A joint World Bank and IMF report has revealed that Ghana is on track to halving poverty level before the targeted date outlined in the Ghana Poverty Reduction Strategy (GPRS) II, which seeks to bring the average per capita income of Ghanaians to middle-income level by 2015. The recently completed Ghana Standards Survey (GLSS-5) confirmed the joint World Bank and IMF report, showing that national poverty headcount had declined to 28.5 percent by year ending 2006, down from 39.5 percent in 1998 and 52 percent in 1992.

The 218 page document is the fifth in a series of Annual Progress Reports (APRs) and the first on the assessment of progress made in the implementation of policies outlined in the GPRS II; 2006-2009.

The document was released in late July, touching on seven chapters namely – introduction; macroeconomic performance and economic governance; private sector competitiveness; human resource development; good governance and civic; linking the GPRS II and the 2006 budget and implementing the GPRS II at the District level.

The chapters were associated with five appendices which provide an assessment on programmes such as the Multi Donor Budget Support (MDBS), the linkage between the 2006 Annual Budget and GPRS II, performance towards the attainment of the Millenium Development Goals (MDGs) and the African Peer Review Mechanism (APRM).

Macroeconomic performance and EconomicGovernance

According to the report, the performance of macroeconomic indicators in the first year of the implementation of the GPRS II continued to be satisfactory with some good progress being made in 2006. It attributed the country’s resilience in the wake of increases in the world market price of crude oil to improve fiscal management, prudent monetary management, debt relief, a supportive international environment and structural reforms.

Growth rate, according to the report exceeded the target set out in both the GPRS II and the 2006 Budget, reaching a peak of 7.3 percent from a projected rate of 6.11 percent.

The agriculture sector also saw a tremendous growth thereby exceeding its target set out in the GPRS II recording a 5.7 percent growth against the projected 5.2 percent.

Though inflation rate could not meet its target as set out in the GPRS II, its significant drop from 23.6 percent to 10.6 percent was highly commended by both the IMF and World Bank. It attributed the rate which is still below the target of single digit set in the GPRS II to global increases in the price of petroleum which negatively affected non-oil producing developing countries, including Ghana.

Growth in domestic revenue generation as a percentage of GDP, which was previously performing well did not meet its target. It witnessed a slight drop from a previous record of 23.87 percent in 2005 to 22.3 percent in 2006 against the projected target of 23.5 percent.

The Cedi, according to the report, maintained its relative stability against the dollar in 2006, depreciating by only 1.1 percent but could not withstand the stronger performance of the British Pound and Euro, due to international market development.

The report attributed the performance of the Cedi against the dollar to improve private remittances through formal channels, increased foreign exchange liquidity on the forex market, and sound fiscal and monetary policies which contribute to a build-up in Ghana’s external reserves. Balance of Payment (BOP) from the report recorded a surplus of US$178.8 million compared to a surplus of US$84.34 million in 2005. It also attributed its improvement to strong performance by the export sector, and growth in remittances, donor resources and the debt relief.

Total stock of medium and long-term external debt, which stood at US$6,347.9 million as of end of year 2005, significantly reduced to US$2,143.79 million in 2006, as a result of a 66 percent debt reduction facility secured under the Multilateral Debt Relief Initiative (MDRI). Level of external debt service as a percentage of exports of goods and services declined from 5.8 percent in 2005 to 3.2 percent in 2006, which according to the report is still higher than the target of 2.3 percent set for the period.

Public Domestic Debt (excluding 4,952.3 billion Cedis interest, bearing revaluation stock and other long-term stocks held by Bank of Ghana) stood at 17,061.2 billion Cedis or 15.2 percent of GDP, having increased from 11.5 percent in 2006.

“Results from Ghana Living Standards Survey (GLSS 5) indicate declining trends in poverty in more recent years.

The proportion of Ghanaians described as poor in 2005/06 was 28.5 percent, compared to 39.5 percent in 1998/99 while those classified as extremely poor reduced from 26.8 percent over the same period.

Thus the first Millennium Development Goal of halving poverty rate is most likely to be met if growth of the economy continues to remain high”, noted the report.

PRIVATE SECTOR COMPETITIVENESS

According to the report, the number of days taken to register a business, the volume of domestic credit accessed by the private sector as a ratio of GDP and the number of days spent on resolving commercial disputes exceeded the respective targets set for 2006 and showed significant improvements over the 2005 levels. It said the achievement recorded in this sector have impacted positively on the environment for doing business, FDI net inflows, as well as the level of economic activities.

Growth rate of agriculture also exceeded its target, recording a high performance of 5.7 percent against a target of 5.2 percent but fell below the growth rate of 6.6 percent anticipated in the 2006 budget statement.

From the report, efforts to promote commercial farming yielded limited results and the projected target of 2.5 percent in 2006 could not be met. It said risk to agriculture continues to be high and the share of credit to agriculture by Deposit Money Banks and percentage of cultivated lands under irrigation continue to decline.

Overall teledensity or penetration rate of telephones according to the report improved over the 2005 level and exceeded the target set for 2006 but said progress towards internet access is still low.

HUMAN RESOURCE DEVELOPMENT

From the report, enrollment at the basic school level recorded a significant progress, attaining 9.8 percent at the kindergarten level, while the Primary and Junior Secondary levels recorded increases of 7.8 percent and 8.8 percent respectively in 2006.

Compared to the previous year, Gender Parity Index (GPI) at the Kindergarten and Primary levels remained relatively stable, while the GPI at the Junior Secondary School level improved.

This achieved feat, according to the report, has increased pressure on existing classroom facilities and teachers, thereby posing challenge to improving the quality of education in the country. The proportion of trained to untrained teachers continues to decline, in spite of various initiatives to train and retain teachers. It said the deployment of teachers to deprived regions and districts also continues to pose critical challenges to the education sector, recording an increase of Pupil:Teacher Ratio-PTR- (35.7:1) in 2005/06 from a 34.9:1 in 2004/05, thereby increasing the workload of teachers for the period. Declines in PTR were recorded in deprived regions and districts during the period under review due to the attraction of more pupil teachers to the teaching profession as a result of the pupil teacher-upgrading programme implemented.

“For the first time, the nationwide School Education Assessment (SEA) was successfully administered”, the report noted. The SEA provides a good tool to measure and improve quality of education. A total of 900,000 students in grades Two were assessed.

Touching on health, the report said almost all the sector-wide indicators registered improvements when the performance of the sector was reviewed.

GOOD GOVERNANCE AND CIVIC RESPONSIBILITY

All the areas reviewed under this column, according to the report, witnessed tremendous improvement over the previous year. However, decentralization remains a challenge and the Bank and its sister agency called for a critical look into this area.

RECOMMENDATIONS

Though the World Bank and the IMF were much impressed with the level of development of the country, it highly recommended critical look into some sectoral issues for further improvement.

The most pressing sectoral issues outlined in a different report by the World Bank and IMF Joint Advisory Note are the delivery of infrastructural services, restoring and expanding power supply capacity, and realigning power sector utility tariffs, as well as strengthening land administration and natural resource management. Delays in completing these reforms, according to the report have contributed to a substantial deterioration in the country’s fiscal stance.

Touching on education, the report recommended that higher enrollment rates be matched by increased attention to quality issues, while in the delivery of health services, efforts are required to ensure broad coverage under the National Health Insurance Fund, especially for the elderly, handicapped and the indigent.

It said achieving the latter objective will require sustained efforts in issuing identification cards for those in the exempt categories. On poverty reduction, the report recommended that future APRs incorporate the findings of the GLSS-5.

On Macroeconomic policies and framework, the report noted that key structural constraints be addressed to accelerate growth, while maintaining macroeconomic stability. The main areas it highlighted include; closing the infrastructure gap, raising productivity in agriculture and strengthening further the investment climate in the country.

It said the APR would benefit significantly from including a more comprehensive and updated macroeconomic framework, especially, an assessment of monetary policy and balance of payments that is consistent with the growth assumption.

It also recommended that Debt Sustainability Analysis (DSA) be the focus of macroeconomic framework in the current post-debt relief era since the country has started to make recourse to non-concessional borrowing both in international and domestic capita markets.

Touching on the energy sector, the report said unreliable power supply is the most binding constraints for private sector development in the country, accounting for the country attaining around 0.5 percent less in real GDP growth in 2006 than otherwise could have been expected. It therefore called for a comprehensive plan to resolve the country’s energy problems.

On good governance and civic responsibility, the report noted that decentralization remains a challenge and therefore welcome the development of the National Decentralization Plan.

It stressed that a gradual approach to extending administrative and fiscal responsibilities to regional and local governments would be beneficial. “The devolution of these administrative and fiscal responsibilities would ensure that an adequate revenue base is delegated down together with expenditure obligations and that there is sufficient capacity at lower levels of government to perform the delegated tasks”, noted the report. It added “It would be prudent not to allow borrowing by local governments”.