$535m Credit For Ghana

The World Bank last Tuesday released $535 million, its single largest credit to Ghana in more than 50 years, to support the country’s 2009 Budget.

The amount was released upon a request made by the country in April this year and it is expected to help stabilise the economy. The loan will be directed into economic governance, macroeconomic stability and the transport and environmental sectors as part of a total amount of $1.2 billion earmarked for the country for the next three years.

Disbursement of the funds is due to start weeks after the country has gone through its internal approval processes, including a Cabinet scrutiny and endorsement, parliamentary approval and a legal opinion from the Attorney-General’s Department. The Economic Governance and Poverty Reduction Credit (EGPRC) component of the amount is $300 million, half of which is available for immediate use, with the other half due for disbursement in September. The Transport Sector Development Programme developed by the government will benefit from a $225 million support, with $10 million credit going into Natural Resources and Environmental Governance (NREG).

“This is a government of Ghana-driven request and it is the shortest, coming in two months,” the Finance and Economic Planning Minister, Dr Kwabena Duffuor, told the Daily Graphic shortly after the World Bank Board had approved the loan in Washington DC on Tuesday. He explained that the credit was very concessionary at zero per cent interest to be retired in 40 years, after a 10-year grace period, adding that the support would enable the release of more resources to ministries, departments and agencies (MDAs) for the discharge of their duties.

The approval and subsequent release of the funds also means that the government will have the fiscal space to reduce domestic borrowing, which has in recent times made treasury bills attractive but crowds out the private sector from either enjoying increased credit allocation or borrow at a comparatively uncompetitive rates. The $535 million credit can be perfectly placed within the context of aid effectiveness, which stresses ownership, where partner countries are given the chance to exercise effective leadership over their development policies and strategies and co-ordinate development actions.

Aid effectiveness also places emphasis on donors basing their overall support on partner countries’ national development strategies, institutions and procedures, harmonising donors’ actions with country programmes, managing the processes in a transparent way to ensure collective effectiveness, as well as being mutually accountable. Dr Duffuor said the World Bank did not set out conditions for the country, except to encourage it to vigorously pursue the things the government itself had spelt out in the budget to achieve.

His assertion of zero conditionalities was supported by the World Bank Country Director for Ghana, Mr Ishac Diwan, who said, “It is important to stress that these are not externally imposed conditionalities. These are actions that the government has decided to undertake in order to ensure fiscal prudence, transparency and accountability in the delivery of services.” Mr Diwan appealed to citizens, Parliament and development partners to be vigilant and play a part in “promoting value for money in the disbursement of hard-earned resources”.

Dr Duffuor added that most of the targets set out in the budget had been achieved. They include establishing a single treasury account (achieved), improving compliance with the Public Procurement Law (on course), correcting any budget deviations such as fiscal deficit and pro-poor expenditures (on course) and submitting to Parliament the Freedom of Information Bill, which has already left Cabinet on its way to Parliament. The government has already reconstituted the boards of the Electricity Company of Ghana, the Volta River Authority, the Tema Oil Refinery, the Ghana National Petroleum Corporation, the Public Utilities Regulatory Commission and other energy-related regulatory bodies and authorities.

It has also set out to adopt an electricity sector financial recovery plan, adopt a draft legislation on the Ghana Petroleum Regulatory Authority and Oil and Gas Fiscal Regime and is working hard to eliminate ghost names, especially on the payrolls of the health and education services.But the World Bank wants the government to appoint a Minister for Public Sector Reforms. There has been a clarion call from all quarters for reforms in the public sector to reduce red-tapeism and ensure timely and value-added delivery of services.

The World Bank further explained that the EGPRC budget support would assist the country’s efforts at bringing the fiscal situation back on a sound and sustainable track, while protecting the development objectives in the Second Growth and Poverty Reduction Strategy (GPRS II) of the period 2006-2009. The support for the Transport Sector Development Programme, which spans 2008 to 2012, was to improve mobility of goods and passengers through a reduction in travel time and vehicle operating cost and the implementation of safety strategy, the bank said. It explained that the objective would be achieved through the strengthening of the capacity of transport institutions in planning, regulation, operations and maintenance.

The project includes $64 million for the improvement of trunk roads, $78 million for the improvement of urban roads, including the rehabilitation of Burma Camp and Giffard roads, and the financing of urban transport infrastructure such as depots, terminals and access facilities to the planned Bus Rapid Transit system in Accra. Improvement of feeder roads will receive $50.5 million support to enhance access to rural areas to improve foodstuff distribution. The World Bank also explained that the $410 million support for the NREG was the second in the series of three development policy operations earmarked for the period 2008 to 2010. “It is a sector budget support operation targeting the natural resources and the environmental sectors.

The objectives of the three series of operations are to ensure predictable and sustainable financing for the forest and wildlife sectors and effective forest law enforcement and improve mining sector revenue collection, management and transparency,” the bank said, among others.