a specific thematic area. To deepen the M&E institutional arrangements, Regional poverty monitoring groups have been established as well. M&E Communication Strategy: A comprehensive communication strategy was developed at the end o f the third quarter of 2003, to inform and educate all stakeholders about the GPRS and the APRs findings. In addition, the interaction with civil society organisations (CSOs) has been improved to enhance the mechanism of effective representation in the M&Eprocess. 69 Monitoring the GPRS Indicators: The Annual Progress Report (APR) has provided the key platform for the monitoring and evaluation of progress towards the achievement o f GPRS targets as well as the outcomes and impacts of government policies. Three successions o f APRs (2002, 2003 and 2004) have been prepared and widely disseminated. The recommendations from these reports have influenced the respective annual national budgets and the formulation of GPRS 11. As part of the process of determining the impact of the socio-economic policies on the poor, poverty and social impact analysis (PSIAs) studies were also undertaken. The National Development Planning Commission (NDPC) with the support o f development partners has commissioned five PSIAs to ascertain the impacts of selected policy reforms implemented under the GPRS. 6.2.2 The Challenges Among the lessons drawn from the implementation of the current M&E system are the severe institutional and technical capacity constraints and the fragmented set o f uncoordinated information, both at the national and sub-national levels that confront the development o f an effective and efficient M&E system. The two key institutions, the National Development Planning Commission (NDPC) and the Ghana Statistical Service (GSS), continue to depend on the existing systems of MDAs, who are the primary sources, of information. These systems which have been in place over different time spans reflect a variety of approaches to sector specific monitoring and varying degrees o f success. Another level o f contribution lies with the regional and district level institutions, embodied in the District Assemblies. 6.3 STRENGTHENINGTHE M&E SYSTEMUNDERGPRS I1 In spite of the achievements in M&E for the GPRS I,more is needed to ensure that the system i s firmly established, recognized and accepted by all, with full participation and contribution of all stakeholders. The key institutions need to be strengthened and empowered to lead the process and sustain the system with continuous flow o f timely, reliable, accurate and relevant information that will be used to track progress. A common, centrally located database will be established for the storage and retrieval o f basic data for the country as a whole, and also by regions and districts, providing easy assess to all stakeholders, of which a nationaldatabase in the form o f (GhanaInfo)' i s the core. The primary goal o f the M&E System under GPRS I1i s to facilitate the tracking o f progress and effectiveness, as well as to identify bottlenecks associated with the implementation of the Strategy. The proposed system, which forms an integral part of the GPRS 11,would have the following specific objectives: 0 reinforcing institutional arrangements with adequate capacity to support and sustain effective monitoring and evaluation 0 strengthening and effectively coordinating existing mechanisms for monitoring and evaluating the effectiveness o f public sector service delivery evolving an efficient system for generating relevant, reliable and timely quantitative and qualitative information 'GhanaInfo i s a comprehensive and up to date national socio-economic database system that was launched in Ghana in July 2005. I t i s expected, among others, to increase availability of up-to-date indicators for monitoring the implementation of GPRS 11. 70 managing an effective feedback mechanism that make statistical information available in useable form to government and civil society 0 ensuring a holistic approach to M&Ethat would include monitoring o f inputs (notably resource allocation and use), as well as processes and outputs, in addition to evaluating the outcomes of programmes/ projects. 0 fostering participatory M&E improving coordination between CMAs and MDAs to strengthen demand for M&E. 6.3.1 Reinforcing institutional arrangements The key institutions involved in the participatory M&E system includes: Office o f the President, Parliament, NDPC, Ministry of Finance and Economic Planning, Ghana Statistical Service, PPMEDs o f MDAs, National Inter-Agency Monitoring Groups, Regional Monitoring Groups, District Monitoring Groups and Civil Society Organisations. The technical responsibility for coordinating the system rests with NDPC in active collaboration with GSS. In conformity with the decentralization policy, it is important that all district assemblies have staff on their team representing these two institutional components o f the M&E system. To ensure improved implementation of the M&E plan the institutional arrangements currently in place will be reviewed to identify ways of strengthening roles and institutional capacities. 6.3.2 Strengthening and effective coordination of existing mechanisms Greater coordination i s needed between the key government agencies including the Office of President, NDPC, MOFEP, GSS, MLGRD and the other MDAs. This includes better information flow and incentives for monitoring and evaluation at all levels. There i s therefore the need to build the capacities and develop the expertise in these key institutions for effective coordination and sustainability o f the M&Esystem. 6.3.3 Evolving an efficient system for evidence-based monitoring and evaluation: Adopting an evidence-based M&E systems will mean ensuring a holistic approach to M&E that would include monitoring of inputs (notably resource allocation and use), as well as processes and outputs, in addition to evaluating the outcomes of programmes/ projects. Essential to the M&E plan i s the selection o f core indicators to be used in tracking the performance of the GPRS I1 implementation. Indicators will be disaggregated to a level appropriate for proper tracking o f differential impact o f poverty with respect to districts, gender, and ecological zones. Data collected during the implementation o f GPRS Iand other existing reports and surveys will form the basis for developing indicators, where appropriate, for GPRS 11. The Ghana Statistical Service (GSS) will oversee data collection and compilation activities across government institutions. The GSS will therefore continue to take the lead role in all 71 major surveys and in the systematic compilation o f statistics and indicators from all major sources o f data, Le., censuses, sample surveys, and administrative records. A crucial component of evidence-based M&E is the management of effective feedback mechanisms which i s in turn contingent upon a good data dissemination system founded on a comprehensive database. At present, though the Ghana Statistical Service does not produce enough statistics to meet the wide range of needs, the limited data available through censuses and surveys are underutilized, and are generally not made available to users who could add value to the statistics through their research and policy analysis. Moreover, most MDAs collect administrative information that can be processed to generate valuable statistics. More concerted effort would need to be made to harness the potentials o f these rich sources of data. The GhanaInfo will be the software for the compilation and dissemination o f indicators required for monitoring GPRS I1at the district, regional and national levels. A National Expenditure Tracking System (NETS) has been developed by the Ministry o f Finance and Economic Planning and the Accountant General's Department to capture all sources o f public sector funds and expenditure. This system i s being rolled out to MDAs. The NETS will serve as a useful link for the monitoring (at least on expenditure or inputs) of the implementation of the GPRS when harmonization o f GPRS format with the MTEF budget format i s completed. 6.3.4 Ensuring participatorymonitoring and evaluation Under GPRS 11 a participatory M&E mechanism will be implemented by deploying the knowledge resources o f a wide of stakeholders including central and local governments, NGOs, civil society organisations, the private sector, the academic community and, especially, poor people themselves in the monitoring and evaluation processes. This will be achieved through consultative mechanisms including Citizen's Report Cards and independent results elicited from the African Peer Review Mechanism (APRM) which periodically assesses the performance o f Government interventions and their impact on growth and poverty reduction. Dissemination of information on growth and poverty reduction will continue to be a key component o f the monitoring and evaluation plan. Efforts will be made to ensure that timely information i s available in the right form to meet the needs o f stakeholders, including development partners. Regular Bulletins will be prepared and disseminated by PPMEDs and MMDAs to inform stakeholders on the status of M&E activities. Annual Progress Reports (APRs) will continue to be produced in the first quarter of each year by the National Development Planning Commission. The report will summarise the movements o f significant indicators during the year, including the Millennium Development Goals, the District Assemblies' Common Fund, and the disbursement and utilizationof H P C funds. A central repository of relevant documentation on the GPRS will be established at the NDPC. 72 CHAPTERSEVEN FINANCINGTHE GPRS I1 7.1 The Resource Envelope The resource envelope comprises both domestic and external sources of financing. In each of the four years within the GPRS I1period, budgetary resources will constitute an average of 35 percent o f annual GDP. Domestic revenue sources make up some 23 percent o f GDP, while grants from bilateral and multilateral sources constitute about 5.5 percent o f GDP. The remaining 6.5 percent i s expected to come from divestiture receipts, programme loans and exceptional financing arrangements. It i s envisage that Ghana would gradually wean itself off excessive reliance on donor budgetary support. This will entail intensified domestic revenue mobilization that will not damage Ghana's competitiveness within a tax framework ascertained as fair by taxpayers, especially by corporate enterprises. Although the potential for additional domestic resource mobilization appears to be circumscribed, efforts will be directed at increased tax revenue mobilization at the margin through three main areas, viz: 0 broadening the tax base to raise the tax - GDP ratio with minimal additional tax increases after critical impact analyses elimination o f exemptions and loopholes in the tax system, and strengthening o f tax administration, especially in areas where efficiency gains have not been fully explored exhausted, such as customs and the informal sector. With regard to external inflows, it is expected that HIPC savings and other debt relief as well as resources from the Millennium Challenge Account will be channelled to augment domestic resources. Proceeds from the M C A Compact, in particular, will largely enhance the financing of transport and irrigation facilities required to promote integrated agricultural development. With the current improved sovereign ratings and the deepening and sustenance of political and economic governance, Ghana can take advantage o f resources on the international capital market by issuingsovereign bonds. Additionally, the financial environment i s expected to improve significantly with the implementation of the Financial Sector Strategic Plan. This initiative will impact positively on the mobilization of domestic savings for the strengthening of the private sector. Two key policy instruments, namely, the long term savings schemes, and the Venture Capital funds will be instituted to strengthen the financial environment for the implementation o f the GPRS 11. 73 Table 7.1: MediumTermExpenditureFramework 2005-2009 - (a) TotalPayments (inbillioncedis) 2005 2006 2007 2008 2009 Proj. Outturn Budget Projected Projected Projected (Ql-Q4) Estimate Estimates Estimates Estimates Total Payments 35,672.2 38,972.9 44,767.4 49,828.7 55,135.9 Statutory Payments 12,217.6 13,993.2 13,035.1 13,637.4 14,775.1 External Debt Service 3,610.0 4,537.4 3,404.5 3,417.5 3,898.6 Principal I/ 2,608.0 3,473.1 2,452.9 2,447.1 2,778.4 Interest 1,002.0 1,064.3 951.6 970.3 1,120.1 Domestic Interest 2,470.6 2,426.8 1,607.9 1,187.4 848.5 District Assemblies CommonFund 1,069.9 1,204.3 1,443.7 1,607.8 1,780.4 Transfers to Households 2,927.8 3,340.6 3,789.4 4,280.8 4,759.7 Pensions 613.8 705.9 804.5 911.0 1,012.9 Gratuities 356.0 409.4 466.6 528.4 587.5 Social Security 618.8 711.6 793.2 887.9 987.2 National Health Fund (NHF) 1,339.2 1,513.7 1,725.1 1,953.5 2,172.1 Education Trust Fund 1,175.6 1,386.3 1,538.4 1,727.1 1,912.7 Road Fund 883.3 1,068.9 1,251.2 1,416.8 1,575.3 Petroleum-related Fund 80.3 28.9 0.0 0.0 0.0 Discretionary Payments 23,454.6 24,979.7 31,732.4 36,191.4 40,360.9 Personal Emoluments (MDAs- Item 1) 8,683.1 9,990.0 11,129.7 12,458.2 13,851.9 Administration (MDAs-Item2) 1,613.0 2,186.8 2,507.0 2,853.0 3,184.0 Service (MDAs- Item 3) 969.6 808.8 927.3 1,055.2 1,177.6 Domestic Investment (Item 4) (Excl. Statutory Funds) 1,427.9 1,684.8 3,200.3 4,783.7 8,484.4 Net Lending 98.0 39.5 0.0 0.0 0.0 New Loans 98.0 39.5 0.0 0.0 0.0 Loan Recoveries 0.0 0.0 0.0 0.0 0.0 Foreign-financed Investment (Item 4) 5,790.0 6,251.8 8,279.3 9,646.9 10,791.0 Strategic Oil Stocks 145.0 145.0 145.0 145.0 145.0 VAT refunds 72.0 100.0 111.0 124.6 138.0 Outstanding Commitments 1,117.7 347.0 97.0 0.0 0.0 Roads 100.0 100.0 0.0 0.0 0.0 Non-roads 1,017.7 247.0 97.0 0.0 0.0 Utility Price Subsidies 412.0 0.0 0.0 0.0 0.0 o/w TORSUnder- recovery 412.0 Other Transfers 350.0 350.0 398.9 451.8 502.2 Safety net for petroleum deregulation 250.0 250.0 284.9 322.7 358.7 Lifeline consumers o f electricity 100.0 100.0 114.0 129.1 143.5 HIPC-financed Expenditure 1,614.8 1,822.1 2,193.8 2,114.3 2,086.8 Divestiture Liabilities 0.0 0.0 0.0 0.0 0.0 Repayment of Domestic Debt 996.2 1,167.7 2,740.0 2,558.7 0.0 Redemption of Deferred Interest Payments on inflation-indexed Bonds 165.3 86.2 3.1 0.0 0.0 Discrepancy 0.0 0.0 0.0 0.0 0.0 14 (b) Total Receipts (inbillioncedis) 2005 2006 2007 2008 2009 Proj.Outturn Budget Projected Projected Projected (Q1-Q4) Estimates Estimates Estimates Estimates Total receipts 35,672.5 38,972.9 44,767.4 49,828.7 55,135.9 Total Revenue (domestic tax and non-tax) 24,116.2 26,411.3 29,902.3 33,303.9 36,872.0 Grants 5,354.8 5,099.3 7,400.3 8,467.6 9,104.3 Project 2,840.0 2,505.9 4,028.1 4,866.6 5,443.7 Programme 1,354.0 1,388.0 2,091.5 2,351.8 2,630.7 HIPC Assistance 1,160.8 1,205.4 1,280.7 1,249.2 1,029.9 Loans 4,437.0 5,383.4 6,018.6 6,767.7 7,570.3 ProjectLoans 2,950.0 3,746.0 4,25 1.2 4,780.4 5,347.3 Programme Loans 1,487.0 1,637.5 1,767.3 1,987.3 2,223.0 DivestitureReceipts 150.0 335.0 0.0 0.0 0.0 DomesticFinancing(Borrowing) 0.0 0.0 0.0 0.0 93.1 DeferredInterestPaymentson Inflation-indexedBonds 66.7 14.8 0.0 0.0 0.0 ExceptionalFinancing(HIPC Debt Relief) 1,547.8 1,729.1 1,446.2 1,289.6 1,496.3 Memoitems Overall CashBalance(including Divestiture) -2,28 1.7 -2,400.4 -2,268.8 -3,051.4 -6,38 1.2 percent of GDP -2.4 -2.1 -1.8 -2.1 -4.0 Domestic Revenue 24,116.2 26,411.3 29,902.3 33,303.9 36,872.0 percent of GDP 24.9 23.5 23.4 23.0 22.9 Domestic Primary Expenditure 21,522.4 24,156.1 28,635.7 33,018.2 39,597.9 percent of GDP 22.2 21.5 22.4 22.8 24.6 Domestic Primary Balance 2,593.8 2,255.3 1,266.7 285.7 -2,726.0 percent of GDP 2.7 2.0 1.o 0.2 -1.7 NominalGDP (billioncedis) 97,018.0 112,320.3 128,012.8 144,960.7 161,177.3 7.2 The Resource Gap The estimated total resources required to finance the GPRS I1i s US$ 8.06 billion (2006- 2009). These costs consist primarily of investment and service costs and exclude wages, salaries and administrative expenses associated with project and programme implementation. The budgeted expenditures for investments and services over the same period amount to US$6.27 billion, indicating an overall funding gap o f $1.79 billion, which i s expected to be filled by external inflows and resources from the capital market. The external inflows expected to be harnessed from HIPC savings, debt cancellation and Millennium Challenge Account will complement domestic resources. Given Ghana's favourable sovereign ratings, augmented by good governance, additional resources could be sourced from the international capital market. 75 APPENDICES APPENDIX 1:Rankingof Poverty IncidencebyRegionand by Districts REGION DISTRICT OVERALL RURAL URBAN GREATER ACCRA AMA 8 0 8 GREATER ACCRA TMA 19 35 17 GREATER ACCRA Ga 26 54 16 GREATER ACCRA DangbeWest 51 58 29 GREATER ACCRA DangbeEast 54 61 23 WESTERN Wassa West 16 18 11 WESTERN SAEMA 17 0 17 WESTERN Juabeso-Bia 22 22 29 WESTERN BibianilAnhwiasolBekwai 23 25 19 WESTERN Wassa Amenfi 25 26 22 WESTERN Sefwi-Wiawso 28 28 30 WESTERN MpohorNassa East 29 29 30 WESTERN Aowin/Suaman 29 28 32 WESTERN Jomoro 42 51 20 WESTERN Ahanta West 44 51 15 WESTERN NzemaEast 45 55 18 ASHANTI KMA 10 0 10 ASHANTI AdansiWest 25 47 10 ASHANTI AfigyafKwabere 36 43 25 ASHANTI Ashanti Akim North 37 52 25 ASHANTI EjusdJuaben 40 46 22 ASHANTI Afigya Sekyere 43 53 24 ASHANTI SekyereWest 44 58 23 ASHANTI Atwima 45 51 25 ASHANTI Ashanti Akim South 45 49 29 ASHANTI Offinso 47 53 33 ASHANTI Amansie East 50 54 19 ASHANTI BosomtwelAtwimafKwawoma 50 51 46 ASHANTI Amansie West 52 52 0 ASHANTI EjurdSekyeredumase 52 65 38 ASHANTI SekyereEast 53 65 30 ASHANTI Ahafo-AnoNorth 55 62 23 ASHANTI Adansi East 57 60 21 ASHANTI Ahafo-Ano South 64 65 50 BRONGAHAFO Sunyani 34 58 25 BRONGAHAFO Berekum 37 54 23 BRONGAHAFO Techiman 41 63 24 BRONGAHAFO Tanoso 48 61 31 BRONGAHAFO Dormaa 51 62 28 BRONGAHAFO Asunafo 56 64 35 BRONGAHAFO Asutifi 60 64 37 BRONGAHAFO Jaman 69 80 41 BRONGAHAFO Atebubu 69 85 35 BRONGAHAFO Wenchi 71 83 44 BRONGAHAFO Nkoranza 71 83 35 BRONGAHAFO Kintampo 73 86 32 BRONGAHAFO Sene 83 89 24 VOLTA Kadjebi 33 35 23 VOLTA Nkwanta 43 45 24 VOLTA Kpando 44 51 21 VOLTA Ho 45 58 20 VOLTA Keta 46 54 40 VOLTA Hohoe 49 54 27 VOLTA Ketu 52 60 37 VOLTA Jasikan 52 55 38 VOLTA Krachi 53 53 49 VOLTA South Tongu 58 hl _ _ 36 76 REGION DISTRICT OVERALL RURAL URBAN Akatsi 60 67 34 VOLTA NorthTongu 64 67 48 EASTERN New-JuabenMunicipal 20 38 17 EASTERN Akuapim North 31 31 32 EASTERN Yilo Krobo 31 31 33 EASTERN Akuapim South 32 35 29 EASTERN KwahuSouth 35 40 26 EASTERN EastAkim 38 39 35 EASTERN Birim South 43 47 40 EASTERN Kwaebibirem 44 46 41 EASTERN SuhundKrobodCoaltar 44 49 28 EASTERN Fanteakwah 45 48 30 EASTERN Birim North 47 45 60 EASTERN West Akim 47 52 36 EASTERN ManyaKrobo 58 85 17 EASTERN Asuogyaman 62 78 17 EASTERN Afram Plains 84 87 22 CENTRAL CapeCoast Municipal 36 54 27 CENTRAL Awutu/Effutu/Senya 49 65 41 CENTRAL Mfantsiman 50 58 41 CENTRAL Assin 52 48 77 CENTRAL UpperDenkyira 54 49 71 CENTRAL Twifu/Heman/Lower Denkyira 55 50 84 CENTRAL KomendafEdindEguafolAbirem 56 64 37 CENTRAL Gomoa 58 62 49 CENTRAL Ajumako/Enyam/Essiem 61 64 46 CENTRAL AsikumdOdoben/Brakwa 62 74 35 CENTRAL AburdAsebdKwamankese 63 68 49 CENTRAL Agona 68 51 77 NORTHERN Tamale 59 87 43 NORTHERN Savelugu-Nanton 77 91 51 NORTHERN East Dagomba 84 92 63 NORTHERN East Gonja 85 92 41 NORTHERN Bole 87 92 50 NORTHERN West Mamprusi 87 92 52 NORTHERN Nanumba 88 88 90 NORTHERN Chereponi-Saboba 88 90 69 NORTHERN EastMamprusi 88 89 80 NORTHERN West Gonja 89 94 43 NORTHERN Zabzugu-Tatale 89 89 94 NORTHERN Tolon 90 90 98 NORTHERN Gushiegu-Karaga 92 92 95 UPPERWEST Wa 79 98 33 UPPERWEST Lawra 88 96 38 UPPERWEST Jirapa-Lambussie 89 98 37 UPPERWEST Sissala 91 98 30 UPPERWEST Nadowli 96 96 0 UPPEREAST Bolgatanga 88 99 51 UPPEREAST Kassena-Nankani 91 99 48 UPPER EAST BawkuWest 92 98 62 UPPER EAST Builsa 98 98 0 UPPEREAST Bongo 99 99 0 UPPEREAST Bawku East 99 99 _ _ n 77 r? '?t 3 M c 0 00 ig $ $ E E E 3 g - g g- E Z E 8 E E 3 u k2 C ari c-4 r i r i 91r; :- x * YB W u B IE I2 ri Y RE I.. . 3 p! 3 i i sr - 20e M 2Y - P 3 U U 9 9 U c2 z W n i L I s 3 n * I- I * L s N Pi I t I * i E ? u, 3 3 3 ri 0 I I U m r d w w- c? c? 3 4 m - ri ri ri ri I I I E . I u. . I d 25 L) 8E :; a- m 0 . I k.. 3 Fi e I. I - I I I * - i m N. N' i I W 2Y E . W 2 * I L r 0 1 Y -. -. ,-. m m 3 -4 m * E 0 0 W 53 5 .-3 CI 2 I, Y 2Y VJ u 3 E kaW e! *aE d c * OE ci c 2 ui h -T z i i 0 0 * d I 1 -.3c 1Nr? 4 3 3 pc m Y I $ Y 1 3 REPUBLIC OF GHANA GROWTHAND POVERTY REDUCTION STRATEGY (GPRS11) COSTINGFRAMEWORK (2006 - 2009) VOLUME I1 NOVEMBER, 2005 NATIONAL DEVELOPMENT PLANNIN( COMMISSION TABLE OF CONTENTS TABLE OF CONTENTS.............................................................................................................. i LIST OF TABLES AND FIGURES.......................................................................................... iii LIST OF ACRONYMS............................................................................................................... iv EXECUTIVE SUMMARY.......................................................................................................... v CHAPTER ONE: INTRODUCTION .......................................................................................... 1 1.1 Background.......................................................................................................................... 1 1.2 Review of the GPRS IExpendituresFramework................................................................. 1 1.3 Strategic Focus of GPRS I1Expenditures............................................................................ 2 CHAPTER TWO: SUMMARY OF GPRS I1POLICIES AND STRATEGIES......................... 3 2.1 MacroeconomicStability ..................................................................................................... 3 2.2 Privatesector competitiveness............................................................................................. 3 2.3 HumanResourceDevelopment............................................................................................ 5 2.4 GoodGovernance and Civic Responsibility........................................................................ 7 2.5 Monitoring and Evaluation................................................................................................... 7 CHAPTER THREE: COSTING THE GPRS I1........................................................................... 9 3.1 Methodology andAssumptions........................................................................................ 9 3.2 Costingthe GPRS Strategies............................................................................................ 9 4.1 ResourceEnvelope.............................................................................................................. CHAPTER FOUR: THE RESOURCEENVELOPE AND THE FINANCING GAP..............11 11 4.2 The ResourceGap ............................................................................................................... 13 4.3 ImplementationChallenges................................................................................................. 14 4.3.1 Budget Support vs Project Support........................................................................... . 14 4.3.2 Frontloadingvs.BackloadingResourceFlows.......................................................... 14 APPENDICES............................................................................................................................ 16 APPENDIX 1: GPRS I1EstimatedCost by Thematic Area. 2006-2009................................... 16 APPENDIX 2: GPRS 11EstimatedCost by Focus Area. 2006-2009 ....................................... 17 I. PRIVATESECTOR COMPETlTIVENESS ............................................................... 17 i I1. HUMANRESOURCEDEVELOPMENT.................................................................. 19 I11. GOOD GOVERNANCE AND CIVIC RESPONSIBILITY ....................................... 20 APPENDIX 3: GPRS I1EstimatedCost by Policy Objactive. 2006-2009................................ 22 LIST OF TABLES AND FIGURES Figure 3.1: Allocation of Resource under GPRS I1(inpercentage) ........................................ 10 Table 4.1: Medium Term ExpenditureFramework .2005-2009 ............................................ 11 Table 4.2: Resource Gap for 2006-2009 GPRS I1Implementation ....................................... 15 ... 111 LISTOFACRONYMS MDAs Ministries,Departments andAgencies HIPC Highly-IndebtedPoor Country MTEF Medium-TermExpenditureFramework AGOA Africa Growthand OpportunityAct EU-ACP EuropeanUnion-African-Caribbean-Pacific iv EXECUTIVESUMMARY This document i s presented as Volume I1of the Growth and Poverty Reduction Strategy (GPRS 11).Itrepresents the costingframework for the effective implementationof the GPRS II. It briefly reviews the costing framework for the financing of programmes and projects under GPRS I, identifies some of the constraints in the resource allocation and actual expenditures and proposes strategic focus of expenditure outlays under GPRS II. The costing framework i s basedon the following thematic areas of the GPRS 11: Private Sector Competitiveness 0 Human Resource Development 0 Governance and Civic Responsibility The total cost of implementing the GPRS I1i s estimated at 73.374 trillion cedis (US$ 8.063 billion). Of this, Private Sector Competitiveness will require 25.981 trillion cedis (US$ 2.855 billion), Vigorous Human Resource Development will cost 40.298 trillion cedis (US$ 4.428 billion), while Governance and Civic Responsibility i s estimated to cost 7.096 trillion cedis (US$ 0.780 billion). While the cost of ensuring continuous macro-economic stability i s covered under Economic Governance, that for monitoring and evaluation i s captured mostly under Governance as well as the related strategies of the other thematic areas. The resource envelope comprises both domestic and external sources of financing the GPRS 11.A financing gap of (US$ 1.79 billion) has been identified in the budgetary projections. This resource gap i s expected to be financed through increased domestic resource mobilization, programme loans and grants, and other financing instrumentsincluding the international capital market. V CHAPTER ONE 1. INTRODUCTION 1.1 Background The overarching goal of Ghana's current socio-economic development agenda i s to attain middle income status (with a per capita income of at least US$lOOO) by the year 2015 within a decentralized, democratic environment. This i s to be complemented by the adoption of an overall social protection policy, aimed at empowering the vulnerable and excluded, especially women to contribute to and share in the benefits of growth of the economy, thus ensuring sustained poverty reduction. GPRS I1i s presented in two volumes: Volume I,the policy framework of the Growth and Poverty Reduction Strategy (GPRS 11) analyses the macroeconomic context and the development policy choices that should be made to attain the goals of GPRS II.It includes a policy matrix, which outlines issues, policy objectives, and strategies, and also identifies the agencies responsible for implementing each component of the strategy. Volume 11i s the four- year costing framework for the effective implementation of the GPRS I1and strategies. 1.2 Review of the GPRS IExpendituresFramework .... GPRS Iwas formulated around the following five thematic areas: Macroeconomic Stability Production and Gainful Employment HumanDevelopment and Provision of Basic Services Vulnerability and Exclusion Good Governance. At initial formulation, the total cost of GPRS Iwas estimated to be US$5.283 billion. Financial allocation to the five main thematic areas were as follows: 8% for programmes geared towards ensuring macroeconomic stability, 27% for enhancing production and gainful employment and 58% was for enhancing human resources development and efficient and equitable provision of basic social services. Three percent of the total cost was for developing and implementing special programmes for the vulnerable and excluded, and about 4% for financing activities and institutional reforms designed to enhance good governance. However, due to resource constraints, it was not possible to commit the above estimated resources for the implementation of GPRS I. Details of expenditures on programmes and projects under GPRS Iwere highly fragmented and incomplete in some cases. For instance, some expenditures financed under the HIPC debt relief facility, a number of statutory funds and internally generated funds were outside the budget. 1 Furthermore, the MTEF, which was expected to provide the link between the GPRS and the budget, had a major shortcoming in that while it provided a high level of details, it did not aggregate spending into programmes thus making it difficult to track the relationship with programme priorities as set out inthe GPRS I. 1.3 Strategic Focus of GPRS I1Expenditures GPRS I1proposes to overcome these limitations by adopting the following measures: Pooling of resources for financing expenditures associated with the implementation of the growth and poverty reduction strategy. Currently resources, which have been allocated to poverty reduction related interventions are dispersed through various projects and programmes directly implemented by MDAs and a number of District Assemblies. Under GPRS 11the proposal i s to ensure that as far as possible, available funds targeted at growth and poverty reduction are consolidated and rationally allocated. Improvedtargeting of the resource allocation mechanism Inallocating these resources, emphasis will be placed ontargeting the priority programmes, projects and activities under the respective thematic areas of the GPRS 11. Alignment of MDAs objectives to the strategic objectives of the GPRS I1 Under the MTEF, which provides the current framework for annual budgeting, the objectives are drawn from strategic plans developed by MDAs. Under GPRS 11, all MDAs objectives are aligned to GPRS 11 objectives in order to enhance the environment for a more effective monitoring of expenditure outlays inthe GPRS 11. 2 CHAPTER TWO 2. S U M M A R Y OF GPRS I1POLICIES AND STRATEGIES 2.1 Macroeconomic Stability GPRS I1will continue with the implementation of policies that will sustain the gains made in macroeconomic stability under GPRS Iand enhance the environment for accelerated growth through: 0 prudent fiscal policy management a monetary policy that i s flexible enough to respond to external shocks, promote growth and ensure price stability real interest rates that enhance effective mobilisation of savings and make credits affordable to the private sector relatively stable real exchange rates that promote internationaltrade 2.2 Privatesector competitiveness Structural transformation under GPRS 11i s to be propelled by the agricultural sector inorder to maximize the benefits of accelerated growth. The choice of an agriculture-led growth strategy i s predicated on the followingpremises: Agriculture i s the highest contributor to GDP and provides employment for over 60 percent of the population. Consequently growth in the sector will impact directly on growth of the economy as well as employment. the bulk of the poor, especially women, are engaged in agriculture - food crops, livestock and fisheries. accelerated development of agriculture as the growth point in the medium term will have a direct benefit on poverty reduction and reduce the rural-urban drift. increased productivity in agriculture will ensure food security and contribute immensely to the health and well being of the population. a modernized agricultural sector has the capacity to prepare the ground for structural transformation between agriculture and industry Thus inthe next few years growth will be led by the agricultural sector, which will provide the necessary inputs for a vibrant agro-processing industrial sector in the medium term (by 2010). Inthe process, the areas of Ghana's comparative advantage inagriculture will be enhanced and transformed into competitive advantage inthe sub-region. Policy Interventions The following broad areas have been identified for priority interventions for accelerated agriculture led growth: 0 reform to land acquisition and property rights 3 accelerating the provision of irrigation infrastructure enhancing access to credit and inputsfor agriculture promoting selective crop development modernising livestock development improving access to mechanised agriculture increasing access to extension services provision of infrastructure for aquaculture restoration of degraded land and environment In line with the long term vision of developing an agro-based industrial economy, the interventions in agriculture will be complemented with appropriate interventions in the trade and industry sector. The broadpolicy objectives and strategies outlined to achieve this include: 0 ensure proper integration of the nation's production sectors into the domestic market: promote agro-processing expand agricultural marketing 0 enhance access to export markets increase industrial output and improve the competitiveness of domestic industrial products facilitate the development of commercially viable export and domestic market oriented enterprises in the rural areas promote industrial sub-contracting and partnership exchange promote the development of the craft industry for export ensure the health, safety and economic interest of consumers Support services Strategic support sectors that would be developed to facilitate improved productivity in agriculture and agro-industry include transportation, energy, science and technology. The broad policy objectives here include: ensure the provision, expand and maintain transport infrastructure of all kinds that link the rural to the urban centres; and ensure provision of affordable and accessible transport system that recognises the needs of people with disabilities. Additional sectors to support growth Other sectors which are targeted for development in view of their employment creation and income generation potentials include: mining (especially exploration and exploitation of the lesser developed minerals such as salt); Information and Communication Technology (ICT); tourism; music and film industry; as well as the development and production of commodities under the Special Initiatives for export including garments and textiles Employment generation and improved safety nets In order to ensure that employment expands along with production and that the benefits of growth i s widely shared through better job opportunities and thus poverty reduction, the broad employment sector objective will be to ensure an adequate, well regulated, stable labour market to support accelerated growth. 4 2.3 HumanResourceDevelopment The main goal of Human Resource Development under GPRS I1i s to ensure the development of a knowledgeable, well-trained and disciplined labour force with the capacity to drive and sustain private sector-led growth. Policy Interventions The following broad policy areas have been identified to drive the development of the necessary human resources for accelerated economic growth: education and skills development improved; access to health care, malaria control and HIV/AIDS prevention and treatment; access to safe water and adequate sanitation; housing and slum upgrading; and population management. In addition relevant issues relating to vulnerability and exclusion will be mainstreamed in the human resource development strategy. Education Priority policy interventions in the education sector that will deepen and sustain the progress made ineducation under GPRS Iand accelerate growth include the following: increase access to and participation ineducation and training at all levels bridge gender gaps in access to education in all districts improve quality of teaching and learning; improve efficiency inthe delivery of education services promote science and technology education at all levels with particular attention to increased participation of girls. Skills and entrepreneurialdevelopment will be guided by the following priorities. provide skills and entrepreneurial training in a gender responsive and equitable manner promote dialogue between industry and skills/professional training institutions to produce skilled labour requiredby industry strengthen and support HR training institutions promote apprenticeship training; promote the adoption of the National Youth Policy and enactment of the Disability Bill In order to accelerate access to quality health services, the health sector will continue to deepen efforts and focus on the three broad policy objectives. These are: bridge the existing equity gap in access to good quality health and nutrition services ensure sustainable financing arrangements that protect the poor enhance efficiency in service delivery In Ghana, malaria remains the leading cause of morbidity, accounting for about 40% of all outpatient attendance. The following priority interventions in the Roll Back Malaria (RBM) 5 plan will be promoted and strengthened under GPRS 11: improve malaria case management; multipleprevention; improved partnership; and focused research. HIV/AIDS pandemic at the prevalence rate of 3.4% has negative impact on productivity, loss of productive assets, high treatment costs and the break in the transfer of valuable livelihood knowledge from one generation to the next. To effectively address this issue, the following strategies will be adopted to prevent the spread of HIV/AIDS in order to keep the prevalence rate below 5%: reduce new HIV/STI transmission; reduce the impact of HIV/AIDS related vulnerability, morbidity and mortality; enhance the coordination and management of the national HIV/AIDS response. Safe water and environmental sanitation The following priorities will guide the delivery of safe water and sanitation in the next four years: accelerate provision of safe water in rural and urban areas; accelerate the provision of adequate sanitation; improve environmental sanitation inurban and rural areas. Urban housingand slumupgrading The ultimate goal of Shelter Policy i s to provide adequate and affordable housing with requisite infrastructure and basic services to satisfy the basic needs of the people. GPRS I1 treats housing provision as a strategic area for stimulating economic growth while at the same time improving the living conditions of Ghanaians. The very activity of providing housing contributes to economic growth through multiplier effect of housing construction on the economy. Population management Population management will be based on the following priorities: promote access to and utilization of family planning services educate the youth on sexual relationship, fertility regulation, adolescent health marriage and child bearing promote sexual health, delayed marriage and child bearing promote compulsory education for children especially the girl-child up to secondary promote compulsory and universal birth registration as a basic right and population management measure integrate population variables into the GPRS at the national, regional and district levels and improve population database for the GPRS promote the integration of HIV/AIDS into sexual and reproductive health programmes strengthen the multi-sectoral, multi-disciplinary institutional co-ordination collaboration and networking for population management. Mainstreaming the Vulnerable and Excluded inHumanResourceDevelopment Issues relating to vulnerability and exclusion have been mainstreamed in the GPRS 11. A comprehensive Social Policy Framework to update existing policies where necessary and 6 Strategy. The proposed system, which forms an integral part of the GPRS 11, will build on the progress made under GPRS Iand would involve the following key strategies: reinforce institutional arrangements that can support and sustain monitoring and evaluation processes evolve an efficient system for evidence-based monitoring and evaluation strengthen and effectively coordinate existing mechanisms evolve an efficient system for generating relevant, reliable and timely quantitative and qualitative information manage an effective feedback mechanism that makes statistical information available in useable form to government and civil society ensure a holistic and participatory approach to M&E including consultative mechanisms such as the APRM Enhanced efforts to implement the M&E Plan will focus on strengthening institutional capacities to link M&E results to national policy and decision-making and budgeting. The outputs from the M&Eefforts will be documented and widely disseminated through the Annual Progress Reports 8 CHAPTER THREE 3. COSTING THE GPRS I1 3.1 Methodology and Assumptions Methodology The costing of the GPRS I1was based on the following: GPRS I1policy objectives 0GPRS I1strategies outputs derived from GPRS I1strategies 0activities to realise the outputs 1.MDAsdefined Activities, to be undertaken inorder to realize outputs. 2. Input costs for the activities are determined from quantities, frequencies and unit costs. 3. The sum of the input costs, gives the activity cost. The activity costs are then aggregated to get the output cost. Output costs are further aggregated to obtain the costs for each thematic area. Assumptions i. Thecostsofbothnewandon-goingprogrammesandprojectsnecessaryformeeting growth and poverty reduction targets are included intotal cost of implementation. ii. The activities costedconsistmainlyof capital and service expendituresassociated with the programmes and projects. iii. TheimplementationoftheGPRSI1involvesactivitiesthatmaybecarriedoutbythe public sector alone, or by the private sector inpartnership with the public sector. Inthe case of the latter, only the public sector activities are costed. 3.2 Costing the Strategies The matrix in Appendix 1 (Summary) presents the costing of the strategies of GPRS II. These are categorised under the 3 main thematic areas identified inVolume 1of the GPRS 11: Accelerated Private Sector-led growth 0 Vigorous HumanResource Development Good Governance, and Civic Responsibility As shown inAppendix 1the total cost of the GPRS 11is estimated at 73.374 trillion cedis (US$ 8.063 billion). Of this, Private Sector Competitiveness will require 25.98 1 trillion cedis (US$ 2.855 billion), cost for Human Resource Development i s estimated to be 40.298 trillion cedis 9 (US$4.428 billion) and Good Governance and Civic Responsibility is estimated to cost 7.096 trillion cedis (US$ 0.780 billion). Nearly 73% of the resource associated with the Private Sector Competitiveness thematic area i s expected to go into programmes and projects intended to raise agricultural productivity, develop small-scale agro-industries, improve the transport infrastructure, facilitate both domestic and international trade, and the develop the capacity and competency of domestic industries. In the area of Human Resource Development, about 97% of the thematic area resources are expected to go into Education, skills and man-power development, and the provision of health services with environmental sanitation being essential component of it. Public policy management and public sector reforms, protecting rights under rule of law, public safety and security, and fighting corruption and economic crimes are expected to take about 71% of the resource allocation to Good Governance and Civic Responsibility, while about 8% goes to ensuring continuous macroeconomic stability. The costs for monitoring and evaluation activities are included both in the Governance section as well as under related strategies in the other thematic areas. Consistent with the objectives of GPRS 11, resource allocation to Private Sector Competitiveness thematic area has increased from 27% in GPRS Ito 35% under GPRS 11.This i s to ensure that more resources are allocated to the growth inducing points in the economy. Figure 3.1: Allocation of Resourceunder GPRS I1(inpercentage) GOOD GOVERNANCE AND CIVIC - - 10% PRIORITIES FOR PRIVATE SECTOR 35% HUMAN RES0 55% 10 CHAPTER FOUR 4. THE RESOURCEENVELOPEAND THE FINANCING GAP 4.1 ResourceEnvelope The resource envelope comprises both domestic and external sources of financing. In each of the four years within the GPRS I1implementation period, budgetary resources will constitute an average of 35 percent of annual GDP. Domestic revenue sources make up some 23 percent of GDP, while grants from bilateral and multilateral sources constitute about 5.5 percent of GDP on the average. The remaining 6.5 percent is expected to come from divestiture receipts, programme loans and exceptionalfinancing arrangements. About seventy percent of total receipts are expected to be generated internally (Le. domestic tax and non-tax sources). Personnel emoluments will constitute the largest share (40 percent) of discretionary expenditure. This figure i s however expected to decline to 30 percent between 2006 and 2009. The greater proportion of investments under GPRS I1i s expected to be fundedfrom inflows of donor funds in view of the fact that most of the internally generated funds will be devoted to personnel emoluments. Foreign financed investment expenditures i s expected to account for approximately 30 percent of total discretionary expenditure during the same period. On the other hand, domestic investment expenditure (excluding statutory expenditure) i s expected to remain at 10 percent of discretionary expenditure between 2006 and 2008, ,risingthereafter to 20 percent in2009. Grants and loans will account for 27 percent of receipts in2006 rising to 31 percent by 2009. The Grant component i s expected to exceed the loan component by 2009, rising from 13 percent to 17 percent while loans will remain fairly stable at 14 percent of discretionary expenditure over the same period (see tables 4.1 (a) & (b). Table 4.1: MediumTerm ExpenditureFramework 2005-2009- (a) Total Payments (in billion cedis) 2005 2006 2007 2008 2009 Proj Outturn Budget Projected Projected Projected (QI-Q~) Estimate Estimates Estimates Estimates Total Payments 35,672.2 38,972.9 44,767.4 49,828.7 55,135.9 Statutory Payments 12,217.6 13,993.2 13,035.1 13,637.4 14,775.1 ExternalDebtService 3,610.0 4,537.4 3,404.5 3,417.5 3,898.6 Principal 1/ 2,608.0 3,473.1 2,452.9 2,447.1 2,778.4 Interest 1,002.0 1,064.3 951.6 970.3 1,120.1 DomesticInterest 2,470.6 2,426.8 1,607.9 1,187.4 848.5 DistrictAssemblies CommonFund 1,069.9 1,204.3 1,443.7 1,607.8 1,780.4 Transfers to Households 2,927.8 3,340.6 3,789.4 4,280.8 4,759.7 Pensions 613.8 705.9 804.5 911.0 1.012.9 11 2005 2006 2007 2008 2009 ProjOutturn Budget Projected Projected Projected (QI-Q~) Estimate Estimates Estimates Estimates Gratuities 356.0 409.4 466.6 528.4 587.5 Social Security 618.8 711.6 793.2 887.9 987.2 National HealthFund (NHF) 1,339.2 1,513.7 1,725.1 1,953.5 2,172.1 EducationTrustFund 1,175.6 1,386.3 1,538.4 1,727.1 1,912.7 RoadFund 883.3 1,068.9 1,251.2 1,416.8 1,575.3 Petroleum-relatedFund 80.3 28.9 0.0 0.0 0.0 DiscretionaryPayments 23,454.6 24,979.7 31,732.4 36,191.4 40,360.9 PersonalEmoluments(MDAs- Item 1) 8,683.1 9,990.0 11,129.7 12,458.2 13,851.9 Administration (MDAs- Item2) 1,613.0 2,186.8 2,507.0 2,853.0 3,184.0 Service (MDAs- Item3) 969.6 808.8 927.3 1,055.2 1,177.6 DomesticInvestment(Item4) (Excl. StatutoryFunds) 1,427.9 1,684.8 3,200.3 4,783.7 8,484.4 NetLending 98.0 39.5 0.0 0.0 0.0 NewLoans 98.0 39.5 0.0 0.0 0.0 LoanRecoveries 0.0 0.0 0.0 0.0 0.0 Foreign-financedInvestment(Item4) 5,790.0 6,251.8 8,279.3 9,646.9 10,791.0 StrategicOil Stocks 145.0 145.0 145.0 145.0 145.0 VAT refunds 72.0 100.0 111.0 124.6 138.0 OutstandingCommitments 1,117.7 347.0 97.0 0.0 0.0 Roads 100.0 100.0 0.0 0.0 0.0 Non-roads 1,017.7 247.0 97.0 0.0 0.0 UtilityPriceSubsidies 412.0 0.0 0.0 0.0 0.0 O/W TORSUnder- recovery 412.0 OtherTransfers 350.0 350.0 398.9 451.8 502.2 Safety net for petroleumderegulation 250.0 250.0 284.9 322.7 358.7 Lifeline consumersof electricity 100.0 100.0 114.0 129.1 143.5 HIPC-financedExpenditure 1,614.8 1,822.1 2,193.8 2,114.3 2,086.8 DivestitureLiabilities 0.0 0.0 0.0 0.0 0.0 Repaymentof DomesticDebt 996.2 1,167.7 2,740.0 2,558.7 0.0 Redemptionof DeferredInterest Paymentsoninflation-indexedBonds 165.3 86.2 3.1 0.0 0.0 12 (b) Total Receipts (inbillioncedis) ~ 2005 2006 2007 2008 2009 Proj Outturn Budget Projected Projected Projected (Ql-Q4) Estimates Estimates Estimates Estimates Totalreceipts 35,672.5 38,972.9 44,767.4 49,828.7 55,135.9 Total Revenue (domestic tax and non-tax) 24,116.2 26,411.3 29,902.3 33,303.9 36,872.0 Grants 5,354.8 5,099.3 7,400.3 8,467.6 9,104.3 Project 2,840.0 2,505.9 4,028.1 4,866.6 5,443.7 Programme 1,354.0 1,388.0 2,091.5 2,35 1.8 2,630.7 HIPC Assistance 1,160.8 1,205.4 1,280.7 1,249.2 1,029.9 Loans 4,437.0 5,383.4 6,018.6 6,767.7 7,570.3 Project Loans 2,950.0 3,746.0 4,25 1.2 4,780.4 5,347.3 ProgrammeLoans 1,487.0 1,637.5 1,767.3 1,987.3 2,223.0 DivestitureReceipts 150.0 335.0 0.0 0.0 0.0 DomesticFinancing (Borrowing) 0.0 0.0 0.0 0.0 93.1 DeferredInterestPayments on Inflation- indexedBonds 66.7 14.8 0.0 0.0 0.0 ExceptionalFinancing(HIPC Debt Relief) 1,547.8 1,729.1 1,446.2 1,289.6 1,496.3 Memo items Overall Cash Balance (including Divestiture) -2,28 1.7 -2,400.4 -2,268.8 -3,05 1.4 -6,381.2 percentof GDP -2.4 -2.1 -1.8 -2.1 -4.0 Domestic Revenue 24,116.2 26,411.3 29,902.3 33,303.9 36,872.0 percentof GDP 24.9 23.5 23.4 23.0 22.9 Domestic Primary Expenditure 21,522.4 24,156.1 28,635.7 33,018.2 39,597.9 percentof GDP 22.2 21.5 22.4 22.8 24.6 Domestic Primary Balance 2,593.8 2,255.3 1,266.7 285.7 -2,726.0 percentof GDP 2.7 2.0 1.o 0.2 -1.7 Nominal GDP (billioncedis) 97,018.0 112,320.3 128,012.8 144,960.7 161,177.3 4.2 The Resource Gap The estimated total resources required to finance the GPRS I1i s US$8.06 billion(2006-2009). These costs exclude wages and salaries and administrative expenses associated with project and programme implementation. A comparison of the macroeconomic framework data with the estimated cost of implementing the GPRS I1provides an indication of the resource gap that must be filled to ensure full implementation of the programs and projects identified in the GPRS II. Over the period, total receipts are expected to rise by 41 percent from $38 trillion in 2006 to $55 trillion in 2009. Domestic tax revenue i s estimated to account for approximately 23 percent of GDP over the period, which compares quite favorably with most developing countries but i s slightly lower than the level (24 percent) achieved in 2005. 13 The budgeted expenditures for investments and services over the same period only amount to US$6.27 billion indicating an overall funding gap of U.S$1.79 billion which i s expected to be filled by external inflows and resources from the capital market (see table 4.2). External inflows are expected to be harnessed from HIPC savings, debt cancellation and Millennium Challenge Account to complement domestic resources. Given Ghana's favourable sovereign ratings, augmented by good governance, additional resources could be sourced from the international capital market. The implementation of the Financial Sector Strategic Plan i s expected to improve the domestic financial environment significantly. This should lead to increased domestic savings mobilizationto makeresources available to the private sector. It is expected that Ghana would gradually wean itself off excessive reliance on donor budgetary support. This will entail intensified domestic revenue mobilization that will support Ghana's competitiveness without unduly overburdening taxpayers, especially corporate entities. Consequently the following broad measures will be adopted: Broadening the tax base so that tax GDP ratio increases on account of existing tax windows with minimal additional tax increases after critical impact analyses Reduction of exemptions and elimination loopholes intax system, and Strengthening the capacity of tax administration. 4.3 Implementation Challenges Resources constitute one of several implementation challenges that bedevil the success of development programs. This section identifies some of such challenges and flags them for debate with domestic and foreign partners. 4.3.1 Budget Support vs. Project Support Donor partner resources currently constitute a mix of budgetary support and earmarked funds. The Multi-Donor Budgetary Support (MDBS) program was designed to promote increased direct budgetary support. While this mechanism of resource allocation provides greater flexibility in the use of resources, the downside i s that such flexibility could compromise discipline required to adhere to fiscal priorities. Successful implementation of the GPRS I1will therefore require an appropriate mix of direct budgetary support and earmarked funds. 4.3.2 Frontloading vs. BackloadingResourceFlows Furthermore, the real value of resource commitments by donor partners will be higher if they are frontloaded. Indeed, frontloading will minimize the tendency to reallocate resources to expenditure categories such as personnel emoluments in the event of resource constraints. 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II - II rnII m W 8 s 8 r- 7 8 m e GHANA POVERTY REDUCTIONSTRATEGY 2004 Annual Progress Report NATIONAL DEVELOPMENT PLANNING COMMISSION March2005 ACRONYMS ADB African Development Bank ADR Alternative Dispute Resolution A E S D AgriculturalEngineeringServices Directorates AG Attorney General's Department APR AnnualProgress Report ART Anti-Retro-viralTherapy A S Audit Service ABEDA Arab Bank for Economic DevelopmentinAfrica BESIP Basic Education Sector ImprovementProgramme BOG Bank of Ghana B P E M S Budget andPublicExpenditureManagement CAGD Controller and Accountant General's Department C B O Community Based Organization CEPA Centre for Policy Analysis CEPS Customs Excise andPreventiveService CG Consultant Group CHPS Community Health Planningand Services CHRAJ Commission for Human fights and AdministrativeJustice CIDA Canadian International Development Agency CPI ConsumerPrice Index CRMAS Community Resource Management Areas CRT Criterion Referenced Test csos Civil Society Organisations CSPG Cross Sectoral PlanningGroups for the GPRS update CWIQ Core Welfare Indicators Questionnaire C W S A Community Water and Sanitation Agency DA District Assemblies DACF District Assemblies Common Fund DANIDA DanishAid Agency DAs District Assemblies DFID Department for InternationalDevelopment (UK) D H S Demographicand Health Survey D M I S DMTDP District MedmmTerm Development Plan DP Development Partners DPCU District PlanningCoordinatingUnit DPMG District Poverty Monitoring Group D S W Department of Social Welfare D W S T District Water and Sanitation Team EFA Education For W E M I S Education Management Information System ESP Education Strategic Plan EPA EnvironmentalProtectionAgency EXIM Export Import FASDEP Food andAgriculture Sector Development Program FCUBE Free Compulsory Universal Basic Education FGD Focus Group Discussion FOB Free On Board G A C C Ghana Anti-CorruptionCoalition GBB Government Book of Business GCB Ghana Commercial Bank G D H S Ghana Demographic and Health Survey GDO Gender Desk Officer GDP Gross Domestic Product GER Gross Enrolment Rate G E S Ghana Education Service GETFUND Ghana EducationTrust Fund G H D S Ghana Health and DemographicSurvey G H S Ghana HealthService GIDA Ghana Irrigation DevelopmentAuthority GLSS Ghana Living Standards Survey GoG Government of Ghana GPRS Ghana Poverty ReductionStrategy GSS Ghana Statistical Service GTZ GermanTechnical Assistance HIRDP HighImpactRapidDelivery Programme HIPC Heavily IndebtedPoor Country Initiative HIV HumanImmunodeficiency Virus H M I S Health Management Information System HRD HumanResource Development ICCES Integrated Community Centres for EmployableSkills ICT Information and CommunicationTechnologies IDA International DevelopmentAgency IEA Institute of Economic Affairs IGR Internally Generated Revenue ILO InternationalLabour Organization IMF International Monetary Fund I S O D E C Integrated Social Development Centre I?TU Intermediate Technology Transfer Unit Iand can assist to improve the lot ofthepoor. u t : Communi0Forest ResourceManagement Committeesare in place. O n e hundred and eight District Medium T e r m Development Plans were appraised on sustainability, and 660 district officials in DAs were trained on this. Districts have been The formalised, systematic and comprehensive process of evaluating the environmental effects of a policy, plan or programme, its alternatives, and/or mitigation measures. encouraged to address environmental issues and have incorporated actions in their strategies and plans. Regional EPA- and Economic Planning Officers were trained as well, in view of their roles in planning and budgeting. InMay 2004 a Ministerial Conference (withparticipationof the Vice President, 4 Ministers and a wide range of stakeholders) took place, following various regional conferences, to debate the SEA findings and recommendations. The Vice President expressed government commitment to the SEA process being incorporated into the national development planning process. The followingrecommendations were made: All sector policies to be subjected to SEA; SEA principles, processes, findings and recommendations to be integrated in the GPRS and MTEFprocesses; Sector and district guidelines to be infused with SEA principles at national and district levels; Comprehensive sector wide SEASare to be conducted. T h e following products were finalized in 2004: The report (in three volumes: Executive Summary, Process Report and Contents Report); The Manual for officers in MDAs, DA's and interested others (NGOs, CSOs, DPs); T h e NDPC guidelines on SEA and on the update of the GPRS; The Advisory Notes for MDAs; A pictorial brochure on the SEA process; A SEA poster. T h e printing and dissemination of the SEA products wdl be carried out in 2005, and guidance for the implementation of SEA tools will be provided by EPA at national and district level. EPA will also be directly involved in the monitoring of the follow up of the SEA recommendations and tools. A SEA Manualwas prepared to ensure that the key elements of SEA and sustainability principles are included the formulation, analysis and refinement of policies and programmes at both sectoral and district levels5. Each thematic group for the update of the GPRS d use the Manual, including the matrix to score policies and programs (on the effects on natural resources, social and cultural conditions, the empowerment of women, access of the poor, equity: benefits to be distributed equitably and should not discriminate against any groups, and effects on the local economy). A sustainability test i s also included in the Manual. SEA Guidelines were also prepared which aim at MDAs to mainstream environment and integrate SEA principles in their Sector Medium T e r m Development Plans and M&E. T h e strength of the SEA i s that it has incorporated capacity and awareness budding at both national, regional and district levels, i s integrated in the NDPC planning process and, throughi t s systematic approach, and provides an example for assessment of other governmental policies. It brought to the fore in a practical way the crucial link between poverty and environment in the drive towards poverty reduction. 1.7 RECOMMENDATIONS INAPR 2003 ON GPRS MONITORINGAND EVALUATION Table 1.1below shows a summary of the key recommendations made inAPR 2003 on GPRS monitoringand evaluation. The SEA Manual contains the tools usedfor assessing risks and opportunities on policies, plans and programs, related to the environment. I I i L L L L 1 2 r r r L c I $"m ?z :: c C i E E C i E 2 m 3 0 Y B yo Y L 0C E - 352 2 r O B N ae 3 i - > CHAPTERTWO THE LINKSBETWEENTHE GPRSAND THE2004 BUDGET 2.1 INTRODUCTION The 2002 and 2003 Annual Progress Reports discussed the extent to w h c h the Budgets reflected the policy thrust of the GPRS. This was to give an indication of whether government i s persistent in i t s poverty reduction strategy and whether resources are allocated appropriately. This part of the 2004 Annual Progress Report looks at whether the 2004 Budget reflected the thrust of the GPRS, and the actual discretionary expenditures of 2004. The assessment of the consistency of the budget with the GPRS will be from the perspective of: T h e budget process; T h e extent to which the macro-framework provided by the budget was consistent with the GPRS; T h e distribution of total budgetary allocations; Sectoral distributionof Government of Ghana's (GoG) resources; Distributionof donor allocations T h e distribution of expenditures by item of expenditure (i.e., personnel emoluments, administration, service, and investment). T h e extent to which government expenditures were allocated for poverty reduction programmes and projects. The Budget PreDaration Process and Use of GPRS - In the preparation of the 2004 Budget, several activities were undertaken to link the budget to the GPRS: Workshops were organised to improve MDAs understanding of the MTEP process as well as linkmgthe GPRS and APR to the Budget; Within each priority area, MDAs were required to show the progress made in achieving targets set in the GPRS and the remaininggaps up to 2005; MDAs were required to incorporate poverty reduction policies of the GPRS into their Strategic Plans. The MDAs are reminded of the role of the GPRS and XPR at the budget preparation stage and the inclusion of the GPRS programmes and projects in their budgets; T h e NDPC i s represented at the budget preparation stage by the Director-General. He/She ensures that the GPRS and the Annual Progress Report are considered in the budget preparation. The Annual Progress Report monitors the implementation of the GPRS. It i s linked to the Budget through the policy initiatives recommended in the report which are meant to be implemented by the MDAs; Inthe 2004Budget, resources allocated to the Social Sector were increasedinresponse to recommendations from the APR to the extent that the GPRS target of 34.3% in Social Sector allocation was increased to 38.8%. The Macroeconomic Framework of 2004 Budget and the GPRS The 2004 Budget was driven by the underlying economic framework of the GPRS: increasing revenue intake to accommodate increased poverty-related spending and accelerated development; 17 strengthening public expenditure management; and usingan optimummix of appropriate fiscal and monetary policies to impact positively on macroeconomic targets including inflation. The macroeconomic framework as provided in the budget i s consistent with the GPRS targets (Table 2.1). T h e macroeconomic objectives and targets proposed in the 2004 budget are s d a r to those of the GPRS with only a few exceptions. Both the budget and the GPRS propose to tackle issues which include: Reduction of the domestic debt Reduction of inflation to single digits Increasing revenue m o b h a t i o n C u r t a h g deficit financing by pursuing a policy of zero net domestic financing Rationalization of expenditure through effective monitoring Agriculture 4.8 6.0 7.5 4.8 Industry 5.2 5.2 5.1 5.2 Services 5.1 4.7 4.7 5.1 Ratio of revenues (excluding grants) to 22.5 22.5 23.8 22.3 GDP The GPRS target of 5% GDP growth has been exceeded in 2004 with a growth rate of close to 6%. Although inflation rates have fallen significantly since 2000 the 2004 single digit target has not been realised and i s unlikely that the 2005 target of 5% can be achieved. This can be explained by the fact that the inflation target in an election year was too ambitious, there were higher than expected foreign inflows, an the economy was coming out of the effects of the 2003 petroleum price increases. Sectoral growth rates of output targeted by the GPRS have been achieved for 2004 and are likely to be exceeded in2005. Revenue targets have been achieved. Stock of reserves have improved and targets exceeded. The objectives of the GPRS include: accelerated real GDP growth to 5% by 2005; reduction in poverty from 39% to 32%; improvement in basic infrastructure such as roads, water, sanitation and market access; increase in the level of primary enrolment and education completion rates; 18 reduction ininfant, child and maternal mortality and the incidence o f infectious diseases; improvement in governance and the efficiency of the public sector. gender equity. Five priority areas have been identified in the GPRS; Infrastructure Development Modernisation of Agriculture based on Rural development Enhanced Social Services Good Governance Private Sector Development Table 2.2: Functional Distribution of Total Discretionary Expenditure: 2001-2004 C/O) Infrastructure 11.64 17.20 17.2 15.53 19.1 10.9 19.1 Social 30.18 34.71 38.1 38.67 34.3 38.8 34.3 . MinistryofEducation 22.44 24.14 26.85 26.65 Source:AppropriationAct and BudgetStatements of 2001 to 2005 The 2004 budgetary targets and policy direction included major policy initiatives and financial provisions for the attainment of these goals. The Budget's discussions of the performance of the various sectors o f the economy in 2003 and the outlook for 2004 were conducted within the framework of the GPRS five priority areas. Provisions were made in the budget to fund these priority areas. (Appendix 8 of 2004 Budget Statement) There i s a one-to-one link between budget expenditures and the M V programmes and projects. 2.2 DISCRETIONARY BUDGET FOR 2004 AND THE MEDIUMTERM PRIORITIES Table 2.2 shows the Functional Distribution of Total Discretionary Expenditure and Table 2.3 the distribution of total government discretionary expenditure for the 2001-2004 periods. 19 In2003 the linkwas obviouswhen the GPRS 2003 targets are comparedwith the 2003 budget. There i s correspondence between the broad sectors especially for Administrationand Economic and Social Sectors. Budget allocations to the Social Service sector have increased consistently since the beginningof the implementation of the GPRS. In 2003 and 2004 allocations to the sector exceeded the GPRS targets. The 2004 spendingreportedby CAGD Fable 2.3B) indicates that GoG spending in the Social Sector of 55.1% of MDAs discretionary spending exceeded the budget target of 48.1%. Additional funds constituting 28.5% of HIPC funds were also spent on the sector Table 2.3A Functional Distribution ofTotal GOG Expenditure 2001-2004 (YO) Source: Computed from AppropriationAct and Budget Statementsof 2001 to 2005 This consistent increase of resources to the Social Services sector translates into an increase in resources to activities directed to the poor, vulnerable and excluded reflecting the broad priorities of the GPRS. Within the sector there was a switch in resources to the Health sub- sector at the expense of education. Allocation to education in 2004 was slightly below that of 2003. The increase was in response to the recommendations of the 2003 APR. Economic Services sector's allocation has declined since 2002 declining by almost 50 percent from 18.02% to 8.9% which is below the GPRS target of 10.3%. Allocations to the agriculture sub-sector continued to decline. From 7.1% in 2001, it has declined to 3.03% in 2004. T h i s decline in the agricultural sector's share has serious implications for the poor to the extent that the poor relies on agriculture and related activities. Infrastructure's share has been below the GPRS targets. T h e allocation of 10.93% in 2004 was below the GPRS targets of 19.1%, althoughsome HIPC funds (15.5%) were spent on the sector. The Public Safety sector has been receiving increased allocation reflecting the importance of upholding the rule of law, public order and safety as major pdlars of the GPRS with a slight increase in 2004 to 11.9% from the 2003 allocation of 11.52% and 4.3% of HIPC funds. 20 2001 2002 2003 2004 Budget Economic services 14.99 18.02 9.06 8.92 Social Services 30.18 34.71 38.67 38.82 Infrastructure 11.64 17.20 15.33 10.93 Public Safety 7.94 9.67 11.53 11.67 TOTAL 64.75 79.6 74.78 70.5 Government%ending.on Povertv Reduction Poverty reduction requires infusion of resources not only to the broad priority sectors, but also to programmes and projects in the areas known to be poor. The 2004 Budget had a strong linkage with the GPRS. Table 3.5 shows GOG poverty related expenditures in by sector in 2004. In spite of the financial constraints, poverty related activities were funded in full. Government addressed poverty by increasing i t s share of spending in the social sector and through direct actions to increase productive assets and basic services to the poor by spending 6441.39 billion cedis in 2004. Poverty reduction spending was in effect increased by 43.1% in 2004 over 2003 sigmficantly greater than the planned 34.4% increase over 2003. Expenditures on poverty reduction constituted about 28.1% of total government spending in 2004 and slightly exceeded planned expenditures of 27.97% for the year. Poverty related expenditures were largely directed at Basic Education, Primary Health Care, Agriculture, Rural water, Feeder Roads and Rural Electrification. The slight decline in the share of spending on primaryhealth care can be explained by the increase in"other poverty" expendture. 21 .. T h e pro-poor spending was supported by allocation of HIPC funds to the following priority areas of the GPRS: macroeconomic stability - $301.4 bdlionwas used for domestic debt servicing; human resource development - $393.62 bLUlon was released for various educational . programmes and activities; $178 billion for the health sector and $179 billion for the .. provision,and $79 bdlion for water and sanitation; private sector development - $677 bdlion was disbursed for activities in agriculture and infrastructure; modernization of agriculture - $72 billion; energy sector - SHEP was funded with about $228 bdlion; good governance - $125 billionwas disbursed for the 2004 elections. Table 2.5: Government Spending on Poverty Reduction 2003 Budget 2003 Actual 2004 Budget 2004 Actual Total povertyreductionexp. #billion 4059.28 4278.74 5456.21 6122.61 Total govt expenditure gbdlion 15713 15744.10 19507.80 21765.10 T o t a l nnvertv r d . exn. as O/o of total Govt exn. 25.83 27.18 27.97 28.13 Exp. % of Poverty Spending 2.7 1.o 2.6 1.8 FEEDER ROADS Feeder Roadsexp #billion 227.98 306.38 296.52 337.98 Roads andTransport exp #billion 887.38 809.28 1039.69 1045.32 Feeder Roads Exp as % of Roads and 25.69 37.86 28.52 32.33 ~ 22 OTHER POT`ERTY EXPENDITURES* Other Poverty exp. $billion 751.04 773.16 919.31 1281.82 Other poverty exp. as `/oo f Tot Govt exp. 4.78 4.91 4.71 5.89 of Poverty Spending 18.6 18.1 16.8 20.9 2.3 DONOR RESOURCESAND GPRS PRIORITIES As shown in Table 2.6 donor resources to sectors of the economy in 2003 were in broad conformity with the Medmm Term Priorities of the GPRS. There was a significant increase in allocation to Administration higher than in 2002 and 2003 reversing the downward trend since 2001.The Ministry of Finance also experienced a little increase. But it was the Ministry of Health which was a significant beneficiary of donor expenditure, improvingon the increase from 8.0% in 2002 to 9.9% in2003 to 15.44% in2004. Infrastructurewhich is the largest recipient of donor allocations experienced a decline from 51.5% to 43.49%. An important aspect of donor funding was the unexpected increase in actual expenditure to $5.8 trillion which i s more than double the budget target for 2004 of $2.492 trdlion Allocations to the Public Safety sector by donors declined from 1.6% to only 1.52% in 2004. Table 2.6: FunctionalDistributionof Total Donor Spending: 2001-04 Revenue Agencies Contingency 1.0 GrandTotals 100 100 100 100 #billion 2,492,200 Uthsation of Discretionarv Pavments Table 2.7 shows that although the sectoral allocations may broadly reflect GPRS priorities, personnel emoluments are s d l the largest component of discretionary expenditures. I t s share of total discretionary payments from 43.7% in 2003 to 35.1% in 2004, although as a percent of GDP personal emoluments increased over the period. Allocation to Administration also increased as a percentage of GDP implying that these expenditures are growing faster than the growthinGDP. 23 A significant amount o f funds w h c h could have been used to improve investments were directed to financing the large increase in udty price subsidies which shot up from 2.15 in 2003 to 11.2% in2004. Investment allocation increased from 27.8% to 29.4%' the increase being mainly attributed to increased donor funding, although there was a little increase in domestic financed investment. T h e ratio of domestic financed investments to total investments in 2004 was 26.2%, with the rest being foreign financed. Although the dependence on donor funds has deched, it s d l accounts for a greater part o f the nation's investment expenditure thus rendering development efforts extremely susceptible to the vagaries of donor resource flows. To avoid the possibility of development agenda being susceptible to resource inflows, the Multi Donor Budget Support (MDBS) needs to be strengthened andmore donorsencouraged to join. Table 2.7: Utilization of Discretionary Payments $billion Source: 2004,2005 Budget,AppendixTables The Government needs to maintain an appropriate balance between expenditures on overheads (Le. personnel emoluments and administrative expenses) on the one hand and expenditures on services and investments on the other. Table 2.8 shows investment spending in each sector as a percentage of the sectors' Discretionary Expenditure in 2004. W i t h each sector investment spending by government constitute a small proportion of the sector's spending with the remaining spent on emoluments, administration and services. It i s only in infrastructure (68.2%) that a large percentage of the spending i s for investment. On the contrary, donor funding i s mainly for investment, with for example 96.8% and 73.5% of donor funding in infrastructure and administration respectively being for investments . 24 Table 2.8: Investments as a percentage of Sector Discretionary Expenditure in2004 Source: Computed from 2004 Budget Statement, Appendix Tables 2.4 ACHIEVEMENTS OF 2004 BUDGET INITIATIVES Table 2.9 summarises the achievements of the 2004 Budget initiatives, and assesses whether these initiatives were implemented. Table 2.9: 2004 Budget Initiatives and Achievements 2004 BUDGET INITIATIVES STATUS IN2004 A. Tax relief measures Individual Income Tax relief Fully implemented Minimumtax threshold raised from 1.2m to 1.5m Income exceeding 60m instead o f 48m attracts 30% Corporate Income Tax Relief Corporate tax reduced from 32.5% to Fully implemented 30% Fully implemented 1st time listed companies - 25% Fully implemented 5 year tax holiday for companies into agro and waste processing. Thereafter 20% for companies within Accra/Tema, 10% and 0% for companies in and outside other regional capitals Vehicle Income Tax Fully implemented Vehcle income tax for articulated trucks reduced froml.2m to 0.9m Tax Clearance Certificate Fully implemented Single instead o f multiple tax clearance certificates within single calendar year B. Reduction of Import Duties& Removal of V A T on Selected Inputs Import duties o n aluminium ingots Fully implemented reduced from 10% to 5% Fully implemented V,%T on imported raw materials inputs is Fully implemented zero-rated Dutieson imported lumber removed Fully implemented VL4Ton irrigation pumpsremoved Fully implemented Duty and VAT o n imported inputs for Fully implemented 25 fishing nets and ropes removed I 0Taxes on musical instruments removed Fully implemented G C N E T processing fee o n currency Fully implemented importation removed Automation 0 GCMS to be deployed to Aflao and Elubo b y 1st Quarter 2004 Aflao operational, Elubo to be operational in March 2005 0 DVLA to be connected to the GCNET to Network exists reduce illegal vehicle clearance and Partially implemented registration Non-Tax Revenue 0 Ensure competitive returns/ dividends from government's investments Non-Tax receipts o f $1,136.3 billion exceeded the Ensure proper disclosure and budgeted estimates by nearly 68 percent, mainly as a result accountability o n the retained and use o f o f more effective implementation o f the Financial noli-tax revenue by authorized M D A s Administration Act as it relates to State Owned Enterprises (SOEs). The 2004 performance represented 1.4 percent of Interest Rates computation o n government contracts be reviewed GDP compared to 0.5 percent o f GDP in 2003. L o w cost houses nationwide should be Embarking o n an exercise with the Security Agencies to sold to occupiers and other prospective track illegal operators (in 10 MDAs) behind forgery and buyers and proceed invested into the, duplication o f Value Books to curtail revenue leakages. Rural Housing program Twenty five (25) illegal operators have so far been Restructuring o f G C B - Government prosecuted; decision o n its shareholding Release o f $11.5 billion to 18 MDAs to implement revenue enhancement measures; D.Consumer protectionThrough Enforcement of Health and Safety Standards Food & DrugBoard to be resourced to ensure that all food items, drugs, cosmetics, medical devices and household chemicals both o f local and foreign origins meet all prescribed health, quality and safety standards. Enhance value addition in Cocoa Industry Implemented by increasing local processing o f raw cocoa beans from the current 25% to 35% Extend 5-year tax holiday to companies that use cocoa waste as their main or principal raw materials. New varieties o f pineapple to be introduced Regulated warehouse receipt system for agricultural commodities to be developed to assure price stabhty and sustainable provision o f finance to farmers. E.FinancialSector Reforms The Venture Capital Fund Bill and the Long Term Savings Introduce the Long-Term Savings Rill and Rill were both passed by Parliament. The Venture Capital provide selected tax relief under the Long Fund is to address inadequate capital problems of the term saving Scheme private sector especially, the Micro, Small and Medium Other Rills to be introduced: Enterprises (MSME); whde the L o n g Term Savings law is Foreign Exchange Bill to deepen savings mobilisation for the economy as well as Credit Union Bdl to broaden retirement options for Ghanaian workers; The Insurance Rill In 2005, The Government will actuahe the take-off of Billsand Cheques Billto reform the Bdof both the T'enture Capital Trust Fund and Long Terms Exchange A c t Savings Scheme. Supplementary laws to strengthen Implement the Venture Capital Fund Payment Systems, namely Foreign Exchange Bills and Cheque Rdl will be tabled before Parliament Government Support to Eximguaranty The Ministry o f Finance will pursue the passage of ancillaq 26 CompanyLtd regulatory laws such as Credit Bureau Law, Non-Bank Government Support in the Micro & Financial Institutions Law and Money Laundering/CFT Small Enterprises Sector - Restructuring Law. Similarly, the Insurance Law to enable insurance of Government sponsored Micro Vinance business enhance its savings mobilization role and further Programs create level playing field within the Insurance Industry will also be tabled beforeParliament. Government will submit to parliament a number of legislations in 2005 including the Foreign Exchange Bill, the Anti-MoneyLaunderingBLU, Credit Union Bill and the Non-BankFinancialInstitutionsBill for passageinto law. F.PublicSector Reform 0 The office pursued the additional responsibility for Finalise and implement the first phase Public Sector Reform (PSR), where it took a critical look of the reform with emphasis on at the gamut of programmes being pursued with the aim participation and ownership by public of giving a new image and direction for PSR. The office servants andtheir respectiveMinisters. developed a framework that would enable it re-examine and make proposals for retooling the Public Sector. A draft proposal on the way forward has received Cabinet approval. Some institutions involved in the implementationaspects of the PSR, have their objectives and aims redefined to conform to the new proposals and vision. G.Deregulationinthe PetroleumIndustry Preparatory works for the commencementof the deregulation Accelerate the program for deregulationprogrammein2005 were carriedout in 2004. of petroleum sector approved by As a frrst step, Tema Oil Refinery's (TOR) Cabinet operations were restricted to processing of crude oil in 2004 and the private sector (Oil Marketing Companies (OMCs)) agreed to finance the procurement anc importationof the shortfallof finished products.The firs tender for importationwas heldin March, 2004. The following projects were also undertakenin ordei to ensure availability of petroleumproducts in all parts 01 the country and also for export: Rural Kerosenc Distribution Improvement Programme; Export Orientec Oil Refinery Project; Single Buoy Mooring (SB;GI) Project and Buipe-Bolgatanga Petroleum Products Pipelint Project. Began in March with h t e d importation of crude oi by Oil MarketingCompanies 2.5 POLICY RECOMMENDATIONS So far there i s no gender specific budgeting and the little allocation to the Ministry of women and Children's affairs i s getting even smaller. This could b e attributed to the limtted experience with gender specific budgeting. The role of the M i n i s t r y of Finance and Economic Planning inthis will be strengthened. The MTEF process needs to be strengthened, a necessary requirement for linking medium term policy planning and the budget. In the preparation of the 2006 Budget the link between the Budget and the Annual Progress Report will be further strengthened. T h i s will be achieved through the circulation of the policy initiatives recommendedinthe 2004 APR to the Chief Directors and the PPMEs of the MDAs These policy initiatives need to be known well in advance by the MDAs so that they can be budgeted for. 27 CHAPTER THREE OVERVIEW OF THE FINANCIAL PERFORMANCE OF DISTRICT ASSEMBLIES This section examines the performance of districts with regard to major sources of funding. It includes a review o f DACF, HIPC fund, and Internally Generated Funds and h o w these were utilised. 3.1 SOURCES OF FUNDSTO DISTRICTS Fundingfor the execution of district development plans come from a wide number o f sources. The major established sources however remain: 0 GoG subventionto districts for salaries andother administrative expenditure 0 DistrictAssemblies' CommonFund,(DACF) *:* GOGfunds through MDAs e:* HIPC relief fund *:e Development Partners: (EU, CIDA, DANIDA, UNICEF, GTZ/I