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Ghana Country Assistance ReviewA Study in Development Effectiveness

Robert P. Armstrong

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Ghana Country Assistance ReviewA Study in Development Effectiveness

Other Titles in the Series

r -PARED IiY THE WORLD BANK OPERATIONS EVALUATION DEPARTMENT

Developing Industrial Technology: Lessons for Policy and Practice(1995; contains summaries in French and Spanish)

Evaluation and Development: Proceedings of the 1994 World Bank Conference(1995)

The World Bank and Irrigation(1995; contains summaries in French and Spanish)

1993 Evaluation Results(1995; contains summaries in French and Spanish)

Structural and Sectoral Adjustment: World Bank Experience, 1980-92(1995; contains summaries in French and Spanish)

Gender Issues in World Bank Lending(1995; contains summaries in French and Spanish)

The World Bank's Role in Human Resource Development in Sub-Saharan Africa: Education, Training,and Technical Assistance(1994; contains summaries in French and Spanish)

1992 Evaluation Results(1994; contains summaries in French and Spanish)

New Lessons from Old Projects: The Workings of Rural Development in Northeast Brazil(1993; contains summaries in French, Portuguese, and Spanish)

World Bank Approaches to the Environment in Brazil(1993; contains summaries in French, Portuguese, and Spanish)

Evaluation Results for 1991(1993; contains summaries in French and Spanish)

Trade Policy Reforms under Adjustment Programs(1992; contains summaries in French and Spanish)

Evaluation Results for 1990(1992; contains summaries in French and Spanish)

World Bank Support for Industrialization in Korea, India, and Indonesia(1992; contains summaries in French and Spanish)

Population and the World Bank: Implications from Eight Case Studies(1992; contains summaries in French and Spanish)

Forestry: The World Bank Experience(1992; contains summaries in French and Spanish)

The Aga Khan Rural Support Program in Pakistan: Second Interim Evaluation(1990; contains sunmmaries in French and Spanish)

Ghana Country Assistance ReviewA Study in Development Effectiveness

Robert P. Armstrong

THE WORLD BANKWASHINGTON, D.C.

Copyright © 1996The Intemational Bank for Reconstructionand Development/THE WORLD BANK1818 H Street, N.W.Washitnrtn, D.C. 204A3. U.SC A

All rights reservedManufactured in the United States of AmericaFirst printing January 1996

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The complete backlist of publications from the World Bank is shown in the annual Index ofPublications, which contains an alphabetical title list (with full ordering information) and indexesof subjects, authors, and countries and regions. The latest edition is available free of charge fromDistribution Unit, Office of the Publisher, The World Bank, 1818 H Street, N.W., Washington, D.C.20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Iena, 75116 Paris, France.

Cover: Tending palm seedlings at an orchard in Kwae/tractor maintenance at Kpong Farm(Ghana)Credit: World Bank/Yosef Hadar

ISSN: 1011-0984

Library of Congress Cataloging-in-Publication Data

Armstrong, Robert P. (Robert Pritchard), 1935-Ghana, country assistance review / Robert P. Armstrong.

p. cm. - (A World Bank operations evaluation study, ISSN1011-0984)

Includes bibliographical references.ISBN 0-8213-3465-41. World Bank-Ghana. 2. Economic assistance-Ghana. 3. Ghana-

Economic conditions-1979- 4. Ghana-Economic policy.I. International Bank for Reconstruction and Development.II. Title. III. Series.HG3881.5.W57A76 1995338.9'1'09667-dc2O 95-41383

CIP

Contents

Foreword xiPrefacio xiiPrOface xiiiSources and acknowledgments xivAbbreviations and acronyms xv

Executive summary 1Resumen 10Resume analytique 20

1. Overview of Bank/Ghana relations 31

Overview of Bank/Ghana relations, 1983-93 31Key events and people 32The congruence of government and Bank strategies 34Overview of Bank lending 36

2. Relevance of the Bank's assistance strategy 39

Main conclusions 39Selective coverage 39Bank strategy papers 40Evolution of the Bank's assistance strategy 40Relevance of the Bank's strategy 47Conclusions 55

3. Effectiveness of the Bank's instruments 58

Introduction 58Most and least effective instruments 58Overview of Bank and total donor assistance 59The effectiveness of lending-performance trends 60Projects with unsatisfactory outcomes 61

vD

Status of t.e po. tfoio 67TVA oiczC AS 1nteatioAlLa i;9 .a;Fiil dnce % wporatnon 70

Allocation of staff resources 71Economic and sector work 72Aid mobilization and coordination 75

4. Agriculture and education: objectives and performance 80

Agricultural obiechtves and perfo-r-ance 80Educational objectives and performance 85

5. Progress toward the strategic objectives 91

Overview of outcomes 92External shocks/exogenous factors 93Evaluation of performance in economic management 95Progress of growth and poverty alleviation objectives 104Sustainability indicators 112Annex: projected vs. actual values for selected macroeconomic variables 113

6. Conclusions and recommendations 116

Overview 116Key strategic issues 117Recommendations 118

References and bibliography 129

Supplement 137

Introductory note 138Management response 139Committee on Development Effectiveness response 140

Boxes

1 Ghana at a glance 41.1 Selected notable events, 1981-94 331.2 Conditions for successful adjustnent in Ghana 351.3 Ghana compared with other Sub-Saharan African and low-income countries 372.1 Bank-Fund coordination 432.2 IMF views on the sequencing of Ghanaian reforms 502.3 The downside of high aid dependency: dangers and distortions 533.1 Outstanding projects 62

viii

3.2 Lessons from the Structural Adjustment Institutional Support (SAIS) Project 663.3 Attainment of institutional development objectives 685.1 Projected vs. actual cocoa prices 945.2 Aid and the Dutch disease: macroeconomic management

when everybody loves you 965.3 Is credibility the binding constraint to private investment? 1005.4 Rent-seeking and patronage relations 1035.5 Program of Actions to Mitigate the Social Cost of Adjustment (PAMSCAD) 1065.6 The Social Dimensions of Adjustment (SDA) Project 1085.7 Main findings about poverty in Ghana 111

Tables

1.1 Commitments and disbursements in Ghana, FY79-94 362.1 Ghana: phasing and sequencing of the adjustment process 443.1 Aid flows, 1981-92 593.2 IDA lending by major lending instrument, FY79-94 603.3 Unsatisfactory projects 653.4 Ghana-selected indicators of Bank portfolio performance and management 703.5 Staffyears by main instrument 714.1 Selected agricultural indicators 834.2 Education sector indicators 875.1 External shocks and performance response measures 935.2 Selected incentive indicators 985.3 Selected fiscal and monetary performance indicators 995.4 Selected indicators of public sector reform 1025.5 Selected growth and structural indicators 1045.6 Selected social indicators, 1970-92 1105.7 Recent trends in poverty, 1988-92 1105.8 Selected sustainability indicators 112

Figures

5.1 Projected vs. actual values: changes in terms of trade 955.2 Projected vs. actual values: changes in export prices 955.3 Official assistance 1135.4 World Bank lending program 1145.5 Savings and investment 1145.6 Government accounts 1145.7 Resource and trade balances 1145.8 Current account balance 1145.9 GDP growth 1145.10 Growth of agriculture 1155.11 Growth of industry 1155.12 Growth of services 115

ix

Foreword

This country assistance review (CAR) on studies, and aid mobilization and coordina-Ghana is the first in a new series of OED tion) has been particularly significant.studies. These studies will, for each countryconcerned, evaluate the relevance and effi- Looking ahead, however, the study cautionscacy of the Bank's overall country assistance that progress will not be sustained unlessstrategy and the effectiveness of the various Ghana speeds up implementation of a largeinstruments of Bank assistance, with a view unfinished agenda of reforms designed toto drawing lessons from experience. stimulate private sector development and

enhance the prospects for sustainable agri-Ghana was selected for this first CAR in part cultural growth. Accordingly, the Bank'sbecause of its experience of sustained adjust- country assistance strategy should give cen-ment and resumed growth. Poverty in tral importance to the 'nexus" of decliningGhana has decreased and the gross domestic agricultural productivity, high populationproduct (GDP) growth rate has averaged growth, and environmental degradation, asnearly 5 percent over the past decade- well as to economic governance and institu-higher than in any African country except tional development issues.Botswana and Mauritius. At the same time,there remain questions regarding the extent, The study also advises the Bank to strengthendepth, and sustainability of Ghana's eco- its process of country-assistance strategynomic recovery. formulation through more rigorous self-

evaluation and risk analysis combined withThe review finds that World Bank loans of regular monitoring of performance against amore than $2 billion since 1984, including set of suggested sustainability indicators.more than $1 billion for adjustment opera-tions, did contribute to Ghana's progress. Robert PicciottoThe impact of the Bank's nonlending ser- Director Generalvices (policy dialogue, economic and sectoral Operations Evaluation

xi

Prefacio

Este examen de la asistencia para paises, en servicios no financieros del Banco (dialogoque se analiza el caso de Ghana, es el sobre politicas, estudios econ6micos y secto-primero de una nueva serie de estudios del riales, y movilizaci6n y coordinaci6n de laDepartamento de Evaluaci6n de Opera- ayuda) ha sido especialmente importante.ciones (DEO). A fin de extraer las ensefian-zas oportunas, los estudios evaluaran la No obstante, en el estudio se pone de relieverelevancia y eficiencia de la estrategia global que el progreso no sera duradero a menosde asistencia para paises del Banco y la que Ghana acelere la aplicaci6n de impor-eficacia de los numerosos instrumentos tantes reformas pendientes destinadas ade ayuda de la instituci6n en cada pais estimular el desarrollo del sector privado yafectado. mejorar las perspectivas de crecimiento

duradero del sector agricola. Por consigu-Ghana fue seleccionada para este primer iente, la estrategia de asistencia para paisesexamen de la asistencia para paises debido, del Banco debe centrarse en el vinculo entreen parte, a su historial de ajuste y crec- la baja de la productividad del sector agri-imiento sostenidos. La pobreza ha dis- cola, los altos indices de crecimiento de laminuido, y durante el uiltimo decenio el poblaci6n y la degradaci6n del medio ambi-producto interno bruto (PIB) ha crecido a un ente, asi como en la gesti6n econ6mica y lospromedio de casi un 5 por ciento, el mas alto problemas de desarrollo institucional.de Africa con excepci6n de Botswana yMauricio. No obstante, persisten dudas con En el estudio se recomienda tambien que elrespecto a la amplitud, profundidad y Banco refuerce la formulaci6n de estrategiassostenibilidad de la recuperaci6n econ6mica de asistencia para paises mediante una laborde Ghana. mas rigurosa de autoevaluaci6n y analisis

de riesgos, ademas de un seguimiento per-En el examen se ha comprobado que los i6dico de los resultados a la luz de un con-prestamos otorgados por el Banco Mundial junto propuesto de indicadores de laa Ghana a partir de 1984, por un total de sostenibilidad.mfs de US$2.000 millones (incluidos mAs deUS$1.000 millones destinados a operaciones Robert Picciottode ajuste), contribuyeron al progreso Director Generalecon6mico del pais. La repercusi6n de los Evaluaci6n de Operaciones

xii

Preface

Cette 6tude de l'aide apportee au Ghana est et coordination de l'aide) a WS particuliere-la premiere d'une nouvelle serie d'etudes du ment sensible.Departement de l'valuation retrospectivedes operations (OED), qui permettront d'& Pour l'avenir, les auteurs avertissent toute-valuer le bien-fonde et l'efficacit6 de la fois que le Ghana ne pourra pas continuer astrat6gie generale d'aide de la Banque au faire des progres s'il n'acc6lre pas la misepays beneficiaire, ainsi que l'utilite pratique en oeuvre d'un vaste programme encoredes differents instruments mis en oeuvre a cet inacheve de r6formes destinees a stimuler leegard, afin de tirer les lecons de l'exp6rience. developpement du secteur prive et a

ameliorer les perspectives d'une croissanceLe Ghana a ete choisi pour cette premiere durable de l'agriculture. Les problemes6tude en partie du fait de ses efforts etroitement lies au dclhn de la productivitesoutenus d'ajustement et de la reprise de sa agricole, de la forte croissance demo-croissance. La pauvrete y a diminue, et le graphique et de la degradation de l'environ-produit interieur brut (PIB) y a connu une nement devraient donc occuper une placecroissance moyenne de pres de 5 pour cent de tout premier plan dans la strategie d'aidepar an au cours de la derniere decennie, la de la Banque, de meme que les questionsplus elevee d'Afrique en dehors du touchant a la gestion economique et auBotswana et de Maurice. Des questions sub- developpement institutionnel.sistent cependant, concernant l'ampleur, laprofondeur et la durabilite de la reprise Les auteurs de l'etude recommandent egale-economique au Ghana. ment a la Banque de renforcer son processus

de formulation de strategies d'aide aux paysCette 6tude revele que les prets de la en effectuant des auto-6valuations et desBanque mondiale, soit plus de 2 milliards analyses de risques plus rigoureuses, et ende dollars depuis 1984, dont plus de 1 mil- suivant regulierement les r6sultats obtenusliard pour des op6rations d'ajustement, ont par rapport a un ensemble suggere d'indica-effectivement contribu6 au progres du teurs de durabilite.Ghana. L'incidence des services dispensespar la Banque en dehors des prets (dia- Robert Picciottologue de politique economique, 6tudes Directeur generaleconomiques et sectorielles, et mobilisation Evaluation des operations

xiii

Sources and acknowledgm-rents

This study is founded on a variety of Bank staff provided inputs relating to ex-sources. World Bank country program ternal shocks, commodity price projections,papers, country strategy papers, and coun- and the costs of manpower and other re-try assistance strategy documents provided sources employed by the Bank in carryingbenchmarks for evaluating the Bank's over- out its assistance strategy.all assistance program. Project completionreports and OED project performance audits The kind cooperation and valuable assis-were used to identify project-level experi- tance of all those who contributed their timeences and factors underlying project success and efforts to the preparation of this studyand failure over time. Evaluation studies on are much appreciated. Special thanks areprojects financed by other donors were also extended to those Ghanaians and Bank staffconsulted. Project supervision reports and who gave their time for extensive interviewsperiodic implementation reviews provided in which they conveyed their knowledgeinformation on the performance of ongoing and insights. Particular thanks also areprojects, and on systemic project implemen- extended to Mark Baird and Manueltation issues. Reviews were also made of Pefialver who provided overall supervisionBank archives and of the substantial litera- and helpful advice, and to Norma Namisatoture, Bank and non-Bank, on Ghanaian who cheerfully provided word processingdevelopment. Thanks are extended to the and administrative support of the highestmany library and archival staff who helped quality.the study team with its searches.

The study was prepared under the-overallInterviews were held by the study team coordination of Robert Armstrong, the prin-with staff of the Bank, International Finance cipal author and task manager. The studyCorporation, International Monetary Fund, team included Ronald Ridker (education),African Development Bank, and other Jacob Meerman (agriculture), Niels Dabel-donors, as we'll as with Ghanaians i both stein (poverty), William Branson (macroeco-the public and private sectors. Background nomic policy), Sulaiman Wasty (portfolioreports were prepared by study team mem- performance), and Sanliang Yue (data analy-bers on agriculture, education, poverty, and sis). Editorial and production assistance wasmacroeconomic management issues. Other provided by Angie Gentile-Blackwell.

xiv

Abbreviations and acronyms

AEF Africa Enterprise FundAGC Ashanti Goldfields CorporationAPDF Africa Project Development FacilityCAM Country assistance management (system)CAR Country assistance reviewCAS Country assistance strategyCEM Country economic memorandumCIR Country implementation reviewCOCOBOD Ghana Cocoa Marketing BoardCPP Country program paperCSIR Country strategy and implementation reviewCSP Country strategy paperDAC Development Assistance CommitteeDEC Development economics vice presidencyDFC Development finance companyEPS Extended poverty studyERP Economic recovery programESW Economic and sector workGDP Gross domestic productGNP Gross national productGLSS Ghana Living Standards SurveyIBRD International Bank for Reconstruction and DevelopmentID Institutional developmentIDA International Development AssociationIFC International Finance CorporationILO International Labour OrganizationIMF International Monetary FundMFEP Ministry of Finance and Economic PlanningMIS Management information systemMTADS Medium-term agricultural development strategyNATCAP National Technical Cooperation and Assessment Programme (UNDP)NGO Nongovernmental organizationODA Official development assistance

xv

OED Operations Evaluati;on Department(MnC -rativn al -.-a;ieent

OPR Operational Policy Review DepartmentPAMSCAD Program of Actions to Mitigate the Social Costs of AdjustmentPAR Performance audit reportPBD Planning and Budgeting DepartmentPCR Project completion reportPER Public expenditure reviewPFP Policy frameworlk paperSAC Structural adjustment creditSAIS Structural adjustment institutional support projectSAL Structural adjustment loanSAR Staff appraisal reportSDA Social Dimensions of Adjustment (Project)SDR Special drawing rightsSECAL Sector adjustment loanSOE State-owned enterpriseSPA Special Program of Assistance for AfricaSY StaffyearTA Technical assistanceUNICEF United Nations Children's Fund

xvi

Executive summary

Bank assistance was generally effective in ing excellent Bank-country relations and ahelping Ghana make considerable economic true sense of partnership with a core groupprogress over the past decade. But this of Ghanaian officials responsible for prepar-progress cannot be sustained unless (a) the ing and implementing the ERP. A key factorimplementation of a large unfinished agenda in sustaining the reforms since 1983, despiteof adjustment is accelerated in the short run; a setback in 1992, was the continuity andand (b) the government and donors alike competence of this core group.mount a concerted effort to address the keylong-term "sustainability issues." The watch- The main accomplishments over the pastword is sustainability. And the criteria for decade are well known. Exchange rate andassessing the success of future Bank assis- trade reforms were the centerpieces of thetance should be focused largely on the per- ERP, and Ghana now has an interbank for-formance of a specific set of sustainability eign exchange market, few quantitativeindicators. restrictions, and low levels of protection.

Extensive price and distribution controlsIt is now more than ten years since Ghana were dismantled. The fiscal situation waslaunched its far-reaching but "gradualist" greatly improved and rationalized, espe-Economic Reform Program (ERP). The Bank cially on the revenue side. Inflation wasGroup has lent Ghana more than $2 billion brought down from more than 75 percent insince 1984-more than $1 billion for adjust- the early 1980s to 10 percent in 1992. Morement operations. Much has been achieved was invested in rehabilitating Ghana'sowing to the joint efforts of the government moribund infrastructure. Poverty wasand the Ghanaian people, supported by the reduced and social indicators improved.World Bank Group and other donors. The The regulatory framework has been im-International Monetary Fund (IMF) and the proved. Cocoa and other exports haveWorld Bank played major roles in helping the recovered. And gross domestic productgovernment shape and underwrite the ERP as (GDP) growth has averaged about 5 percentit evolved over the years. And it was clearly over the past decade.owned by, not forced on, the government.

Moreover, unlike the experience in manyIn the 1980s, against a background of highly adjusting countries, the stabilization objec-strained relations and mutual mistrust, the tives were achieved simultaneously withBank succeeded, by and large, in establish- increased real public expenditures, especially

1

on= socia! serices and on public in.veshLtment Rethinking the stratevv

suit of "adjustment with a human face." For the Bank's assistance to Ghana in thePoverty in Ghana is less than in many other years ahead to be as relevant, efficacious,African countries and has been reduced in and cost-effective as possible, it is recom-recent years. Progress has continued in get- mended that the Bank and governmentting the prices right, in rehabilitating the together rethink some of their priorities andinfrastructure, in rationalizing the revenue focus increasingly on the issues mentionedstructure, and in public investment program- ill the two previous paragraphs. Thisming-areas where both the government's implies giving more attention to institu-and the Bank's strengths can be built on. tional development, economic governance,

aid dependency, and sustainability issues.But fiscal problems have resurfaced in paral- Two of the key sustainability issues are howlel with the move to greater democracy since to increase substantially the very low pri-1992. And a long agenda of unfinished vate investment rate (recently as low as 4adjustment remains. Performance has been percent of GDP) and the even lowerdisappointing in private-sector develop- national savings rate (less than 1 percentment, public enterprise restructuring, civil of GDP).service reform, expenditure control, agricul-tural development, educational achieve- It is further recommended that the Bankment, environmental control, and redefine some of its comparative advantagesinstitutional development. Progress in pri- and refine its performance indicators. And itvatization has also been slow, although should sharpen its processes for formulatingsome important new privatization measures and monitoring the implementation of itswere taken in 1994 and early 1995. country assistance strategy as articulated in

the country assistance strategy papers.The prospects for sustaining a satisfactoryrate of per capita growth and reducing In the 1980s, the Bank's strategy and instru-poverty further are uncertain, unless Ghana ments were effective in helping the Ghana-continues to rely on exceptionally high vol- ian government to stabilize, liberalize, andumes of concessional aid, something that rehabilitate an economy in crisis. Particu-may not be feasible nor indeed desirable for larly in the mid-1980s, the Bank's programreasons discussed later. Agricultural growth of assistance to Ghana gets high marks forremains well below what is necessary and the relevance of objectives, efficacy of imple-feasible-and may well be no better than the mentation, cost-effectiveness, and staff per-rate of population growth. Total and private formance. The government also gets a highsavings and private investment remain rating for borrower performance.extremely low. Educational testing results inthe primary schools are very low. There are The hardest parts of Ghana's adjustmentserious envirolerita' problems. And even agenda are yet to come, and the objectivesa continuation of the 5 percent growth of the and instruments have to be adjusted accord-last decade, at the current population ingly. The remaining hard adjustment mea-growth rates, would require some 35 years sures need to be taken and deepened.to double the current per capita income and Urgent attention needs to be given to severalto reach a still low level of $900 by the first longer-term issues if the growth and gainsthird of the twenty-first century. achieved are to be sustained-or acceler-

2

ated. The binding constraints are on the A shared vision. The future strategy should beinstitutional and managerial side. based on a shared vision of what kind of

society the Ghanaian government and peo-Key issues. Questions that need to be ple wish to bring about. As a senior Ghana-addressed explicitly in the Bank's country ian official said, "When we know what westrategy are: What can the Bank do to want and take the initiative, things go okay.improve the sustainability prospects? And But when the World Bank takes the initia-what pace of change is needed, on which key tive, things don't work so well." It should befronts, to minimize the risks that Ghana's a central role of the Bank to help Ghanaiansprogress will not be sustained? Most of the elucidate the options, and then to foster thetruly important issues-as distinct from the needed policy changes, investments, andurgent issues that tend to command atten- institutions. If in the 1980s a main thrust oftion-can be called the "sustainability issues." the strategy was to "get the prices right," forTwo of the main ones are the "leading sector" the 1990s it should be in helping Ghana toand aid dependency issues. "get the institutions and economic gover-

nance right."In the 1980s, recovery relied necessarily onthe public sector as the leading sector, and The policy measures that most need to bewas foreign-aid led. During the 1988-92 taken by the government, and be supportedperiod, annual net disbursements of official by the Bank and other donors, includedevelopment assistance (ODA) averaged 10 developing and implementing a "nexuspercent of GDP (this figure does not include strategy" (defined below) that gives prior-some of the IMF arrangements). Aid-sup- ity to agricultural development, familyported expenditures on infrastructure and planning and environmental protection,social sector development can keep growth civil service reform, capacity building (butgoing for a time. But sustained growth and not through the traditional technical as-poverty alleviation requires a far more vigor- sistance projects that have so far provenous private-sector response, based on higher ineffective), and the divestment and re-domestic savings and private investment, structuring of the large and inefficientthan has been achieved so far. Ghana's heavy public enterprise sector.dependence on foreign aid also has other dis-advantages, and the future strategy should Two critical issues are how to stimulate theprovide for reducing this dependency. needed private-sector response, and how to

reverse the declining productivity in agricul-Following the 1992 election of a civilian gov- ture without harming the environment.emnment under a new constitution, the politi-cal economy is now quite different from that More gradualism-or breakthroughs? The gov-in the 1980s. The challenge for the Bank is to ernment strategy has, since 1983, beenhelp Ghana manage a transition to a more based on a gradualist approach in which itsustainable development path while it also took the better part of a decade for mosttransforms its political forms and processes. of the agenda of stabilization and liberal-The sustainability of the political and social ization measures to be implemented. Thistransitions depends partly on how the econ- gradualism was facilitated by the sub-omy fares, and vice versa. The Bank's strat- stantial aid provided by the donors, espe-egy and instruments therefore need to be cially in the form of quick-disbursing aid,forged to fit the new political economy. much of which financed current expendi-

3

ture. The strategy Yow needs to accelerate ieeded private sector respomase or to raisethe pacing and revisit the sequencing of agricultural productivity, upon which thefutre policy and program actions in light sustainability of future developient are soof the current strategy's failure to foster the dependent.

4

(BxIcntinued)

when the Economic Recovery Program was supported by substantial aid from the(1RP) was adopted, Ghana's ecoinomny had IM, World Bank, and other donors.collapsed. The ER was therefore launched

at a time when, a broad, consensus for Adjustment nmeasures were implementedChange prevailed. Initial reform efforts with varying degrees of intensity and suc-focused on stabilization and liberalization cess. Good progress was ,made, for exampleand were in general successful until a weak- in exchange rate, pricing, and trade policyening of ,fiasca discipline, in' the wake of reform. There remains, however, a substan-the 1992 elections, resulted in a resurgence, tial agenda of reform to be undertAken ,i

in inflation and in a rapid depreciation public sector management and civil serviceOf the now market-determined. exchange reform,. public enterprise divesiture, andirate. creating an enabling environment for privat

sector development. The weakest aspec ofAverage annual GDP grwth over the the economic recovery has been the low p4.decade followmig the introduction of the vate savings and investment rates, which,ERP-was neary 5 p n, wth senrices nd to increase substantialy to sustaiTbeing the stest-growmig sector. Agric- growth inLthe medium_ term. Issues of h

tural sector growth over this decade was 2.3 population growth, declining agriculturallercent overall, with M1 perent growth in' productivity, and environmental problems

cocoa production but only 2.2 perc'n' also need tb be addressed if growth ts to be

growth in food production. hisrecovery sustained over a longer run.

A Fw KEY INDICATORS (1993)

% of GDP

Private investment 4 Po o(annual grow 3.1Government investment 10 irolmelit ratioConsumption 101 Primary 71National savings C1.4 SeondaLry 3

Broad money .17 Inflation25Foreign financig 9-

Accelerating the adjustment will undoubt- binding constraints have clhanged and thatedly be difficult in the face of developments the readiness of donors to support reformsin democratization that may slow decision- that are not accelerated is uncertain in an eramaking. But it must be recognized that the of scarce donor resources. What is needed

5

today isa strategy tu-iar makes a break- late the strategv with suecifir reference to.;hr.ough- ill ir ellveiment climate anH busi- evolving political and social as well as eco-ness environment for the private sector. nomic institutions, that is, in the context ofAccelerated programs of privatization, the political economy. The strategy shouldunequivocal support for private sector ultimately be based upon a shared vision ofdevelopment, and in-depth administrative what kind of society the Ghanaian govern-reforms appear to be the foundation for per- ment and people wish to bring about.suading the private sector that Ghana'sincreasinglly policies are Mvionitor performance against sustainability indi-unlikely to be reversed. cators. There is no agreed or established set

of core sustainability indicators for Ghana. ItFor the Bank. The Bank had a well-established would be useful if such a set were identifiedcomparative advantage in helping Ghana to and used in the Bank's country assistancecorrect its distorted macroeconomic and sec- strategy (CAS) for purposes of optionstoral policies and to rehabilitate its infrastruc- analysis, policy dialogue, and performanceture. The Bank now needs to further develop monitoring. The report suggests a subset ofand improve its capabilities-to become such indicators (Table 5.8). It suggests fur-more effective in key areas where its past ther that an additional subset of governance-assistance has been least effective: cum-institutional development indicators be

developed and applied. Macro-level moni-* In fostering private-sector development, toring needs to be supplemented by more

an area in which the International micro-level monitoring of attitudes andFinance Corporation needs to play an behaviors of farmers, informal sector partici-increasingly active role, including pants, women in the labor force, the poor,through the African Enterprise Fund. the civil service, and students and teachers

in the classroom.* In promoting institutional development

and capacity building. Key indicators of the sustainability of growthand poverty alleviation include: fertility rate,

* In helping the government to become productivity growth and structural changesmaller and more efficient. in agriculture, total and private domestic

savings rates, the "genuine" savings rate• In elucidating policy analyses and (national savings less depreciation of fixed

options to promote enlightened public capital and depletion of natural resources),debates on key policy issues among private investment ratio and annual rate ofwider constituencies. private investment growth, export growth

rate, especially of nontraditional exports, pri-mary school enrollment rate (especially of

Recommendations for the design of girls) and criterion reference test scores, andBank strategy the government revenue to GDP ratio. Either

the levels or the trends in these indicators areFocus on sustainability. The Bank's strategy worrisome. Relevant governance indicatorsneeds a longer time horizon and a central (which are admittedly hard to define in objec-focus on identifying and addressing the tively monitorable form) would include: thebinding constraints to sustainable, long-term predictability, openness, and competence ofdevelopment. This implies a need to formu- policymaking; the professional ethos of the

6

bureaucracy; accountability of the executive Focus on governance. A greater focus on sus-branch of government; participation of civil tainability also implies a need to focus onsociety in public affairs; rule of law; and inci- governance factors. The government is still

dence of civil disturbances. in some areas part of the problem ratherthan part of the solution. For example,

Develop and implement a "nexus strategy." The Ghana's overstaffed and poorly functioningCAS should give higher priority to agricul- public administration and public enterprisestural development, family planning, and are impediments to private sector develop-environmental protection. The "nexus" here ment through financial crowding out (exces-refers to the combination of rapid popula- sive credit to the parastatals), through thetion growth, declining agricultural produc- "unlevel playing field" between public andtivity, and environmental deterioration. This private firms, de facto monopolies, rent-combination of problems warrants priority seeking, obstruction and harassment byattention in both the lending program and in public officials, inefficient delivery of infra-nonlending services (economic and sector structure and other public goods and ser-work, policy dialogue, and aid coordina- vices, and through the "signals" received (iftion). A better information base is needed not intentionally sent) that statist or populist(for example, on levels and trends in agricul- policies and intimidating practices are nottural production and productivity) and new yet permanently relegated to the past.modeling approaches should be encouragedto elucidate the critical linkages. The Bank's strategy, therefore, and its policy

dialogue with the government shouldThe poor in Ghana are disproportionately emphasize the need to address those gover-rural and located in the northern region, nance factors that tend to diminish private-where the nexus problem is most pro- sector confidence and hence private-sectornounced. Dealing with the linkages is there- savings and investments. And the longer-fore critical to alleviating poverty. It is also term strategy also needs to be geared to fos-critical to avoiding tribal strife, such as tering social and political sustainability,occurred in the north region in early 1994- which implies ensuring that the benefits ofwhich appears at least partly attributable to growth, and of external assistance, arethe growing scarcity of fertile land and ten- broadly shared through the society, espe-sions over land rights. cially by the poorest segments.

Focus on institutional development. A greater Make the Bank's strategy more strategic. Futurefocus on sustainability implies a need to Bank strategy papers (including sectoralfocus in turn on institutional constraints. and other strategy documents, as well asBoth the Bank and the government need to country assistance strategies) should beformulate and implement a coherent and made "more strategic" by ensuring thatcomprehensive strategy for public adminis- they address head-on questions such as:tration reform. This strategy should address Which long-term and short-term constraintsthe root causes of underutilization of Ghana's are most binding? What are the criticalexisting human capacities and capabilities, "sustainability issues," and what canthe overstaffing and low productivity of the donors do about them? Which risks can becivil service and public enterprises, and the managed and which cannot? How arepoor performance of most technical assis- lessons of past experience being heeded?tance projects (not only the Bank's). What "critical masses" of Bank/donor lend-

7

ing and noniending services can improve government to dis ccu Bank and einitlIine prospects of getting signiticant "break- authored reports with broader audiences,throughs" on the binding constraints? And and by undertaking more "outreach" activi-what are the Bank's comparative advan- ties in regard to its provision of nonlendingtages in assisting Ghana? The previous sec- services. The outreach should be a two-waytions of this summary have addressed some street and involve more listening by Bankof these questions and they are further staff to views and concerns of Ghanaiansdeveloped in the main report. Future strat- and others such as academic analysts ofegy papers should fo-cus, more so than in Ghanaian social and political issues.the past, on assessing risks and on elucidat-ing options (especially regarding risks to be Develop a more strategic approach to institutionaltaken or avoided) for the Bank's senior development and technical assistance. Ghanamanagers and the Board. lacks a coherent strategy for civil service and

parastatal sector reform, and it is a matter ofStrengthen CAS evaluation and accountability. highest priority for the Bank to assist in for-A corollary to making the Bank's strategy mulating it. Another problem has been the"more strategic" is that the CAS and its dis- poor efficacy of technical assistance to Ghana.cussion should serve, among other things, to Such assistance has too often been character-clarify what the Region should (and should ized by the dominance of short-term productsnot) be held accountable for in implement- and events over longer-term processes geareding its country assistance strategy. It may be to institutional development, capacity build-useful and possible to identify some strategy ing, and learning-by-doing. The Bank shouldimplementation performance indicators that encourage the government to convene a localserve to strengthen accountability without consultative group to focus on these technicalcompromising the flexibility needed by the assistance issues and come up with an agreedRegion at the tactical level. In any event, it is action plan.recommended that future country assistancestrategy papers contain a more substantial Get at the real causes of inadequate expendituresection comprising a self-evaluation of Bank management. Despite many public expendi-successes and failures in achieving targets ture reviews and the provision of technicaland objectives specified in previous papers. assistance in financial management, Ghana'sIt should also explain how the lessons poor expenditure management continuesderived from that evaluation are being to be a major problem. Priority should beapplied in the current strategy. given to solving this problem, but not by

further relaxing conditionalities regardingthe government's required share of local

Recommendations for achieving expenditures.objectives

Do not oversell Ghana as a success story. GivenReach out, and listen to, broader constituencies the large unfinished agenda of reform andin and outside Ghana. There is an unmet the challenges of making the gains sustain-demand among Ghanaians for information able, overselling Ghana as "success case"and analysis on the country's economic and may be a disservice to the country by detract-social situation and prospects. The Bank can ing attention from the needed reforms. Nev-help meet this demand by disseminating its ertheless, the relative success of thedocuments more widely, by encouraging the government policies under the ERP so far

8

may be held as an example to other countries performance indicators. This attention needsnot yet committed to adjustment. to be made explicit in the design of nonlend-

irLg as well as lendir.g ser-vices.Beware the downside of excessive aid dependency.The Bank should give greater consideration Develop improved aid coordination policiesto minimizing the potential adverse effects of and practices. All of the above-mentioned"too high" levels of external aid, including recommendations have implications forupon the behaviors of government officials. donor coordination, as the Bank has a roleExcessive aid may allow governments to to play in getting all donors to focus on sus-postpone adoption of needed but politically tainability, to work in the context of a com-difficult reforms, thus reducing savings and mon strategy for institutional development,private investment and delaying the to minimize the downsides of aid depen-expected supply response. But it may also dency, and so on. Aid coordination is cur-lead to excessive numbers of projects relative rently effective in some areas but not into the country's absorptive capacity, depen- others, and the government needs to bedency behaviors (such as "let the donors do urged to take a much greater role itself. Init"), distortions in incentives created by mul- particular, sectoral and subsectoral coordi-tiple scales of donor-financed supplements nation needs to be strengthened in a contextand allowances, and the dominance of of agreed sectoral strategies and actiondonor-driven objectives and donor-specified plans.

9

Resiimen

En terminos generales, gracias a la asistencia En los afios ochenta, en circunstancias dedel Banco Ghana logr6 considerables avances relaciones muy tensas y desconfianza mutua,econ6micos en la decada pasada. Sin em- el Banco logro en general establecer exce-bargo, estos avances no podran sostenerse a lentes relaciones con el pais y un verdaderomenos que: (a) se acelere a corto plazo la sentido de colaboraci6n con un grupo basicoaplicaci6n de un programa importante de de autoridades de Ghana responsables de laajuste que aun no ha Ilegado a su fin, y (b) el preparaci6n y aplicaci6n del PRE. Un factorgobierno y los donantes aunen sus esfuerzos fundamental para apoyar las reformas desdepara resolver "problemas fundamentales rel- 1983, a pesar de un retroceso en 1992, fue laativos a la sostenibilidad" a largo plazo. La continuidad y competencia de este grupoconsigna es la sostenibilidad. En consecuen- basico.cia, los criterios para evaluar la eficacia de laasistencia del Banco en el futuro deben cen- Los principales logros alcanzados durante eltrarse en gran medida en el desempefio de iultimo decenio son bien conocidos. Las refor-un conjunto especifico de indicadores de mas cambiaria y comercial fueron piezas fun-sostenibilidad. damentales del PRE; actualmente Ghana

cuenta con un mercado cambiario interban-Hace mas de diez afios que Ghana inici6 un cario, pocas restricciones cuantitativas y nivelesPrograma de Reforma Econ6mica (PRE) de bajos de protecci6n. Se levantaron amplios con-gran alcance, aunque "gradualista". Desde troles de precios y distribuci6n. La situaci6n fis-1984, el Grupo del Banco ha otorgado a Ghana cal mejor6 y se racionaliz6 en gran medida,financiamiento por mas de US$2.000 millones, especialmente en lo que respecta a los ingresos.mas de US$1.000 millones de los cuales se des- La inflaci6n se redujo, de mas del 75 por cientotinaron a operaciones de ajuste. Mucho se ha a principios de los anos ochenta, a 10 por cientologrado gracias a los esfuerzos conjuntos del en 1992. Se hicieron mas inversiones en tareasgobierno y el pueblo de Ghana, con el de rehabilitaci6n de la infraestructura derespaido del Grupo del Banco Mundial y otros Ghana, cuyo estado era deplorable. La pobrezadonantes. El Fondo Monetario Intemacional se redujo y los indicadores sociales mejoraron.(FMI) y el Banco Mundial prestaron una gran Se introdujeron mejoras en el marco reglamen-ayuda al gobierno para la formulaci6n y apli- tario. Se reactivaron las exportaciones de cacaocaci6n del PRE a lo largo del tiempo. Dicho y otros productos. En la decada pasada el pro-programa fue, sin lugar a dudas, obra del gob- ducto interno bruto (PIB) medio fue de un 5ierno y no le fue impuesto. por ciento.

10

Asimismo, a diferencia de lo que sucedi6 en puede ser igual o inferior a la tasa de crec-muchos paises en proceso de ajuste, los imiento de la poblaci6n. El nivel de ahorroobjetivos de estabilizaci6n se lograron en total y privado, asi como el de la inversi6nforma simultanea con el aumento del gasto privada siguen siendo muy bajos. Los resul-publico real, sobre todo en servicios sociales tados de los test de rendimiento escolar en ele inversiones puiblicas. Este resultado nivel primario son muy bajos. Existen proble-seguro facilit6 la aplicaci6n del "ajuste con mas ambientales graves. Aun cuando sigu-una dimensi6n humana". En Ghana hay iera registrandose un crecimiento de 5 pormenos pobreza que en muchos otros paises ciento como en la d6cada pasada, a la actualafricanos, y en los uiltimos antos se ha tasa de crecimiento de la poblaci6n se necesi-reducido ain mas. Se ha seguido avan- tarfan unos 35 antos para duplicar el nivelzando en cuanto al logro de un nivel ade- actual de ingresos per capita y ilegar a uncuado de precios, la rehabilitaci6n de la nivel, que seguiria siendo bajo, de US$900 eninfraestructura, la racionalizaci6n de la el primer tercio del siglo XXI.estructura de ingresos y la programaci6nde las inversiones publicas, esferas en lasque pueden basarse los puntos fuertes tanto Reconsideraci6n de la estrategiadel gobierno como del Banco.

Para que en los pr6ximos anios la asistenciaSin embargo, a partir de 1992, junto con la que presta el Banco a Ghana sea importante,intensificaci6n de la democratizaci6n, se eficiente y eficaz en funci6n de los costos envolvieron a presentar problemas fiscales. la mayor medida posible, se recomiendaAun queda por aplicar parte de un pro- que el Banco y el gobierno reconsideren engrama importante de ajuste. Los resultados forma conjunta algunas de sus prioridadeshan sido desalentadores en lo que respecta a y se centren cada vez mas en las cuestioneslos siguientes aspectos: promoci6n del sector mencionadas en los dos parrafos prece-privado, reestructuraci6n de las empresas dentes. Esto entrafia prestar mfis atenci6n alpublicas, reforma de la administraci6n desarrollo institucional, la gesti6n econ6-pimblica, control del gasto, desarrollo agri- mica, la dependencia de la ayuda y loscola, nivel de instrucci6n, protecci6n del problemas relativos a la sostenibilidad. Dosmedio ambiente y fortalecimiento institu- de los principales problemas de esta natu-cional. Tambien ha sido lento el avance de raleza consisten en c6mo aumentar consid-las privatizaciones, pese a que se adoptaron erablemente la tasa muy baja de inversi6nalgunas medidas nuevas al respecto en 1994 privada (que hace poco fue de 4 por cientoy principios de 1995. del PIB) y la tasa de ahorro nacional aun

mas baja (de menos de 1 por ciento delLas perspectivas de que se mantenga una PIB).tasa satisfactoria de crecimiento per capita yse reduzca mas la pobreza son inciertas para Se recomienda ademas que el Banco deter-Ghana, a menos que este pais siga contando mine nuevamente algunas de sus ventajascon niveles extraordinariamente elevados de comparativas y mejore sus indicadores deayuda en condiciones concesionarias, lo que desempeflo. Ademas, deberia perfeccionar sustal vez no sea factible ni, es mas, recomend- procediniientos de formulaci6n y seguimientoable por las razones que se explican mas ade- de la ejecuci6n de su estrategia de asistencia alante. El nivel de crecimiento agricola sigue los paises, como se expone claramente en lossiendo inferior al necesario y viable, y bien documentos de esa indole.

11

JWWADRO J�: BREVE DESCRWCJ(5N LIE GHANA

�i�ana es Un pais de ingreso bajo. con unos 1.6 La economia en general dependi6 en grani�fll�nes de habitantes, ubicado en la costa medida de la producci5n y e�portad6n 4�occld�nlal de Africa. Su superficie es aproxi- productos primarios;(agricolas y minerales).�adamente igual a Ia del Reino Unido, Las exportaciones de orp, cacao y maderaUganda y Ia Repi�b1ica Dexnocnitica Popular si�uen �s�nta�tci Ei wtayor parte del totalLao. El ingreso per ckipita en 1992 era .de de exportaciones de mercancias; a eIla� les�JS$45O (segiTh el m�todo del Atlas del Eanco corresponde, respectivamente, una propor-Muindial). La esperanza media de vida es de ci�n de 29 por ciento, 31 por ciento y 1� pori,mos 55 aiXos y Ia tasa de alfabetizaci6n es de ciento en ese total.

ximadarnente 60 por ciento.El sector agricola, incluidas la silvicultura y

Ia pesca, sigue siendo el sector predomi-�VQlUd611 politica nante; ernplea a unas dos terceras partes de

Ia fuer�a lahoral y a �l se le atribuye asi Ia�ana declar� su independencia en 19� Y mitad del producto interno bruto (PIB) total.�it� gobernada por sucesivos regimenes La producci6n agricola, que t�s �undamenta1-dvlies �y militares. En 1992 se �probd tma mente de pa�e�ia escala se concentra en k�snueya constitucidn por refer6ndum y �e lIe- cullivos alimentarios bAsicos y de cacao. En

a �abo elecciQnes para presidente Y la actualidad Qhana e� el segundo producto�i�k�nbros del poder legislativo en las que y exportador de ca4�ao m�s grande del�gtticlpatnn vaxios partidos politicos. El nmndo f4espu�s de C�te �U oire). - -

�t�t �residente del gobierno civil electo es

�l 7�nlente (retirado) de la Fueria A�rea Los servicios co�stituyen �l s&gundo sectoi�rry l�awllngs. La� pr�5ximas elecciones de mAs grande de la econom(a; a ellos Ics �prre-,

(pxesidente y rolembros del sponde una proporci6n creciente del P$ (37

P�ier Wgl�lativ�) tendrAn lugar en 1996. � ciento en 1993), en tanto que al sectorindn�stria1 le corresponded otro 1(; por ciento.

El �iste�na ecou6micp�voJuci6n �con�uica

Ghana � dotada de una amplia gaina der�cu�sos tiaturales, conio tierra cultivable� La econonifa de Ohaxia creci6 en los pntnerost�osques y dep&sitos importantes de oro, dia- afios que siguieron a I� independencia� peromantes, bauxita y inanganeso, asi como con- se contrajo a partir deinediados 4e los aiiesslderable capacidad de energia hidroek�ctrica. sesenta hasta los priirteros de l�t d�cada de

12 _________ ___________________________________________________________________________

(Recuadro 1 de la pdgina anterior)

1980. Para 1983, a?io en que se adopt6 el Pro- considerable de ayuda del FMI, el Banco

grama de Recuperaci6n Econ6mica (PRE), la Mundial y otros donantes.economnia de Ghana se habia desmoronado.Por lo tanto, el PRE se iicd6 en momentos en Se aplicaron medidas de ajuste con distinto

que habia un amplio consenso acerca del grado de intensidad y kxito. Se lograron

cambio. Los prinmeros esfuerzos de la re avances importantes, por ejemplo, en mate-forna, que se centraron en la estabilizaci6n y na de reformna cambiaria, de la polItica corn-

la liberalizaci6n, en general fueron satisfacto- ercial y en la fijacifn de precios. Sin

rios hasta que se deterioro la, discplina fiscal, embargo, adn- queda por aplicar un pro-despues de las elecciones de 1992, lo que dio grama importante de reforna relativa a la

lugar a un nuevo brote de inflaci6n y a la r6p- gesti6n del sector pdblico y la adminis-

ida depredaci6n del tipo de camnio, ahora de trai6n p(tblica, venta de empresas p(iblicas

mercado. y la creacifn de un chima propicio para eldesarrollo del sector privado. El aspecto n-us

El Pil anual medio durante el decenio, endeble de la recuperaci6n econ6mdca ha

despues de la introduccifn del PRE, fue de sido las bajas tasas de ahorro privado e

alrededor de 5 por ciento, en tanto que el inversi6n, que deben aumentar consider-

sector de servicios fue el que creci cDn mris ablemnente para sostener el crecimiento a

rapidez. El crecirniento global del sector plazo medio. Para que el creciniento se

agricola durante esta decada fue de 2,3 por sostenga a largo plazo tambi6n es preciso

ciento, el de la pro6duccion de cacao fu:e de abordar los problemas relativos al elevado

3,1 por ciento, y el de la producci6n de ah- creciniento de la poblaci6n, la baja de la

mentos de s6lo 2,2 por ciento. Esta recu- productividad agricola y las cuestiones

peracion se vio respaldada por un nivel ambientales.

ALCUNOS DE LOS FRINCIPALES INDICADORES (193)

Porcentaje del PIB: Porcentaje

Inversi6n privada 4 Poblaci6n (crecimiento anual) 311InversOn piblica 10 Tasa de matriculaConsurno 101 Prhnaria 71Ahorro nacional 1,4 Secundaria 39Dinero en sentido amplio 17 lMac6n 25Financiarniento externo 9

13

En los afos ochenta, la estrategia y lk,s oricial para ei desarrollo (ACIOD fucron deU,Ce 1 ualouu graruil oyudiar di un promedio dei l" por crento del l'l3 (esta

gobiemo de Ghana a estabilizar, liberalizar y cifra no incluye algunos de los acuerdos delrehabilitar una economia en crisis. Sobre FMI).todo a mediados de los afios ochenta, el pro-grama del Banco de asistencia para Ghana Los gastos en concepto de desarrollo del sec-se destaca por la pertinencia de sus obje- tor social e infraestructura financiados contivos, la eficacia de la ejecuci6n, la eficacia fondos de ayuda tal vez sigan aumentandoen funci6n de los costos y el desempefio de por algiin tiempo. rin embargo, para el crec-sus funcionarios. El gobierno tambi6n logra imiento y la reducci6n de la pobrezauna buena clasificaci6n por su desempefno sostenidos hace falta una reacci6n muchocomo prestatario. mas energica del sector privado, basada en

un volumen de ahorro nacional e inversi6nLo mas dificil del programa de ajuste de privada mayor que el alcanzado hastaGhana auin no ha tenido lugar, y los obje- ahora. La fuerte dependencia de Ghana detivos e instrumentos deben ajustarse en la ayuda externa tambien tiene otras desven-atenci6n a ello. Deben adoptarse e inten- tajas, y en la estrategia para el futuro se debesificarse las dificiles medidas de ajuste reducir esta dependencia.que quedan pendientes. Para que se man-tengan o aumenten el crecimiento y los Tras la elecci6n de un gobierno civil en 1992,beneficios, se debe prestar atenci6n con arreglo a una nueva constituci6n, lainmediata a varios problemas de larga economia politica actual es muy distinta de laduraci6n. Las restricciones con que se topa de los afios ochenta. El Banco encara else vinculan con los aspectos institucionales desafio de ayudar a Ghana a lograr una tran-y administrativos. sici6n a un rumbo mas sostenible de desar-

rollo, al mismo tiempo que transforma susPrincipales problemas. Los interrogantes que instituciones politicas. La sostenibilidad dedeben abordarse expresamente en la estrate- las transiciones politicas y sociales dependegia del Banco para el pais son los siguientes: en parte del desempefio de la economia yZQu6 puede hacer el Banco para mejorar las viceversa. Por lo tanto, la estrategia y losperspectivas de sostenibilidad? ZQue ritmo instrumentos del Banco deben ajustarse a lade cambio hace falta, y en que frentes clave, nueva economia politica.a fin de minimizar los riegos de que el crec-imiento de Ghana no logre mantenerse? La Una visio'n comun. La estrategia futura debemayoria de las cuestiones verdaderamente basarse en la visi6n comuin acerca de laimportantes, a diferencia de los problemas clase de sociedad que el gobierno y elurgentes a los que por lo general se presta pueblo de Ghana quieren que exista. Comomas atenci6n, pueden denominarse "proble- afirm6 una alta autoridad de Ghana:mas de sostenibilidad". Dos de los princi- "Cuando sabemos lo que queremos ypales de estos son los relativos al "sector tomamos la iniciativa, las cosas van bien,punta" y la dependencia de la ayuda. pero cuando es el Banco Mundial el que

toma la iniciativa, las cosas no van tanEn los anios ochenta la recuperaci6n tuvo bien." La principal funci6n del Bancoque basarse en el impulso del sector pulblico deberia ser ayudar a los ghaneses a dis-y la ayuda extranjera. En el periodo 1988-92, cernir las opciones, para luego promoverlos desembolsos netos anuales de asistencia los cambios necesarios en las politicas,

14

inversiones e instituciones. Si en los anos Sin lugar a dudas, acelerar el ajuste seri difi-ochenta el principal impulso de la estrategia cil en vista de que el proceso de democrati-era "lograr el nivel adecuado de precios", zaci6n puede to-A ,ar lento el procesoen los noventa deberIa ser "lograr institu- decisorio. Sin embargo, debe admitirse queciones y una gesti6n econ6mica adecuadas". las restricciones son otras y que la disposici6n

de los donantes a apoyar reformas que no seLas medidas de politica mas acuciantes para agilizan es incierta en una epoca de recursosel gobierno, y que el Banco y los donantes escasos de donaci6n. Lo que se necesita en ladeben respaldar, comprenden la formu- actualidad es una estrategia que permitalaci6n y ejecuci6n de una "estrategia combi- establecer un clima mas propicio para lasnada" (tal como se la define mas adelante) inversiones y la actividad empresarial. Alque otorgue prioridad al desarrollo agricola, parecer, la aceleraci6n de los programas dela planificaci6n de la familia y la protecci6n privatizaciones, el claro apoyo al desarrollodel medio ambiente, la reforma de la admin- del sector privado y las reformas administra-istraci6n piblica, el fortalecimiento de la tivas profundas son las bases que permitirancapacidad (aunque no a trav6s de los convencer al sector privado de que es pocoproyectos tradicionales de asistencia tecnica probable que se inviertan las politicas cadaque hasta ahora han demostrado ser inefi- vez mAs acordes con el mercado.caces), y la venta y reestructuraci6n deempresas pCblicas grandes e ineficientes. El Banco. El Banco contaba con una ventaja

comparativa de larga data en lo que seDos problemas cruciales son c6mo estimular refiere a ayudar a Ghana a corregir politicasla reacci6n tan necesaria del sector privado y macroecon6micas y sectoriales distorsion-revertir la baja de productividad de la agri- adas y rehabilitar su infraestructura. Ahoracultura sin ocasionar dafnos para el medio es preciso que el Banco fortalezca y mejoreambiente. mas su capacidad, a fin de aumentar su

eficacia en esferas clave en las que en el,Mds gradualismo o avances decisivos? Desde pasado la asistencia no ha sido tan eficaz,1983, la estrategia oficial se ha basado en un a saber:enfoque gradualista, debido a lo cual la apli-caci6n del programa de medidas de estabi- * La promoci6n del sector privado, esferalizaci6n y liberalizaci6n llev6 la mayor parte en la que la Corporaci6n Financierade la decada. Este gradualismo fue propici- Internacional debe desempefiar un papelado por el volumen considerable de ayuda mAs activo, incluso a traves del Fondoproporcionado por los donantes, especial- para empresas africanas;mente en forma de ayuda de rApido desem-bolso, gran parte de la cual sirvi6 para * El fomento del fortalecimiento institu-financiar gastos corrientes. Ahora es preciso cional y la capacidad;acelerar el ritmo de la estrategia y revisar lasecuencia de las futuras medidas pro- * La ayuda para achicar el sector publico ygramAticas y de politicas teniendo en cuenta mejorar su eficiencia, yque con la estrategia actual no se ha logradopromover la reacci6n necesaria del sector * La aclaraci6n de analisis y opciones deprivado ni elevar la productividad agricola, politicas a fin de promover debates pCibli-factores de los que tanto depende la sosteni- cos luicidos de amplia participaci6n sobrebilidad del desarrollo en el futuro. los principales problemas de politicas.

15

NRecm-neiiiiiLJones acerca del disenio de ahorro total y nacional privado; la tasa "nat-*a >ildktrid Idei E>anco ural" de ahorro (ahorro riacional menos

depreciaci6n del capital fijo y agotamientoCentrar la atencidn en la sostenibilidad. La de los recursos naturales); la tasa de inver-estrategia del Banco debe abarcar un plazo si6n privada y la tasa anual de crecimientomas largo y prestar primordialmente aten- de la inversi6n privada; la tasa de crec-ci6n a la determinaci6n y eliminaci6n de las imiento de las exportaciones, especialmenterestricciones que se oponen a un desarrollo de las exportaciones no tradicionales; la tasasostenible a largo plazo. Ello entrafta la de rtatricuia primaria (sobre todo de !asnecesidad de formular la estrategia con- nifnas) y los resultados de los test basados ensiderando especificamente las instituciones un criterio, y la relaci6n ingresos pulblicos-politicas, sociales y econ6micas en evoluci6n, PIB. Preocupan tanto los niveles como lases decir, en el contexto de la economfa tendencias de estos indicadores. Los indi-politica. En definitiva, la estrategia se basaria cadores de gesti6n pertinentes (que seen una visi6n comiun acerca de la clase de admite que son dificiles de determinar a finsociedad que el gobierno y el pueblo de de que puedan seguirse objetivamente) com-Ghana quieren lograr. prenderian: la previsibilidad, apertura y

competencia en materia de formulaci6n deSeguir el desempefno frente a indicadores de las politicas; la calidad profesional de lasostenibilidad. No existe un conjunto convenido burocracia; la responsabilidad del podero establecido de indicadores de sostenibilidad ejecutivo del gobierno; la participaci6n de lacon respecto a Ghana. Seria util identificar y sociedad civil en los asuntos puiblicos; elutilizar un conjunto asi en la estrategia de asis- imperio de la ley, y la frecuencia de los dis-tencia a los paises (CAS) a los fines del analisis turbios civiles.de las opciones, el dialogo sobre politicas y elseguimiento del desempefio. En el informe se Formular y aplicar una "estrategia combinada".recomienda un subgrupo de indicadores de En la CAS se debe otorgar prioridad mas ele-esa naturaleza (vease el Cuadro 5.8). Se vada al desarrollo agricola, la planificaci6n derecomienda ademas formular y aplicar un la familia y la protecci6n ambiental. El t6r-subconjunto adicional de indicadores de fort- mino "combinada" se refiere en este caso a laalecimiento de la gesti6n y las instituciones. Se relaci6n entre el rapido crecimiento de ladebe complementar el seguimiento a nivel poblaci6n, la disminuci6n de la produc-macroecon6mico con un mayor seguimiento a tividad agricola y el deterioro del medionivel microecon6mico de las actitudes y los ambiente. La existencia de problemas inter-comportamientos de los agricultores, quienes conectados justifica que se les preste atenci6nintegran el sector informal, la mujer en la especial, tanto en el programa de finan-fuerza laboral, los pobres, la administraci6n ciamiento como en los servicios de distintapublica y los estudiantes y maestros en las naturaleza (estudios econ6micos y sectoriales,aulas. dialogo sobre politicas y coordinaci6n de la

ayuda). Se necesita una mejor base de infor-Los principales indicadores de la sostenibili- maci6n (por ejemplo, acerca de los niveles ydad del crecimiento y la reducci6n de la tendencias de la producci6n agricola y la pro-pobreza son: la tasa de fecundidad; el ductividad) y se deben promover nuevosaumento de la productividad y los cambios enfoques ejemplares que pongan claramenteestructurales en la agricultura; las tasas de de manifiesto los vinculos fundamentales.

16

En Ghana, la mayor parte de los pobres vive empresas publicas y privadas, la existenciaen zonas rurales y en la regi6n norte del pais, de monopolios de hecho, el fin de lucro, ladonde la interconexion de los probiemas es obstrucci6n y la deshonestidad por parte demas acentuada. En consecuencia, abordar los los funcionarios puiblicos; la prestaci6n inefi-vinculos existentes reviste importancia vital ciente de infraestructura y otros bienes y ser-para aminorar la pobreza. Tambi6n es esen- vicios suministrados por el estado, y lascial para evitar conflictos intertribales, como sefiales que se reciben (cuando no se envianlos ocurridos en la regi6n norte del pais a intencionalmente) de que las politicas estatis-principios de 1994, lo que al parecer se tas o populistas y las practicas intimidatoriasatribuye, al menos parcialmente, a la cre- no han quedado totalmente relegadas alciente escasez de tierras fertiles y a las dis- olvido.putas acerca de los derechos de propiedadsobre la tierra. En consecuencia, en la estrategia del Banco y

en su dialogo sobre politicas con el gobiernoPrestar atencion especial al desarrollo institu- se debe hacer hincapi6 en la necesidad decional. Prestar mas atenci6n a la sostenibili- abordar los factores de la gesti6n de losdad entrafna a su vez la necesidad de asuntos publicos que en general menoscabancentrarse en las restricciones institucionales. la confianza del sector privado y, por ende, elTanto el Banco como el gobierno deben for- nivel de ahorro e inversi6n privados.mular y aplicar una estrategia coherente e Ademas, es preciso orientar la estrategia aintegral relativa a la reforma de la adminis- largo plazo a la promoci6n de la sostenibili-traci6n publica. Esta estrategia debe abordar dad social y politica, lo que entrafia asegurarlas causas basicas de la subutilizaci6n de la una amplia participaci6n de la sociedad,capacidad y el potencial de los recursos especialmente de los segmentos mas pobres,humanos de Ghana en la actualidad, el en la distribuci6n de los beneficios del crec-exceso de personal y la baja productividad imiento y la asistencia externa.de la administraci6n publica y de las empre-sas puiblicas y los resultados insatisfactorios Aumentar la eficacia de la estrategia del Banco.de la mayoria de los proyectos de asistencia Los futuros documentos de estrategia deltecnica (no s6lo de los del Banco). Banco (incluidos los sectoriales y otros docu-

mentos de estrategia, asi como las estrate-Prestar atenci6n especial a la gesti6n de los asun- gias de asistencia a los paises) deben ser mastos publicos. Prestar mas atenci6n a la sosteni- eficaces y debe asegurarse que en ellos sebilidad entrafia la necesidad de centrarse en aborden frontalmente interrogantes comolos factores relativos a la gesti6n de los asun- los siguientes: LCuales son las principalestos publicos. El gobiemo sigue siendo en restricciones a corto y a largo plazo? ,Cualesalgunas esferas parte del problema y no de la son los problemas fundamentales en torno asoluci6n. Por ejemplo, el exceso de personal y la sostenibilidad, y que pueden hacer alel mal funcionamiento de la administraci6n respecto los donantes? ZCuMles son los ries-publica y de las empresas publicas de Ghana gos que pueden ser objeto de gesti6n yconstituyen un impedimento para el desar- cuales no? ZQu6 atenci6n se presta arollo del sector privado, por cuanto desplaza ensefianzas extraidas? ZQu6 masa critica dea este en el ambito financiero (volumen exce- servicios de financiamiento y de otra natu-sivo de creditos a las empresas paraestatales); raleza del Banco y los donantes puede mejo-fomenta la desigualdad de posibilidades para rar las perspectivas de lograr un avance

17

significativo en 10 que respecta a la elixni- los ghaneses existe urla diemnanda insatis-,'.AriAm. 5 ' 'Y cuilcs sor . as fecl'a de ittiumicult)y dvlnansis ae iaventajas comparativas del Banco para situaci6n economica y social y las perspecti-prestar ayuda a Ghana? En las secciones vas del pais. El Banco s6lo puede ayudar aanteriores de este resumen se han abordado satisfacer esta demanda mediante laalgunas de estas cuestiones, que se tratan en difusi6n mas amplia de sus documentos,mas detalle en el informe principal. Los doc- alentando al gobierno a discutir informes,umentos de estrategia en el futuro deben del Banco y conjuntos, con un publico mascentrarse, mas que en el pasado, en la evalu- amplio, y realizando ms actividades deaci6n de los riesgos y la explicaci6n clara de extensi6n en lo que respecta a la prestaci6nlas opciones (sobre todo con respecto a los de servicios distintos de los de finan-riesgos que deben asumirse o evitarse) que ciamiento. Las actividades de extensi6nse presentan a los directivos superiores y al deben ser interactivas; los funcionarios delDirectorio Ejecutivo. Banco deben escuchar mas las opiniones y

preocupaciones de la poblaci6n y otrosFortalecer la evaluacio'n y responsabilidad de la interesados, como los especialistas en elCAS. La consecuencia natural del aumento anAlisis de problemas sociales y politicos dede la eficacia de la estrategia del Banco es Ghana.que la CAS y el analisis de esta deben servir,entre otras cosas, para aclarar la responsabil- Formular un enfoque mds estrategico respectoidad que cabe (o no) a la Oficina Regional del fortalecimiento ins titucional y la asistenciapor la ejecuci6n de la estrategia de asistencia t&nica. Ghana no tiene una estrategia coher-a los paises. Tal vez sea util y posible identi- ente para la reforma de la administraci6nficar algunos indicadores de los resultados publica y el sector paraestatal, por lo quede la aplicaci6n de la estrategia que sirvan ayudar a formularla reviste la maxima prior-para reforzar la responsabilidad sin compro- idad para el Banco. Otro problema ha sido lameter la flexibilidad que necesita la Oficina ineficacia de la asistencia tecnica paraRegional por razones de tactica. De Ghana. Con mucha frecuencia dicha asisten-cualquier manera, se recomienda que los cia se ha caracterizado por la prevalencia defuturos documentos de estrategia de asisten- productos y acontecimientos de corto plazocia a los paises contengan una secci6n mas en procesos largos orientados al fortalec-importante que abarque la autoevaluaci6n imiento institucional y de la capacidad y alde los logros y fracasos del Banco en lo que aprendizaje sobre la marcha. El Banco debehace a la consecuci6n de las metas y obje- alentar al gobierno a convocar a un grupotivos especificados en documentos anteri- consultivo local que se centre en estos prob-ores. En ellos tambi6n se debe explicar el lemas de asistencia tecnica y elabore un planprovecho que se saca de ensenanzas convenido de acci6n.derivadas de esa evaluaci6n para la estrate-gia actual. Abordar las causas reales de la gestion inade-

cuada del gasto. Pese a los muchos examenesdel gasto putblico y al suministro de asisten-

Recomendaciones para alcanzar cia tecnica en materia de gesti6n financiera,los objetivos la mala administraci6n del gasto de Ghana

sigue siendo un problema grave. Se debeAcercarse y escuchar a cfrculos mds amplios de dar prioridad a la soluci6n de este problema,interlocutores dentro y fuera de Ghana. Entre aunque sin liberalizar mas las condicionali-

18

dades relativas a la participaci6n exigida del a un niumero excesivo de proyectos engobierno en el financiamiento de los gastos relaci6n con la capacidad de absorci6n dellocales. pais; a actitudes dependientes (como dejar

que los donantes hagan lo que hace falta); aNo pecar de optimismo acerca del exito del caso de distorsiones de los incentivos creadas porGhana. Teniendo en cuenta el importante pro- escalas multiples de financiamiento comple-grama inconcluso de reforma y el desafio que mentario y asignaciones proporcionados porrepresenta la sostenibilidad de los beneficios, los donantes, y al predominio de objetivos eexagerar el exito del caso de Ghana puede indicadores de desempefio fijados por losperjudicar al pais, al distraer la atencion de donantes. Es preciso contemplar expresa-las reformas que hacen falta. Sin embargo, mente esto en el disefio de los servicios dehasta ahora el exito felativo de las politicas financiamiento y de otra naturaleza.oficiales en el marco del PRE puede consider-arse un ejemplo para otros pafses que auin no Formular polfticas y prdcticas mejores de coordi-estan empefiados en la tarea del ajuste. nacion de la ayuda. Todas las recomendaciones

mencionadas tienen repercusiones impor-Estar alerta ante la faz negativa de la excesiva tantes para la coordinaci6n de la ayuda, yadependencia de la ayuda. El Banco debe prestar que al Banco le cabe ayudar a que todos losma s atenci6n a reducir al minimo los posi- donantes se centren en la sostenibilidad, tra-bles efectos adversos de los niveles "excesi- bajen en el contexto de una estrategia cominvamente altos" de ayuda externa, incluso en de desarrollo institucional, y atenien losel comportamiento de los funcionarios puibli- aspectos negativos de la dependencia de lacos. Los volfumenes excesivamente elevados ayuda, por ejemplo. En la actualidad la coor-de ayuda tal vez permitan a los gobiernos dinaci6n de la ayuda es eficaz s6lo en algu-posponer la adopci6n de reformas necesarias nas esferas, y es preciso instar al gobiemo apero dificiles desde el punto de vista politico, desempefiar una funci6n mucho mas impor-con lo que se reducen el ahorro y la inversi6n tante. Sobre todo, la coordinaci6n sectorial yprivada y se demora la reacci6n prevista de subsectorial debe fortalecerse en el contextola oferta. Ademas, tambien pueden conducir de planes de acci6n y estrategias sectoriales.

19

Resume' analvtiiueW A

Dans 1'ensemble, les interventions de la tion dans le temps. Ce programme etait mani-Banque ont aide le Ghana a faire des progres festement l'oeuvre du gouvernement et ne luieconomiques considerables au cours des dix a pas et impose.derni&es annees. Mais ceux-ci ne sauraientetre durables a moins: (a) que l'application Au cours des ann6es 80, dans une situationde nombreuses mesures d'ajustement, en marquee par des relations particulierementgrande partie inachevee, ne soit reprise et tendues et une mefiance reciproque, laacceleree a bref delai; (b) que le gouverne- Banque a reussi dans l'ensemble a etablirment et les bailleurs de fonds n'entrepren- d'excellentes relations avec le Ghana et unnent un effort concert6 pour s'attaquer aux veritable esprit de partenariat avec un< problemes de durabilite >> fondamentaux groupe restreint de fonctionnaires ghaneensqui se posent pour le long terme. Le mot c1l responsables de la preparation et de la miseest durabilite. Il faudra donc que les criteres en oeuvre du PRE. Un facteur essentiel qui aqui serviront dans l'avenir a evaluer le suc- soutenu les r6formes depuis 1983, malgre unces de l'aide de la Banque soient etroitement recul en 1992, a ete la presence permanentelies a une serie particuliere d'indicateurs de et la competence de ce groupe.durabilite.

Les principaux r6sultats obtenus depuisll y a plus de dix ans maintenant que le une dizaine d'annees sont bien connus.Ghana a lance son Programme de reforme Le PRE prevoyait comme elements fonda-6conomique (PRE) global mais << progressif '>. mentaux une reforme du taux de changeLe Groupe de la Banque lui a prete plus de et une reforme commerciale, qui lui ont2 milliards de dollars depuis 1984, dont plus permis d'avoir aujourd'hui un march6de 1 milliard pour des operations d'ajuste- interbancaire des changes, de faiblesment. Des progre,s considerables ont ete restrictions quantitatives et de faiblesrealis6s grace aux efforts concertes du gou- niveaux de protection. La r6glementationver-nement et de la populat-ion ghaneenne, generaie des prix et de la distribution a esoutenus par le Groupe de la Banque mondi- demantelee. La situation budgetaire a etale et d'autres bailleurs de fonds. Le Fonds sensiblement amelioree et rationalis6e,mon6taire international (FMI) et la Banque notamment du c6te des recettes. L'inflationmondiale ont joue un r6le important en a et ramenee de plus de 75 pour cent auaidant le gouvernement a etablir et pour- debut des annees 80 a 10 pour cent en 1992.suivre le PRE au fur et a mesure de son evolu- Des investissements plus consid6rables ont

20

ete consacres a la remise en etat de l'infra- mesures importantes dans ce sens aient 6t6structure moribonde du pays. La pauvrete prises en 1994 et au debut de 1995.a e attenuee et les indicateurs sociaux ontprogresse. Le cadre reglementaire a et La possibilite de pouvoir assurer durable-amelior& Les exportations de cacao et ment un taux de croissance par habitant sat-d'autres produits ont amorce une reprise. isfaisant et de reduire encore la pauvreteEnfin, la croissance du produit interieur reste incertaine, a moins que le Ghana nebrut (PIB) a 6t6 de quelque 5 pour cent en continue a dependre d'un volume excep-moyenne au cours des dix dernieres tionnellement eleve d'aide concessionnelle,annees. solution qui n'est peut-etre ni faisable, ni

souhaitable pour les raisons indiqu6es ci-Par ailleurs, a la difference des r6sultats con- dessous. La croissance agricole reste tresstates dans de nombreux pays appliquant inferieure a ce qui est a la fois necessaire etune politique d'ajustement, les objectifs de la possible, et pourrait ne pas d6passer le tauxstabilisation ont ete atteints parallelement a de croissance de la population. L'epargneune augmentation des depenses publiques totale et l'epargne privee, de meme que lesreelles, notamment pour les services sociaux investissements prives, restent extremementet les investissements publics. Ce resultat oii faibles. Les resultats de tests dans les 6colesl'on a gagn6 sur les deux tableaux a facilit6 la primaires sont 6galement tres inferieurs a ceconduite d'une << politique d'ajustement a qu'ils devraient &re. Le Ghana connait devisage humain >>. Le probleme de la pauvrete serieux problemes ecologiques. Meme si leau Ghana est moins grave que dans les taux de croissance de 5 pour cent des dixautres pays africains et a pu etre attenue au dernieres ann6es devait durer, il faudrait,cours des dernieres annees. Les autorites, avec le taux de croissance actuelle de la pop-non sans succes, ont continue a rechercher de ulation, 35 ans environ pour doubler l'actueljustes niveaux de prix, a renover l'infrastruc- revenu par habitant et atteindre le niveau,ture, a rationaliser la structure des recettes et pourtant faible, de 900 dollars d'ici le pre-a mieux programmer les investissements mier tiers du XXIe siecle.publics, domaines ou l'on peut tirer parti despoints forts dont disposent a la fois le gou-vernement et la Banque. Reconcevoir la strategie

Des problemes budgetaires sont toutefois Pour que l'aide de la Banque au Ghana aureapparus au moment de la transition vers cours des annees a venir soit aussi correcte-un regime plus democratique amorcee en ment orient6e, efficace et rentable que pos-1992. Il reste une longue liste d'operations sible, il est recommande que la Banque et led'ajustement inachevees. Les resultats sont gouvernement r6examinent ensemble cer-decevants dans le domaine du developpe- taines de leurs priorit6s et se concentrentment du secteur prive, de la restructuration davantage sur les questions mentionneesdes entreprises publiques, de la r6forme de dans les deux paragraphes pr6c6dents. Celala fonction publique, du contr6le des suppose qu'ils accordent une plus grandedepenses, du developpement agricole, des attention au developpement des institutions,resultats scolaires, de la gestion de L'environ- 3 la gestion des affaires economiques, a lanement, et du developpement des institu- question de la dependance vis-a-vis de l'aidetions. Les progres du c6te de la privatisation et a celles liees a la durabiite. Deux questionsont aussi et6 lents, bien que de nouvelles essentielles relatives a la durabilit6 sont de

21

sav.,ir cvi-ninenl relever sensibiiement le trcs aborder expliciteinent sont le.s siiivantes-au x *it intvestissements priVes (qui est Que peut faire la Banque pour ameliorer les

recemment tombe jusqu'a 4 pour cent du perspectives d'un redressement durable? APIB) et le taux d'epargne national encore plus quel rythme le changement doit-il sefaible (moins de I pour cent du PIB). derouler, et sur quels fronts essentiels, pour

6viter au maximum le risque de n'accomplirIt est recommande en outre que le Banque que des progres de courte duree? La plupartredefinisse certains de ses avantages com- des questions vraiment importantes - parparatifs et affine ses indicateurs de perfor- opposition aux questions urgentes qui ten-mance, tout comme elle devrait ameliorer dent a retenir toute 1'attention - pourraientles m6thodes qu'elle applique a la formula- Wtre appelees les << questions de durabilite >>.tion et a la surveillance, au niveau de l'exe- Parmi les questions principales figurent cellecution, de la strategie d'aide qu'elle du << secteur dominant»> et celle relative a laapplique au Ghana, telle qu'enoncee dans dependance vis-a-vis de l'aide.les documents relatifs a cette strategie.

Au cours des annees 80, le redressementAu cours des annees 80, la strategie et les economique ne pouvait s'appuyer que sur leinstruments utilises par la Banque ont e secteur public en tant que secteur dominantefficaces et ont aide le gouvernement et recevait son impulsion de 1' aide etrangere.ghaneen a stabiliser, a lib6raliser et a Au cours de la periode 1988-92, les decaisse-redresser une 6conomie en crise. Vers le ments annuels nets au titre de l'aidemilieu des ann6es 80, notamment, le pro- publique au developpement (APD) ont etegramme d'assistance de la Banque pour le de 10 pour cent en moyenne du PIB (chiffreGhana a obtenu d'excellents resultats en ce qui ne comprend pas certains accords con-qui concerne la pertinence des objectifs, Yeffi- clus avec le FMI).cacite d'execution, la rentabilite et le travaildu personnel. Le gouvernement, de son cote, Les depenses soutenues par l'assistance pourest tres bien note aussi en tant qu'emprun- l'infrastructure et le d6veloppement duteur. secteur social peuvent continuer a assurer la

croissance pendant un certain temps. MaisLes phases les plus difficiles du programme une croissance et une attenuation de la pau-d'ajustement du Ghana sont encore a venir, vrete durables exigent une r6action beaucoupet les objectifs vises et les instruments plus vigoureuse du secteur prive, qui sup-appliques devront etre modifies en con- pose un niveau d'epargne int6rieure et d'in-sequence. Il reste a prendre et a approfondir vestissement priv6 plus eleve que celui qui acertaines mesures d'ajustement difficiles. I1 ete realis6 jusqu'a present. La forte depen-faut d'urgence aborder une serie de ques- dance du Ghana vis-a-vis de l'aide 6trangeretions concernant le long terme si l'on veut a aussi d'autres inconv6nients et la strategie amaintenir - ou acc6lerer - le rythme de venir devrait chercher a la r6duire.croissanlce actuel et !es progres deja accom-plis. Les contraintes fondamentales dans ce Depuis l'6lection d'un gouvernement civildomaine se situent sur le plan institutionnel en 1992 dans le cadre d'une nouvelle consti-et sur le plan de la gestion. tution, l'economie politique est tres dif-

ferente de celle des annees 80. Le defi queQuestions essentielles. Les questions que la doit relever la Banque est d'aider le Ghana astrategie de la Banque pour le Ghana doit op6rer avec succes une transition vers un

22

mode de d6veloppement plus durable tout Deux questions cruciales se posent: Com-en reformant ses structures et m6canismes ment stimuler les r6actions du secteur privepolitiques. La viabilit6 des transitions poli- dont lYeconomie a besoin? Commenttique et sociale depend en partie des resul- inverser le mouvement de baisse de la pro-tats de l'6conomie, et inversement. La ductivite dans I'agriculture sans nuire aBanque doit donc concevoir des strategies et 1'environnement?des instruments qui soient adaptes A la nou-velle economie politique. Faut-il plus de progressivit - ou des modifica-

tions radicales? Depuis 1983, le gouverne-Une vision commune. La strategie future doit ment met en oeuvre une strat6gie graduelleere fondee sur une vision commune du genre qui a exige presque dix ans pour l'applica-de societ6 que le gouvernement et le peuple tion de la plupart des mesures de stabilisa-ghaneens souhaitent creer. Comme I'a declare tion et de liberalisation. Cette demarcheun haut fonctionnaire ghan6en: << Lorsque progressive a et facilitee par I'aide consid-nous savons ce que nous voulons et que nous erable fournie par les bailleurs de fonds,prenons des initiatives, les choses se passent notamment sous la forme d'aide A decaisse-bien. Mais lorsque c'est la Banque mondiale ment rapide, dont une grande partie a serviqui prend l'initiative, les resultats sont moins a financer les d6penses ordinaires. Il fautbons. >> Une des fonctions essentielles de la aujourd'hui en accel6rer le rythme et reex-Banque devrait etre d'aider les Ghaneens A aminer la chronologie des elements des poli-definir leurs options, puis d'encourager les tiques et programmes futurs puisque lamodifications de politique, les investissements strategie en question n'a pas r6ussi A provo-et la cr6ation des institutions necessaires. Si, quer une r6action du c6te du secteur priv6,au cours des annees 80, l'orientation princi- ni A accroitre les rendements agricoles, 6l6-pale de la strategie a consiste A <« rechercher de ments pourtant indispensables A unjustes niveaux de prix >>, elle devrait pour les developpement durable au cours des anneesannres 90 consister A aider le Ghana a A venir.<< rechercher une juste structure pour ses insti-tutions et une juste conduite des affaires Une acc6leration de l'ajustement sera incon-economiques >>. testablement difficile etant donne l'evolution

vers la democratie qui pourrait ralentir leLes mesures que le gouvernement devrait processus de d6cision. Il faut toutefoisprendre imperativement, et que la Banque et reconnaitre que les contraintes fondamen-d'autres bailleurs de fonds devraient tales ont chang6 et qu'il n'est pas certain, aappuyer, comprennent la mise au point et une 6poque oii leurs ressources sont rares,l'application d'une << strategie nexus >> (voir la que les bailleurs de fonds soient disposes Ad6finition ci-dessous) qui accorde la priorite appuyer des reformes sans aucune accel6ra-au developpement agricole, au planning tion. Ce qu'il faut aujourd'hui, c'est unefamilial et A la protection de l'environnement, strat6gie qui modifie radicalement le climatA la reforme de la fonction publique, au ren- des investissements et le milieu des affairesforcement des capacites (mais non au moyen en faveur du secteur prive. Des programmesdes projets d'assistance technique tradition- de privatisation accel&r6s, un appui sansnels qui se sont montres jusqu'A present inef- reserve au developpement du secteur priv6ficaces), au desinvestissement et A la et des reformes administratives en pro-restructuration du secteur trop vaste et ineffi- fondeur semblent etre les elements neces-cace des entreprises publiques. saires pour persuader le secteur prive qu'il y

23

NCAi)R� I. L1� (�HANA EN BR�F

be 0bna est un pays �. f�ible rewr�t1 ave� ne1lemen�, V&c6�orn4ed�p4p�y �i

une population d'e�wiron 1�i miUidns %Yhae fr�s latg� p�t dei� prQd�t��bit8nts, si1� sur Ia c�te opest deYA�e�. iciAhu� et �Sa superficie terrest�e est � peu pr�s celle tions. Les e�po ta��o�s � d� �du Royaume-Uni, de 1'Ouganda et d� la b�is c6n�$�t �4c�e p�u� J� pF�i� �R�pul*que d�rno�ratique populaire law, te partie 4e� e drtaUoxis de m��4revex�u p�r habitant en 1992 �t�it 4e 4�U �VeC 4�$ p�4s 4e 29, � eL 13 p4:i�&dollars 2m�thode de EAtlas de la� � re�p�yei�entmoudiale). L'esp�ranre de �ie �n�W est

environ 5� �ns et le tau�� cEalp ttk�n 4* �ede14r �eq1�' � kest de te1qt�e 6t1 pduT tent. $yl�4I�e e� 4a i� p�h�

A �'

le� 4�e�

be Ghana a acc�4� � �I ind�p�nd een 1%7cession

et a � gouvern� depuis �p�i* � � ade r�irnes civils et �ait�ires. �p�199Z� �ne � a� �nowie1I� con�tituf�ioma� � �prouV�e p�r �r�f�renWim et �le� ketions p ide�tiel1 et �parlementaires

orW eu lieu s�ut� lThas&de �r�gi�ne vii �1tt est le �pi�aixdefde Fair J�rry �&liAgs (� M�te). 1* � � t4tg� �e4

tunis, presidentlelfe par�� depro �aines �ie � �t�Ilernentaires, �urout J�ieu en � �ji� 4

Structure �conw3�ii�1IeA

be Ghana poss�id� iine lar&& d& �Ad�u� w�ressources natureijes telles 4ue 1� terres

24

6 --- g$3/ @S @ L

IL 0U92

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n iaUiSe4vA4Gsej IIUpOO ffUO mod uf p u,-m rj'p tx d cl Pg

,~jq~S~Z~s 1 ¢auiw 1apui AUm ?idt,-L -' ' ' 'we

~ 9AJ~Zd ~xd~j ~p xiw~ 'IU t od so~d ap

- .ou f ap -UM u Ul -:f. : ro . : -,:.-s d m'za , . .' , ', n TIP '' g uua(om S

clup sp wi.rjq p o. ebqld -- ' P . ' U '

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Ui la uSbOJ4fI s- IawoI P x E -' SP H TWp I u4:

_~Iqgp np xm' jjbja mood O*jm'xi m I UOW1CISt.W O io?U

-fi uo qe~z.idd Xso aWou axd -cj ap :sP . . .I 1 W PIeSWtum Kl*e .p.

-XdX4/1 t qXOhv ,p ~~~uorpv eOapwdsap ' a.r , salll4duuq;q ap,?a"'.p t jf' 'P' uo; :uop ,,,,,, ,@

-mrns np ~ sua Utap samWop s Q4<X?~P 3GAV I<J >-U,it,S~?~l ap ;' Cspuoauund s*lo a:uo it uanvpa si0 s SU!P g a 4 Y ' t Vi Wirnod V ap lw, lp u X cud s uo SOP 'vxu e it

-flo ?I, luo sajqejzo;,lddv sqold se ss ap:ssa d -ons ap lo gvua4u!,p sOO sw >a1 qiua& o u p-saenbddv op iuo luoul"STO -samgatu se "P9: qWp-n t,4

run geW zi,- In np I

wof, san agmq yep,aawp ,,,,s,,,,,.:,,,nr, ,anbuvg vl apw Um p aw4odhiw P apn . w u q} ,, :,,,,

S , , ; ~~~~~~~~~~~.7 ........................... ; P ...A s v ;@ i

a peu de chances que le Chana Inverse l'ori- tiques et sociaies, de meme qu'econonmiques,d pln iu cest-a-aire du contexte global de l'economie

favorable aux mecanismes du marche. politique. En dernier ressort, la strategie devraetre fondee sur une vision commune du genre

Pour la Banque. La Banque jouit d'un avan- de societe que le gouvemement et le peupletage comparatif bien etabli pour aider le ghaneens souhaitent creer.Ghana a corriger les distorsions de sa poli-tique macroeconomique et sectorielle et a Suivre les resultats en leur appliquant des indica-moderniser son infrastructure. La Banqune teurs de durabiWi .il n'existe pas dans le casdoit desormais d6velopper et affiner ses du Ghana un ensemble convenu ou etablicapacites, afin d'etre plus efficace dans les d'indicateurs fondamentaux de durabilit6. I1domaines essentiels oui elle a le moins bien serait utile d'en creer un et de l'appliquer a lar6ussi jusqu'a pr6sent: strategie d'aide de la Banque pour pouvoir

analyser les options, engager un debat d'ori-• Encourager le d6veloppement du secteur entation et suivre les resultats. Le rapport

prive, domaine dans lequel la Societe propose un sous-ensemble de tels indicateursfinanciere internationale sera amenee a (Tableau 5.8). I1 y est aussi suggere que l'onjouer un r6le de plus en plus actif, mette au point et que l'on applique un autrenotamment par l'intermediaire du Fonds sous-ensemble d'indicateurs de developpe-africain pour les entreprises. ment concernant la conduite des affaires

publiques et le fonctionnement des institu-* Promouvoir le developpement des insti- tions. La surveillance au niveau macro&

tutions et le renforcement des capacit6s. conomique devra etre completee parl'observation plus rigoureuse au niveau

* Aider le gouvernement a r6duire son microeconomique de l'attitude et du com-champ d'action et a devenir plus efficace. portement des agriculteurs, des participants

du secteur non structure, des femmes com-* Effectuer des analyses et definir des prises dans la population active, des pauvres,

options afin d'encourager un debat pub- de la fonction publique, des eleves des ecoleslic elaire sur les questions essentielles de et des enseignants dans les salles de classe.politique gen6rale entre des groupes plusnombreux. Les indicateurs fondamentaux de la durabil-

ite de la croissance et de l'att6nuation de lapauvrete sont les suivants: taux de fecon-

Recommandations concernant dite, augmentation des rendements etl'orientation de la strategie de la restructuration de l'agriculture, taux de l'&Banque pargne int6rieure globale et de l'epargne

privee, taux d'6pargne << reel >> (epargnePrivilegier la durabilite. La strategie de la nationale moins la depreciation du capitalBanquc doit se situer da-ns un norizon tem- fixe et la diminution des ressourcesporel plus long et se concentrer sur la naturelles), ratio et taux annuel de crois-recherche et l'elimination des contraintes fon- sance des investissements prives, taux dedamentales qui font obstacle a un developpe- croissance des exportations, notamment desment a long terme durable. II faudra pour cela exportations non traditionnelles, taux d'in-formuler la strat6gie en tenant express6ment scription dans les ecoles primaires (notam-compte de l'evolution des institutions poli- ment pour les filles) et resultats de tests

26

critiques, enfin rapport des recettes ceux qui ont elat6 dans le nord du pays aupubliques au PIB. Ces indicateurs posent debut de 1994, et qui semblent en partiedes problemes soit du fait de leurs niveaux, attribuables A la rarete croissante de terressoit du fait de leurs tendances. On trouverait fertiles et aux tensions resultant de dif-parmi les indicateurs relatifs a la conduite ferends concernant la propriete des terres.des affaires publiques (qui sont, il faut ledire, difficiles A definir sous une forme qui Viser le d6veloppement des institutions. Pouren permette une surveillance objective): la mieux se concentrer sur la durabilite, il fautprevisibilite, la transparence et la qualite de s'attacher en particulier A la question desla formulatior. des politiques; la conscience contraintes institutionnelles. La Banque et leprofessionnelle chez les fonctionnaires; la gouvemement doivent tous deux formulerresponsabilite financiere du pouvoir execu- et appliquer une strategie coherente et glob-tif; la participation de la societe civile aux ale en vue de la reforme des administrationsaffaires publiques; la primaute du droit; et publiques. Cette strategie devra s'attaquerl'incidence des troubles civils. aux causes premieres de la sous-utilisation

des capacit6s humaines et des competencesConcevoir et appliquer une *. strat6gie nexus >. La qui existent actuellement au Ghana, au gon-strategie d'aide au Ghana devrait accorder flement des effectifs et A la faible productiv-une plus forte priorite au developpement de ite de la fonction publique et des entreprisesl'agriculture, au planning familial et A la pro- publiques, et aux resultats insuffisants de latection de l'environnement. Ici, le terme de plupart des projets d'assistance technique((nexus >> se refere A un enchainement de dif- (pas seulement ceux de la Banque).ferents facteurs: croissance rapide de la pop-ulation, diminution des rendements agricoles Insister sur la conduite des affaires publiques.et degradation de l'environnement. Cet Pour accorder plus d'importance A la durabil-enchevetrement de problemes exige de la ite, il faut aussi prendre en compte les facteursBanque une attention particuliere A la fois au relatifs A la conduite des affaires publiques.niveau du programme de pret et dans le tra- Dans certains domaines, le gouvernement faitvail des services d'appui (6tudes sectorielles encore partie du probleme plut6t que de laet economiques, dialogue d'orientation et solution. Par exemple, les administrations etcoordination de l'aide). Il faut disposer d'une entreprises publiques ghaneennes, avec leurmeilleure base d'information (concernant, personnel plethorique et leur faible niveaupar exemple, les niveaux et les tendances d'efficacite, sont un obstacle au developpe-de la production et des rendements agricoles) ment du secteur prive, d'abord parce qu'elleset encourager de nouvelles m6thodes de absorbent une trop grande partie desmodelisation pour detecter les connexions ressources financieres (le credit est alloue enessentielles. priorite aux entreprises paraetatiques), mais

aussi a cause de Y'< inegalite des regles duAu Ghana, une trop forte proportion des jeu >> entre les entreprises publiques et lespauvres se trouve dans les zones rurales et entreprises privees, de monopoles de fait, dedans la region septentrionale, oui le prob- la recherche d'avantages personnels, d'uneleme du nexus est le plus apparent. II est attitude d'obstruction et de harcelement chezdonc essentiel de s'attaquer aux liaisons les fonctionnaires, de l'inefficacite de la miseentre les problemes si l'on veut attenuer la en place de l'infrastructure et de la prestationpauvrete. Cette demarche est indispensable des biens et des services publics, et des << sig-aussi pour 6viter les conflits tribaux tels que naux )» recus (sinon envoyes deliberement)

27

selon lesa,uels les nolitiques etatiques ou pop- reprises dans le rapport principal. Dansuistcg " t 1pR i-i."f-; es Y'inmid ,da ne L i'avenir, ies documents de strategie devraient,pas encore definitivement une chose du A l'intention des cadres superieurs de lapasse). Banque et des membres du Conseil, se con-

centrer plus qu'auparavant sur l'6valuationEn cons6quence, dans sa strategie et dans des risques et sur l'explicitation des optionsson dialogue d'orientation avec le gou- (notamment en ce qui concerne les risques Avernement, la Banque doit insister sur la prendre et les risques A 6viter).necessite d'aborder les aspects de la con-duite des affaires publiques qui tendent A Renforcer l'gvaluation de la strategie d'aide-paysreduire la confiance du secteur prive et, de et le principe de la responsabilitefinanciere.ce fait, 1'epargne et les investissements de Rendre la strat6gie de la Banque << plusce secteur. La strategie A plus long terme strategique >> a pour consequence que ladoit aussi viser a encourager la creation strat6gie particuliere A un pays et l'examend'un contexte social et politique durable, ce qui lui est consacre devraient servir, entrequi implique que les b6nefices de la crois- autres, A mieux pr6ciser les 6lements poursance et de l'aide exterieure soient repartis A lesquels la region devrait (ou ne devrait pas)peu pres egalement dans toute la societ6, etre tenue comptable dans l'ex6cution demais en privilegiant les segments les plus cette strategie. II est parfois possible et utilepauvres. de trouver des indicateurs de performance

applicables a l'ex6cution de la strat6gie quiLa strategie de la Banque doit etre plus contribuent A renforcer le principe de lastrat6gique. Dans l'avenir, les documents responsabilite sans compromettre la soup-strat6giques de la Banque (y compris les doc- lesse necessaire dont la Region a besoin auuments sectoriels et les autres etudes de niveau tactique. De toute facon, il est recom-strategie, dont celles relatives A un pays mande que les futurs documents strategiquesdonn6) devraient etre << plus strategiques >> en relatifs A un pays renferment une section plusce sens qu'ils devraient s'attaquer de front A importante comprenant une 6valuation par lades questions telles que: Quelles sont les con- Banque elle-meme des succes et des 6checstraintes A court ou A long terme constituant constat6s pour les objectifs specifies dans lesles obstacles les plus serieux? Quelles sont documents anterieurs. La section devrait<< les questions de durabilite >> critiques et aussi expliquer comment les lecons decoulantcomment les bailleurs de fonds peuvent-ils de cette evaluation sont mises A profit dans lales resoudre? Quels sont les risques dont on strategie en cours.peut ou non s'accommoder? Tient-oncompte, et comment, des lecons de l'exp6ri-ence ant6rieure? Quelles << masses critiques »> Recommandations concernant lales services de pret et les services d'appui de realisation des objectifsla Banque et des bailleurs de fonds doivent-ils atteindre poour amAliorer les chances Chercher a toucher et a ecouter des groupes plusd'operer des << demarrages >> importants dans nombreux d l'interieur et a l'exterieur dul'6limination des contraintes fondamentales? Ghana. Les Ghaneens manquent d'informa-De quels avantages comparatifs la Banque tions et d'analyses sur la situation et les per-dispose-t-elle pour aider le Ghana? Certaines spectives 6conomiques et sociales de leurde ces questions ont ete abordees dans les pays. La Banque peut contribuer A satisfairesections precedentes de ce r6sume et sont cette demande en diffusant plus largement

28

ses documents, en encourageant le gou- Ne pas exagerer la reussite du Ghana. Etantvernement a etudier avec des groupes plus donne la longue liste de reformes encorenombreux les rapports de la Banque et les inachevees et le probleme de devoir r6aliserrapports emanant de plusieurs partenaires, des gains durables, toute exag6ration con-et en entreprenant des activites d'informa- cernant le succes remport6 par le Ghanation concernant la prestation des services peut etre prejudiciable au pays, en detour-d'appui. L'activit6 d'information doit fonc- nant l'attention des reformes necessaires.tionner dans les deux sens et suppose que Quoi qu'il en soit, le succes relatif de la poli-le personnel de la Banque ecoute davant- tique du gouvernement dans le cadre duage les opinions et les preoccupations des PRE peut jusqu'a present etre cit6 en exem-Ghaneens et d'autres personnes telles que ple aux autres pays qui ne sont pas encoreles chercheurs analysant les questions engages dans la voie de l'ajustement.sociales et politiques qui se posent auGhana. Etre conscient des inconvenients d'une trop

grande dependance vis-a-vis de l'aide. LaMettre au point une orientation plus strategique Banque devrait s'attacher davantage a min-vis-a-vis du de'veloppement des institutions et de imiser les effets defavorables possibles desl'assistance technique. I1 manque au Ghana niveaux d'aide exterieure << trop eleves >o, yune strategie coherente dans le domaine de compris ceux affectant le comportementla fonction publique et de la reforme du des fonctionnaires du gouvernement. Unesecteur para6tatique; il est donc imperatif aide trop importante peut inciter les gou-que la Banque contribue a formuler une telle vernements a ajourner I'adoption de re-politique. Un autre probleme est le faible formes necessaires mais politiquementniveau d'efficacite de l'assistance technique difficiles a mettre en oeuvre, reduisant ainsiau Ghana. Cette assistance a trop souvent les investissements et l'epargne privee etet dominke par des elements et des activ- retardant les reactions attendues du c6teites a court terme au detriment de processus de l'offre. Mais il peut aussi en r6sulter unplus longs visant le d6veloppement des nombre de projets excessif par rapport a lainstitutions, le renforcement des capacites et capacite d'absorption du pays, des com-l'apprentissage par l'action. La Banque portements de dependance (par exemple,devrait encourager le gouvernement a for- <« laissez faire ca aux bailleurs de fonds >),mer un groupe consultatif local pour 6tudier des distorsions dans les incitations cre6esces questions d'assistance technique et con- par les multiples baremes de supplementsvenir d'un plan d'action. et d'allocations financ6s par les bailleurs de

fonds, enfin la predominance d'objectifs etS'attaquer aux causes reelles de la gestion ineffi- d'indicateurs de performance specifies parcace des de'penses. Malgre de nombreux exam- ceux-ci. Au stade de la conception, l'atten-ens consacres aux depenses publiques et a tion exigee par ce problkme doit etre ex-l'octroi de l'assistance technique dans le plicitement evoquee au niveau des servicesdomaine de la gestion financiere, le faible d'appui tout autant qu'au niveau des ser-niveau de la gestion des depenses au Ghana vices de pret.reste un probleme majeur. I1 faut accorder lapriorite a la r6solution de ce probleme, mais Mettre au point de meilleures politiques et pra-non en assouplissant davantage les condi- tiques pour la coordination de l'aide. Toutes lestions obligeant le gouvernement a assumer recommandations precitees ont implicite-une part des depenses locales. ment des repercussions sur la coordination

29

entre les bailleurs de fonds, puisque Ia Suiie. La coordination de l'aide est actuelle-Bancue an:;rrAl dc*tenir d :SUS e ment Dien menee dans certains domainesdonateurs qu'ils se concentrent sur la dura- mais non dans d'autres, et le gouvernementbilite, qu'ils travaillent dans le contexte doit etre incite a y jouer un plus grand roled'une strat6gie commune en vue du d& lui-meme. En particulier, la coordination sec-veloppement des institutions, qu'ils min- torielle et sous-sectorielle doit etre renforcdeimisent les inconvenients d'une trop grande dans le cadre de strategies sectorielles et dedependance vis-a-vis de I'aide, et ainsi de plans d'actions convenus.

30

1. Overview of Bank/Ghana relations

We need Bank people who can speak our cul- gling. Other important facets of Ghana's de-tural and political economy language ... who cline were the deterioration in institutions,can talk to us in our own terms. especially the schools and civil service, and

the exodus from the country of many well--Senior Ghanaian official educated Ghanaians. On the political front,

the 1970s and early 1980s were a period ofAt the time of its independence, in 1957, political instability, with three successfulGhana was considered a middle-income coups (1972, 1979, 1981), one palace coupcountry with a per capita income high by (1978), and other attempts to overthrow theAfrican standards, an educational system government. This political volatility wasjudged to be the best in Africa, fairly well- both a cause and consequence of the poormaintained infrastructure, and adequate economic performance. The combination ofgovernment institutions. Ghana's growth of political uncertainty, poor economic poli-the 1950s continued into the early 1960s, cies, and general economic decline renderedaided by high world cocoa prices. But falling it impossible for the Bank to maintain eithercocoa prices and dirigiste economic policies a satisfactory policy dialogue with succes-led to stagnation in the late 1960s. The econ- sive governments or a satisfactory portfolioomy followed a persistent downward spiral of projects.throughout the 1970s and into the early1980s owing to weak producer incentives, In the early 1980s, three shocks precipitatedpoor economic management, and declining a virtual collapse of the economy: a pro-external aid levels. The outcome was high longed drought, a marked deterioration ininflation, diminished import capacity, and a the terms of trade, and the unexpected re-steady decline in per capita incomes. turn to Ghana of more than a million

Ghanaian workers expelled from Nigeria.The policy environment of this period wasone of large budget deficits, pervasive con-trols, and a pricing framework that, to- Overview of Bank/Ghana relations,gether with an overvalued exchange rate, 1983-93discouraged private sector savings and in-vestment, provided inadequate incentives Bank/Ghana relations were strained andfor production and exports, and encour- difficult between the mid-1960s and earlyaged corruption, rent-seeking, and smug- 1980s (largely for the reasons described

31

above) hut improved mark'edly in. the Jerry Rawlings, the siigele m.ist important*e- e 982S3tc ~ 8_ v la). 2.e'i'iiee relations "event" was his decision to turn to a market-

became very good from about 1985 on- oriented, outward-looking structural adjust-wards, as mutual mistrust was replaced by a ment program-against the background ofrespectful partnership in which the Bank be- years of failed dirigiste/statist policies, ex-came the lead donor. Strains emerged be- ternal shocks, the failure of aid from thetween November 1992 and mid-1993 as eastern bloc, and disruptions occasioned byGhana's adjustment program came "off early efforts to install a radical populisttrack" and the Bank withheld disbursemlents regimiie. The culminating event was the offi-on its adjustment operations. But these cial adoption of the Economic Recovery Pro-strains were moderate and transitory, and gram (ERP) in April 1983.current relations are again good, and theoutlook is for continued good relations at Box 1.1 provides a chronology of both a num-both the technical and the policy levels.' ber of important Ghana events and some no-

table events in Bank/Ghana relations.The nature of the relations is changing as a Changes in the Bank's "Ghana team" inconsequence of Ghana's movement toward 1982-85 were too gradual to be classified asdemocracy and the Bank's increased atten- an "event," but over these years the Banktion to participation, institutional develop- mobilized a very strong core country teamment, and governance issues. In the 1980s, for Ghana. The coincidence of these twothe Bank dealt with only a small group of counterpart teams, with their compatible per-leaders and technocrats accountable to an sonal as well as intellectual qualities, goes aunelected head of state. In the 1990s, Ghana long way to explain why Bank/has an increasingly active Parliament Ghana relations improved so much during(notwithstanding its one-party composition) the mid-1980s. Many individuals-both inand new forms of decentralized organiza- the government and in the Bank (and in othertion and accountability. If these trends con- donor agencies)-did in fact exert heroic ef-tinue, the Bank will increasingly deal with a forts to make good things happen in Ghana.wider set of Ghanaian constituencies. In many instances, the key individuals who

made a difference in the Bank/Ghana rela-tionship, and in some of the Ghanaian out-

Key events and people comes, were at the "working level."

The main "events" that served to put Compared to the dramatic events of theBank/Ghana relations on a new footing early 1980s, the remainder of the decade waswere the change of government in Decem- relatively uneventful. There has been a highber 1981, the economic collapse of 1982-83, degree of continuity in the political leader-and the appointment of a small core team of ship and in the core economic team, relativehighly competent Ghanaian technocrats peace with Ghana's neighbors, internal po-(also in 1982 --83) with a common, coherent litical stability, and no major exogenousview of what needed to be done and com- shocks (other than declining terms of trademanding the instruments of central execu- offset by increased aid from the Bank andtive authority. other donors). The main "event" of the rest

of the decade was Ghana's gradual imple-Given the concentration of power in the mentation of the ERP and adjustment pro-hands of the head of state, Flight Lieutenant gram into which the ERP evolved.

32

x 1.1; ei S4E D NOTABLE EiVENTS, 198144

Ghana events Events in, Bank/Ghana relations

1981 Coup led by Flight Lt. Raliwngs assumes Bank/IDA lending suspended (Junepower (Dec.> 1981-Jan. 1983)

118 Severe drought/b fires (198283) - President Clausen visits GhanaClose rlatio'ns with Libya (19828) B:ank economic mission (Nov.)Peoples' and Workers Defense Conmitteesnobilzed1Unsuccessful coup attempts (1982-89)

1 . I;. .Return of one nillion Chanaians expelled Reconstruction Import Credit 1 (Jue)from Nigeria CnsultativeGroup resumeld (after 13-yearEconomic Recovery Program (ER?) hiats) (No.)launched (Apr.)

1984 Attempted coup Subsequent annual Conulative GroupUniversity reopened meings (1984-93Y

Export Rehabilttion Credit (also TechnicalAssistance Credit) (an.)

1-985- Nationa Economic Commission established Reconstruction ImportCredit!! (March)1986 Strained reldons with Togo . tAdjustent Crit (March)

Coup attempt failed Education Setr A djus nt Credit 1987 Togo border reopened (May) Strucural Ad- -tment Credit (SAC) I (April)

Student disturbances (March-June) Presdent Coaevlst Ghana quly)-Worldfak reorganization

198 Ditrict-level political reforms/electons -l SetrAdstmentCredit 1 (May> .1989 3District-level political irefors/elections SAC I (April)1990 Investors Conference Jan,) Ed-ucationStor Ad justtnentCred it 1 (May>

Formation of National Commission forDemocracy

1991 C-lashes in northeem region (Gonja/Nawuri) SAC Ill (May)-i-a-cial Sector Adjustment Credit (Dec.)

1992 Government awards 80 pervent wage In Agriculture Sector Adjustm-ent Creditcreases to civil service (Aug.) ;M-rc-)Presidential elections won by Ra:wlngs A credi tc-releases withheld(58 percent) (Nov.) 19r-Parliamentary elections (National Dem- "Ghana 20W' report issued (Nov.) (Worldcratic Congress wins 189of I sea - 0ank 1 -:-:sition boycotts)Dec.)

1993 g Opposition parties recogize legidmacy of BAtra tt4atche o SAC EI-government (Aug.) -(-JrltatIve ($roup meetg (June) results inMorethan 1O0,0 Ghanaan evacuatedfrom- donordpls of more than $2 billionCOte d'lvoire (Nov.)

1994 Clashes in northern region, - -- leses withheld on INSAC ,(l-Konkomba/Nanumba (estimated 1,00 ietrds i and.killed, refugee movements> (Feb.) A (Agictra AdjustmentPrivatization of Ashanti Goldfields ; i. lt) owin tdelay privatizatons

....... ... ..... 3

33

Tw_o close-y related events in 1992 arc im- however, donor/government relations ;r.poila.i L uie Bank Ghana relationship, general and Bank/government relations inOne was the adoption of a new constitution particular are, again, quite good.and the elections of that year, which havealready changed, and probably will con-tinue to change, the nature of government The congruence of government andand the forms of governance in Ghana. By Bank strategiesthemselves, these changes have so far nei-ther strengthened nor weakened The fact that the Bank and government hadBank/Ghana relations. They will however shared objectives and an agreed strategy forchange the nature and forms of the relation- undertaking a reform program explains theship in significant ways. The implications good working relations and the generallyfor the Bank's strategy are discussed in high quality and effectiveness of the policyChapter 2. The other 1992 event was the dialogue that evolved during the 1980s. Thegovernment's decision, shortly before the two parties perceived each other as partnerselections, to increase civil service wages by in Ghana's development. There were differ-some 80 percent-an action that was not ences, but these had more to do with tactics,provided for in the budget and that trig- pacing, and sequencing of reforms, thangered a large fiscal deficit, renewed infla- with the overall paradigm of reform. Bytion and exchange rate depreciation, and around 1990, however, there was less con-strains in government/donor relations. gruence between the strategy and policies

proposed by the Bank and those that theFollowing nearly a decade during which the government wanted to pursue. But the dif-stabilization components of the adjustment ferences and disagreements rarely becameprogram remained "on track," with the in- contentious.flation rate reduced to about 10 percent(from more than 100 percent), the increased In the same month in which Flight Lt. Rawl-fiscal deficit had a significant effect on the ings came to power (December 1981), theBank/country relationship. New concerns World Bank published a document that artic-arose about the sustainability of adjustment, ulated its view of the problems andand about whether the pursuit of votes prospects of African countries. The docu-would entail a serious erosion of fiscal disci- ment, entitled Accelerated Development in Sub-pline. The government was disappointed Saharan Africa: An Agenda for Action (Worldand to some extent angered by the Bank's Bank 1981), did not have specific direct ap-suspension of disbursements on its adjust- plications to Ghana, but was consistent withment operations-just at the time, from the much of the Bank's advice to Ghana andgovernment's point of view, when it most with many of its adjustment operation condi-needed quick-disbursing funds. In 1993 and tionalities. One central theme of the report1994 the government has taken new revenue was the need for countries (such as Ghana)and other measures-though not to the ex- to "get the prices right." This was a main ob-tent advocated by the International Mone- jective of Ghana's ERP and of the condition-tary Fund (IMF or Fund) and the Bank-to alities attached to Bank lending in the 1980s.put the adjustment program back on track. As this report will describe, Ghana has madeThe gains have however been offset in part much progress in getting its prices right; itby larger-than-planned borrowing by the now faces a new set of binding constraints tostate enterprise sector. By customary criteria, sustained growth and poverty alleviation.

34

t + COWmo~'Ns FoR SUCCESSFuL ADJUTmNT mN GHANA

enteral question in the political economy of * There was continuity and long tenure byChs.na's reform program is. How did it prove this core team and by the head of statep.s.lbe :for.the government to mobilize and under whom they served.maintaIn the political support that made the-r-n possible.? Some answers are:. The government comprised an authori-

tarian regime headed by a charismatic: There was a crisis, and a broad: public leader who did not have to run for re-

perep ser election or be unduly concerned about1980-83; there was a consensus that the delivering fast results.old order had failed, And especially be-cause this crisis culminated a long peiod A fast albeit modest improvement in con-of decline, there was a greater readiness ditlons ollow adoption of e ERP; al-

by various interest groups to accept a thouhis wasiniimoeattributablenew direction of policy-even ifthis in- o ovr the d that the

- volved actions that had previusly been . ERP ie f r Racceptace.

anathema, for example, devalation.- Relations with donors improved consid-

Thie political opposition was initially - etablyand large aid flows permitted the

fragmented, demoralized, and intimi- benfits to be greater and the adjustment

dated. But by the time of the 1992 elec- pssto be more gradual than would

tions, the main opposition parties were have been possle with a lower volume

themselves advocates of continued aid of aid.

even accelerated adjustment. m- - * .Notwtstadng mnany govemncwe prob-

A Although the leadership did not share les, corruption was relatively contained

with the public a long-term vision of te on the government sie. Donors on theirkind of society the reforms were intended side largely refrained from, pushing their

to bring about, the ERP was a public and ow favored white elephant projects

comprehensive program that served as0! GD.- growth (at about 2 percent per

an action plan for transformation. cpt e nu>wa utie,wtc4p#a peranrhumi was. siistained, wi'th

a The reform program was conceived and redistributin in favor of the richest andmanaWd by a core team of technocrats poorest the lattr largeLy in the rural

with a common, coherent view of what areas. Te poorer, rural beneficiaries fneeded to be done and commanding the the reforms became the main supporters

instruments of concentrated executive (i the 1992 eletons) of the government

- authori-ty - - party that had launched the ERR

35

The focus now is mnore orn the need to "get Overview of Bank lendin-X::u: s :rn rig,X.," al1[v'¢ give more at-

tention to longer-term issues that were the During the four years prior to the launching ofmain focus of the Bank's long-term perspec- the ERP, International Development Associa-tive study on Africa published in 1989 tion (IDA) commitments and disbursements(World Bank 1989). to Ghana totaled about $100 million. During

the four years, FY83-86, IDA commitmentsGhana has frequently been cited by senior rose to nearly $500 million and disbursementsBank managers and others as an "African exceeded $200 million. Thereafter, the lendingsuccess case" insofar as it has sustained its program was further built up to commitmentreform program for more than a decade, averaging about $250 million annuallyachieved 5 percent gross domestic product (FY87-FY94) and disbursement of close to(GDP) growth, and reduced poverty. This re- $200 million. Of the total commitments of $2.4port will consider in some detail the respects billion during FY83-94, adjustment lendingin which Ghana has been most and least amounted to about $1 billion, or roughly 40successful in achieving development objec- percent. Table 1.1 shows the distribution oftives. To put the Ghanaian economy and IDA lending and disbursements by major sec-achievement in some perspective, Box 1.3 tor group. Assessments of the relevance andshows how Ghana compares with other efficacy of this lending, and of the deploymentAfrican and low-income countries in terms of the Bank's nonlending instruments, are pro-of a number of key indicators. vided in the next chapters.

TABLE 1.1: COMMITMENTS AND DISBURSEMENTS IN GHANA, FY79-94($ million)

TotalSector Variable ($) 1979-82 1983-86 1987-90 1991-94 1983-94

Agriculture Sum of loan/credit 30 25 116 217 358Sum of disbursement 34 22 43 158 223

Industrial/industrial Sum of loan/credit 19 60 177 141 378devel. and finance Sum of disbursement 4 29 128 160 317+ financial

Infrastructure Sum of loan/credit 54 114 160 307 581Sum of disbursement 80 55 148 145 348

Social sectors Sum of loan/credit 0 50 190 230 470Sum of disbursement 2 14 66 132 212

Multisector + Sum of loan/credit 0 220 285 148 653public sector Sum of disbursement 0 105 344 220 669management

Grand total Sum of loan/credit 103 469 929 1,042 2,439Sum of disbursement 120 226 730 814 1,769

Source: World Bank database.

36

Box 1.3: GHANA COMPARED WITH OTHER SUB-SAHARAN AFRICAN AND LOW-INCOME

COUNTRIES

How does Ghana compare with other countries (including China and India, whichSub-Saharan African (SSA) countries? A com- have comparable per capita income levels).parison between key social and economic in- Particularly notable are the differences indicators for Ghana and these other countries fertility rates and primary school enrollmentshows that Ghana compares favorably with rates.other African comparators, especially interms of recent trends in these indicators, butlags behind low-income countries taken as a Economic perfoance

group. With regard to the economic indicators,

Ghana also compares favorably with SSASocial performance countries but is far behind the average for

low-income countries, inclusive of AsianGhana compares favorably with SSA coun- countries. Moreover, because Ghana's pertries in terms of most social indicators capita income had declined so much before(namely, incidence of poverty {headcount 1983, and because population growth re-ratio], total fertility rate, life expectancy, in- mains high, even the 5 percent annualfant mortality, and primary school enroll- growth in GDP since 1983 has so far servedment) even though it has a lower per capita mainly to restore average living standardsgross national product. Average daily calorie to levels reached long before. As may beintake in Ghana, though slightly increased, seen from the table, Ghana is highly depen-failed to recover its previous position (2,089 dent on external aid but not more so thanin 1986). The recent trend for these indica- other SSA countries on average. But its sav-tors is favorable, in contrast to much of the ings performance is notably poor in com-rest of Africa where per capita incomes have parison to all low-income countries. This isdeclined and poverty has worsened. But as also the case with respect to its private in-the table below shows, the comparison is not vestment rate (not shown) of only 4 percentso favorable with respect to low-income of GDP in 1993.

(continued)

37

Notes to remain good at thle techllicill level, for examrple, regardting

investment projects, everi durinig periods wlheii the policy dia-

l. This distinction betweeri relations at thie policy vis-a-vis the logue WdS poor or abseiit. Ftlhiopia duiring the Meiigistu reginmetechnical level is an important oile; in sorne cases relations imay was an exanmple of this plhenonmenoji. hn Ghana, however, thebe good at one level but nlot at anoither. It wvas not unusilal, for relationls at both levels hlive tendedi tt) move m-ore or lessexample, fcor relations between Baiik staff aiid cotimtry officials together.

38_ __

2. Relevance of the Bank's assistance strategy

The critical test of the success of any adjustment its mix of instruments to reflect the new re-policy is growth. The Ghanaian program went alities, needs, and perceptions.for growth and has provided the wherewithal toenable Ghanaians to dare to hope. The Bank's country assistance strategy over

the past ten years has been relatively strong-Senior Ghanaian official with regard to its near-term "adjustment

agenda" but weaker with regard to inte-This chapter describes the evolution of grating into this agenda the objectives ofthe Bank's assistance strategy for Ghana poverty reduction, institutional develop-over the past decade and evaluates its ment, and environmental sustainability. The"relevance." strategy has so far been successful in foster-

ing growth led by Ghana's public sector. Butboth the country's and the Bank's strategies

Main conclusions were slower to confront the constraints toprivate sector development. What is now

The main conclusions are that: (a) the strat- needed on the Ghanaian side is a clear vi-egy for the 1980s of "going for growth" sion and enunciation of the country's ownthrough a public sector-led recovery pro- long-term development strategy. In turn,gram was highly relevant in its priority ob- what is needed on the Bank side is a clearjectives and its instruments; (b) the strategy elucidation of what the Bank and its part-of the late 1980s and early 1990s has only ners can and cannot hope to accomplish ingradually come to recognize the unsustain- helping Ghana to achieve an economic tran-ability of the growth pattern of the 1980s sition to a more sustainable, less aid-depen-and the critical importance of institutional dent, private sector-led growth process.constraints ("implementation issues" and"sustainability issues"); and (c) Bank strat-egy documents have been strong in their di- Selective coverageagnosis of constraints to near-term growthbut weaker with regard to risk assessment, For purposes of this report, the main "ob-priority setting, long-term issues, and ac- jectives areas" will be public sector manage-countability. The changed binding con- ment and policy reform, institutionalstraints and political economy of the 1990s development, educational sector develop-require the Bank to adjust its priorities and ment, and agricultural development. Two

39

overarchirin obiectives that have not been 1984 (at th.t n$'tNmuch focused upon in past Bank strategies, changes in the Bank's country assistancebut which are of great importance, are good program being made to respond to the on-governance and sustainability. Given the going changes in Ghanaian policy. In fact,need for selectivity, this report will not have the next CPP was not reviewed by seniormuch to say about other important objec- management until January 1986. In the ab-tives and sectoral issues, for example, gen- sence of a CPP for the period 1983-85, someder issues, environmental protection, internal Bank documents (especially back-infrastructure, family planning, urban devel- to-office reports) from missions in late 1982opment, and so on. The main question on and early 1983 are taken as a proxy. A coun-private sector development is: Why has the try strategy paper was prepared and re-private sector response in Ghana been so viewed in 1990 and again in 1993.2 Nosluggish despite the many favorable further CSPs will be prepared because themacroeconomic measures taken? With re- country assistance strategy process is sub-gard to the Bank's instruments, particular suming the country strategy paper processattention is given to adjustment lending and and document. The latest country assistancethe related policy dialogue, economic and strategy for Ghana was reviewed by thesector work (ESW) (mainly as it related to Board in April 1994.adjustment lending and the dialogue), andto selected technical assistance (TA) opera-tions and aid coordination initiatives. Evolution of the Bank's assistance

strategy

Bank strategy papers Overview

The Bank's assistance strategy for the period The Bank's strategy for Ghana over the pe-1983-93 is embedded in many strategy-re- riod 1983-93 was characterized by consider-lated documents, including business plans, able continuity in its basic objectives andannual country assistance management sys- instruments. The central objective was totem (CAM) statements of objectives, country help Ghana adopt and implement an "adjust-program and budget papers, sectoral strat- ment agenda" largely in keeping with theegy papers, and policy framework papers, tenets of stabilization, liberalization, andamong many others.' Between the early "market-friendly' policies as advocated in1970s and 1988, the basic Bank document particular by the Bank's World Developmentused for the country assistance strategy re- Report 1991, which focuses on the challengesview was the country program paper (CPP). of development. In particular, IMF and WorldThe CPP was superseded in 1988 by the Bank policies during the period under reviewcountry strategy paper (CSP), which was in- put emphasis on: exchange rate rationaliza-tended to serve more distinctly as a strategic tion (geared to restoring export competitive-rather than a programming document. For ness and inducing rapid growth inthe present country assistance review, the nontraditional exports); fiscal discipline; taxfour CPPs/CSPs prepared between 1981 and and tariff reform (geared to improving incen-1993 provide these benchmarks. tives to production, broadening the tax base,

and improving efficiency while at the sameAfter the 1981 country program paper, a time retaining equity objectives); price andnew CPP should have been prepared by trade liberalization; deregulation; legal re-

40

forms and measures to secure property made a case for a large increase in the lend-rights, promote competition, and stimulate ing program, from the average $18 million ofprivate investment (including foreign direct the FY78-80 period to a proposed commit-investment); privatization and reform of state ment level averaging $80 million for the pe-enterprises; and financial liberalization. This riod FY82-86. In addition, two largeagenda of reforms geared to "getting the bal- structural adjustment loans (SALs) wereances, prices, and incentives right" domi- identified as reserve projects for FY82 andnated the policy dialogue and the Bank's FY84 in the event the government moved(and IMF's) lending conditionalities in the more vigorously to undertake economic re-decade 1983-93. forms than was assumed in the base case.

Initially the IMF took the lead in the policy The country program paper noted the poordialogue owing to the high priority given to economic performance and policy shortcom-stabilizing the economy and adjusting the ings but made a case for increased lendingexchange rate. A distinguishing characteris- and ESW based on a perception that thetic of the strategy was its "gradualism." The (then) new civilian government "seemedsequencing was orthodox in that it moved eager to receive outside advice on economicfrom initial emphasis on stabilization and and sectoral policy matters."4 But the CPPrehabilitation projects to liberalization and hedged its bets: the "most likely" scenarioadjustment operations. Sectoral adjustment was a muddle-through scenario entailingoperations preceded the structural adjust- modest policy change at best-well short ofment operations. Both the dialogue and the what was needed to justify adjustment lend-lending program moved gradually toward ing. Yet, the prospects for improving the pol-deepening the adjustment program in areas icy dialogue were argued to be sufficientlyinvolving more difficult governance and in- good as to warrant a substantial increase institutional development issues, for example, investment lending. No specific targets orin privatization, public enterprise restructur- events were identified as "triggers" to aing, civil service reform, and private sector larger or smaller lending program.development.

The Bank's senior management did not ac-The strategy in the 1981 country cept the Region's proposed strategy andprogram paper lending program; the internal contradictions

were all too apparent. Proposed project lend-The 1981 country program paper was pre- ing was curtailed in the absence of substan-pared against the background of longstand- tial policy changes, including exchange rateing deterioration in Bank/country relations adjustments. Staff were authorized to prepareand in the country's economic situation. In for nonproject lending in case of a coherentthe three prior years (FY78-80) only three reform program and instructed to focus onIDA operations (DFC II, Rural Development longer-term structural macroeconomic issuesII, and Roads III) were approved for a total of and the cocoa sector. No new loans were ap-$54 million. This was tantamount to a "core proved between June 1981 and January 1983.program" or holding operation.3 Nonlendingservices were also minimal since the Consul- The strategy in 1982-83tative Group was suspended and there waslow demand for ESW. The 1981 CPP was nev- No CPP was prepared between 1981 andertheless an "advocacy document," and it 1986, but the evolution of the strategy can be

41

traced from other documents and interviews h2hi1it2ion t^libcralizatio I Ja Q-rgwfh

with Bank staff. A key document (December Table 2.1, taken from that report, shows the1982) noted that whereas the Bank had kept range of policy and institutional reformsthe lending program "captive" to macroeco- that the Bank was to advise and assist withnomic reform (which the Ghanaian authori- for the next ten years. This economic reportties were starting to consider seriously), the was, therefore, an important, high-qualityGhanaian authorities' receptivity and inter- strategy document, as it laid out the Bank'sest in pursuing an economic dialogue with recommended program for Ghana to get itsthe Bank was very much dependent upon prices right, to improve capacity utilization,an early resumption of Bank lending. Given and to reduce government intervention inthis perceived linkage, the case was made the economy. It also provided recommenda-for resumed lending even if the Ghanaian tions for sectoral reforms and recovery mea-policy measures fell short of expectations, sures, and projected the substantial externalon the grounds that providing the support assistance necessary to make the reform pro-needed to make the reform package work- gram succeed, and served as an instrumentable would enable the Bank to establish its of aid mobilization.credibility with the authorities and influencethe course of events. The 1986 country program paper

This high-risk approach was adopted and By the time the next CPP was reviewed inthe Bank did resume lending in 1983, even January 1986, there had been a sea change inthough the Ghanaian program was per- Bank/Ghana relations and in Ghana's eco-ceived to be far from a "first best" and the nomic situation, triggered by the launchingprospects for sustaining the reforms were of the ERE The government had by then imi-highly uncertain. Within the Fund and plemented a wide-ranging set of reforms in-Bank there were two schools of thought. cluding exchange rate devaluation,Some advocated going ahead with lending, increased cocoa producer prices, removeddespite the gradualism of the 1983 ERP, in price controls, rationalization (partial) ofthe hope that the government would find petroleum and utility prices, reduction in ex-the political will to sustain and deepen the ternal arrears, and the exercise of fiscal andreforms with the aid and advice of the monetary discipline. These reform effortsFund and Bank, and subsequently other were supported between mid-1983 and end-donors. Others were skeptical of the gov- 1985 by two IMF standby arrangements (to-ernment's commitment to reform and its taling more than 400 million Specialability to sustain even a modest program. It Drawing Rights, or SDR) plus two Compen-is not clear to what extent the pro-lending satory Finance Facility drawings (totalinggroup in the Bank may have influenced the another SDR 178 million).Fund's decision to go ahead with its 1983standby arrangement, but in any event this The Bank had established a good policy dia-paved the way for the Bank's own resump- logue, taken the lead in aid mobilization (in-tion of lending (see Box 2.1 on Bank/Fund cluding through chairing resumed annualcoordination). Consultative Group meetings), and mounted

a substantial lending program, up from zeroThe Bank's 1983 economic report laid out in in FY82 to $73 million in FY83, $125 mnillionconsiderable detail a sequenced process of in FY84, and $175 million in FY85. Cofinanc-adjustment moving from stabilization to re- ing of IDA projects in those years totaled

42

*0 t A)UIND COORINAION ; ' '

-',i before the poliy framework paper's d cocoa produce pricing whe, in 196-87i , Baik/Fund ital wi-win stflati6i '(i whi

&S,drhon on Ghana was compatvely cocoa producer prices had t f tj*<-ltS+ Worn the &Pbegnnig of:Ghanars Ec.- creasing both production and. omicecovery Program in 1983, the two weR as reducing smug stifs worked i tandem and Ghana was cho- som trade-offs between fiscal a'nd

n asone of sx pilot countries for "enhanced oectives.cula rat between the Bank and Fund.Ths led to mor freqe and tel ex- A major Bank/Find disagreemawentchanges of information and draft documents over the size of the government's wathan typically characterized Bank/Fund rela- as t Ban supprt a cvil seetOns. hi addtion, it led to a joint seminar to program that called oer a cinghdiscuss a variety of issues relating to Ghana's the Fund proved wiling to accept Banddevelopment. This seminar inrluded numer- felt strongly that in that insta te B,aom stafffrom thea Bas (then) projects De- "capitulated" to the Fund for reasons

patmelnt who normally had little or no than the technical merits of thei

cotact with te Aind This kind of initiative -io. A goverment,view ofths-was exceptional athe tire- that the earlier failure to oe a ,

the civil service rforms, indu4ingthem

The division of labo between the ank and supported selective salary:Fund Iaely fled traditional lnes lypi- partly to blame for the 1992 l"ecl dfferences arose over the years wh for . the wage bil Ntihstanig texample. Bank staff felt tht fund require- sionl Bank/F disagrveemnts, t:ents on the overall budget deficit ad of both instfittions-believeth Ba

credit ceiings were sraing recovery and collaboration on Ghina w ehaving advese effects on Bank projects. the years The staff cooperat do'Fund staff on their part had reservations prp in and monitoring o

.about the Bank's endorsing Ghana' grad nomic- and finacial pograms mumn in adjusting the exchatge rate (imply- itici pa in missn ing nultiple exchange rates} and about Bank, overlapping of issions f

1'i,&ppgls M5 the foreign eca bnge auction. Te PP ;. ff~rences also arose cont~er tie matter collaboratio-n.

... ......... ... ........ 4 .

43

LiberalizationStabilization Rehabilitation and growth

Policy reform phase phase phase

(a) Pricing reform package1. Exchange rate x o +2. Interest rate x o3. Wage rate x o +4. Energy prices x o +5. Infrastructure prices x o +

(b) Trade and industrial policy package6. Industrial incentives x o7. Nontraditional export promotion x8. Price controls x o9. Trade restrictions x

(c) Investment package10. Public investment program x11. Private sector initiatives x

(d) Taxation and subsidy package12. Tax reform x o +13. Consumer subsidies x o +14. Producer subsidies x 0 +

(e) Human resource development institutional reforms x o15. Planning process x o16. Investment, appraisal,

monitoring, and evaluation x o17. State enterprises x 018. Export marketing boards x o +19. Mining companies x o +20. Statistical and information system x o +21. External debt management x o +22. Financial intermediation x 023. Agriculture support services x 024. Civil service reform x 0

Legend: x = initiate action; o = continue action, evaluate, and adjust; + sustain actionSource: World Bank data.

$127 million. The lending program was a ment operations on broadening the scope ofmixture of low-conditionality reconstruction the government's reforms into a full-fledgedimport loans, sector rehabilitation loans, and structural adjustment process. This was tospecific investments. The International Fi- include more action on the exchange rate,nance Corporation (IFC) made its first in- further increases in the producer price ofvestment in Ghana in 1984 in a project to cocoa, domestic resource mobilization ef-increase the output of the Ashanti Goldfields forts, increases in both current and develop-Corporation. Against this background, the ment expenditures, reforms in the financial1986 CPP proposed to focus the policy dia- sector, public enterprise reforms, and pro-logue and an increased number of adjust- gressive liberalization of the trade regime.

44

The country program paper proposed to the Bank's annual country performance rat-maintain an average of $85 million per year ings (used to establish "norms" for IDA al-through FY90 with sector adjustment loans locations), Ghana had received very high(in agriculture, industry, education, and ratings for several years. This was reflectedhealth), two structural adjustment credits in an "excellence premium" in both IDA al-(SACs) with conditionalities focused on the locations and administrative resources forareas mentioned above, and a number of in- economic and sector work, policy dialogue,vestment projects.5 The CPP focused on agri- and lending (CAM resources).6 Thus, actualculture, with six projects (out of 21) and 19 IDA allocations to Ghana in the late 1980spercent of total lending. Industry and trans- were averaging more than $200 million perport were both allocated about 14 percent, year-more than double the level requestededucation and health each about 7 percent, in the 1986 CPP. The FY88-91 country assis-and adjustment lending about 32 percent. tance management systems allocated to

Ghana an average of 32 staffyears perThe CPP attached a "relatively high proba- year-more than for any African countrybility that needed policy changes by and save Nigeria.large will be achieved," but it noted that"should the [reform] program seriously fal- The government's ability to pursue its re-ter, both the level of lending and the num- form agenda during the years between 1986ber of operations would be scaled down." and 1990 was enhanced by the fact that thisThe CPP did not however contain any spe- period was relatively uneventful in terms ofcific performance criteria or triggers, and it either major political changes or externalprovided only a single lending scenario. shocks. In keeping with its plan to move to-Three possible risks were identified and ward an elected national government, thebriefly discussed. The political risk was government established elected district as-seen as a risk of instability that might arise semblies during the late 1980s, but as of 1990from the regime losing the support of the the timing and modalities had not been clari-political base of the trade unions and fied. The 1990 CSP envisaged that a broaderworking classes (on which it came to sharing of power on the political front wouldpower) before it could forge new alliances help foster support for further economic re-in the iural areas, the main beneficiaries of forms to maintain the pace of development.the new policies. The implications of these It did not envisage an alternative scenario-risks being realized were not however such as the one that came about in 1992-identified. The other risks identified were when an elections-related wage increase forthose of drought and falling cocoa prices. civil servants put the macroeconomic pro-In both cases, implications were drawn for gram off track and threatened to dampen thethe balance of payments and financing pace of development.gap, but no contingency plans were identi-fied, nor were other implications assessed. The 1990 CSP was a more sober document

than other reports on Ghana at a time whenThe strategy in the 1990 country the country was being extolled as a "successstrategy paper story" and when some Bank staff and man-

agers' thoughts were turning to how to ac-The 1990 country strategy paper was the celerate Ghana's growth to the level of thefirst CSP for Ghana. By that time, Ghana fast-growing countries of East Asia.7 Thehad attained the status of a model client. In CSP did recognize Ghana's "success" in im-

45

proving production incentives, restoring fis- grlamt. As in other areas. iinwpvpr. noi specificcal and monetary discipline, increasing pub- performance criteria or targets were estab-lic investment, and in managing well its lished, and in considering what would war-external financing strategy But it also rant a reduction in lending, the CSP arguedflagged the daunting tasks that lay ahead, that owing to the "complex and subtle na-noting that inflation was still high, the pri- ture of the judgments that will have to bevate investment response weak, the govern- made. . . , no single indicator or group of in-ment's implementation capacity over- dicators can be used to trigger a decision."stretched, absolute poverty still widespread The CSP proposed a base case of lending(estimated at a third of the population), and during the period FY91-95 averaging aboutthe environment threatened. $250 per annum, of which $80 million per

year was for adjustment lending. This com-The 1990 CSP defined three priority objec- pares with average annual lending of $212tives. The first was to intensify efforts to pro- million during the period FY86-90, whenmote private sector development, about half of total lending was for quick-recognizing that this would require the gov- disbursing operations.ernment to take a more "hands off" approachto managing the economy than it had until The strategy as described in the 1993then been willing to adopt. Specific measures country strategy paperrecommended included improving the regu-latory framework for private investment, The 1993 CSP was prepared in the first halfwith comprehensive financial sector reforms, of 1993, shortly after the elections and the 80accelerating the divestiture and commercial- percent wage increase to civil servants. Theization of state-owned enterprises, and im- wage increase resulted in an increase in theproving services and infrastructure crucial to fiscal deficit by about 6 percent of GDP, aagricultural smallholders. The second prior- more than 50 percent increase in the moneyity was given to improving public sector supply, a sharp depreciation in the exchangemanagement and implementation capacity. rate, and a collapse of private investment.Implementation weaknesses were flagged as This was characterized as a (presumablya "binding constraint" and attention was one-time) "cost of the political transition,"given to the deterioration in the Bank's port- indicating that the economy seemed to befolio performance as indicated by a decline in stabilizing satisfactorily in the first half ofgross disbursements, longer intervals to effec- 1993. The tone was generally sanguine. Thetiveness, and an increase in total undisbursed 1993 CSP was significantly influenced by thebalances for investment projects relative to completion in 1992 of "Ghana-2000 and Be-appraisal estimates. The CSP proposed to re- yond: Setting the Stage for Acceleratedlate the volume of future lending to imple- Growth and Poverty Reduction," a majormentation performance, with undisbursed Bank report produced with large Ghanaianbalances comprising the key indicator.8 participation, which emphasized the need

for action in three areas in order to acceler-The country strategy paper also proposed a ate the growth rate well above the 5 percentfew measures to encourage the government rate achieved during the previous decade.to address human resource development, These areas were: private sector develop-poverty, and environmental issues that were ment and export promotion, public sectorseen to ultimately determine the economic management, and human resource develop-and social sustainability of the reform pro- ment. In these respects the 1993 CSP appro-

46

priately put increased emphasis on the long- lending to below 20 percent in FY94-96 (com-term issues. pared to 33 percent in FY90-93 and 47 percent

in FY83-89) subject to improvements in theThe CSP acknowledged that a major impedi- investment project disbursement rate thatment to private sector confidence (private would enable total IDA disbursements to re-investment dropped to less than 4 percent of main at a level of about $200 millionGDP in 1992) was uncertainty about govern- annually.ment attitudes toward the private sector.Steps seen as essential to the emergence of avigorous private sector included removal of Relevance of the Bank's strategyold inhibiting regulations, increased trans-parency and due process in enforcement, The criteria used to assess relevance include:elimination of implicit transfers to public en- adequacy of the diagnoses; realism of as-terprises, more clarity in the limits to private sumptions; clarity of definition of objectives;sector activity, and speedy divestiture cut- timeliness; appropriateness of the prioritiesting through red tape on asset valuation and given to component objectives; appropriate-labor laws. ness of the mix of instruments; adequacy of

risk assessment; realism/feasibility of imple-With regard to public sector management, mentation; and sustainability.9 The follow-the country strategy paper identified the ing paragraphs consider the Bank's strategyneed for a re-invigoration of civil service for the full 1982-93 period according to eachreforms plus steps to make management of those criteria. The chapter concludes withmore effective, reduce uneconomic subsi- an overall assessment of the strategy'sdies on water, electricity and transport, strengths and weaknesses.strengthen expenditure management, im-prove tax collection, and so on. Capacity Right diagnosis? Short-term, yes.building was to become a major focus of Long-term, more work neededBank efforts, based on a capacity-buildingassessment then under preparation. With Getting the strategy "right" in 1982-83 de-regard to human resource development the pended on a good diagnosis of the state ofCSP called for a big push in primary edu- the Ghanaian economy. The governmentcation, which was seen as critical to both was poorly equipped to do its own in-growth and poverty reduction. The CSP depth ESW. The Bank was also handi-also noted that the Bank "would change the capped by the fact that its ESW on Ghanaway it does business in Ghana" by paying had been negligible in the years prior togreater attention to the overall issue of FY83. This vacuum needed to be filled in aownership and avoiding crowding out hurry. This need however could not be metGhanaian initiatives. as fast as was desirable because of the lack

of qualified staff with pre-existing countryThe CSP noted that although some improve- knowledge and experience. With the de-ments had been effected in portfolio perfor- cline in lending, the economists and sec-mance following a major restructuring of toral specialists had been transferred toslow disbursing projects, the average pace of work on other countries. It took some time,IDA projects remained slow, partly owing to therefore, for the stock of people and thethe nonavailability of counterpart funds. It stock of needed country knowledge andproposed to reduce the share of adjustment understanding to be built up.

47

Tli. cS ,-.f the dielays were the weaker de- ment to "'list the goveri-ieilt ' keyv 3evelop-NVIIiSor some initia! operations (for exam- ment objectves ... nd discuss central is-ple, the export rehabilitation project and sues in the economy and its main sectors,"associated TA project of 1983, both rated un- with such listings and discussions not neces-satisfactory, and an industrial sector adjust- sarily calling for an evaluation of the strate-ment credit with some serious design gic focus of the government's program-orflaws).10 It took several years for the Bank to lack thereof. And while the CSP section onbuild up its lending for adjustment, for insti- the Bank's assistance strategy was requiredtutional developm.ent, and for agriculture. to "recommend priorities for policy change"

and to "focus only on the main macroeco-Notwithstanding these handicaps, the Bank nomic and sectoral issues," the requirementdid manage to produce some high-quality to prioritize was not much enforced.economic work, beginning with the 1983country economic memorandum, that pro- In the 1980s, the nature of the main goalsvided a generally sound diagnostic basis for (stabilization, liberalization, rehabilitation)the strategy of the mid-1980s. In the view of made it relatively easy to define the rele-a number of senior Ghanaian and Bank offi- vant key performance indicators, for exam-cials, however, it has proven difficult to get ple, movements in the inflation rate, realsimilarly robust diagnostic foundations in exchange rate, recovery of cocoa exports,some of the sectors, and on some cross- and so on. In the 1990s, the emphasis oncutting issues such as institutional develop- private sector development and capacityment, privatization, and public enterprise building, for example, makes it harder toreform. With few exceptions, moreover, sort out which of the underlying con-most of the Bank's ESW tended to focus on straints are more binding than others, torelatively near-term adjustment issues rather identify the relative priorities of actionsthan upon the longer-term issues. needed, and to define the appropriate key

performance indicators. This problemClarity of definition and monitorability of needs to be approached from two direc-objectives: good in the 1980s, fair in the 1990s tions: One is to put more precision and pri-

oritization into the specification ofA good strategy should have a limited num- objectives; the other is to develop perfor-ber of well-defined and well-prioritized ob- mance indicators that constitute the bestjectives, as objectively monitorable as pos- available proxies for measuring qualitativesible. In all of the Bank's strategy papers, data in a quantitative way."however, the objectives tended to compriseeither such a large number of broad goals Realism of basic assumptions: partial(GDP growth, stabilization, improved publicsector management, environmental protec- Some of the Bank's underlying assumptionstion, and so on) or so many specific "key" about key variables were off the mark. Forand "main" and "high priority" objectives, example, the terms of trade deteriorated sig-that it was hard to discern the truly highest nificantly more in the late 1980s and earlypriorities. 1990s than was envisaged, inflation proved

harder and slower to bring down than wasThe guidelines for CPP and CSP preparation predicted, aid inflows (disbursements)were at least partly responsible. The CSP lagged behind forecasts, and there wasguidelines, for example, called for the docu- overoptimism in the projected trends in

48

agricultural output and in the growth of do- above, this is highly dependent upon gettingmestic savings and private investment. And a right diagnosis of which constraints arethe Bank now readily acknowledges that, in most binding, and which are most amenablethe early and mid-1980s, there was an insti- to remedy and relief through changed poli-tutionwide underestimation of the time re- cies, financial inflows, and projects and pro-quired for countries such as Ghana to grams. In general the Bank's macroeconomicimplement the full range of reforms and to analysis and policy advice in Ghana werereap the benefits in the forms of increased sound. The Bank advocated a tighter budgetinvestment and productivity and reduced policy to reduce inflation, a more flexiblepoverty. Underlying this optimism was an and realistic exchange rate policy to restoreunderappreciation of the importance of non- competitiveness, and a move to positive realpolicy constraints. This said, however, none interest rates both on efficiency grounds andof the above-mentioned projections was so to restore and maintain external balance.far off the mark as to undermine the strategy The Bank supported the movement towardso long as the government remained com- a free foreign exchange market, the removalmitted to pursue the reforms-including of quotas and internal price controls, andmaking adjustments as necessary when tariff leveling and reduction. It supported fi-some of the initial assumptions proved nancial sector reform and institution build-wrong. As the Bank made the right assump- ing in the two financial sector credits. Thetion about the government's ownership of Bank was also aware from the beginning ofand commitment to its reform program, this the problem of low private saving and in-sufficed to make realistic the assumption vestment and with partial success supportedthat the consequences of other wrong as- through the private investment credit mea-sumptions could be managed satisfactorily.12 sures to raise them.

Timely? Yes The Bank strategy as manifested in its eco-nomic studies, policy advice, and adjust-

It was a main contribution of the Bank (and ment operation conditionalities was largelythe IMF) that it supported in a timely fashion in line with the tenets of consensus andthe government's emergent reform program, other benchmarks of "best practices" in ad-a risky thing to do in 1983. This was not only justment advice and lending of the times.because the new Ghanaian team lacked any There were, however, some flaws in the de-track record in managing reform, but also be- sign.13 The first was the early sequencing ofcause some of its members had a record of the adjustment program. The Industrial Sec-anti-market actions and anti-Bank/Fund tor Adjustment Credit (approved in Marchrhetoric. Against this background, staff in 1986), for example, promoted investment incharge of the Ghana program made a strong sectors that were soon to become obsoletecase for accepting these risks-at the risk of due to trade liberalization. It reversed thetheir own credibility-and the Bank made a sequence of stabilize, liberalize, invest, sosubstantial upfront commitment of resources. that the credit supported some nonviable

firms. A second problem was the lack of pro-Appropriate priorities? Short-term, yes. vision of assistance for potentially viableLonger-term, uncertain firms in the wake of the trade reform, result-

ing in a large number of bankrupt firms stillA corollary of "getting the priorities right" is in receivership. A third deficiency was in the"getting the sequencing right." And as noted financial sector, where an initial emphasis

49

on cleaning the balance sheets of the banks coherent institutional development (ID) strat-meant treating symptoms rather than root egy that deals adequately with demand-sidecauses, and the lack of pressure to make the as well as supply-side constraints,m5 and withfinancial system more competitiv the eeconomic governance factors.credit and foreign exchange markets witholigopoly structures. This contributed to the As identified in the Bank's latest report onhigh real interest rates and a lack of avail- gavernance (World Bank 1994b), some im-ability of foreign exchange.14 portant facets of economic governance with

which the Bank may legitimately be con-The Bank's strategy d ay also be faulted for cerned (because of their direct bearing onbeing slow in identifying aiid addressing the development prospects) are the following:institutional impediments to the reforms. It predictability, openness, and competence ofwas not until 1987, for example, that the btank policymaking; professional ethos of the bu-approved a profject to strengtIhen the capaci- eaucracy; accountability of the executiveties of the e of economic ministries/agencies, branch of government; participation of civilA more appropriate sequencing would have society in public affairs; rule of law; and in-aimed pit improving implementation capaci- cidence of armed conflict among factions,ties earlier. And as will be discussed in Chap- tribes, and clans (within and across countryter 3, the Bank's overall strategy is still handi- borders). Neither the formal strategy pa-capped by the lack of a comprehensive and pers nor other internal documents re-

50._

viewed in the archives gave much attention reform and privatization when the politicalto these issues until very recently.' 6 leadership was strongly resistent to these

measures. To be sure, strong Bank condi-

Finally, and perhaps most importantly, the tionalities in these areas, even if agreed toBank should have sought, earlier and more by the government, would not have beenforcefully, actions by the government to fos- "owned" by the government and would notter private sector development, especially to have been implemented effectively. Theimprove investor confidence; to accelerate view of this report is not that the Bank andthe slow processes of privatization, public Fund should have "pressed" for reforms inenterprise restructuring, and civil service these areas through conditionalities, butreform; to identify and solve fundamental rather should have concentrated uponproblems in expenditure management (a doing more and better ESW and establish-main cause of the "counterpart fund prob- ing a better and broader dialogue on the op-lem"), to address some of the above- tions, including nonconventional forms ofmentioned governance issues seen to im- privatization.pede both private sector development andID; and to give more attention to longer- Important reasons why liquidations and di-term issues such as family planning, agri- vestitures were probably more needed incultural productivity, and environmental Ghana than in many other countries weredeterioration-the "nexus issues." that (a) the state-owned enterprise (SOE)

sector was (and still is) large; and (b) theIMF staff who were involved in designing the level of private sector confidence was so lowarrangements of the 1980s also believe that that a "nongradualist" approach to dealingthe IMF (and implicitly the Bank) should with the enterprises seems all -he more nec-have pressed for earlier actions in financial essary to provide a signal to the private sec-sector reform and state enterprise divestiture tor that the government is truly seriousin particular (Box 2.2). This IMF diagnosis is about its market-friendliness, and will notconsistent with the views of many Bank staff. soon reverse its policies.The Fund's report emphasizes the crowdingout effects, financial and otherwise, that The point is often made that reforms suchmade the slow pace of privatization and pub- as SOE rationalization, privatization, andlic enterprise reform a constraint to private financial sector reform require much moresector development. The government's lack administrative and institutional capacity toof action on these fronts was perceived by the carry out than, for example, price and tradeprivate sector as a "danger signal," given its reforms. This is quite true. But the bindingfears that the "unlevel playing field" in favor constraint to movements on these fronts inof state enterprises might persist, and that the the 1980s and early 1990s was not so muchgovernment might even reverse the trend to- Ghana's lack of implementation capacity asward promoting a more "market friendly" the lack of political will and the failure toenabling environment for private sector even design a program that could in timedevelopment. be implemented, even if only gradually in

the face of the implementation constraints.Some government officials and Bank staff Finally in 1994-95, however, the govern-argue that it would have been futile or even ment did begin to move ahead with bothcounterproductive for the Bank and Fund to the design and implementation of a num-"press" for more and faster state enterprise ber of privatizations.

51

Mix of instruments: appropriate in the G hana's unfinished agenda of adjustm ......s.t.r... ent,i198Qs,. evolv4n th 1q99fLs 11 OC- V pa-C Iet -I t It,

and public enterprise reform, do require sub-The Bank's ESW and aid mobilization/co- stantial institutional capacities to achieve. Soordination were well suited to address the the Bank is now very much in transition inpriority needs of the 1980s. The studies fed trying to accomplish these new tasks and tointo the policy dialogue, and the Bank was "get the instrument mix right."' 7

relatively well equipped to provide advicein areas where Ghana's policies were Adeauate risk assessment? 1Incerfni

weakest, for example, the large distortionsin prices and incentive structures. The The Bank's guidelines called for country strat-Bank was also well equipped, initially egy papers to "assess the sensitivity of thethrough the Consultative Group and staff base case (of macroeconomic projections) tovisits to donor capitals, and subsequently variations in parameters subject to great un-through the Special Program of Assistance certainty," and also to deal with exposure andfor Africa (SPA) and Global Coalition for creditworthiness issues, including "countryAfrica, to be a major force in aid mobiliza- risk." Given that Ghana was an IDA countrytion and coordination. And with a compar- throughout the review period, no creditwor-ative advantage in infrastructural thiness analysis was required per se. But aninvestment, the Bank was also well in-depth risk assessment is an integral part ofequipped to undertake the rehabilitation any strategy. The Ghana CPPs and CSPs wereprojects needed in the 1980s. The modus relatively weak on this front. The two mainoperandi was simple, with a relatively areas of risk that most documents flaggedsmall and cohesive Bank team dealing with were the possibilities that government com-a small and cohesive team of technocrats on mitment would falter and that cocoa pricesthe government side. would fall by more than was assumed in the

base case. In neither case, however, did theThus, the Bank's instrument mix of the strategy papers outline contingency plans for1980s made a good match to the priority ob- dealing with such eventualities (except byjectives. And these in turn made a good fit to cutting the lending program in the case of fal-the country's political economy, for reasons tering progress on reform).outlined in Box 1.2 and because the initialmeasures (stabilization, price decontrols, In following up on the 1992 Portfolio Man-and so on) did not require much institu- agement Task Force Report (an internal Banktional capacity to implement. And this was report), the Bank has sought to make morea major strength of the strategy. robust its assessments of risks at the project

level and its identification of measures thatDuring the 1990s, however, the needs have may be taken to manage or minimize thosechanged and so has the political economy. risks. It has not however taken similar actionWith democratization has come the need for to ensure that the country assistance strategythe Bank to relate to more constituencies. includes a robust risk assessment. 18 SinceWith the emergence of institutional and gov- some aspects of country risk and creditwor-ernance constraints has come the need for thiness assessment typically call for morethe Bank to pursue a less familiar agenda, to confidentiality than other issues, this maydevelop new instruments, and to mobilize not make the CAS (which has a less restrictednew skills. And the main tasks now on distribution than the CPP and CSP) an

52

Box 2.3: THE DoWNSIDE OF HIGH AID DEPENDENCY' DANGERS AND DISTORTIONS

A main finding of this study is that too little at- * Donor-driven budgets and processes.tention has been given by the donor commu-nity in general and the Bank in particular to * Rent-seeking and patronage relations; other

- . - ., . . - ~~~~~"extenmal disectomoiest' and "addictive be -the downside of Ghana's high aid dependency. e dA corollary finding is that more attention de- ha 'iors.-serves to be given to sustainability inidicators a The use of leverage and reverse-leverage;that presuppose declining rath-er than increas- conditionality conflicts.ing or continuing, high aid dependence.

* The use of aid to facilitate avoidance rather

The main dangers and distortions arising than implementation of needed adjust-from Ghana's high aid dependence a-re: ments, especially those involving downsiz-

img the public sector.

a Dutch disease (see Box 5.2 in Chapter 5).* Overreliance on donor initiatives and ac-

* Donor-driven agendas and priorities; ac- tions; "letting the donor do it."

countability to donor constituencies vis- Examples of each of. these distortions areA-vis local constituencies. provided in the report.

appropriate vehicle for such assessment. At policies that seems feasible of implementa-the same time, there is no more fundamental tion, taking into account real-worldmatter for both senior management and the constraints.Board to discuss than how much of whichkinds of risks the Bank should be prepared to It is also appropriate that the Bank be prag-take, and whiclh risk management strategies matic and make comproynises with its first-are most appropriate. best solutions if second-best solutions can be

found that are ruiore "owned" by the govern-Feasible implementationi and owntershtip? ment and so have a better chance of sus-1980s, high; 1990s, unitcertain taimled implementation. Botlh the IMF and

Bank appreciate that it is better to have a rel-In judging the relevance/appropriateness of atively "soft" program that is owned by thea B3ank strategy, it is necessary to consider government than a "harder" one that is nothow much congruence there is-or is not- so ownied. In Ghana's case, both the IMF andbetween the economic management strategy Bank settled for a more gradualist programof the government and the econonmic man- of reforms than they preferred. In retrospect,agement strategy the Bank is advocating. It is this seems to have been a correct decision. Itappropriate for the Bank to advocate a "first does not however imply that Glhana's gradu-best strategy," where first best refers not to alism was optimal. 19 Of course no one knowssomie textbook ideal but to the best set of the counterfactual, that is, whether a faster

53

pace would oi4 have led to reversals. And work of d couirv'.V overra-i-i extern.al assis-o-i-le U> {'tierve tnat Gnana's reforms, tance requirements and the roles of othernotwithstanding the setbacks on the fiscal donors and creditors.22 In practice, theside since 1992, have been sustained for Bank's strategy papers have given little at-longer than in any other African country.20 tention to the matter of donor comparative

advantages, whether at a point in time or asThe downside of the large aid flows that re- they might be developed over time, evensulted from this posture, however, has been with regard to partners as close as the IFC.23a number of "dependency effects," sumima- Considerable attention was given to ensur-rized in Box 2.3, which now constitute a ing that adequate aid could be mobilized,danger to the sustainability of the reforms. but much less attention was given to aid co-These effects, including new forms of rent- ordination matters such as the "downside"seeking that serve to undermine govern- of the dependency effects that may be en-mental capacities, have tended to be too tailed when so much aid is being providedmuch ignored by donors. by so many donors.

An important feature of the Ghanaian reform Sustainability? The uncertain path fromprogram from its beginning in 1983 is that recovery to sustainable growththe government had a high degree of owner-ship of its program. There is considerable ev- The Ghanaian strategy was to "go foridence of this, including public statements of growth" above other objectives, and thethe authorities that made it clear that they Bank supported this strategy. This led to thewere responsible and accountable for the designation of the rate of GDP growth as the"bitter medicine" that had to be swallowed, dominant indicator of the success of theand that the World Bank and IMF were their strategy, for both the government and thesupporters, not their scapegoats. Similarly, Bank. And although growth in agriculturethe Ghanaian officials were known in the and manufacturing was much lower thanBank as people who knew their own minds projected, not much attention was paid toand were tough negotiators, able to define these shortcomings because the mining andthe limits of which issues they were or were services sectors-especially trade, govern-not prepared to take on, and determine how ment services, and transport-grew enoughfar they could go. And when the government to enable aggregate output to rise by the tar-delivered on most of what it had agreed to geted-and seemingly satisfactory-5 per-do, this performance built confidence in the cent per annum. No one wanted to "argueBank and donor community that led to the with 5 percent" when the rest of Africa andgradual buildup of assistance pipelines. The most of the world was doing so poorly.downside of the "soft" and gradualist ap-proach was that certain problem areas were A number of nongovernmental organiza-left unaddressed for too long (for example, tions (NGOs) raised concerns and com-civil service reform and privatization).2 1 plaints that the government's "jump start

strategy" of the economy was hurting the en-Defining the Bank's role vis-a-vis other vironment by pushing logging and other re-donors: not much done source exploiting activities.24 Meanwhile, the

United Nations Children's Fund (UNICEF),Guidelines for both the CPP and CSP called the International Labour Organization, andfor Bank strategy to be defined in the frame- others raised concerns that the government,

54

Bank, and Fund were giving too little atten- Among the relative weaknesses identifiedtion to poverty and the social costs of adjust- were a lack of clarity in objectives and theirment. Independently of these latter priorities; too much focus on aggregatepressures, however, the government (GDP) growth as the indicator by which suc-launched, with Bank support, ambitious pro- cess of the strategy would be gauged; insuf-grams of educational reform and of restoring ficient "strategizing" (for example,basic social services, including in the rural identification of which constraints are mostareas. For this they deserve good marks. binding at each stage, and concentrating re-

sources on key constraints); a lack of robustProbably the main shortcoming in the de- risk assessment; delays in giving attention tosign of the Bank's assistance strategy has implementation and institutional con-been the lack of attention given to what may straints; and most importantly, an overrid-be called a broader set of "sustainability is- ing focus on near-term stabilization andsues." In the CPPs and CSPs, a few passing adjustment issues that crowded out atten-references were made to environmental tions and resources available to devote toproblems, but none of the strategy docu- the "sustainability issues," of which thements discussed the matter of sustainability "nexus issues" and the "dependency issues"with reference to the political or social di- are important subsets. This last point will bemensions, financial dependency dimen- further explained and elaborated upon insions, or structural dimensions. The Ghana the next chapters.brief for the last two SPA meetings has con-tained a section on "sustainability indica-tors," but this frame of reference did not Notesappear in the last CSP or in the latest CASs.How the current strategy might focus upon 1. The policy framework paper (PFP) is of course different from

the sustainability issues and incorporate a the other documents in that it represents a statement of a gov-

set of sustainability indicators will be dis- ernment's development program, rather than of the Bank's

cussed in some detail in Chapter 5. strategy and program. But PFPs are nevertheless strategy docu-ments for the Bank as well as the government in that the Bank

officially endorses such programs and pledges to help the coun-

tries implement them.

Conclusions 2. The country program paper (CPP) guidelines in effect between

1979 and 1988 called for CPPs to be prepared at intervals of not

The above review of the "relevance criteria" longer than three years. The country strategy paper (CSP) guide-lines issued in 1988 called for CSPs to be prepared at two-year in-does not readily give rise to a rating. It tervals for countries receiving International Development

shows, however, that the Bank's strategy Association (IDA) commitments in excess of $100 million. Hence,

had some notable strengths, including espe- the Region was not in compliance with OMS 1.12 in this regard.

cially initial sound diagnostics based on According to the strict "letter" of the guidelines, a CSP shouldhave been prepared in 1988 and in 1992 rather than 1993. It maygood-quality economic work; close align- however be argued that there was compliance with the "spirit"

ment between the Bank's country assistance in that both senior management and the Board were continu-

strategy and the government's strongly ously apprised through various other documents (for example,

"owned" own strategy; timeliness; accept- reports on adjustment operations) of the Bank strategy and lend-

ably realistic assumptions about external ing program. This was moreover a period in which there wasconsiderable continuity in the government's strategy and Bank's

events; especially for the 1980s, an appropri- program, so that new strategies were not required by significant

ate mix of instruments; and a generally ap- changes in country conditions.

propriate sequencing and an acceptable 3. With the benefit of hindsight, it appears remarkable that the

"second-best" pacing. Bank found Ghana to be still creditworthy for International Bank

55

for Reconstruction and Development (IBRD) lendine as late as 14 The main caue of re: ,nfiaf.on, hig, red ijisrest rdtes,F176--,7-and not for enclave oerations. The FY76-77 MBr d forci anechanf i a ,"'S ,l'operations were for power, industry, a development finance com- cal discipline in 1992-93, with the consequence that too much ofpany, and roads. But since the 1970s are prior to the period cov- the burden of stabilization fell on monetary policy. This wasered by this review, no attempt has been made to assess how this however a failure in the government's implementation of itscame to be or the lessons to be derived from that period. own stabilizaton program, not a shortcoming in the design of

4. In retrospect this appears to have been wishful thinking. the Bank's strategy per se.

5. Not including resources from the Africa Facility that were 15. The demand side constraints refer to those factors that im-projected at about $20 million per annum. pede effective utilization of existing capacities, individual and

institutional, for example, the government's bypassing (at a po-6. The performance ratings and IDA allocation exercises re iiticai ievel) of the civil service when it comes to decisionmak-mained procedures internal to Bank management. ing on implementation issues.

7. In the early 1990s, references were being made to Ghana as a 16. This is not to say that the Ghana team lagged behind the restprospective 'tiger" of Africa. of the Bank in this regard. Yet even the 1994 country assistance

8. It was proposed that if total undisbursed balances for invest- strategy paper (CAS) hesitated to mention the serious tribalment lending were higher than aggregate appraisal estimates conflict in the north of Ghana in February 1994-an event thatby more than a 50-75 percent range, then the volume of lending seemingly called for interpretation as to its significance andin the following year would be reduced to $150 million, with implications.

cutbacks focused on sectors of weak performance. 17. The apt observation that there was closer "fit" in the 1980s

9. In project evaluation, sustainability is assessed independently than in the 1990s between Ghana's political economy, the bind-of relevance, and there can be cases where projects are found to ing constraints, and the Bank's instruments and comparativehave a satisfactory outcome even when the benefits are unlikely advantages is attributable to Mr. Ravi Kanbur, current chiefto be sustainable. In the case of an overall long-term Bank assis- economist of the Africa Region.tance program, however, the targeted outcome is itself a sustain- 18. The CAS guidelines call for some assessment of the past andable improvement in the country's welfare, so it is impossible to prospective effects of changes in a country's external environ-imagine a satisfactory outcome that is not sustainable. Hence, in ment, and also of the sustainability of the reform process in thecountry assistance reviews, unlike in performance audit reports, case of countries in the process of economic adjustment.sustainability will be treated as a criterion of relevance.

1 9. Other things being equal, the more congruent the Bank's10. The quality and impact of specific projects will be reviewed preferred strategy for a country and the government's actualin Chapter 3. strategy for that country, the more "relevant" is the Bank's strat-

11. There is often some resistance to the adoption of any set of egy in the sense of its probability of implementation. On theperformance indicators on the grounds that they imply a "tar- other hand, a Bank assistance strategy that leads the Bank togetry," or may be used as "triggers" in a mechanistic way, or compromise so much that it supports a nonviable govemmentmay lead to excessive micromanagement. The 1990 CSP re- strategy would be congruent but not relevant. To be relevant, aflected this resistance in seeking to avoid quantitative triggers Bank strategy has to support a govemment strategy that is atthat could result in a lowering of the lending program. The po- least minimally viable, however close or far that may be from asition advocated later in this report is that a set of "sustainabil- "first best" or best practice strategy. If that test is not met (as inity indicators" should comprise a core set of indicators by 1981), then the Bank should refrain from providing assistancewhich the performance of the country's strategy and Bank's as- other than in the context of a "core program."sistance should be assessed. There is considerable truth to the 20. In attempting to think systematically about the "counterfac-saying that "what gets measured gets done"-especially to the tuals," the Operations Evaluation Department (OED) did un-extent that the list of priority indicators is short. But this em- dertake some formal macro analysis. In addition, it consultedphasis on "getting the right indicators" does not at all imply relevant published analyses (such as Roe and Schneider 1992)that such indicators should be instruments of micromanage- that assessed links between social developments, investor confi-ment. Quite the contrary! dence, and the sustainability of Ghana's reforms, plus the sub-

12. If the Bank has been too widely off the mark in some as- stantial literature on Ghana's political economy. This facilitatedsumphons. for example, about the external financing require- the analysis of both "counterfactual scenarios" of the past andments or availabilities, or the severity of terms of trade shocks, some "sustainability scenarios" of the future. Substantial addi-then it is true that even a govemment fully committed to r- tional formal modeling work in these areas is needed to makeform could not have managed the shocks or shortfalls, and the such analyses more robust and more relevant to future policy-strategy might have failed for lack of realism in the assump- making and future Bank strategy design.

tions. But this did not happen. 22. This is not to say, however, that a "tougher" posture by the

13. The strengths and shortcomings on the implementation side Bank would have ensured the needed acceleration and deepen-will be discussed in Chapters 3 and 4. ing of the reforms. Ideally, the Bank would have been more ef-

56

fective in helping the government to see for itself the benefits of 24. Relations with the IMF were of course a special case (seeaccelerated reform versus the costs of delay. But this is not tan- Box 2.1). There were close relations and good communicationstamount to saying the more leverage should have exercised between the Bank and International Finance Corporation, orthough tougher conditionalities. Bank staff correctly recognized IFC, (including Foreign Investment Advisory Service) staff whothat government ownership was critical. commented upon draft CPPs and CSPs, but there is little evi-

dence of much attempt to achieve fully integrated Bank/lFC23. The CAS guidelines go further and call for "an assessment aene See alsehptery3.of the role the Bank might play relative to the plans and capa- strategies. See also Chapter 3.bilities of other multilateral and bilateral donors"-a formulat- 25. See, for example, Friends of the Earth (1993). The OED mis-ing that invites the Bank to identify and pursue its comparative sion cannot attest one way or the other to the validity of allega-advantages. tions made in such documents.

57

3. Efferti eness of the Banlk's instruments

When we know what we want and take the ini- ports (PARs) and project completion reportstiative, things [projects, programs, and so on) go (PCRs) prepared by the Africa Regional Of-okay. But when the World Bank takes the initia- fice and the Ghanaian government. Thetive, things don't work so well. current OED database contains evaluations

of 41 Bank/IDA projects undertaken in-Senior Ghanaian official Ghana since 1968, of which 16 are PARs and

25 are PCRs. For the period 1983-93, the

Introduction database includes 19 evaluations of which14 are PARs and five PCRs. The aggregatecommitment amount for these 19 projects

this chapter focuses on the effectiveness of was $744 million, equivalent to 35 percentthe various Bank instruments, namely lend- of the $2.1 billion in commitments for alling (for investment projects, adjustment op- IDA projects approved in 1983-93.erations, and technical assistance), ESW,and aid mobilization/coordination.1 As in Only one OED impact assessment has beenother parts of this report, the coverage is se- made of a Bank project in Ghana. This waslective rather than comprehensive. Empha- the assessment of the resettlement componentsis is given to identifying instruments that of the Kpong hydroelectric project. That pro-appear to have been most and least effec- ject was implemented between 1977 and 1982,tive. Hence, particular attention is given to before the period covered by this review.the four projects approved since 1983whose outcomes have been rated as unsat-isfactory, and to the two projects whose out- Most and least effective instrumentscomes were deemed by the OperationsEvaluation Department (OED) to have been The Bank's most effective instruments havehighly satisfactory. Attention is also given been its macro- and policy-oriented eco-to OED's findings regarding project impacts nomic work, the macro-level policy dia-on institutional development and ratings of logue, the structural adjustment operations,the sustainability of project benefits. lending for infrastructure rehabilitation,

and its aid mobilization efforts (includingThe main sources for drawing conclusions leadership of the Consultative Group forabout the efficacy (and where possible the Ghana and the Special Program of Assis-cost-effectiveness) of Bank projects in tance that mobilized substantial cofinanc-Ghana are OED's performance audit re- ing). The country economic memoranda of

58

1983 and 1985 were particularly useful doc- sources, and that few other African coun-uments that helped the Bank, government, tries were comparably aidworthy.and donors to share a common set of priori-ties, and Bank ESW was also effective inhelping the government with its tax reforms Overview of Bank and total donorand public expenditure programming. assistance

Less satisfactory or mixed results have been Aid flows to Ghana should be regardedassociated with lending for agriculture, so- largely as endogenous because they have beencial sectors, finance and industry; with some very much tied to Ghana's economic manage-sector work; and with efforts to foster aid ment performance. Through most of the 1970scoordination (as distinguished from aid mo- and into the early 1980s, when the Bank andbilization). The least effective instruments other major donors judged Ghana's economichave been those (including technical assis- management performance to be poor, aidtance) aimed at fostering institutional devel- flows were relatively low (about 3 percent ofopment in general and institutional reforms GDP in the years 1981-83). After Ghanain the civil service and public enterprise sec- adopted its ERP in 1983, the aid pipeline wastor in particular. One general problem that built upon only gradually. But since 1987made for lowered effectiveness of lending Ghana has been a favored aid recipient, andwas that the Bank and other donors some- official development assistance (ODA) com-times pushed more operations and financing mitments averaged about $800 million peron Ghana than the limited absorptive capac- year between 1987 and 1993. The 1993ity could manage effectively. For the Bank, recorded commitment was about $700this reflected in part the fact that Africa had million.2 By the end of 1992 the undisburseda more or less fixed share of total IDA re- aid pipeline exceeded $1 billion.3

TABLE 3.1: AID FLOWS, 1981-92(ODA terms, $ million)

Yearly average for perioda

1981-83 1984-86 1987-89 1990-92

Commitments, total 186 356 737 888of which IDA 33 137 258 280

Gross disbursements 152 288 554 873of which IDA 14.4 94 189 190

Net disbursements 133 264 522 687of which Bank/IDA 19 89 177 176of which IDA 14 93 187 188

as % of GDP 3 5 10 10per capita ($) 12 21 37 45

Net transfers 105 238 478 635of which IDA 12.7 90.3 181.3 178

a. Calculated from yearly averages.Sources: Organization for Economic Cooperation and Development, World Bank Debt Tables.

59

'A'li, sn tfat (Shin- .cco.:nca IDA OTsbiuseiiiejiis .n in.vsPtrnePrt nF r>ci-t

very aicr-ctepenCient courtry, with riet OD at a level of about $80 million over severaldisbturJsements equivalent to about 10 per- years. This reflects a variety of problems incent of GDP over the five years 1988-92. Ghana's implementation capacity, iiicludingGhana has enjoyed both an "adjustment pre- its management of counterpart funds. Thesemiurn" (entitling it to IDA allocations above issues will be discussed below.and beyond the IDA norm) and SPA eligibil-ity (entitling it to large cofinancings in thIe The Bank built up its commnitmrent and dis-ID A adjust.ment operations). bursement rates until leveling off in the

early 1990s. Sectoral adjustment lending wasIDA assistance to Ghana over the period undertaken ahead of structural adjustment1984-92 was equivalenrt to 34 percent of total lending, and combined sectoral and struc-ODA coinmmitments, 28 percent of gross ODA tural adjustment lending reached about $1disbursemnents, and 32 percent of net billion-equivalent to 42 percent of the totalODA disbursements. In recenit years, IDA IDA lending of $2.4 billion.cornmitments have leveled off at about $250annually-equivalent to about one-third ofthe annual average ODA commitments. The effectiveness of lending--Table 3.2 slhows IDA commitments and dis- performance trendsbursemerits to Ghana, by major lending in-strument, for the fiscal years 1979-94. PCR-PAR performance ratings were avail-

able for 41 completed operations in GhanaAn matter of considerable concern to the as of November 1994 (representing totalBank lias been the stagnation in the level of commitments of $1 .1 billion). About half of

TABLE 3.2: IDA I.ENDING 13Y MAlOR LFNDINC; INSTRUMENT, FY79-94($ million)

TotalMajor, lendinig instrunient Variable ($) 1979-82 1983-86 1987-90 1991-94 1983-94

Financial intermediary Sum of loan/credit 19 0 30 0 30loans Sum of disbursement 4 18 14 20 53

Sector adjustrrtcnt loans Sum of loan/credit 0 257 191 186 633Sum of disbursement 0 106 257 231 595

Structural adjustment Sunm of loan/credit 0 0 264 133 397loans Sum of disbursement 0 0 190 206 396

Specific investment Sum of loan/credit 30 103 237 390 730loans Sum of disbursement 80 43 135 178 357

Sector investment and Sum of loan/credit 54 75 186 318 579maintenance loans Sum of disbursement 36 45 103 160 307

Technic.al assistance Sum of loan/credit 0 35 21 15 71loans Su.m of disbursement 0 13 30 18 61

Iotal Sum of loan/credit 103 469 929 1,042 2,439Sum of disbursement 120 226 730 814 1,769

SourLe: Worldc Bank data.60 .---------.

60 .. ; .. n. ... . ... .-.. =.=. X

these completed operations were approved ternal environment, particularly in the termsprior to 1983, but in terms of volume of of trade; (b) the extent to which Ghana man-lending the projects approved since 1983 aged to buffer domestic economic activitycomprise about two-thirds of the total. from exogenous shocks through appropriateAmong these rated projects, 32 (or 78 per- economic management; and (c) portfolio-cent) were judged as satisfactory by the specific characteristics.evaluators. A significant proportion of thesatisfactory projects and programs have also There are also substantial variations acrossbeen marked by likely sustainability albeit sectors. The sectors at the upper end of themoderate achievements of institutional ob- range have been energy, human resources,jectives in several instances. power, transport, and water and sanitation.

The sectors with below-average trends in-The satisfactory proportion of the Bank's clude technical assistance, telecommunica-portfolio in Ghana compares favorably with tions, finance, and agriculture. Thethe Bankwide satisfactory average of 74 per- performance of program and policy loanscent and with the Africa Region's satisfac- has generally been consistent with the over-tory average of 65 percent. Equally all country average. Power, transport, andimportant, the 80 percent of program and water and sanitation sectors have main-policy loans (principally, adjustment opera- tained consistently highly satisfactory rat-tions) judged to have been satisfactory is ings whereas the agriculture sectorconsiderably higher than the Bankwide av- performed worse during the latter half oferage of 73 percent and the Africa Region's the 1970s but shows some improvement inaverage of 59 percent. Two highly satisfac- performance ratings in the recent period.tory operations are summarized in Box 3.1.One reason why these SALs succeeded bet- Shifts in the sectoral composition of theter than the sectoral adjustment loans (SE- portfolio had a considerable impact on over-CALs) was that they involved decisions only all portfolio performance. This was mea-at the macro level, whereas the SECALs re- sured by comparing Ghana's portfolioquired coordination at the sectoral levels performance trends with "normalized"where the deficiencies in information, insti- trends. Had the Bank continued to lend totutions, and management were more severe. the same sectors after 1974 at the same pro-

portionate levels as in the years prior toPortfolio performance in Ghana has fluctu- 1974, Ghana's overall performance trendsated considerably in recent decades. For pro- would have witnessed a commensurate de-jects approved in the late 1960s until 1974, the cline during approval years 1974-79 largelyshare of evaluated projects that received a because of the poor performance of financerating of satisfactory remained around 88 sector loans.percent. For projects approved in 1974-79,portfolio performance ratings deterioratedsharply, with the percentage of projects rated Projects with unsatisfactory outcomessatisfactory declining to the mid-60s range.And for projects approved in the 1980s, per- Of the 41 projects evaluated by OEDformance trends show the satisfactory ratio through June 1994, nine were rated as hav-improving again to the mid-80s level. The ing unsatisfactory outcomes (Table 3.3). Fivedifferences in satisfactory ratings over time of the nine projects, including the three agri-reflect a combination of: (a) changes in the ex- cultural projects, were approved in the

61

ouadn progas bte Qpe rati on \teha level was; lacking.X 3 00 t

EvlainDprmn vlatos

62~ ~ ~ ~ ~ ~~~~~~~~Mi stegh _ts SA operaton_ la

(BOX 3.1 continued)

* Implemetntation. Arrangements,, especially public sector-dominated economy were not

for SAC L, kept the political directorate and sufficiently considered.

senior officials informed, and provided for

adequate coordination and monitoring. * Institutions. Bank study of institutionsand analysis underlying institutional re-

* Supervision. Bank staff hands-on supervi- formn was limited. Thus, there was no def-

sion facilitated work on the public invest- inition of future roles of institutions that

rent program, budget, tax reform, public would lose regulatory functions as liber-

expenditure review, and, to a much lesser alization proceeded.

extent, civil service reform. Staff devotedtwice as much time to supervision of a Continutity. Frequent turnover of Bank

these operations as to the average Africa staff, regarded by the client as disruptive

Region SAL operation, of the adjustment process, was an unde-sirable feature of the Bank's conduct of

The OED audits identified also some weak- these operations.

nesses in these generally successful opera-

tions. These included: Lessons

* ESW. In cocoa marketing and state- a Brainstorming sessions involving high

owned enterprise reforms, the economic levels of government at the design stage

and sector work was inadequate to un- of the adjustment program have consid-

derpin the Bank's efforts to convince the erable merit as a means of enhancing the

governmwent regarding the need fo,r and - client's sentse otf ownership and strength-

direction of change. ening commitment to implement it. TheGhana experience shows that the inclu-

• Inexperience. Bank staff lacked experience sion of the private sector, unions, and

in public enterprise and in cocoa market- other interests in such sessions can foster

ing reforms. greater understanding and acceptability

of necessary policy measures.• Narrowness ofperspective. Bank insistence on

specific targets for divesting state enter- a Where, as in Ghana, the public sector has

prises did not appear to take into account been the dominant operator in the formal

sufficiently the policy and institutional con- economy for over 30 years and the culture

straints facing private investment at the or tradition of private entrepreneurship

time; other options were inadequately con- has been substantially weakened, private

sidered. Similarly, the financial implica- entrepreneurs should be expected to re-

tions of widespread retrenchment in a (continued)

63

spend only cautio usly to partia l changes mobilizing resources need to be put inin te plic eniroment Thy ned o pace,andthelegl bsis and admisr-

be f+convincedthaSt plcy chnge illbe 2z0000i0tive prcedresneedto be clarified fr po-

permanent and comrehensive nd t at i e tenhnvetr as well asifornbureaucrts

ttho elaysandfinia rcalan oto erprivtob- fit oAllmtc nibr thesedrequir mentshv tofb ad-

and wealthtwillabe consistentwe enavirs early in the wdjusi tment presits-

hcnmcancd role tca envisae rorntenpivte sec- tinwr;ncoa,Bksafddntcnultor.be Frequent coslaiosbteeh suffinentanwiofficnias, concu owithithesvie

g n a th pv secto can beheXi0lAiCy0i thatlthew progres on thee as t no agreement pro

ufse fu int mere aragthed laterte cmpothbles- og the technical assistance mhaucha hedwith thepaiol arc heanges and binientio f- loahseatin ind on e, the rloynk of Bnkist aff s-

ion etheribctie ingyimpes imes to the ir oaldisrs w ank eto petse dit utt reSs hailna-reconos we piaiti ironment de - n efforts in crcva, hacreas ie ab mannt oat

sratibedn Chaptiurier. 'hcy were based on in- presiblems with conplmntracth ane and persufficha Ghanformasreurstaindtion and werefompesmentadlel was rat e ip l ementato n

O preoiingeret in entivense to stime pro- on th norms ofsstaff time providedfvate ionesultntiontition maleamntion losof aim nfrasteuntuoeraeton soul

taentces for assitiesa thge rate inhs.nErd in - (e reviewd ting w ofaterhd e rioenorlc.

pesmicind wereatio r acterized by implemen- ttoans wer te rtedchnic asnsatistace leoan tain relay dat ncia adthe r prob-

gramswasnotwelladvanced.Thelevel waso lmo w, and therenl wvaslnoagereementsth

en sitation arc ten woreabltation loans andemeinn mining,Pethoeu Bank'sinsstnctue onerfor-

proenctes werte prematur sand that theirdprepai- exprtsdid improve tashamered wyenremsubstata

sufficentifration a nd w aersaerTe implemente loamsweexrated as unsaetisfaectory.eain t

64

TABLE 3.3: UNSATISFACTORY PROJECTS

Year of approval

Sugar rehabilitation 1972

Livestock development 1974

Telecommunications 1975

Upper region agricultural development 1976

Second National Investment Bank (NIB) 1979

Energy 1983

Export rehabilitation 1984

Export rehabilitation technical assistance 1984

Structural adjustment institutional support (SAIS) 1987

Source: World Bank data.

implementation delays and, eventually, an process and to ensure that appropriate staffunsatisfactory outcome. Finally, the Struc- skills are mobilized (see Box 3.2). A funda-tural Adjustment Institutional Support Proj- mental problem is that civil service salaryect (SAIS) (Credit 1778) failed to meet its and other conditions are so poor that thereobjectives mainly because the project did not are few, competent counterparts to work withhave either an adequate degree of local own- consultants (local or expatriate), as trainedership or sufficient discipline in the process staff leave the service in large numbers. In-of supervision by the Bank. Other factors service training is woefully inadequate, buthaving an adverse effect on the outcome the benefits of training cannot be sustained inwere the legacy of mutual mistrust between the absence of reforms that improve motiva-the political leadership and the civil service, tions as well as salaries of productive civiland the management styles of those oversee- servants and public enterprise employees.ing the project.

The effectiveness of the Bank's lending pro-Among the key lessons learned from this last gram as a whole has been hindered by insti-project were that the "enabling environment" tutional and managerial weaknesses on thefor institutional development in the public part of the implementing ministries andsector is more important than the choice of agencies. In many cases, it is not easy to as-instruments applied in technical assistance certain whether the more binding constraintoperations, and that the governance-related to effective implementation is a lack of com-constraints to effective Bank assistance for in- mitment or a lack of institutional and man-stitutional development are fundamental, agerial capacity. But the latter are clearlybinding constraints. The SAIS project con- serious constraints. In some cases, moreover,firmed the desirability of pursuing a "pro- ownership has been lacking. The Agricul-cess" rather than a "blueprint" approach to tural Diversification Project was reportedlythe design of such projects. But it also a project pushed by the Bank on a govern-pointed to the need to put discipline into the ment reluctant to accept it.

65

499

_ 'SECtiVl0000000dd;;0:t'V:0;00 0ff0 000 ;:d0

'~~~~~~~~~~~~~~~~~~~~~~~~~Pl

i;tiji0i0i;t 0t;00:;i0et0:X;N;\XX0 Sti:iStESS;;t;;i:^UC:i;.t0\it:XSt\0^;:0ik;;l;ki^XAX@i}: S9 LTta^S:t WA UO aI

In some cases, technical assistance has helped roughly on a par with the all-Regions aver-to improve institutional capacities, but the ages, and compared favorably with therecord on TA effectiveness is itself very mixed Africa Region averages. The Annual Reviewand on the whole poor. How to improve the of Portfolio Performance (ARPP) ratings ini-effectiveness of TA is a subject that requires tially improved from 1.72 in FY89 to 1.59 inmore concerted attention by both the donors FY90, but then fell to 1.92 by the end ofand government. The United Nations Devel- FY93. A major cause for concern was theopment Programme's National Technical Co- proportion of "problem" projects in theoperation and Assessment Programme portfolio, which have yet to show any signif-(NATCAP) was supposed to help in this re- icant improvement.gard but this program is ineffective and lacksdonor confidence. And TA does not much Some of the implementation delays in thehelp to address systemic problems such as the portfolio were attributable to the deteriora-poor ethos of the bureaucracy and distorted tion of disbursement ratios. The undis-incentive structures, which, being problems bursed balance rose steadily over the fivethemselves, tend to render TA ineffective. years from FY89-93. Some of this increase

was accounted for by the depreciation of theBox 3.3 describes a cross section of projects dollar against the SDR, but the bulk was duein which varied progress was achieved on to a substantial deterioration of the dis-the ID front. bursement ratio, from 33.1 percent in FY88

to 14.3 percent in FY92. This compared to aBankwide ratio of 17 percent and the Africa

Status of the portfolio Region's average of 15 percent in FY92.

As of FY93, 40 projects and programs under The lack of timely availability of matchingimplementation had received supervision funds for the government's contribution toratings (for their overall status as well as projects has often become a bottleneck toprogress toward their development objec- Bank disbursements. The government hastives) as reported by the Bank's Operational argued that the Bank's practice of requiringPolicy Review (OPR) Department. In addi- upfront payments into project accounts intion, audits of six PCRs were in progress. the relevant ministry or agency ties up re-About 13 percent of the ongoing projects sources inefficiently, and that the prolifera-were marked by considerable implementa- tion of accounts also leads to loss of controltion difficulties. The overall status of the by the Ministry of Finance and EconomicBank's current portfolio was then below the Planning.Bankwide average. Problem projects thenincluded: Mining Sector Rehabilitation, Concerns have also been expressed regard-Small and Medium-Scale Enterprises, Rural ing delays in contract processing and pro-Finance, Cocoa Rehabilitation, Forest Re- curement both at the level of the ministrysources Management, Telecommunications and the implementing agencies. The BankII, Petroleum Refining and Distribution, has undertaken a training seminar for pro-Power V, Public Enterprise Technical Assis- ject coordinators to address the issue of im-tance, and Transport Rehabilitation. plementation delays. Especially for

procurement of goods, the Ghana SupplyDespite slipping over the period FY89-93, Commission's monopoly position adverselyGhana's supervision measures remained affects its efficiency and performance ac-

67

89

AM4#` ~

ol lll" o UW.4,Lp ?php

~~ ~~'J~~~ ~~Th~~AV tp))Ixrnn~~~~~~~~Js~av$m

s~~~~~~~~v~

(Box 3.3 continued)

lished, but the latter remained under- Negligible resultsstaffed. Simflarly, no worthwhile institu-tional improvement was achieved in gold a RIC I (Credit 1393, approved in 1983).mining activities. Notwithstanding the achievement of the

objective of providing quick-disbursinig• Health and Education Rehabilitation Project foreign exchange to finance urgently

(Credit 1653, approved in 1986). Despite reeded rehabilitation imports, the pro-the emergency nature of the projet, sev- gram made very little progress towarderal long-term benefits were derived building the procurement and implemen-

from the project: (a) work in the critical tation capacity of the Ghanaian agencies.area of drug supply and extension of im-munization coverage; and (b) developing a Export Rehabilitation Project and Export Re-

niddle-level leadership in the health sec- habilitation Technical Assistance Projecttor and in the Ministry of Health. (Credits 1435 and 1436, approved in

1984). The implementation of these proj-• Petroleum Refinery Rehabilitation and Techni- ects, except perhaps in the ports sector,

cal Assistance Project (Credit 1446, ap- left much to be desired. In timber, theproved in 1984). The projet was designed timing of the deployment of advisors was

also to provide technical assistance for a out of phase with physical rehabilitation.management improvement program (MP) In cocoa, expertise could not be effi-

and for training of Ghanaian Italian ciently provided and effectively utized.Petroleum Company refinery staff. But it The implementation of the project in the

took considerably more time than was mining sector was very poor.originally expected. The study on the NITPwas seriously delayed, and implementa- a Second National Inestmedt Bank (NIB) Pn4-tion of the recommendations had to be car- ect (Credit 0901, approved in 1979). Theried out under a succeeding project (Credit technical assistance components of the1819), project consisted of (a) assisting the gov-

ermnent In formulating and implement-• Water Supply Technical Assistance and Reh- ing an export and marketing program;

bilitation Project (Credit 1342, approved in and (l) improving the internal operations

1983). The primary objective of the poj ~ of (hanaS primary development financeect-to strengthen the an capab inittio The project had a minimal ef-ties of the Ghana Water and Sewerage f on 0ittproving NI's instional

Corporation both at headquarters and in .cblithe districts and to improve its oratiefficiency and fiandal perfqrmance-was £ StructuratlAdjustment Institutional Supportnot as successfully achieved as had ben Project (Credit 1778, approved in 1987).envisaged during prject preparation. (See B 32

_________________________________i______________________________ 69

IA-r E 3.X: GHAN.A-SELECTED INDICATORS CI RA-T( .R... I.-E

Indicators FY84 FY88 FY91 FY92 FY93

Portfolio performanceNumber of projects under implementation 15 25 38 38 40Average implementation period (years)a 3.3 2.9 3.3 3.5 3.5

Average ratings (scale of 1-4, with I being the highest)Development objectivesb 1.67 1.40 1.43 1.58 1.57Overall statusc 1.93 1.68 1.71 1.95 1.92

Percent of projects rated 3 or 4Development objectivesb 13.3 .0 5.3 10.5 7.5Overall statusc 26.7 4.0 7.9 18.4 12.5

Canceled during FY in $ million .01 .00 1.85 .18 .89Disbursement ratio (%)d .5 .5 17.4 14.5 17.5Disbursement lag (%)e .0 .0 4.0 12.9 25.9Supervision resources (total in staffweeks) 260 358 453 601 631Average supervision (staffweeks/project) 17.4 14.3 11.9 15.8 15.8

Supervision resources by locationHeadquarters (%) 100 99 100 88 76Resident Mission (%) 0 1 0 12 24

Supervision resources by rating categoryProjects rated 1 or 2 14 14 12 13 15Projects rated 3 or 4 27 13 24 30 24

a. Average age of projects in the Bank's country portfolio.b. Extent to which the project will meet its development objectives.c. Assessment of overall performance of the project based on the ratings given to individual aspects of project imple-mentation (for example, management, availability of funds, compliance with legal covenants) and to developmentobjectives. The overall status is not given a better rating than that given to project development objectives.d. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at the beginning of theyear: investment projects only.e. For all projects comprising the Bank's country portfolio, the percentage difference between actual cumulative dis-bursements and the cumulative disbursement estimates as given in the 'original staff appraisal report/president's re-port forecast' or, if the loan amounts have been modified, in the 'revised forecast'. The country portfoliodisbursement lag is effectively the weighted average of disbursement lags for projects comprising the Bank's countryportfolio, where the weights used are the respective project share in the total cumulative disbursement estimates.Source: World Bank data.

countability. However, the alternative of its involvement in Ghana in recent years,competitive contracting through private sec- with generally satisfactory results to date.tor procurement agencies remains closed.

As of June 1994, IFC's Ghanaian portfolioamounted to 20 projects for total commit-

The role of the International Finance ments of $155 million, of which $148 millionCorporation (95 percent) was related to loan investments

and $7 million to equity. The mining sectorNotwithstanding some continuing impor- accounted for 76 percent of the total. Ghanatant constraints to private investment, and now represents one of IFC's largest expo-especially direct foreign investment (see sures in Sub-Saharan Africa. The substantialChapter 5), IFC has progressively increased growth of IFC's activities in Ghana led to the

70

opening of an office in Accra in May 1992. tor. IFC has also become actively involved inUntil 1990, IFC involvement in Ghana was the development of the small business sectorheavily oriented towards the gold sector, in through its Africa Enterprise Fund (AEF),keeping with the government's strategy to which provides loan and equity financing torehabilitate and expand a sector that repre- small businesses. Ghana is by far the mostsents almost one-quarter of export resources. active AEF country, with 17 approved proj-Ashanti Goldfields Corporation (AGC), with ects totaling about $9.2 million. With thea total exposure of $79 million, represents opening of its satellite office in Accra lastone of the highest single-company expo- year, IFC expects a continued increase in itssures in IFC's portfolio. involvement.

From IFC's point of view, its most satisfac- Several AEF projects have matured with as-tory involvement has been in the gold sec- sistance from the Africa Project Develop-tor, where it has brought some $386 million ment Facility (APDF). Ghana is currently theto rehabilitate the sector on its own account, most active APDF country. The Facility hasas well as on account of participants through processed 20 projects since its inception inmobilizations. In FY92, it introduced AGC to 1986, for which it developed concepts, mar-the derivative-products market through the keting strategies, and in many cases helpedapproval of a $140 million gold-link loan to mobilize local funding. Twenty-two newfinance its future expansion, and a gold projects are currently in the pipeline.hedging facility to enable the company topurchase forward-sale and option contractsfrom international bullion dealers. IFC also Allocation of staff resourcesassisted the government in its divestiture ofAGC, through a successful flotation in the Table 3.5 describes trends in the Bank's de-international market. ployment of staff resources, as allocated

among the main instruments. As may beWhile in volume terms IFC's financing has seen, the trend in the total amounts of staffbeen concentrated in the mining sector, it time allocated for Ghana was very much inhas diversified into a range of activities in line with the trends in lending volume de-steel manufacturing, aluminum, plastics scribed earlier-a rapid buildup in the mid-products, tourism, packaging, soap, wood 1980s but a leveling off (albeit still someproducts, agribusiness, and the financial sec- increase) in the early 1990s.

TABLE 3.5: STAFFYEARS BY MAIN INSTRUMENT

(annual average)

1983-86 1987-90 1991-94

Lending 8.8 13.8 12.3Supervision 4.8 8.0 12.3Economic and sector work 6.0 7.8 7.5Aid coordination 0.8 0.8 0.5Technical assistance 1.0 1.8 1.5Other 1.0 1.0 1.3Total 22.4 33.2 35.4

Source: World Bank data.

71

E cno i and etr. r..- r. wnrk O..j R;v 77Q-.;ffve>r-4, --

period 1987-94.4 But it is difficult to identifySome of the main conclusions on the Bank's and measure quantitatively the benefits ofESW on Ghana, 1983-93, are: (a) it had to activities such as ESW, and to gauge what"fill a vacuum" especially in the mid-1980s, impact or influence any particular studyand to some extent today as well; (b) it was had, directly or indirectly, on any particularof mixed although generally high quality; audience, or any particular decision.(c) it had a substantial impact on the formu-lation of the Bank's country assistance strat- The above assertions that the Bank's ESW onegy in general and on the lending program Ghana had a "substantial impact" on the(and the quality thereof) in particular; and government, donors, and Bank managers(d) it had a substantial impact on the gov- are largely based on the answers of moreemment as an instrument of policy dialogue than 150 respondents drawn from these au-and on the donors as an instrument of aid diences to interviews in which questionscoordination. were posed regarding the perceived im-

pact/influence and the strengths and short-Some weaknesses were that: (a) it was slow comings of the Bank's ESW. The judgmentsto turn from short-term macroeconomic is- rely not on the views of the authors as to thesues to matters of poverty, environment, the impact they thought (or hoped) they had,"nexus," institutional development, eco- but rather of the audiences who might be ex-nomic governance, and other so-called long- pected to have some bias toward underre-term issues; (b) it was sometimes too porting the actual impact. Given the close"economistic," or without sufficient regard linkages between the Bank's ESW on Ghanafor the political economy or cultural context; and its country assistance strategy, it is prob-(c) it tended to be "inward looking" (for ex- ably inevitable that the "relevance" of theample, without much reference to other ESW is found to parallel the relevance of thework on Ghana outside the Bank), and was assistance strategy, as was assessed in somedisseminated to only a narrow audience; detail in Chapter 2.(d) it sometimes presented as prescriptionsthe Bank's preferred options, rather than In the early 1980s when lending was mini-elucidating options for consideration by pol- mal, there was a hiatus in Bank economicicymakers; (e) it was sometimes presented in work on Ghana. Consequently, it took someless than the most user-friendly fashion; time to fill the vacuum of country knowl-and (f) its availability led in some cases to edge, especially since there was a lack ofneglect by the government to do its own flexibility in the Region in reassigning staffeconomic analysis. The criticisms notwith- across divisional and departmental lines. Asstanding, and subject to the caveats below, one Bank lead economist observed: "Thisthe Bank's ESW on Ghana was on the whole shows how the Bank pays a heavy price forhighly relevant, especially in the mid-1 98s budgeting according to lendling size, as itbut also thereafter, efficacious to a satisfac- took us about three years to properly stafftory degree, and cost-effective. ourselves after the government of Ghana de-

cided to launch the ERP." As neither theThe judgments above cannot be defended government nor anyone else had been pro-on the basis of a robust cost-benefit method- ducing economic or sectoral studies forology. The costs (Table 3.5) were an average some years, only the Bank and Fund wereof six staffyears per year in the period 1983- able and willing to fill the void.

72

Fortunately, in spite of the lag by the Bank in tax reform, and some aspects of public ex-filling the void, the quality of what limited penditure analysis-the government did ineconomic studies the Bank was able to pro- fact pursue the recommended reforms. Thisduce in the mid-1980s was very high, not was also the case with the first two struc-only in terms of economics but also in strate- tural adjustment credits that OED deemedgic content. As early as October 1983, the to be outstanding projects, based on high-Bank laid out a proposed phasing and se- quality ESW.quencing of Ghana's adjustment processthat stands well the test of "best practice" In other cases where there was either a lackmore than a decade later. The same can be of Bank ESW (say, on institutional develop-said of the 1985 country economic memo- ment and environmental economics), orrandum that provided a strong analytic when the ESW was judged (both by Bankbasis for the well-constructed 1986 country and government staff) to have been of lesserprogram paper, as well as for that year's quality and persuasiveness (privatization,Consultative Group meeting. public enterprise reform), there was less in-

clination on the part of the authorities to ac-In succeeding years, the country economic cept the proffered advice.5

memoranda had a more varied quality, andin some years they were iargely descriptive One apparent exception to the good analy-and not so robust analytically. By and large, sis, good advice, good results links is in edu-however, the Bank's macroeconomic analy- cation where the government accepted Banksis (and in consequence its policy advice) advice, deemed to have been based uponwas sound in advocating tighter budget pol- more or less "best practice" sectoral work,icy to reduce inflation, a more flexible and and where the sectoral work also under-realistic exchange rate policy to restore com- pinned the Bank's two education sectorpetitiveness, movement toward free foreign SECALs. Given the poor outcomes in educa-exchange markets and positive real interest tion testing to date, one may have to revisitrates, the removal of quotas and internal a judgment of the quality of the underlyingprice controls, tariff leveling and reduction ESW, for reasons described in Chapter 4.(though the speed of the last was probablyexcessive), institutional reforms in the Min- Similarly in agriculture, there are stronglyistry of Finance and Economic Planning variant views within the Bank as to the tech-(MFEP) (which advice was not taken), and nical quality of the sectoral work underlyingso forth. Chapter 2 has also provided exam- the medium-term agricultural strategypies of where, with the benefit of hindsight, (MTADS), which provided a basis for nu-it appears that certain advice given to the merous agricultural operations funded bygovernment or action taken by the Bank on the Bank and other donors. That thethe basis of ESW was somewhat faulty. medium-term strategy, which was prepared

jointly by the Bank and government, servedOne hypothesis supported by the Ghana ex- to raise the government's ownership ofperience is that the quality of the Bank's pol- those projects is not questioned. The facticy advice and in turn the likelihood that that post-MTADS agricultural projects ap-this policy advice will be heeded is a func- pear to have better supervision ratings thantion of the quality of the underlying ESW. pre-MTADS projects tends to validate theThus, where high quality ESW was done- importance of ownership. But this reportas for example in the case of cocoa pricing, cannot shed any light on possible tradeoffs

73

between technical quality and greater Owiu- above the 5 percent annual growtlt rateership, if in fact that happened. achieved since 1983. A related aim was to

lengthen horizons and to shift the focus ofAs in other low-income countries, an impor- attentions from near-term to longer-term is-tant area in which Bank ESW of the 1980s sues including human resource develop-"missed the boat" was in expecting that get- ment and capacity building. The report alsoting the balances and prices right would constituted a poverty assessment. Well overproduce rapid supply responses through in- 300 staffyears of resources were devoted tocreased private savings and investment. In this task alone, making it an extremely ex-Chapter 5, other examples are provided of pensive piece of ESW by Bank standards.where the Bank's projections, based on itsESW, were reasonably accurate or otherwise The report got a wide readership, and(and for the right or wrong reasons). An prompted diverse reactions among donors,annex to that chapter provides a set of charts Bank staff, and Ghanaians inside and out-comparing actual and projected values of se- side of the government. Some were of thelected macroeconomic variables. view that it was a "marvelous, readable re-

port, for all the criticisms about its beingThe Bank's work on its public expenditure over-ambitious," and that it did indeed suc-reviews (PERs) has in general been of good ceed in raising sights and understandingsquality and helped to rationalize the pro- about Ghana's longer-term constraints andgramming and budgeting of public expendi- prospects.ture. But one problem that the PERs havenot yet served to solve is that of poor expen- Others took a more critical view, feeling thatditure (cash) management. This problem is "it gave exactly the wrong message" andadversely impacting the rate of project im- was not credible in targeting a dramatic ac-plementation across the board. A recent PER celeration in Ghana's growth rate when, athas focused on these problems and the gov- the very time of its release in draft (the latterernment is reportedly preparing a strategy part of 1992), the government's reform pro-and action plan to address them. The Bank gram had come off track. According to thisshould give high priority to following up on more critical school, the report was akin tothis matter to ensure that necessary correc- advocating a "great leap forward" just whentive actions are taken without delay. the real issue was how to prevent backslid-

ing and even sustain the 5 percent growthOne of the most notable, controversial, and previously achieved. The diverging viewsexpensive pieces of ESW on Ghana to be cut across all audiences, including someproduced by the Bank (together with a team Bank staff who felt that the Bank team tookof Ghanaians) was the internal report enti- too academic an approach, and had too littletled "Ghana-2000 and Beyond: Setting the experience of Ghanaian realities.Stage for Accelerated Growth and PovertyReduction." This study was launched fol- Both views are warranted. The main prob-lowing the Consultative Group meeting of lem with the report was its timing. Its mes-1991 in response to a perception of "adjust- sages would have been far more appropriatement fatigue" and a slowing of the reform and timely in the absence of the 1992 back-momentum. Its objectives were to raise the sliding. The report can be criticized for itssights of Ghanaians and donors alike as to lack of a full poverty strategy and for thethe possibility of accelerating growth to well short shrift it gives to issues such as environ-

74

mental degradation and land tenure. But ronmental and economic and institutional di-this report seems likely to have, and to de- mensions of development. Recent work byserve, a substantial shelf life. It served a Ramon Lopez on modeling interrelationshipsneeded and useful function by raising in Ghana among agricultural production, en-sights, lengthening horizons, putting long- vironmental, and trade policy variables is justterm issues on the table, and getting some the kind of innovative ESW the Bank shouldGhanaians to become more outward look- be encouraging.ing, including through taking heed oflessons of experience from Asia that couldusefully be applied in Ghana. Aid mobilization and coordination

One lesson of experience of "2000 and The Bank has played a leading and highlyBeyond" is that such high profile, high- effective role in helping the government mo-expense ESW undertakings are risky and bilize large amounts of external assistancelikely to be controversial. But the risk of rais- since 1983. It has also played a leading roleing such controversies and debates, within in fostering communication and coordina-and among the various audiences, may well tion among donors, with some success. Thebe worth taking if they serve to shift atten- evidence suggests that such aid mobiliza-tions of policy and opinionmakers away tion/coordination efforts as have been un-from "merely urgent" and toward "truly im- dertaken by the Bank have been highlyportant" issues. The report was surely war- relevant, fairly efficacious (in terms of meet-ranted, and the Bank should not hesitate to ing the limited coordination objectives set),raise its own sights and undertake such am- and on the whole cost-effective (even if thebitious (albeit expensive) undertakings Bank's management information systemwhen circumstances again warrant. data indicating that less than one Bank

staffyear of resources per year has been de-Other issues concerning the management voted to aid coordination is a clear underes-and processing of ESW include the felt but timation).6 In no small part because of theseunmet need on the part of many Ghanaians, efforts, aid coordination is deemed to havewithin as well as outside the government, to been more successful in Ghana than in mosthave access to more Bank documents such other developing countries, and is not nowas "2000 and Beyond" and other Bank re- generally perceived to be a serious problemports that provide otherwise unavailable in- in Ghana.7

formation and analyses. This consideration,plus the fact that a democratized Ghana will This report, however, concludes that Ghanacall for an increasingly well-informed elec- does have an aid coordination problem. Thistorate if economic policy is to be enlight- is not a problem of the Bank's making, norened, suggests that increased priority is one for which it has the principal responsi-warranted for the dissemination of Bank bility for solving. The basic problem is thatESW documents. high volumes of aid and large numbers of

donors and donor-financed projects give riseFinally, in view of the need for economic poli- to a need for many kinds of coordination.cymakers in Ghana to give increasing atten- These range from getting consistency intion to the "sustainability issues," priority basic national and sectoral objectives to get-should be given to developing new analytic ting donors to pursue their own compara-frameworks that integrate, for example, envi- tive advantages (for example, in terms on

75

'F_ t prnlects they d^ I These mn ccctinz Lav_ se ed te .. un_

IC)o ',,ar.n .. n . g drsbursement proce- tion of being forums that (a) served a ca.-idres. Progress has been made on all these alytic function by accelerating someand other fronts, but not to the extent government policy actions (includingneeded. A main source of the problem has preparation of budgets and annual publicbeen the limited role taken by the govern- investment programs); (b) allowed the gov-mnent in aid coordination. 8 ernment to "make its case" regarding its

aidworthiness and to answer questionsThe oveLrall role of aid mobilization and cool- about- its policies and how it intended todination in the Bank's country assistance deal with its main problems; (c) facilitatedstrategy was discussed in Chapter 2. As was exchanges of information among donorsindicated, the Bank correctly recognized, be- about their ongoing and planned activitiesginning in 1983, that more resources would in Ghana; (e) provided an opportunity forbe required to support Ghana's reform pro- stocktaking on both sides; and (f) strength-gram than the Bank and IMF could provide ened the position of the reform elements inalone. But because most donors then had the government by demonstrating the inter-strained (if nolt broken) relations with Ghana, national support for such reforms, and soand were lacking in confidence that the initial probably had some role in helping to keepreforms would be sustained, Bank staff en- the reforms on track.gaged in an active program to persuade otherdonors to extend aid to Ghana, including A few donor representatives expressed morethlioigh numerous visits to donor capitals. critical views of the Consultative Group

meetings as "set pieces with donors andAs was indicated in Chapter 2, the Bank's government alike overstating and braggingaid mobilization objectives with regard to about their accomplishments" and with so-the composition as well as the level of aid called "pledges" (or indicative commit-sought from other donors were highly rele- ments) being "fudged if not farcical." Butvant, and there was a high degree of com- even these critics did not dispute that theplementarity between the Bank's ESW and above-mentioned benefits were to some ex-aid coordination instruments. The Bank and tent realized and all seemed to agree that re-IMF studies underpinned the Bank's aid cent meetings are characterized less by suchmobilization/coordination required, and formal recitals of accomplishments andgave credibility to the analysis of aid more by more constructive and substantiverequiremiients. discussions of issues, generally at the macro

level.The Consultative Group meetings, resumedin 1983 and chaired by the Bank, became the In addition to the Consultative Group'smain formal instrument of aid mobilization, meetings, the Bank organized a social sectorthough not of coordination. In fact, however, donors' meeting in Vienna in 1986 and athe mobilization efforts took place in ad- PAMSCAD (Program of Actions to Mitigatevance of the mneetings, and the main focus of the Social Costs of Adjustment) donors'the meetings, at least until recently, was on meeting in Geneva in 1988. The biannualcommunication (exchange of information SPA meetings that have taken place for theand views) rather than on coordination past several years have served mainly as in-(mnoving toward integrated/harmonizing struments for aid mobilization for adjustingdonor actions or policies). African countries, including Ghana, charac-

76

terized by heavy external indebtedness. In At the sectoral level, monthly health meet-recent years, the SPA has become involved ings among donors (begun in 1986) havein coordinating activities inMcludiing "he de- been followvved by monthly donor meetingssign of a standard audit for the adjustment on education since 1990. There is currently aoperations of all donors, harmonization of monthly lunch of donors involved in thecertain disbursement procedures, untying of health sector and other local donor groupssome forms of aid, and so on. The SPA has for primary and tertiary education, wateralso organized a number of working groups supply, and other forms of infrastructure.to address issues such as public expenditure Lead agencies of such groups tend to extolreviews, poverty, civil service reform, and their benefits, but other donors are moregovernance. While highly relevant, the bene- skeptical."1 And owing to their ad hoc na-fits of such activities are hard to quantify, ture, their sustainability is questionable. Mostand the Bank does not have line-item budget donors appear to want to make these sectoralor management information system entries groups more effective, but specific proposalsfor "SPA inputs" or "Global Coalition for for how to do so seem to be lacking.Africa inputs" 9 against which to measurethe costs. The two main constraints to more effective

coordination at the sectoral level appear toWhereas the annual formal Consultative be (a) the failure of the government to takeGroup meetings were important as catalysts the lead in aid coordination; and (b) the lackfor government actions and for the mobi- of clearly defined sectoral strategies andlization of aid, the true coordination of project priorities consistent with medium-donor policies and programs has come term macro and expenditure frameworks. Aabout more through periodic (generally ad major exception was the medium-term agri-hoc) sectoral consultative groups (often cultural strategy, seen by some donors as afollowing major Bank sector reports) and prototype warranting emulation in otherthrough local aid groups meeting in Accra. sectors. The essence of the problem is bestThe extent and nature of the Bank's partici- characterized by a senior official who ob-pation in these activities seems to be a func- served that: "We have many needs, and if ation not so much of Bank policy or country donor comes to help meet these needs, westrategy as of the approach followed by in- take what the donor offers. Whether thisdividual task managers and Resident Mis- adds up to a cohesive program or not is an-sion staff. When staff are inclined to be other matter."proactive in aid coordination, then actionsmay be taken. But there is little compulsion, A major, strategic issue, which is also a mat-within the Bank or other donor agencies, to ter of aid coordination, is the determinationrequire certain types of coordination be- of the appropriate balances among quick-cause the country assistance strategy re- disbursing aid, project assistance, and vari-quires it. At the macro level, the World ous types of sectoral aid, for example, timeBank Resident Representative has hosted slices of sectoral expenditure programs. Nei-monthly meetings geared mainly to brief ther the Bank's owII strategy documentsother donors on the status of the govern- (CSPs, CASs) nor its documents prepared forment's macro policies and indicators.' 0 aid coordination meetings (SPA, Consulta-These meetings are however more geared tive Group) have been as explicit or as trans-to improving communications than parent as would be desirable in setting forthcoordination. the assumptions and criteria underlying pro-

77

jections of needs for quick-disbursing vis-a- ingly, and to take the lead in mankging aidvis other torms ot aid over the coming years. and directing donors to their areas of com-

parative advantage.In many countries experiencing over-stretched absorptive capacities such as On the Bank's part, however, there is scopeGhana's, it has proven cost-effective to un- for the country assistance strategy to definedertake major project pruning exercises. more clearly how the Bank sees its ownSuch exercises can serve to reduce the num- comparative advantages evolving vis-a-visber of projects under implementiation (pend- other major donors over tiime, and what pos-ing an improvement in absorptive capacity) sibilities it sees to minimize donor competi-in order to ensure that implementation of tion and to improve cooperation in cost-the higher priority projects is not impeded effective ways. A corollary would be to iden-by too much robbing of Peter to pay Paul, or tify possible roles the Bank might play toby too few "critical masses" of implementa- -assist such partners as the African Devel-tion capacity. Given the consensus about opment Bank and major NGOs to deliverhow overstretched is Ghana's absorptive ca- their assistance to Ghana more effectively,pacity, it seems surprising that such an exer- whether alone or in partnership (cofinanc-cise has not been mounted. ing, costudying, coevaluating, and so on)

with the Bank.That it has not implies that the Bank is satis-fied that public expenditure reviews-whichmay now be considered the most important Notesinstrument of aid coordination-are fulfill- 1. Sometimes "policy dialogue" and "portfolio management" areing their function of striking the right bal- treated as separate instruments. But since policy dialogue is so

ance between resource availabilities and much intertwined with ESW discussions and adjustment operation

resource utilizations.12 It is entirely appro- preparation and negotiation, and portfolio management is so inter-

priate that PERs be such instruments, as twined with projed supervision, these will be treated in this chap-ter as subsumed in ESW and lending respectively. There are of

they serve to focus the attention of the gov- course particular portfolio management instruments such as the

ernment and donors alike on the overarch- country strategy and implementation reviews (CSIRs) and country

ing issue-which is not just to maximize implementation reviews (CIRs) at which Bank staff and managers

the return on IDA resources but to make the meet periodically with senior government officials to take stock of

totality of resources, Ghanaian and aid fi- project implementation and sometimes other issues. Documents re-lating to such reviews (especially the CSIRs of 1989,1991, and

nanced, as productive as possible. And 1993), known as the "Akuse Reviews," were of course reviewed by

while other donors note that there have been the mission and proved especially valuable in identifying systemic

improvements in the quality and trans- problems in project implementation. Such problems are identified

parency of the PER, and more donor partici- and discussed in this chapter. But it was not possible to undertake,parency ~~~~~~~~~~~~~~~on the basis of the mainly hearsay and anecdotal information col-

pation/consultation in the PER process, they lected, a process evaluation of portfolio management in Ghana, for

clearly look for further movements in these example, an evaluation of the efficacy and cost-effectiveness of the

directions. "Akuse process" per se.

2. At the June 1993 Consultative Group meeting, donors were re-

In conclusion, it would seem that Ghana's ported to have "pledged" more than $2 billion in assistance. Suchaid coordination problems should be ad- Consultative Group pledges, however, frequently involve some

double-counting and do not provide a good basis on which to pre-dressed mainly by government actions to dic disbursements.

clarify its national and sectoral strategies, to 3. Since the official development assistance flows include

prioritize its projects and programs accord- highly concessionary aid flows only, the above figures do not in-

78

clude, for example, some of the IMF arrangements and other offi- tals). To one of the least structured opening questions ("Is there an

cial flows that were on harder-than-ODA terms. aid coordination problem in Ghana, and if so What is its nature

and how serious is it?"), most respondents answered no, even4. Tiese roay be convecied to currenti dolidr prices. As wtli otiler when they believed that excessive aid and excessive numbers ofBank management information system data, in the esse of theconkmansiderableadjment lendrmation ssth datt lac in Ghecan the projects (in relation to the country's limited absorptive capacity)considerable adjustment lending that took pDlace in Ghana, the wr nedfil eiu rbes

were indeed fairly serious problems.convention adopted was to count as ESW any preparatory work

up to the issues paper stage and as lending the appraisal and 8. The principle that the main responsibility for aid coordina-

subsequent stages of the lending cycle. In practice, especially in tion must lie with the recipient government has been an agreed

the late 1980s when ESW came under some attacks as being of Development Assistance Committee (DAC) priniciple for

questionable efficacy, there became a tendency to record as nearly a decade. See Development Assistance Committee

lending some preparatory activities previously recorded as ESW. (1986).

5. This presentation has not discussed what criteria are appropri- 9. The Global Coalition for Africa (GCA) is a political-level forum

ate to measure the quality and efficacy of ESW One current view for bringing together top-level representatives of African govem-

in the Bank is that the Bank's expenditure on ESW is an invest- ments, donors, and other leaders to focus attention upon and mo-

ment in knowledge and understandings (intellectual capital) bilize support for actions to address some of Africa's major

rather than an operating cost of turning out products called ESW problems, for example, the "nexus," low savings, and the defensereports. The "real" products are seen to be the improved inter- burden. There are surely some benefits to Ghana from the GCA ac-

nalized knowledge of the staff involved and the associated insti- tivities, but it is not possible to quantify the costs, much less the

tutional memory. Some benefits accrued to staff, government benefits, attributable to Ghana per sc.

officials, and Board members who read the reports, but these 10. The IMF, in contrast, considers that it is for the govemment to

benefits are seen as basically externalities. It is the improved decide how much it wishes to communicate to donors about the

competence and knowledge of staff that are the key payoff to the macro situation. T'he Bank tries to steer the fine line between beingESW studies. Another view defines the quality of ESW as virtu- helpful and communicative to other donors without coinmunicat-

ally identical to its impact. ing more than the government may wish to communicate.

6. Considering the time spent by Headquarters staff on consulta- 11. This skepticism seems to be particularly pronounced in the

tions with the IMF on preparing semiannual Special Program of case of NATCAP, the program supported by the United Nations

Assistance for Africa meetings and annual Consultative Group Development Programme for reviewing, prioritizing, and pro-

meetings, visiting donor capitals to discuss sectoral and project gramming technical cooperation from all donors. This seems to be

issues, and the frequent interaction of Resident Mission staff a case in which an effort at donor coordinationi may be counter-

with their counterparts in other donor agencies, it appears that productive, since several important donors seem not to take seri-

aid coordination has utilized considerably more than the very ously either its inputs (requests for data, answers to

modest amounts shown in Table 3.5. The judgment that the questionnaires) or outputs (data, reports). This illustrates that

Bank's aid mobilization/coordination efforts were probably cost- more aid coordination is by no means always a good thing.

effective is based on a counterfactual scenario in which the Bankdid not undertake those aid mobilization/coordination efforts. In 12. It is an arbitrary matter of classification that the public expen-this framework, even a small acceleration of government policy diture review (PER) is definied as an instrument of ESW rather

actions and donor commitments that might be attributable to the than of aid coordination, or lending, or policy dialogue. But

Bank's aid mobilization/coordination activities could justify the given how important the PER is (or should be, even if it is not) tomarginal expenditure of even several man-years of staff time, other donors as an instrument for both aid mobilization and co-

ordination, and at both the macro and sectoral levels, it might7. This finding is based upon extensive structured interviews with well be classified as an aid coordination instrument to emphasize

donor representatives (mainly in Accra and in a few donor capi- this linkage.

79

4. Agriculture and education: objectives andperformance 1

We considered agriculture as cocoa for too long; high fertility and population growth rates,this was a blind spot .... The nexus issues are and environmental deterioration) are criti-now critical. cal. And whether the nexus issues are ade-

quately dealt with or not will have a large-Bank Division Chief bearing on whether Ghana's growth can be

sustained.The educational testing results are again dread-ful, although there may be a mismatch between Education was selected because of the im-what is being tested and what is being learned. portance of human resource developmentIn any event, the test results are provoking a lot to Ghana's longer-term prospects, and alsoof soul searching about what is to be done [about because the Bank has played a substantialimproving educational performance]. role in supporting comprehensive educa-

tion reform, launched in 1986, through two-Bilateral Donor Official education sector adjustment credits and

five investment credits.This chapter reviews briefly the objectivesof the Bank's country assistance strategy in In both sectors important progress has beenagriculture and education, and perfor- made, yet the outcomes, as measured bymance against those objectives. Agriculture trends in output and productivity in agri-was selected because of its large and critical culture and by test scores in the case of edu-role in the economy. The sustainability of cation, have been unsatisfactory to date.Ghana's development will depend heavilyon the extent to which agricultural produc-tivity can be improved. And because most Agricultural objectives andof the poor in Ghana are rural people who performanceremain dependent upon agriculture fortheir livelihood, Ghana's progress in The Bank's strategy in the 1980s gave highpoverty alleviation is closely linked to priority to agriculture in principle, but theprogress in agriculture. Bank was slow in practice to build up its

pipeline of sectoral studies and lending op-A key conclusion of this report is that the erations. The Bank did play a useful role"nexus" issues (that is, the interrelated is- (through policy dialogue and project condi-sues of declining agricultural productivity, tionalities) in pushing for pricing reforms,

80

but the pace of reform in reducing the role was (and is) by small holders using tradi-of inefficient agricultural parastatals contin- tional techniques (slash and burn); mecha-ues to be siow, and the rate of growth of nization and irrigation are still unimportant,agriculture is unsatisfactory. A potential cri-sis looms unless the "nexus issues" are ad- The decline in Ghana's cocoa productiondressed more vigorously by both the from 400,000 tons per year (tpa) in the earlygovernment and the Bank. 1970s to only 158,000 tpa by 1983/84 was

largely due to the decline in real producerBefore 1983, Ghana's approach to develop- prices; other factors included swollen shootment was reflected in the agricultural sector virus disease, drought, bush fires, aging ofby input subsidies, heavy output taxes, ad- trees, ineffective extension services, irregularministered prices, marketing by public mo- input supply, and costly marketing services.nopolies, and processing by public Industrial crops were also held back by lowenterprises for rubber, palm oil, rice, and producer prices and inefficient parastatals.other crops. In general, farm prices were too Public expenditure in agriculture was rela-low and processing too costly. Macroeco- tively low and concentrated on provision ofnomic policies were also antiagriculture in- fertilizers and on high-cost irrigation invest-sofar as the currency was overvalued and ments. Technological packages were availableindustrial protection excessive. In the sev- for several important crops but extension ser-eral years prior to 1983, cocoa growers re- vices were weak and ineffective.ceived less than a fifth of the value of theiroutput (at a realistic exchange rate). Between 1969 and 1980 the Bank approved

eight agricultural sector projects geared toThe results included a catastrophic deterio- helping Ghana to achieve greater self-ration of infrastructure and institutions, the sufficiency in food and raw materials forgradual replacement of official commerce by agroindustry, and to rehabilitate cocoa. Theparallel marketing, and a retreat by farmers projects (for cocoa, integrated rural develop-into subsistence production. Official cocoa ment, oil palm, sugar, livestock, and fish-exports fell by more than half, while other eries) were relatively unsuccessful except forofficial agricultural exports nearly disap- oil palm, mainly because of the overallpeared. During the 1970s agricultural pro- country economic difficulties. Bank staff in-duction grew less rapidly than population. volvement in these projects served to main-The only exception was rice, which became tain some stock of sectoral knowledge in thea flourishing minor crop that enjoyed good Bank. But owing to the hiatus in sectoralprices and privileged access to highly subsi- work, the Bank's sectoral strategy formula-dized inputs, including fertilizer and tractor tion and project development work wasservices. handicapped pending completion of an agri-

cultural sector review in 1985.At the onset of the reforms, Ghana's agricul-ture, including forestry, accounted for about Bank strategy for agriculture in the 1980shalf of GDP, 60 percent of employment, andnearly 80 percent of total merchandise ex- The Bank's strategy in the early 1980s recog-ports (cocoa, 73 percent, forestry products, nized that agriculture was the key sector for4 percent). Cocoa covered half the total culti- short-term recovery and medium- to long-vated area, with the main cereal, maize, term sustained growth. Without growth inbeing grown in all regions. Most production agriculture, foreign exchange shortages

81

wnwould persist, periodic food shortages ThiS was a period of "catching up" in sec-Le i work, anrd auring this periou the ank

lem could become unmanageable, and in- carried out a number of studies on cocoa, ir-dustrial rehabilitation would be hampered. rigation, forestry, and selected crops. In ret-The broad objectives of the strategy were to rospect, the Bank seems to have given toassist the government's efforts to: agriculture in practice less priority than

given to it in the strategy statements of the* Provide adequate incentives through ap- 1980s.

propriate price and trade policies, withprices for a number of important crops On the lending side, the SAC 1 (1987) con-needing to be increased in real terms. tained important conditionalities on cocoa

pricing while the Agricultural Services Re-• Provide inputs, tools and spare parts, habilitation Project (also 1987) tackled the re-

and essential rehabilitation of machinery organization and strengthening of theand equipment. Ministry of Agriculture (especially its policy

and planning functions), pricing and trade* Undertake investment and/or institu- policy, the detailed investment program, ra-

tional restructuring for export/import tionalization of production parastatals, pri-substitution crops-particularly cotton, vatization of input supply (initiated undertobacco, and groundnuts. RIC I), and rehabilitation of cotton. Cocoa

subsector problems were addressed to some* Shift crop production to the private sec- extent in a FY88 Cocoa Rehabilitation Proj-

tor; to implement a food security system ect, but it was not until the 1992 Agricul-for maize. tural Sector Adjustment Credit that the

domestic purchasing monopoly of the* Reduce the number of agriculture-related Cocoa Market Board (COCOBOD) was fi-

public corporations and eliminate subsi- nally broken. Through the 1980s the focusdies to these entities. was instead on trying to improve COCO-

BOD's efficiency through downsizing andThis required promotion of private sector in- restructuring.volvement, reduction in direct governmentintervention (including fertilizer distribu- Policy and outputtion), improved cost recovery on irrigationschemes, streamlining of extension, and a Agricultural GDP estimates (by the Bank)coherent research policy. In retrospect, these suggest growth of less than 2 percent perappear to have been appropriate objectives year since 1984, far below the rate of growthand priorities. of population, and well below the rates tar-

geted in the Bank strategy papers. If agricul-It took some time, however, for the Bank to tural growth has indeed been this poor, thendevelop the necessary ESW and lending in- a key component of the strategy has had astruments. Some agricultural conditionali- highly unsatisfactory outcome. The data onties were attached to the initial reconstruc- agricultural growth are however contradic-tion credits, for example, increased producer tory, with the Food and Agricultural Organi-prices for cocoa, cotton, and tobacco in 1984- zation of the United Nations (FAO)85. But between 1980 and mid-1987 only one estimating that agriculture production (asBank project (Oil Palm II) was approved. distinguished from agricultural value

82

added) grew nearly twice as fast. It seems possible that the Bank has underestimatedhard to reconcile these data. the growth of agricultural GDP. Some Bank

staff privately estimate the growth rate to beFood prices would be expected to increase about 3 percent annually-that is, near tounder a scenario of low supply growth (2 the population growth rate. But that growthpercent) when gross national disposable in- rate must also be regarded as unsatisfactorycome was rising by more than 5 percent an- In any event, given the apparent data dis-nually and when there is a very high income crepancy, the importance of agricultural pro-elasticity of demand for food stables (close duction in the Ghanaian economy-aboutto unity). But real food prices in fact de- half of GDP-and the influence of percep-clined since 1984 (see Table 4.1),2 an out- tions about agricultural growth on strategycome that supports the conclusion that and programming, an effort at reconciliationagricultural growth was more than 2 percent is needed. Table 4.1 shows some key indica-annually. Moreover, the divergence could be tors of agricultural outcomes over thedue to some combination of three factors: decade.greatly reduced costs in the marketing chainfrom producer to consumer, increased im- Since 1983, much of agriculture has been lib-ports, or underestimated production. Since eralized, but by no means all. Food cropsthere were only minor changes in marketing and inputs, now largely untaxed and unsub-organizations and instruments over the pe- sidized, are traded on open markets. Manyriod, reduced marketing costs are not the ex- of the marketing and production parastatalsplanation. Nor do increased imports appear have disappeared or been made private. Yetto have been an important factor.3 The last at end-1993, parastatals still played a domi-factor, underestimated output, would be nant role in tree-crop marketing and pro-consistent with FAO production series based cessing (rubber, cotton, palm-oil) and theon official government data. Since agricul- Ghana Cocoa Board still monopolized ex-tural GDP and production were highly cor- port marketing. It still remained responsiblerelated over the periods in question,4 it is for cocoa research, extension, seed-produc-

TABLE 4.1: SELECTED AGRICULTURAL INDICATORS

1982 1986 1990 1992

Cocoa data

Production ('000 tons) 177 218 261 262Producer price ('000 cedis per

million tons) 12 86 224 258Receipts to farmer (%) 45 41 56 43Duties paid (%) na 58 27 25

Value of nontraditional agriculturalexports ($ million) 6 17 29 22

Annual growth rates (%) 1983-91 1984-92

Agricultural GDP (World Bank) 2.9 1.7Agricultural production (FAO) 7.6 3.1

Note: na means not available.Sources: FAO Statistical Yearbooks, World Bank Macroeconomic Model, COCOBOD, Ghana Export Promotion Board.

83

tion, and quality control, and the producer usually intens*. collacoration between

r'ri' '~ * I a .JIIN ls stvil sm_t orricials in carryingout upstream analytical work. On the

Bank performance and recommendations whole, the MTADS paid big dividends insubsequent government ownership, in im-

Several IDA investment projects in agricul- proved project design, and in improvedture approved in the late 1980s became implementation of Bank-financed andproblem projects, mainly owing to weak other projects, even though it has weak-government ownership, excessive Bank zeal nesses, notably the lack of integratiorn ofin their promotion, a failure to work with cocoa sector issues into the analysis. Butbeneficiaries during project preparation, and after substantial analytical work had beenweak commitment to achieving project ob- carried out, the Bank seemed to lose inter-jectives by those charged with their imple- est in food-security issues, notwithstand-mentation. With the important exceptions ing that poverty is mainly a rural problemnoted below, during the decade 1983-93 the and a sizeable proportion of the popula-Bank correctly emphasized the most press- tion is seriously malnourished. Theing issues in agriculture-those involving MTADS work could still be used to helpbasic structural reform of prices, marketing, develop interventions to enhance food se-and enterprise ownership. curity and thereby help to alleviate

poverty. More attention is warranted inAgriculture received insufficient attention in particular for roots and tubers vis-a-visthe evolving Bank strategy for Ghana for rice, on which large sums have been ex-several reasons. One was the difficulty the pended for low-return irrigation.country operations and agricultural divi-sions had in working together, with country In recent years the Bank has taken useful ini-operations having lead responsibility for tiatives to deal directly with private sectorcocoa sector issues. Another reason was that agents, as in the 1993 Agricultural Sector In-when Nigeria launched its own adjustment vestment Project and in the areas of agricul-program in 1986, this created a large de- tural exports and rural credit. But theremand for staff in the agricultural division of remains a need for more in-depth analyticalthe Bank's West Africa Department to work work to identify specific constraints to in-on Nigeria, resulting in a "crowding out" of crease private investment in agriculture andsectoral work on Ghana for some years. to propose specific remedies. Particular em-

phasis needs to be given in this work to fos-The slow pace in eliminating the parastatal tering investment in nontraditionalmonopoly in cocoa marketing and develop- agricultural exports.ing a more efficient, competitive domesticand export market was a major shortcoming. Following the Bank's suggestion, Ghana cre-In 1994, 11 years after the initiation of struc- ated an interministerial Agricultural Policytural adjustment, Ghana was beginnring to Coordinating Committee (APCC). Chairedopen local cocoa marketing to private opera- by the deputy minister of finance, it has dealttors and cocoa producers were still getting adequately with difficult policy and pro-less than half the value of their production.5 gramming issues that cut across ministries,

including design and implementation of theIn 1991, a medium-term agricultural de- Agricultural Sector Adjustment Credit. Com-velopment strategy was prepared with un- petent authority to deal with agricultural

84

policy issues has been a problem in some stock of well-qualified manpower. But incountries. The APCC approach may be 1983, it faced a crisis of educational declineworth considering elsewhere. in quantity, quality, and infrastructure. Pri-

mary enrollment and adult literacy hadIn recent years, the Bank has not worked fallen back to the average for low-incomemuch with most other donors in agriculture, Africa, while the proportion of governmentnotwithstanding the important contribution expenditures going for education declinedof other donors to Ghana's development. Pre- to only 1 percent in 1983 and 1984. A masssumably the payoff from closer interaction exodus of trained teachers resulted in theircould be considerable. One promising area: replacement by unqualified teachers (44 per-increased harmonization of donor/govern- cent of primary and 33 percent of secondaryment practices with respect to the pricing and teachers were still untrained in 1985), in-distribution of commodity assistance, for ex- structional materials and supplies wereample, of food and agricultural chemicals. severely lacking; and the planning and man-

agement of education was weakened by em-Natural resource conservation: an igration of specialists and lack of transportimpending crisis? to collect statistics, inspect schools, and so

on. Up until 1986, the Bank had never fi-Ghana's land frontier has been receding nanced education in Ghana-a rare excep-rapidly in the last three decades, and rising tion in Africa-and its knowledge of thepopulation density has led to a shortening sector was limited.of the fallow period and a reduction in soilfertility. Increasingly, agricultural produc- Against this background of deterioration,tion is obtained at the expense of the soil, Ghana launched a comprehensive educationthe forests, and the wetlands. The long- reform program in 1986. Its goals were to re-term sustainability of farming is, therefore, place the previous English-style academicbecoming an important issue for policy- education with a more vocationally andmakers, and it will become more so if there practically oriented curriculum, reduce theis a significant increase in the agricultural number of years required to complete thegrowth rate. Soil fertility loss, soil erosion, and primary and secondary cycles, increase ac-deforestation have been estimated to cost as cess to basic education for the rural masses,much as 4 percent of GDP per year.6 The re- improve quality, and accomplish all this in aport "2000 and Beyond" (pp. 31-32) notes financially sustainable manner. This was in-that "though land does not appear to be a deed an important way in which Ghanacritical constraint in the immediate future, sought to achieve "adjustment with a humanthere is still cause for concern." This con- face." The program has been heavily sup-cern would seem to warrant much higher ported by the World Bank and other donors.priority than it has so far received in boththe government's and Bank's strategies. The objectives and the design of this pro-

gram were exemplary, and the reforms havebeen advanced as a model for other devel-

Educational objectives and oping countries. Progress in implementingperformance the program has been substantial on the

input side. But there are major shortcomingsGhana once had one of the most developed in terms of outputs and outcomes. By far theeducational sectors in Africa and a large most worrisome of the problems is the fail-

85

uire to ai l'eve better learning outcomes. Re- date are the result, among orhei Lthings, oftI'tPibi rCsuits suggest that minimal learn- the government's ownership and commit-

ing is happening in the classrooms. ment to the reform program. Another con-tributing factor was a capable task manager

Bank support to the sector located in the field since its inception. Thishas enhanced the dialogue, made it possible

The first Bank-supported project in this sec- to address problems and potential misun-tor, the Health and Education Rehabilitation derstandings quickly, and made it easier forProject (HERP approved in January 1986), the borrower to understand and complyprovided inputs (textbooks and supplies) on with Bank requirements for procurement,an emergency basis to stop the deterioration disbursement, and audit.until a more comprehensive program couldbe worked out. The next two projects, the OutcomesFirst and Second Education Sector Adjust-ment Credits (EdSACs 1 and 2, approved in Although the reform program is still beingDecember 1986 and May 1990, respectively) implemented, it is possible to assessprovided support for the reform and intro- progress so far. In terms of inputs, progressduced cost-sharing and efficiency measures is substantial. Textbooks and teachers' man-to allow more resources to be devoted to uals incorporating the new curriculum havequality improvements and basic education. been produced and distributed, all teachersThe four subsequent projects provided sup- have been provided with at least some in-port for specific sectors: expansion of the new service training for the new curriculum, theSenior Secondary Schools (SSS) into under- structural changes have been fully imple-served areas; nonformal education; tertiary mented, and cost-saving and cost-sharingeducation; and primary education. Alto- measures have been put in place at all butgether, these seven projects have committed the tertiary level-an important qualifica-$232 million to assist Ghana's education sec- tion. The gross primary enrollment ratio hastor. The first two projects have been satisfac- increased, and although the enrollment ratiotorily completed; the others are being imple- for girls remains somewhat lower than formented without major problems. Learning boys, the growth rate of girls' enrollmentoutcomes, however, are difficult to predict. has slightly exceeded that for boys, as may

be seen from Table 4.2.Other donors have made significant contri-butions to the program. The United States In terms of outputs and outcomes, however,Agency for International Development there is cause for concern for several reasons:(USAID) has provided a $35 million grantfor a Primary Education Program (PREP) Enrollments. While enrollment at the sec-while the United Nations Development Pro- ondary level has increased satisfactorily, pri-gramme (along with the Bank) provided mary enrollment is expanding less rapidlyfunds for a technical assistance project to than population. One reason is the increasedhelp establish a central Planning, Budgeting, fees imposed by districts or local communi-Monitoring, and Evaluation (PBM&E) Divi- ties after the government decentralizationsion in the Ministry of Education (MOE). program initiated in 1988.

The size of this Bank portfolio and the gen- Equity of access. Equity of access has been im-erally satisfactory project implementation to proved by locating new schools in previ-

86

TABLE 4.2: EDUCATION SECTOR INDICATORS

Indicator 1970-75 1987/88 1991/92

Gross enrollment ratio (%)Primar, total 80 (1980) 11 74 (1993)

Pupil-teacher ratio (%)Primary 30 23 28Middle/junior secondary school 23 19 18

Trained teachers (%)Primary na 56 72Secondary na 65 72

1980/81-1986/87 1987/88-1991/92

Average annual growth (%)Grade/enrollments 2.3 2.1Primary enrollments 2.6 2.5Girls enrolled in primary school 2.7 3.0Middle/junior secondary

school (JSS) enrollments 2.2 -0.8Girls enrolled in middle/JSS 2.6 -0.9

Note: na means not available.Source: For secondary enrollments in all years and for all 1970-75 indicators and Sub-Saharan Africa comparisons,World Bank (1994c). All other information from a 1994 internal background paper.

ously underserved areas and by eliminating ditures (under the Ghana Living Standardsthe examination that previously took place Survey), and in connection with the partici-at the end of the primary cycle. This allows patory poverty work.students to continue into junior secondarybefore facing a major screening test. There Learning outcomes. Most disappointing andare, however, two countervailing trends. worrisome is that learning outcomes appearFirst, there has been rapid growth in enroll- to be quite poor. The strongest evidence forments in private primary schools in the two this comes from two rounds of criterion ref-major cities. For those who can afford the erence tests given to sixth grade primaryfees, these schools substantially increase the (P-6) students in conjunction with USAID'sprobability of their children getting into PREP project, which indicated in two suc-good senior secondary and tertiary schools, cessive years of tests that only some 2 per-thereby strengthening the high correlation cent of students were able to answer morebetween educational attainment and in- than 60 percent of relatively simple mathe-come. Second, the decentralization of school matics and English questions correctly.management and the cost-sharing measuresare resulting in increased fees, both at pri- This outcome is consistent with other sur-mary and secondary levels, that hurt the veys and with anecdotal information frompoor more than the rich.7 No integrated primary and secondary schools. It is alsostudy has been undertaken to determine the consistent with information (including cir-net effect of these various trends. There have cuit monitoring reports) on within-schoolbeen studies on why parents do not send activities indicating that learning materials,their children to school, on schooling expen- even when available, are often not used,

87

that actual student-teacher conta.t hours On.e reasonl nmay be thar aduitrs are taught in~±reve'^w 'cause cfabscn.eC LCeaclteis itllit. vwn ianguages.

and/or students from class), that in-serviceteacher training (to orient teachers to the Monitoring and evaluation. While some ca-new curriculum) was inadequate, that parts pacity-building activities have borne fruit,of the new curriculum are overly ambitious an important one reviewed in this report-(for example, classes getting through less efforts to establish a viable PBM&E Divi-than half of the syllabus by the end of the sion-has had an unfortunate historyallotted time), and that within-school super- A high level of useful output was pro-vision and discipline of teachers is weak. duced during project implementation,There is also a problem of poor linkage be- but most of this capacity has proved to between the junior and senior secondary unsustainable.schools. One factor that may have affectedthe early scores was a reported "flight to Financial sustainability. Given projected enroll-quality," as the educated and higher-income ment figures, it will be difficult to sustain re-classes rushed their children through the quired recurrent expenditures even if perold system; consequently, some of the better student costs (corrected for inflation) remainstudents missed the first years of the new constant. But if quality is to be increased, theresystem. will be upward pressures on costs related to

vocationalization, the replacement of un-These poor test outcomes have provoked a trained with trained teachers, and upgradingnew stocktaking by the government and materials and supplies. This puts a heavy bur-donors. Efforts are underway, in the context den on measures to improve efficiency andof a Committee for the Review of the Educa- cost-sharing. Thus, the structural change is re-tional Reforms (established in 1994) and the sulting in less savings than originally antici-donors' roundtable, to formulate a new vi- pated; revolving funds for replacingsion and action plan geared to getting more donor-provided textbooks are in place but notsatisfactory results in future. keeping up with financial requirements; room

and board subsidies have been eliminated atNonformal education. The nonformal program secondary level but not at tertiary level if thehas not enrolled as many students as tar- subsidy element in loans is taken into account;geted, although a larger number than ex- and pressures to increase staff, while so far re-pected have come from poorer, rural areas. sisted, are likely to increase over time. The fi-More serious, there seems to be a lack of dis- nancial sustainability outlook needs to becipline in the program's operations and regularly monitored in a modeling frameworkmanagement, as training materials are not that incorporates research findings on all im-available on time, new classes are not open- portant pressures on costs, including the will-ing on schedule, meetings take place less ingness of parents to pay. Contingency plansthan the prescribed four times per week, fi- also need to be developed. These are jobs fornancial records are in disarray, and there are the PBM&E Division, but that division doesdelays in the production of reading materi- not yet have the capacity to undertake them.als in local languages and lags in researchand evaluation activities. In spite of these Conclusionsdifficulties, however, an impact assessmentof the program does report some encourag- The most serious of these problems is theing results in terms of learning achievement. failure to achieve better learning outcomes.

88

It is difficult to discern the root cause of the more discipline and accountability in theproblem and suggest what should be done system-learning outcomes will continue toabout it. Projects supporting the reform pro- be poor if this hypothesis is correct. This isgram provided all the inputs thought to be the premise behind the Bank-funded Pri-necessary for the proper operation of a mary School Development Project, which at-school system. That they proved inadequate tempts to use community pressure andmay mean that the Bank does not know improvements in the calibre and motivationenough about how to reform an education of headteachers to obtain better perfor-system, such as Ghana's, which was so close mance. The measures employed in that proj-to being moribund. A lesson is that, as other ect, however, may be less powerful thancountries and cities (including in the devel- required, given the severity of the problem.oped world) have found, educational re-form is more complex and difficult than is At least two things are needed for parentsoften thought at the onset of a reform pro- and community leaders to exert effectivegram. There seems now to be a consensus pressure on teachers to perform: an objectivethat the Ghanaian reforms were too rushed, way to judge performance, and budgetary orwithout adequate time being allowed for other mechanisms to affect the situation. Thedebate, training of teachers, development first requires examination scores for individ-of curricula, and so on, to phase in the ual classes or schools that can be comparedreforms. over time and across schools. The second re-

quires that the government delegate buge-Two conclusions can be suggested in the tary or employment authority to local com-form of hypotheses that need further testing. munities and, to reduce inequalities in the ca-The first is that the curriculum reforms, im- pacity to pay, provide funds to poorer com-posed on the school system from above, munities (or parents) for use by their schools.were based upon an inadequate knowledge Neither of these conditions is present in mostof the capacity of the average school to ab- of Ghana's rural communities. Communitysorb and implement the changes. To the ex- involvement is however an important objec-tent that was the case, the reforms should tive of the Primary School Development Pro-not have been implemented so rapidly: ject in which 1,500 communities have so farmore time should have been taken to learn participated in selection of their headmaster.about the capacity of the school system, toinvolve teachers in average schools in theprocess of developing the new curriculum, Notesto test the new curriculum and textbooks be-fore applying them wholesale, and to more 1. This chapter is based in large part upon two internal back-

ground papers written by Jake Meerman and Ronald Ridker inproperly train teachers in their use. the Bank's Operations Evaluation Department. With regard to

the "nexus issue" in Africa in general, see Cleaver

The second conclusion/hypothesis is that and Schreiber (1994).

the system of rewards and punishments for 2. This price decline is consistent with the increase over time in

performance within which teachers operate the average purchasing power of the minimum daily wage in

is very weak, and has almost nothing to do kilograms of maize: from 1.02 kilos on average for the threeJunes of 1980-82 to 1.86 kilos for the Junes of 1985-90. See Alder-

with learning outcomes. In Ghana today it is man (1992), Table 1, page 5. The cross-elasticity of demand of

still difficult to fire a teacher for absence or maize with other staple foods is high.

drunkenness, let alone for being a poor 3. For example, grain imports in 1991 at 340 thousand tons

teacher. Until this changes-until there is (compared to 250 thousand tons in 1980) had a value equivalent

89

to less than 3 percent ofaggregatc value added Ii dgriculture t6 The problem should not seem to be muclh less serious if it

(W-orld Bank 199kb. Table 41 -a ui ihwi drriLuiturai growtn is closer to the population

4. The Food and Agriculture Organization's production indices growth rate than Bank data indicate. As was seen above, the

are price-weighted and all intermediate inputs of agricultural Bank seriously overestimated the agricultural/growth rate in

origin are deducted. Use of inputs (chemicals, fuel, tools, and so its earlier projections, and in the face of declining productivity

on) is low in Ghana so that production may be very close to owing to environmental deterioration, the nexus problem

value added in agriculture. Pertinent here is the lack of any may get worse whether sectoral growth is now 2 percent or 3

great increase in input use since 1983. percent.

5. This is considerably below what is received by producers in 7. This has not yet happened at the tertiary level because only

Cote d'lvoire and other competitor countries in the world cocoa feeding subsidies have so far been eliminated and a heavily

market. subsidized loan scheme has been introduced simultaneously.

90

5. Progress toward the strategic objectives

As a sign of how times have changed, just think A substantial part of the "evidence" underly-of terms and words like queuing, essential com- ing many judgments arrived at in this chap-modities, hoarding, middlemen, black marketeer, ter lies in the performance of a variety ofeconomic saboteur! Our children today don't economic indicators shown in several tableseven know what these mean. in the following pages. In brief, the "story"

told by the "incentive indicators" (Table 5.2)-Ghanaian businessman is that great progress was made in "getting

the prices and incentives right." The storyWe didn't have a clear vision after SAC I of told by the fiscal and monetary performancewhat to do in institutional development, private indicators (Table 5.3) is of more mixed suc-sector development, public sector management, cess, such as with good desirable trends, foror state enterprise reform. example, in tax revenues and public invest-

ment expenditures but with inflation and-Senior Bank staff member real interest rates at undesirably high levels

and goverrmnent savings and the M2/GDPThis chapter evaluates the extent to which rations being desirably low. (M2 is definedthe stated objectives of the Bank's country as the sum of money and quasi-money.) Theassistance strategy were achieved. One story told by the indicators on public sectorbenchmark for the evaluation is the set of reform (Table 5.4) is one of very slowtargets identified in the country program progress in that area. Tables 5.5-5.7 describeand strategy papers. The impact of the ex- a story of satisfactory growth in aggregateternal environment is also considered. output, mining, services, and most social in-A principal question addressed is whether dicators but dismal growth in manufactur-the outcomes seem likely to be sustainable. ing, agriculture (with qualifications cited inThe evaluation is made largely through as- Chapter 4), and especially in savings (bothsessing the performance of a number of public and private) and private investment.economic, financial, and social indicators.There is already a substantial literature on A set of charts (presented in an annex toGhana's adjustment record (see Bibliogra- this chapter) compares how actual out-phy); this chapter will therefore give more comes (in terms of the behavior of some keyattention to some selected issues less well variables) compare with the values tar-covered in the literature, for example, insti- geted/projected in the several country pro-tutional development and sustainability. gram and strategy papers described in

91

Chapter 2 These comparisons ser-ve .o facili- tion remained high and too muchl of the bur--. te t e.'£_acy "da3 of uWit *1d1ier, cien of stabulization was put upon monetary

where efficacy refers to the extent to which policy, with crowding out effects on the pri-objectives and targets are achieved. vate sector. The least satisfactory perfor-

mance has been in agriculture2 andThe final set of indicators presented in this manufacturing output growth, in institu-chapter (Table 5.8) comprises some "sustain- tional reform (including the civil service andability indicators" that the report advocates public enterprise divestiture and reform), inshould be key/core benchmarks for assess- investment project implementation, anding future progress. most importantly, in the "sustainability indi-

cators." The disappointing response of pri-vate savings and investment is reflected in

Overview of outcomes these sustainability indicators. Clearly theheavily aid-dependent, public sector-led

Ghana achieved notable success over the growth of the 1980s and early 1990s will notpast decade in macroeconomic policy reform be sustainable indefinitely. As will be dis-as measured by various macro-level indica- cussed below, the interrelated issues of de-tors (GDP growth, export recovery, removal pendence, economic governance, andof price distortions, and so on), but far less institutional development themselves formin terms of institutional and structural a nexus of "sustainability issues" that com-change and as measured by various micro- prise core issues for the Bank's future assis-level indicators (school test results, soil fer- tance strategy.tility, productivity of civil servants, and soon). The successes have been in rehabilitat- Thus, the performance of the Ghanaianing infrastructure, getting the prices right, economy is a qualified success story. The at-freeing up foreign exchange and other mar- tention and praise given by spokesmen forkets, reforming taxes and reducing subsi- the Bank and other donors to the successesdies, initiating cost recovery measures, and at the macro level may have served to meskputting in place some importart elements of some shortcomings at the sectoral and mi.roan enabling environment for private sector levels. WiEhile GDP growth was at or nea&r thedevelopment.' targeted 5 percent annual rate, the composi-

tion of this growth was markedly differentThe record on poverty alleviation is mixed. from what was projected/targeted, with ser-Owing to a lack of baseline data for the early vices (largely trade) growing much faster1980s, it is difficult to establish changes in and agriculture and manufacturing growingpoverty up to 1987/88, when such baseline much slower than targeted. In some cases,data became available. But the available evi- moreover, there seems to have been a "halodence suggests that poverty decreased effect."3 And some apparent successes at thesomewhat in the mid-1980s and that the pro- design stage have not been translated intoportion of the population in poverty has successes at the implementation stage. Fordropped marginally from about 43 percent example, the Ghana education reforms de-in 1987/88 to about 42 percent in 1991/92. scribed in Chapter 4 were still, as of early

1994, being represented as highly successfulGhana also has a mixed record on stabiliza- even though "results on the ground" sug-tion, although budget deficits were reduced gested that the outcome was far from a greatconsiderably between 1983 and 1992. Infla- success.

92

In sum, different stories can be told about slightly until 1987 (104, with 1984 = 100), butGhana depending upon the choice of indica- the index has deteriorated steadily sincetors, and this choice may focus attention on then (to 74 in 1992 and 66 in 1993). Fallingwhich actions and outcomes will be most cocoa prices were a main determinant of thisclosely monitored and measured in future. decline, as they declined from 90-110 centsFor this reason, a main finding of this report per pound in the period 1984-87 to betweenis that it is exceedingly important to "get the 50-56 cents over the years 1989-93.right indicators" as a precondition to "get-ting the indicators right." Ghana was able to offset these external

shocks mostly through its access to in-creased concessional external financing.

External shocks/exogenous factors Since a substantial share of this external fi-nancing was in the form of quick disbursing

Ghana's performance was affected by nonproject aid, the government retainedevents and shocks beyond the control of considerably more financial degrees of free-the government, but which called for a re- dom than had it been forced to undertakesponse by the government and donors. import intensification or economic compres-Table 5.1 shows the nature of the shocks ex- sion. But if the terms of trade deteriorationperienced by Ghana over the 15 years 1978- is permanent, one cannot ignore also the un-92. (Note that a positive sign for the shocks desirable effect of raising the country's aidrefers to adverse shocks rather than to bene- dependence and the consequences of theficial windfalls.) "Dutch disease" (see below).

The terms of trade deterioration was quite Natural disasters and exogenous circum-substantial in the years just preceding the stances are other external shocks. In Ghana,ERP and in recent years. During the mid- with more than 40 percent of GDP originat-1980s Ghana's terms of trade improved ing in agriculture, weather conditions signifi-

TABLE 5.1: EXTERNAL SHOCKS AND PERFORMANCE RESPONSE MEASURES

(as percent of GDP)a

Period average

1978-82 1983-87 1988-92

External shocksTerms of trade 3.4 -0.3 2.8Export volume 0.7 -0.1 0.5Total 4.1 -0.4 2.3

Performance response measuresAdditional net external financing 1.6 -0.8 2.3Export promotion -0.4 0.0 0.9Import intensity 2.8 1.0 -0.5Economic compression 0.0 -0.6 -0.3Total 4.1 0.4 2.3

a. For an explanation of the concepts and methodology employed in deriving this table, see McCarthy and Dharesh-war (1992).Source: World Bank data.

93

in 198-8 anod agin (toa leser 2 xteat) th n ex~ og enoins ditevelopment y wh erea te C ttA1990Niertia's expeGling' em of tvraone millio devauto in 1994 te onsotrttdade hckGhnaanti very83cresuted miny abuca 1e pher-n

bente incras in cohan' poices tion that y~ear9. There wa~srelativ peace~ln bt~etweenGhn

Cionveseln, the ovraluat i~tono tes Cin ( iandsits nev~ighbors, epoliicletailty withi

france (crrenly ofahebomu nt Fiwr n~an oteconty,an no ajo naua iatr

r n

~osi&en1 acuae~ oe~U~~4:te'j 4~e h~&lt&~, ~ ~ i

inodity~~ ~~ pre adcneu~~foeat iha susqety~~4ful twdd A rlted i

cantly affect GDP; performance can vary ciere d'Afrique) relative to the Ghanaian cediseverely owing to periodic droughts such as and hard currencies up to 1993 was a positivein 1981-83 and again (to a lesser extent) in exogenous development whereas the CFA199(. Nigeria's expelling of over one million devaluation in 1994 constituted a shock.Ghanaians in 1983 resulted in about a 10 per-cent increase in Ghana's population that year. There was relative peace between GhanaConversely, the overvaluation of the CFA and its neighbors, political stability withinfranc (currency of the Communaute Finan- the country, and no major natural disasters

94

to cope with between 1984 and 1993. Peri- FIGURE 5.1: PROJECTED VS. ACTUAL VALUES:

odic tensions with Togo and C6te d'Ivoire CHANGES IN TERMS OF TRADE

did not cause major disruptions to the econ-omy. There was however a man-made disas- 30

ter in February 1994 when tribal strife in the 2northern region resulted in deaths of more 20than a thousand persons, in large move- Projected termsof trade

ments of refugees fleeing this strife, and inthe interruption of all developmental activi- _ties in the region. The causes and conse-quences of this strife need to be better -l /understood if the Bank's strategy is to be as"relevant" as may be necessary to help avert -20

recurrences in future. Such events clearly Actual terms of trade

highlight the need for donor strategies to be -30 igrounded in a good understanding of a

Source: World Bank strategy papers.country's po:litical economy.

Because the aid inflows largely offset the ex- FIGURE 5.2: PROJECTED VS. ACTUAL VALUES:

ogenous shocks over the period under re- CHANGES IN EXPORT PRICESview, the latter cannot be blamed for thoseaspects of Ghana's performance that were 30

less than satisfactory. Yet the impact on theeconomy, and on the behavior of the various 20 Projeced export prices

agents in the economy, are very different de- A pending upon whether Ghana's foreign ex- 10change resources come from export earnings /or from aid. This requires that the Bank pay ° \

close attention to how changes in macro /10variables affect micro-level incentives andbehaviors, as in the case of cocoa earnings -20versus aid transfers. It also means that posi- Actual export prices

tive windfalls (such as the discovery of oil, a -30 I I -r - Tsurge in cocoa prices, or very plentiful sup- 1980 1982 1984 1986 1988 199 1992plies of external assistance) typically have Source: World Bank strategy papers.

some distorting, downside effects that needto be monitored and minimized insofar aspossible. These effects may, in some cases, Evaluation of performance in economicoutweigh the benefits when a "behavioral managementapproach" and a long-term view are taken.In Ghana's case, the benefits of plentiful aid This section reviews Ghana's performance inhave more than compensated for the wind- economic management against the objectivesfall losses from the terms of trade. But one of the Bank's strategies as outlined in Chap-type of distorting effect that large aid flows ter 2. The relevant performance indicatorscan create is that known as the 'Dutch dis- are those relating to policy and institutionalease" effect (see Box 5.2). measures. A subsequent section reviews per-

95

*9~~2Ai ~ m DTCHDTEAE ACOEON MICMNGMENT WHIIN

formance against the "bottom line" objec- auction of foreign exchange. In 1991 all ex-tives of accelerating growth and alleviating port proceeds were allowed to be sold topoverty. The final section reviews progress banks and bureaus except for cocoa andagainst some key "sustainability indicators." gold, and in 1992 the Bank of Ghana re-

placed its weekly auction with an interbankExchange rates: excellent. Ghana proceeded market. More than half the foreign exchangegradually, through a number of stages, to in the interbank market is supplied by theachieve its preseoht unified, largely market- Central Bank. The black market premiumdetermined exchange rate system. The for- (see Table 5.2) has become negligible. Theseeign exchange marcets were unified in 1990 developments have helped to foster exportwith the introduction of a weekly wholesale development. But Ghana still lacks orgaiiza-

96

tion for export promotion. There is no export frequently updated policy framework pa-credit facility, export bank, or import duty pers the Bank proved overly optimisticdrawback system, and an "export mentality" about the rate of deficit reduction.4

has yet to develop. The IMF took the lead onexchange rate matters but the Bank played a The 1992 election-related fiscal shock had asubstantial role and made a significant con- greatly adverse impact insofar as it weak-tribution to the exchange reforms through its ened the response to the positive privateeconomic work and policy dialogue. sector development measures. And because

the fiscal situation remained problematicFiscal discipline: fair. Achievements under the into 1994 and 1995, with large credits toERP included increased resource mobiliza- public enterprises being the main problem,tion and budget deficit reduction (see Table this continued to have a depressing effect on5.3 below and Figure 5.6 in the annex to this private investments and savings.chapter). Fiscal policy formulation is how-ever hampered by insufficient data to con- Tax reform: good. There have been major im-struct accurate consolidated public sector provements in resource mobilization and inaccounts. In any event, there was recurrent the rationalization of the tax structure. Theslippage in meeting fiscal targets, and the tax base has been broadened, marginal taxpolicy mix became too weighted toward fis- rates have been reduced, and the indirect taxcal ease and monetary tightness even before regime has been rationalized. A value-addedthe 80 percent wage increase of October tax (on which the Bank did considerable1992. New revenue measures were taken in preparatory work) is to be implemented in1993-94, but the deficits are still larger than is 1995. Other Bank contributions on the rev-consistent with low inflation and the provi- enue side were mentioned above.sion of adequate credit to the private sector.The IMF took the lead in negotiating deficit Public expenditure priorities: fair. Expenditurereduction targets under its arrangements, allocation has improved markedly since thebut the Bank also contributed to the achieve- early 1980s through implementation of ament of budgetary reform through its policy rolling, three-year public investment pro-dialogue, its economic studies relating to gram and regular public expenditure re-taxes, subsidies and cost recovery, and views. Inefficient subsidies have beenthrough its effective technical assistance to reduced, white elephant projects minimized,the National Revenue Secretariat. debt arrears have been cleared, and expendi-

tures have been directed toward priorityThe Bank's strategy documents underesti- areas such as primary education and infra-mated revenue growth before 1988 and structure rehabilitation. Ghana's expendi-overestimated it since then, while it consis- ture levels and composition are however intently overestimated expenditures (see Fig- large part "donor facilitated" if not "donorure 5.6). The revenue overestimate was driven." The huge public sector in terms ofrelated to the underestimation of the decline employment (nearly 600,000 employees in ain coffee prices, while the expenditure over- country of 16 million persons, an extremelyestimate stemmed from overoptimism re- large number by a comparative standard)garding both aid flows and project and the consequently large wage bill under-implementation capacities. The deficits in lie the government's difficulties in control-most years were larger than projected in the ing the deficit. Major weaknesses in budgetcountry program papers, but in the more- execution, accounting, and monitoring sys-

97

iABLE 5.2 ; ShiLClFED INCENTIVE INDICATORS

1984 1987 1990 1993

Exchange rate policyNominal exchange rate (cedis per $) 36 162 330 652Real exchange rate (index) 45 100 102 134Black market premium (%) 147 33 10 3

Trade policy (%)Average of import tariffs 27 24 13 13Import duties/total imports 11 10 13 na

Indices of price liberalizationTradable consumer price (CPI) 100 225 459 665Nontradable CPI 100 206 494 799Tradable CPI/nontradable CPI 100 109 93 83

Incentives for cocoaReal producer price of cocoa

(cedis per metric ton) 758 2,132 1,565 naProducer price/FOB price (%) 36 38 51 naReal interest rate

91 day T-Bill (%) -16.6 -14.5 -7.1 7.6

Financial sector measures (%)Real deposit rates -17.0 -13.3 -14.0 -2.6Real lending rates -12.3 -9.9 -8.8 3.6Spread 4.7 3.4 5.2 6.2

Note: na means not available.Source: World Bank data.

tems remain to be corrected. The Bank made tion of whether the trade liberalization wenta major contribution in this area through its too far too fast (partly as a result of Bankeconomic work on public investment and conditionalities), resulting in the demise ofpublic expenditure reviews. potentially viable firms that did not have

the time or wherewithal to adjust and toTrade liberalization: mixed. The Bank consid- survive.ers Ghana's trade liberalization to have beena success since imports are not subject to Deregulation: fair-to-good. There has beenquantitative restrictions, the import licens- substantial deregulation in recent years, anding system has been abolished (as of 1989), a new investment act now makes the ap-export taxes have been abolished except for proval of all investments automatic. Regula-cocoa, and tariffs have been rationalized and tions were liberalized on minimum capitalbrought to low average levels (three tiers requirements for foreign investors, expatri-with rates of 0, 10, and 25 percent). The re- ate immigrant quotas, technology transfermoval of import quotas and tariff reduction rules, and the number of industrial activitieswas however done quickly and to some ex- exclusively reserved for Ghanaians. Buttent unexpectedly, resulting in widespread Bank staff cite considerable anecdotal re-bankruptcies in the private sector. Both Bank ports of remaining "informal" regulation, in-staff and Ghanaians are divided on the ques- timidation, and rent-seeking behavior by the

98

TABLE 5.3: SELECTED FISCAL AND MONETARY PERFORMANCE INDICATORS

1984 1987 1990 1993

Fiscal indicators (% of GDP)Total revenuea 8.0 14.1 11.8 15.9Tax revenue 6.6 12.7 10.8 12.7Total expenditureb 11.1 19.1 17.0 26.3Recurrent expenditurec 8.6 11.2 10.2 15.5Capital expenditure 2.5 7.9 6.8 10.8

Current savingsd -0.6 2.9 1.6 -0.4Overall deficit -3.1 -5.0 -5.2 -10.4Financing

Monetary (net) 0.7 -1.0 -1.0 0.0Other domestic 0.4 0.6 -0.4 1.6Foreign 2.0 5.4 6.6 8.8

Monetary policy(annual % changes)Broad money 61 53 18 naCredit to rest of the economy 103 30 110 na

Quasi-money/M2 16 21 23 34M2/GDP 11 17 17 17Real M2 growth 25.8 14.0 -13.2 naReal GDP growth 8.6 4.8 3.3 na

Inflation (average) 39.6 39.8 37.2 25.2Real interest rate 91 day T-bill -16.6 -14.5 -7.1 7.6

a. Excluding grants.b. Including capital expenditure financed by externally financed grants and loans.c. Includes special efficiency.d. Total revenue minus recurrent expenditure.Note: na means not available.Source: World Bank data.

public administration that inhibits private Privatization: slow (at least until 1994).investors and underlies the "credibility Ghana's divestiture program progressedproblem" (see Box 5.3). Both the Bank and slowly, with only 54 of 300 nonfinancialIFC have provided studies and advice on public enterprises fully divested by 1993 inhow to improve the business environment. the sense that they were liquidated or leased

or sold to the private sector with all pro-Foreign direct investment: fair. Barriers imped- ceeds collected; in another 16 enterprisesing the entry of foreign firms have in large there has been a partial collection. Bank staffpart been abolished, but foreign investment attribute the slow pace of privatizationinflows have so far been minimal-in large partly to the initial preparation time butpart for the same reasons that inhibit domes- mainly to insufficient political support.tic private investment. Both the Bank and There seemed to be a lack of ownership ofIFC played substantial roles in advising the the program (contrary to the ownership ofgovernment on how to create a more favor- the macroeconomic reforms) partly becauseable investment climate for foreign as well of an ideological heritage (shades ofas domestic investors. Nkrumahism and populist sentiments of the

99

ox 5.3: VIs;CROIDBILTIV THJE BIN)INGdCONSTRAINT TO PRIVATE INVESTMENT?

Atrecent article byEMrnest Aryeetey (1994) trust by the prvate sector for a governmentpublishedtin World Development addresses whose earlier policies.. . indicated antago-

the critical:qulestion:0 Why fis theprivate nistic attitude to private investment." ry teysector not:investing [in Ghanal Ias is esr- dosnot find an expectation that the govern-able and exete? m0:es market-friendly policies will soon e re

versed, but he notes that "thsnet 'is6Aryeeotes that therearea numberof dif- oenexpressedamong Ghferent views on cthi senomic reforms arep o

thoyse heof sy "ianaiang t fosa "

wlude that a "mat or have not gon i aporpovate investors e of tact that r iye

all mne of iev ain fro mco ris aei fon amn ha. in-

ecnoi and ote setoa -eom ae vsosi ainlol neeaieyhg

early Provisional National Defence Council), Divestiture of banks under the Bank's Sec-and partly because of vested interests. Per- ond Financial Sector Adjustment Creditformance contracts were signed with some (FINSAC 2) has proceeded slowly.13 state enterprises but pricing and procure-ment decisions are still taken by the govern- Civil service reform: very slow. Ghana has ament and efficiency improvements in the huge civil service that is widely acknowl-enterprises have been very limited. Capacity edged to be dispirited, de-motivated, over-utilization is very low and many enterprises sized, and underproductive. The ethos ofneed to be liquidated. The retrenchment of the bureaucracy is a major problem, andlabor is however frustrated by prohibitively with donors providing salary supplementsexpensive end-of-service benefits. There is in a variety of overt and covert ways, rentstill a clear action plan for enterprise divesti- seeking is rife. A civil service reform pro-ture or rationalization. The Bank's approach gram (CSRP) was launched in 1987, withto privatization (as well as to deregulate conditionalities prescribed in SAC I. But thepublic enterprise reform and civil service re- CSRP lacked ownership, at least partly be-form) may have been too "formulaic," and cause there was a lack of participation bynot sufficiently heedful of important politi- the various groups that had a stake in thecal and social dimensions of privatization. outcome, and the program had few positive

results. Net retrenchments were negligibleIn 1994 there appears to have been some ac- notwithstanding substantial gross retrench-celeration of activity on the fronts of pro- ments, owing to unplanned new hiringmoting privatization and private sector (Table 5.4). Efforts to control the wage bill atdevelopment. Ashanti Goldfields was priva- 4.5 percent of GDP, which were finallytized and a bill was sent to Parliament to achieved in 1990, were undone by the 1992launch privatization of Ghana's telecommu- wage hike that raised the wage bill to 8 per-nications. A liberal investment law was cent of GDP. Other reforms such as the auto-adopted along with Ghana's subscription to mated payroll system and job evaluationArticle VIII of the IMF whereby Ghana re- and planned links of pay to performancenounced recourse to quantitative restrictions have so far been ineffectual. Bank staff re-on its external trade. 1994 also witnessed in- port, however, that the new Parliament iscreased activity on the Ghana stock market now making demands on the civil service toand a more active dialogue between the become more effective, and a new CSRP ispublic and private sectors. The results in underway that will supposedly involve aterms of private investment levels, however, more participatory process to build owner-remain to be seen. ship and the CSRP within a framework of an

overall strategy regarding the role of theFinancial liberalization: fair. Interest rates have public sector.been liberalized and sectoral lending guide-lines lifted. Bank portfolios have been re- Institutional development and capacity building.stricted, prudential regulations rationalized, Within the last two years the Africa Regionand banking supervision strengthened. But has given greatly increased priority to ca-interest rate spreads are high (Table 5.2) and pacity building as an objective of its countryservice quality is low, pointing to a lack of assistance strategy. Among the country-spe-competition. The oligopoly in financial mar- cific reasons for this emphasis was thekets contributes to high real interest rates recognition that Ghana's project implemen-and lack of availability of foreign exchange. tation capacity was inadequate to manage

101

TA7 Fs 4- 'SELECTED !%T ICAT1Z ;:T T_-_

Numbers of public sector employees, in thousands 1987 1992

Core civil services 131 102Education services 159 167Subvented organizations 81 70Security organizations 29 29

Total government services 400 368Net retrenchment, 1987 to 1992 na (32)

Public enterprises 250 227Net retrenchment, 1987 to 1992 na (23)

Total public sector 650 595Net retrenchment, 1987 to 1992 na (55)

Civil service wages/GDP 2.0 5.7

Performance of state-owned enterprises 1984 1987 1990 1991 1992 1993

Profits (% of GDP) 0.3 1.9 0.7 na na naEstimated no. of public firms na 329 291 266 na na

Divestitures (no. of firms)Targeted for divestment na na 39 42 na naActual divestments na na 23 25 na naProceeds collected na na 7 3 7 1Proceeds partially collected na na 7 4 4 1No proceeds collected na na I 10 2 3Lease/management contract na na 3 0 1 0Liquidation na na 22 2 2 6

Note: na means not available.Source: Husain and Faruquee (1994) for data on public sector employees and World Bank for data on the performanceof state-owned enterprises.

even existing Bank and donor projects, study and action plan for capacity building,much less the more demanding sectoral op- and work is underway to define a strategyerations that the Bank wanted to be able to "for both better utilization of existing capac-launch. "Absorptive capacity" rather than fi- ity and development of the specialized skillsnance was seen as the binding constraint to needed to achieve accelerated economicproject implementation, and the remedy was growth." But the OED findings on past ef-to build capacity. Box 3.3 in Chapter 3 illus- forts to assist capacity building through tech-trated the very mixed record of Bank proj- nical assistance operatinsc emphasize theects in achieving the institutional need to ensure that the systemic, governance-development objectives. grounded constraints to more effective capac-

ity utilization are being addressed at theThe government has created an interagency same time. Otherwise the interventions treatcapacity-building steering committee, a joint symptoms rather than root causes of the inef-UNDP-government team has prepared a ficiency of the public service. Unfortunately,

102

Box 5.4: RENT-SEEKING AND PATRONAGE RELATIONS

A subject much talked about by Ghanaians 1987 (Structural Adjustment Institutionaland by Bank staff working on Ghana, but Support Project). This project helped to fosternot written about, is how the large donor a system in which much of the regular workpresence in Ghana has given rise to new of the Ministry for Finance and Economdcforms of rent-seeking through new forms of Planning, whether preparing the public in-donor/Ghanaian patronage relationships, vestment program or for a Consultativewhich have replaced old forms of rent-seek- Group meeting, came to be undertaken by ading (often associated with access to scarce hoc task forces and short-term consultantsimport licenses or foreign exchange). rather than by the institutional units charged

with these tasks. This de facto privatizationIncentives in Ghana's public sector are sig- often served to postpone if not underminenificantly distorted by multiple scales of the development of the capacity of the insti-dAonor-financed salary supplements, and by tution to do its assigned tasks. But since the,the nontransparent manner in which donor- task forces and steering committees.and ad-.financed benefits (vehicles, external train- visory groups all got supplements, it is no

ing, study tours abroad, appointment to wonder that this approach becane popular.advisory groups, commissioning of studies, Many donors now acknowledge that workand so on) are allocated through patronage does not get done without the payment of.relationships. Another distorting factor has supplements of some sort.been the dominance of objectives that areessentiaUy short-term, product- and event- Behaviors induced by these distortions areoriented, and often donor-driven, over sometimes disabling, as in the case of publiclonger-term objectives that are more "pro- servants who have become resentful andcess onented" and geared to institutional de-motivated because they cannot share indevelopment and capacity building. Techni- donor-financed benefits received by a fa-cal assistance projects that give considerable vored few. The Skills Mobilization Schemediscretion to project and task managers re- of the late 1980s clearly had this kind of ad-

garding the allocations of vehicles, study verse external effect. Yet when the value of atours, and the like are among the principal vehicle is worth several years of a Ghanaiantargets for this rent-seeking. civil servant's salary, and a day's consulting

fee or honorarium is worth a month's salary,An example of the above was found in a much time is spent away from assigned jobsBank technical assistance project approved in in pursuit of fees and favors.

103

the IJNDP study did not addrcss thq- Arm{ ;rc! F--- iwih &Ilu povertyside, utllization issues. alleviation objectives

Future TA and capacity-building activities in GDP growth: right rate (excepting 1992 andGhana should be framed in the context of a 1994), unintended composition. GCP growthcomprehensive strategy for institutional de- averaged nearly 5 percent over the decade---velopment. Many of Ghana's institutional close to the targeted rate. But the composi-problems stem from demand-side rather tion of the growth was quite different fromthan supply-side constraints, and the "ethos that intended and projected (see Table 5.5of the bureaucracy" and the overextension below and Figures 5.9 to 5.12 in the annex toof government are central, systemic issues. this chapter). The growth of both agricultureUntil and unless these systemic problems and manufacturing was substantially lowerare addressed more directly and vigorously and that of the services sector-especiallyby civil service reforms and other relevant the distributive trade subsector-was sub-measures than they have been to date, the stantially higher than projected. The rapidsustainability of the Bank's TA/ID projects growth in trade was stimulated in part byand project components will be uncertain the large amount of nonproject lending thatat best. was spent in large part on consumption and

TABLE 5.5: SELECTED GROWTH AND STRUCTURAL INDICATORS

1984 1985 1986 1987 1988 1989 1990 1991 1992 1993

GDP and sectoral growth rate (%)GDP 8.6 5.1 5.2 4.8 5.6 5.1 3.3 5.3 3.9 5.0Industry 9.1 17.6 7.6 11.5 7.3 2.6 6.9 3.7 5.7 4.3

Mining 13.5 6.5 -3.0 7.9 17.8 10.0 6.4 6.7 10.4 9.1Manufacturing 12.9 24.3 11.0 10.0 5.1 0.6 5.9 1.1 2.7 2.2

Agriculture 9.7 0.6 3.3 0.0 3.6 4.2 -2.0 4.3 0.6 2.8Cocoa -8.4 13.2 18.2 3.3 -6.3 3.2 3.0 -2.0 2.1 3.5

Services 6.6 7.5 6.5 9.4 7.8 6.7 7.9 6.3 6.6 7.0

Sectoral structure (% GDP)Industry 11.3 12.7 13.0 13.8 14.0 13.7 14.1 14.0 14.2 14.1Agriculture 52.5 50.3 49.5 47.1 46.1 45.8 43.5 43.2 41.8 41.0Services 36.2 37.0 37.6 39.1 39.9 40.5 42.4 42.9 44.0 44.9

SavingsSavings (gross national) 4.0 5.4 5.1 5.6 6.2 7.2 7.4 9.3 7.2 1.4Public (% GDP) -0.6 0.1 1.7 2.9 2.7 2.5 1.6 3.2 -2.2 -0.9Private (% GDP) 4.6 5.3 3.4 2.7 3.5 4.8 5.8 6.1 6.4 2.3

Investment(% GDP) 6.9 9.6 9.4 10.4 11.3 13.2 14.4 15 9 12.8 13.9Public 2.5 4.2 7.3 7.9 8.0 7.8 6.8 7.7 8.5 9.9Private 4.6 5.3 2.1 2.5 3.3 5.5 7.6 8.1 4.3 4.0

Memo itemDirect foreign investment

($ million) 2.0 8.0 4.3 4.7 5.0 15.0 14.8 20.0 22.1 25.0

Source: World Bank data.

104

intermediate goods. The slower than pro- vented very significant results from beingjected rate in agriculture was partly at- achieved "on the ground." One counterpro-tributable, as discussed in Chapter 4, to the ductive effect of PAMSCAD may have beenrelative neglect of agriculture by the govern- that it delayed actions by both the govern-ment and donors in the mid-1980s. ment and the Bank to focus more seriously

on designing a true poverty alleviation strat-Poverty alleviation: some gains. The main thrust egy. The SDA project was also plagued withof Ghana's ERP was to "go for growth" as the implementation and capacity-building prob-primary objective vis-a-vis poverty allevia- lems that delayed getting comparable multi-tion, income distribution, environmental con- year analyses of the impact of adjustment onservation, or other objectives. Given the Ghana's poor, and so also delayed prepara-country's circumstances, however, it was tion of the poverty strategy.clear that accelerated growth was a precondi-tion for poverty alleviation. The Bank was Because of the lack of baseline data prior tomore concerned in the mid-1980s with help- the Ghana Living Standards Survey ofing Ghana to get its prices right and to get 1987/88, it is difficult to know what effectstabilized and to get growth going than with the adjustment program had on the poor inreducing poverty-especially since not very the mid-1980s. Bank staff have written thatmuch was known about the extent and inci- "the adjustment program in Ghana has haddence of poverty. And both Ghanaian tech- a positive impact on the poor," citing thenocrats and Bank staff were more than fully major expansion in the provision of socialoccupied initially with crisis management services, particularly in health and educa-and with mobilizing sufficient resources from tion, plus the agricultural pricing policy andhome and abroad to enable the ERP to be liberalization, which increased farm incomeimplemented. generally.

By about 1985, however, the Bank was be- While data on incomes are lacking, it is evi-coming increasingly concerned with the dent that several quality-of-life indicators,need to address the social costs of adjust- including child malnutrition, infant mortal-ment. In the case of Ghana, UNICEF played ity, literacy, and access to water all improveda catalytic role in getting both the govern- since the adjustment program started. Otherment and the Bank to pay more attention to indicators such as primary enrollment ratios"human concerns," albeit not without antag- were less changed while a few indicators,onizing the government. The tensions were such as population per doctor and nurse,resolved and in 1987 two poverty-oriented pointed to deteriorating services. On bal-initiatives were launched. One was a Ghana- ance, however, most social indicators werespecific, multidonor program known as moving in the right direction. Table 5.6PAMSCAD (see Box 5.5); the other was an- shows the movements of several of these in-other multidonor, multicountry program dicators over the past decade.known as the Social Dimensions of Adjust-ment Project (SDA) (see Box 5.6). It was certainly a positive albeit unusual as-

pect of Ghana's adjustment that governmenftPAMSCAD in time became known more as a expenditures rose in real terms even duringpolitical, palliative success but it had design the early stages of stabilization. This was fa-and implementation problems that pre- cilitated by the combination of rising rev-

105

enues (consequent upon the exchange rate, As Table 5.6 shows, public expenditures onpricing, and fiscal reforms), rising aid in- basic social services increased significantlyflows, and the government's concern to give as a share of GDP while expenditures on so-adjustment a human face by improving so- cial security also rose as a proportion of totalcial services. This was a win-win situation. expenditures.

106 .t

(Box 5.5 continued)

-irst Of im£plementation. A contribu- interventions in all regions despite the geo-tor fitor was donors' requirement for graphical concentrations of the poor; con-reppraisal (aftet the Bank's appraisaand trary to the analysis of poverty andadditiol information on project acdivities vulnerabit and the stated intentions therprior to release of funds. About half of the was a. bias in resource allocation toward

pro were cofinanced by three or communi ties and male beneficiaries inmore don. urban and/or southern areas. While these

groups were, affected by. structural adJust-_lmplementation was plagued by the com mert-in the- shot t at s 45,Pk ity of the p am institutional ar- retrenched government employees who in -:ranrements wi the 23 projects, dispersed general found the severane pay wasacross nine sect&s and all reons. Despite not donor-fuwded) ade and -- of

the intentions tot designfthe sprogram for whom ta f various traing-- decentralized imleentationwith modst -and credit schemesoffered-they were tot.inatitltiolnX requiren% tee was a. paiculry veable compared t: t

strn tend cenizAio farms in the nor bem regiokey program maeetresiponslbilities

mi~e~ prageniesand The importan:t lesson from PMSADto establish and equipi Wmplentation that, beingpriMalpalitate In-owtrniffees ni unit with! staff, copu f- i ls> wit s ermand vehls.T nioitig sytm rar th a causes s " tedto a,whikh was to be financed under te sial s eg ttionof the p em a -

---ensIons -of ad e pgram, was partial rather than hoist a tonever establiShed.. v.wtio& .t marginalized is

and ulneabilty fo antemeo. found that nomic p~~olicand plannin by a 'to

Amultidonor evaation in 1990 -yPAMSCAD hid not sig ne addire them within adist a afits ein tetrs of mitigating the socl cot -o tie when the re unanta ss adjustment. Sme feeicinodpove a t poiesand swee a shot time horizon is todd themremaned ul

New data on poverty in Ghana from the are reported in Table 5.7 below. Some ofextended poverty study (EPS) show that the more important conclusions drawnbetween 1988 and 1992 the incidence of from both the EPS and a participatorypoverty in Ghana as a whole fell signifi- poverty assessment are summarized incantly. Some of the more important data Box 5.7.

107

Rso.e JSTMENT (SDA) PROJECT

lThe Ghana Social Dimensions of Adjut- unduly long time-27 months. The SDAv~~t Project was initiated b+ y the "Assess- project was seen by the Ministry of Finance

of Socia Dimensions f Structural and Economic Planning (MFEP) as "supplyAdjustznent fr Sub-Saharan Africa ProF driven" by the Bank (SDA Unitn because of

0which w s-launchedfin 1987 with t.e ^the amount ofinput to and frequency of mis-U~~ite4 Nations Development Programme, sions dealing with Ghana Statistcal Serves

Afrian eveometBak a nd the Bank GSX ad heBak' ery activ roe ne- 0tt;<l0@hnaBeiX: ~~~~~~Aftrne000

The decline in povertybLet-wee-n 19188 ai-d still poorly understood and warraint more1992 was most marked in the rural areas, research. It is also not fully understood whyand especially in the poorest region, rural rural poverty decreased so inucl in a periodSavannah. But poverty has clearly become a of declined agricultural prices and produc-major problem in Accra, where the incidence tivity. But a large part of the answer seemsof poverty tripled from 7 percent to 21 per- to be the growth in the share of incomecent of the population and incote distribu- from nonfarm self-emplow ment in thetion became more uItequal. The causes are poor households. And more than half

108

(Box 5.6 continued)

commodate the regional SDA data re- and consultants. Throughout the project,quitrements. The results were emerging froim government agencies and donors corn-

processing in 1990 and most analytical work plained that the GSS did not make data

took place in the Bank Headquarters. The available soon after processing, and that the

publication of A Poverty Proffle for Ghana, GSS was slow to react to requests for specific

1987-88 (Boateng et al. 1990) provided sub- data. The socioeconomic analysis unit in

stantial and imnportant information for GSS has not been established and the Stud-

poverty analysis in the Bank, and outside, ies; Fund has not been utilized for its pur-

and much poverty analysis and program- pose. Few outside GSS and MEEP knewming is based on this report. Ghanaian re- about its existence, and the panel for vet-

searchers, however, point out that the ting proposals was never established. The

database is accessible in Washington, DC, frustration was clearly expressed by a Bankonly. Processing of two subsequent surveys mission in March 1991: "the GSS should not

in 1988/89 and 1990/91 has not yet been be in the business of undertaking its own

completed. Both have been plagued by a policy analysis function, until such time as itnumber of technical problems, diffculties of can first dernonstrate its ability to meet

compatibility between the rounds, shortage its own deadlines for providing macro-

of qualified staff, and a management who economic and socio-economic data in a userhad no experiencr with this type of survey, friendly format to MFEP and line, Min-

and therefore could not provide the neces- istries.' The fund is now used to finance sta-

sary professional supervision. fistical trouble-shooting consultancies.

In terms of capacity building in the Ghana The evaluation and monitoring fund was

Statistical Services, the project has not been nev7er implemented. Initially delays were

very successful Permanent technical assis- caused by lack of donor funding. Switzer-

tance is supplemented by numerous trouble- land withdrew its commitment in 1991 and

shooting missions from the Bank (SDA Unit) the component was dropped.

of that income came from service activities, Ghana, the indicator remained essentiallymainly wholesale and retail trading. The unchanged between 1985 and 1992 at 40sustainability of these trends is among (zero is perfect equality, 100 perfect inequal-the more important "sustainability issues" ity), which compares favorably with levelsin Ghana. of inequality in Latin America and a number

of African countries in the range of 40-60The most common indicator for relative in- but unfavorably with Asia where the rangecome inequality is the Gini coefficient. For is 25-40.

109

TAR' RT E .: SELECTED SoCAF. Nm-A.PC 1Q7"

Indicator Unit of measure 1970-75 1980-85 1987-92

Public expenditures on basicsocial services % of GDP 6.3 3.2 7.4

Expenditure on social security % of total govt. expenditures 6.9 4.0 6.4Primary school enrollment % of age group 71 76 77Literacy % of population (age 15+) 30 53 60Female literacy % of female (age 15+) na 42 51Infant mortality per 1,000 live births 107 98 81Life expectancy years 50 52 56Total fertility rate births per woman 6.6 6.5 6.1Population growth rate annual % 2.2 3.7 3.0Energy consumption per capita kg of oil equivalent 125 78 96Population per physician persons 12,900 14,894 22,970Population per nurse persons 693 640 1,669

Note: na means not available.Source: World Bank (1994c).

TABLE 5.7: RECENT TRENDS IN POVERTY, 1988-92(headcount and poverty gap ratios by region)

1988 1992

Ratio Share (%a Ratio Share (%)

HeadcountbGreater Accra 7 2 21 6Other urban 32 23 27 22Rural coastal 37 12 27 12Rural forest 38 31 33 32Rural savannah 50 31 39 29Ghana 36 100 31 100Sub-Saharan Africa 48 48

Poverty-gap ratiocGreater Accra 2 1 5 6Ghana 12 8Sub-Saharan Africa 18 19

Squared poverty gap (%)Ghana 6.36 5.11

a. Shares may not add to 100 percent owing to rounding.b. Headcount ratio: Percentage of the population whose in.;ome or consumpion is less than a pre-specified povertyline.c. Poverty-gap ratio: The "gap" or distance between the mean income (expenditure) of the poor and the poverty line.The poverty line was $31.23 per person per month at 1985 prices.Sources: Data for 1988 from World Bank (1990 and 1993a); data for 1992 from an internal World Bank extendedpoverty study.

110

anl - . pR- -,<3~~~~~~~~~~~~~~~~~~~~5it2~~~~~~` 4 't VgS j .p, Q , ,j < e<a

s.7W ,1 5,-1,,

, V A, .g ,,, v . , , ,; . ,', .;, , (m;W3CP uwiT . qw a _

41i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~od~~~~~~~~~~~~~~~~~~?4 ,, .w ur i tzodxa , ,~~4l ~* g.. gi;itW

tt~~~~~~~ u uwoz$ $ go rf-l -O iup

*a e} aAl t4ap ntv~ ipi 3j w j-:dupeu

ai 'swu-q ddo poow puv data zodxa piq A4J#QW)T1I~~ #44 ~W 4' t' P 4"P .^- ,.m..p'uad# pa ai ,u ,,wA,;o'i,

MYq aahjdw 2. aopetW % ,,*n$oiq ?~ p?l Be;IM4

4>'012012 pa$* S#Ij QOj1fqp3S' 'W@I. ' ' '''' At *noo 'm am -ui 'A adt p;; ' ai~ax p'' s'zou ' ,$w.zavn.'

jwd 'uapo am 'wvq'n "'''sa ai pm ipww 'ywou'o '""

S~~~~~~~~~~~~~~iaaap eoftV > (peapt> e

" q" swnd j rn aaza ~e *noq puezo4

~~~~~~~~UVj eo x1no 4 SP#A0

V~~tW~VNf`P*ad04 J/1*AOQICW ±J$4 j~ ~ ~~~~~~~~~~~4 W47/yTi,.' ,; S "X'" s ?' .A' ,

&~~~~40 5wu

Sustahi-ability indicators growth of the past decade canntt vo on in-definitely. For others, sustainability is seen

The sustainability of Ghana's growth as an environmental issue-reversingmeans different things to different people. trends in deforestation, soil erosion, and soAt a project level, project designers or re- on. And for still others, sustainability is anviewers focus mainly on financial sustain- issue of self-sufficiency in foreign exchange,ability-as in the case of schools, which will where the central question is how fast ex-not be sustainable unless growing govern- port expansion and import substitution willmrent revenues permit growing allocations proceed to enable a country to restore cred-for teacher salaries and other operation and itworthiness and no longer be dependentmaintenance expenditures. For many, the upon foreign aid.central sustainability issue is the need to ac-celerate private sector development, as it is Under the auspices of the SPA, the Africarecognized that the public sector-led Region developed its own set of sustainabil-

TABLE 5.8: SELECTED SUSTAINABILITY INDICATORS

1984-87 1988-92 1993

Savings, investment, and aid dependencyPrivate investment (% of GDP) 4 7 4National savings (% of GDP) 5 7 1.4"Genuine savings rate"a (% of GNP) -12 -4 -1 (1992)External aid dependencyb (% of GDP) 5.8 10.7 9 (1992)

Nexus indicatorsTotal fertility rate 7 6 6Agricultural growth rate 3 2 3

Cocoa 7 0 4Agriculture, livestock fishery 3 3 3Forestry 1 3 1

Environmental indicatorsAnnual loss from deforestation, erosion,

soil fertility (% of GDP) 4.0Deforestation rate (annual % of total

forests) 1.3

Export growthTraditional 11 5 20Nontraditional 32 8 -0.1

Government revenue (% of GDP) 12 13 17

Poverty/income distributionProportion of population below poverty

line (%) 36 (1988) 31(1992)Distribution inequality index (Gini

coefficient) 41 41

a. The "genuine savings rate" is obtained by subtracting depreciation of fixed capital and depletion of natural re-sources from the national savings rate.b. Net ODA disbursements as percent of GDP.

112

ity indicators. Taking that set as a departure The behavior of all the variables shown inpoint, Table 5.8 presents a set of sustainabil- Table 5.8 has been discussed elsewhere inity indicators for Ghana. The rationale for this report. But by pulling these key indica-the choice of these variables and the inter- tors together, attention is focused on how se-relationships among them are fairly self- rious is the problem of putting Ghana'sevident, but a few Ghana-specific factors development on a more sustainable path.may be emphasized. One is that the empha- These indicators point to a potential "sus-sis on the growth of nontraditional exports tainability crisis," which should commandis all the greater considering that some of the urgent attention of government andGhana's traditional exports are nonrenew- donors alike. The indicators may also use-able (gold, other minerals), some are based fully serve as key long-term target variablesupon already overexploited resources (log- to be monitored at the highest levels.ging), and cocoa is a product lw,ith very lowincome and price elasticities, making it un-desirable from a producer's standpoint to Annex: projected vs. actual valuesexpand world production. Thus, if the long- for selected macroeconomicterm outlook for traditional exports is not variablesfavorable, and the size of the domestic mar-kets limits the scope for import substitution, The following charts compare how actualthere is all the more reason to regard the outcomes (in terms of the behavior of somegrowth of nontraditional exports as a critical key variables) compare with the values tar-policy variable. geted/projected in the several country pro-

gram and strategy papers described inThe need to regard these variables together Chapter 2. These comparisons serve to facili-is underlined by the fact that some of the re- tate "efficacy analysis," which focuses onlations among the variables are complemen- the extent to which the Bank's (and govern-tary, some competing. Accelerating the ment's) policy and output objectives weregrowth of private investment, for example, achieved.will be essential to get progress in all theother variables, although in the short runthere may be tradeoffs between increasinggovernment revenues and providing ade- FIGuRE 5.3: OFFICIAL ASSISTANCE

quate incentives to private investors. By the 700 -- _ _ -__1

same token, foreign aid may be supportive Projected official

of private investment in the short run (as 600 assistance

through the financing of infrastructure that 50'improves the enabling environment) but -A \

could undermine it by financing govern- io 4Iment expenditures that would crowd out, / \ / Projected Bank

rather than crowd in, private investment. 300- // \ / disbursement \ /

And in both the short run and longer run, 200- AcluaofficialF-/ i,

efforts to deal adequately with the "nexus is- | assistance ,'

sues" are essential to raise "green" savings, 100 _ AcA`alBank

which in turn are needed to finance a more - - disbursement

adequate level of private investment. 1981 1983 1985 1987 1989 1991

113

FIGURE 5-4: WORLD BAMK LENDLNTG PROGRW41 ViIURF 5 7 RESOURCE AND TRADE BALA,NCES

350- 200

300 ~ ~ ~ ~ ~ ~ ~~~~~ /s\ O ; ~~~~~~~~~~~~~~~~~~Actual trade balance300 0

250 -200 Projected trade*15~~~~~~~~~~~~~~~~~c

20 A0u0 /\\

-400150

-600 Projected resource100 balance

Actual resource

50 -800 balance

\ / ~~~~~~~~~~~Projected1981 1983 1985 1987 1989 1991 1980 1982 1984 1986 1988 1990 1992

FIGURE 5.5: SAVINGS AND INVESTMENT FIGURE 5.8: CURRENT ACCOUNT BALANCE

20 100 _

18 Actual gross domestic ActIualinvestment r -4

16

14 j0

/rojected gross F lo ~~~~~~~~~~~domestic investment

rI 8 --

6- *-400

2 / Projected savings Actual savings -500 P

0 - -- , ---- T -T -_ -- 600 - T , v -- , -_,____ -

1985 1987 1989 1991 1980 1982 1984 1986 1988 1990 1992

FIGURE 5.6: GOVERNMENT ACCOUNTS FIGURE 5.9: GDP GROWTH

2 5 - - - - - - - - - - - - - - - - - - - - -1 0 -_ _ _ _ _ _ _ _ _ _ _ _ _

Projected expenditure _

20- Actual ereditue -0--p.

15 h---------: 6 Actal-

Actual revenue 25 Projeded revenue Projected

Actual deficit---,,, -2

-5 _ _ _ _ - 2 \ - -

-10 -6 Projected deficit

-15 -_, _ _ -- - -- -8 T 1 T -- I

1985 1987 1989 1991 1980 1982 1984 1986 1988 1990 1992

114

FIGURE 5.10: GROWTH OF AGRICULTURE FIGURE 5.12: GROWTH OF SERVICES

10 20-

8 - A te 15 Actual

198 Actua ---- 96 188 190 19 190 192 98 186 98 190 92

4 5

0 -5-2

4 ~~~~~~~~~~~~~~~~~-10

-6~~~~~~~~~~~~~~~~~~1

1980 1982 1984 1986 1988 1990 1992 1980 1982 1984 1986 1988 1990 1992

Sources: World Bank data and strategy paper.

FIGURE 5.11: GRowTH oF INDusTRY

20___- -

is A Notes

10 Actal- 1. See especially text tables and annex for evidence underlying

these and similar assertions.5

2. Even if the agricultural growth rate is higher than Bank data0 et _ l _ indicate, it is unlikely that the growth has reached the rates tar-

geted; more seriously, the trends in agricultural productivity-S \ I and in environmental deterioration are the most wonrisome.

-10 3. This was clearly the case, for example, with the Structural Ad-justment Institutional Support Project, which tended to be re-

-15 garded (including by the PCR) as more successful than the facts

-20 rX-T- warranted, probably at least in part because of that project's as-1980 1982 1984 1986 1988 1990 1992 sociation with the successful first two structural adjustment

operations.

4. See Faruqee (1993).

115

6. Conclusions and recommend ations

We need longer time horizons. Even the tives, efficacy of implementation, cost-effec-CSP/CAS has a short-term horizon. tiveness, and staff performance. The Ghana

government warrants a high rating for bor--Senior Bank official rower performance during those years.

We need to define better [in our country assis- In recent years, however, the performancetance strategies] what we need and want to hold on both sides has been more mixed.ourselves accountable for. Progress has continued in getting the prices

right, in rehabilitating the infrastructure, in-Bank director rationalizing the revenue structure, and in

public investment programming. These areareas where both the government's and the

Overview Bank's strengths and comparative advan-tages can be built upon.

In order for the Bank's assistance to Ghanain the years ahead to be as relevant, effica- Performance has however been disappoint-cious, and cost-effective as possible, this re- ing in private sector development, privati-port recommends that the Bank rethink zation (at least until 1994 when moresome of its priorities; give more attention to privatization activities were launched) andinstitutional development, economic gover- public enterprise restructuring, civil servicenance, and sustainability issues; redefine reform, expenditure control, agriculturalsome of its comparative advantages; refor- development, educational achievement, en-mulate its performance indicators; and re- vironmental control, and institutionalfine its process of country assistance development.strategy formulation.

Ghana's agenda of unfinished adjustment isThe Bank's strategy and instruments were a long one and the prospects for sustainingeffective, in the 1980s, in helping the a satisfactory rate of per capita growth andGhanaian government to stabilize, liberal- poverty alleviation are uncertain. Agricul-ize, and rehabilitate a moribund economy tural growth remains well below what isin crisis. Particularly in the mid-1980s, the feasible (and may well be no better than theBank's program of assistance to Ghana war- rate of population growth), private savingsrants high ratings for the relevance of objec- and investment rates remain extremely low,

116

educational testing results in the primary strategy should provide for a reduction inschools are very low, and there are serious this dependency.environmental problems. This being thecase, proclaiming Ghana to be a "success The binding constraints and the prevailingstory" may not be accurate nor in the coun- political economy are now quite differenttry's best interest. from those in the 1980s, the latter being

characterized by a transition toward democ-racy following elections in 1992 of a civilian

Key strategic issues government under a new constitution. Thecurrent challenge for the Bank is how best to

The objectives and instruments of the Bank's help Ghana manage a transition to a morecountry assistance strategy for Ghana today sustainable path while a transition to demo-are not so well adapted to current conditions cratic political forms and processes is under-as they were in the 1980s. The hardest parts way. The sustainability of the political andof Ghana's adjustment agenda are yet to social transitions depends partly on how thecome, and the objectives and instruments economy fares, and vice versa. The Bank'shave to be adjusted accordingly. More ur- strategy must consequently be a "politicalgent attention needs to be given to several economy" strategy.longer-term issues if the growth and gainsachieved are to be sustained, or accelerated. A new strategy should be based on a sharedThe binding constraints are on the institu- vision of what kind of society the Ghanaiantional and managerial side. government and people wish to bring about.

It should be a central role of the Bank to helpKey issues that need to be more explicitly Ghana elucidate the options, and then toaddressed in the Bank's country strategy forge the needed new instruments and insti-are: What can the Bank do to improve the tutions. If in the 1980s a main thrust of thesustainability prospects? And what pace of strategy was to "get the prices right," a mainchange, on which key fronts, is needed to thrust for the 1990s should be in helpingminimize the risks that Ghana's progress Ghana to "get the institutions and economicwill not be sustained? Most of the truly im- governance conditions right."portant issues (as distinguished from the ur-gent issues that tend to command attention) The new strategy also needs to acceleratecan be called the "sustainability issues." the pacing and revisit the sequencing of fu-

ture policy and program actions in the lightTwo main categories of sustainability issues of the failure of the current strategy to fosterare the "leading sector" and aid depen- the needed private sector response or todency. During the 1980s, recovery had to raise agricultural productivity. One of the re-be public-sector and foreign-aid led. Aid- port's conclusions is that unless Ghana's ad-supported expenditures on infrastructure justment strategy becomes less "gradualist"and social sector development can keep the than in the past decade, growth may slowgrowth going for a time. But sustained down to the extent that political and socialgrowth and poverty alleviation will depend stability would be endangered.upon a far more vigorous private sector re-sponse than has so far been achieved. Two critical issues are how to stimulate theGhana's heavy dependence on foreign aid needed private sector response and how toalso has its disadvantages, and the future reverse the declining productivity in agricul-

117

ture without harming the environment. ThI' ;r ndar. gcs tV be&itne inure errec-trends in several environmental indicators tive in key areas where its past assistance(for example, deforestation, declining soil has been least effective, such as in fosteringfertility resulting from shortened fallows) private sector development (an area inneed to be reversed. which the IFC needs to play an increasingly

active role, including through the AfricanThe government strategy (as of 1994) was Enterprise Fund), in promoting institutionalstill based on continued gradualism in ad- development and capacity building, in help-justment, including civil service reform, pri- ing the government to become smaller andvatization, public sector restructuring, more efficient, and in elucidating policyagrarian reform, and family planning. This analyses and options to promote widenedgradualism was facilitated, during the last and more enlightened public debates ondecade, by the substantial aid provided by key policy issues among constituenciesthe donors, especially in the form of quick formerly excluded from such debate anddisbursement policy, much of which fi- decisionmaking.nanced current expenditure. And as notedearlier, the gradualist strategy did lead togrowth although not necessarily of a sus- Recommendationstainable nature.

The main recommendations that flow fromBut the binding constraints have changed. these findings and conclusions are as follows.What is needed now is a strategy thatachieves a breakthrough in the investment For the design of Bank strategy:climate and business environment, and im-provesathe confbsidenes envirofnpate sc in- c Focus the strategy on sustainability, insti-p>roves the confidence of private sector in- ttoaeeomn,adeooivestors and actors. Lack of confidence now tutional development, and economicappears to be the binding constraint to pri- governance.vate sector development. Accelerated pro- * Monitor performance against specifiedgrams of privatization, administrativegram, an "rightizing ofngove sustainability and micro-level indicators.reform, and "right-sizing" of governmentappear to be sine qua nons of increased con- * Develop a "nexus strategy" and sectoralfidence by the private sector that Ghana's in- action plans.creasingly market-friendly policies areunlikely to be reversed. Accelerating adjust- m Make the strategy "more strategic" andment will undoubtedly be difficult in the longer term.face of the developments on the democrati-zation front that may tend to slow decision- For achieving objectives:making, but it appears as a necessarycondition for sustainable growth. a Build on Bank comparative advantages

(ESW, policy dialogue, aid coordination).The Bank has a well-established compara-tive advantage in helping Ghana to correct * Reach out, and listen, to broader con-its distorted macroeconomic and sectoral stituencies within and outside Ghana.policies and to rehabilitate its infrastructure.The Bank now needs to further develop and a Focus the dialogue(s) on hard choicesimprove its capabilities and change its com- and options.

118

• Develop a more strategic approach to dicators." More attention to sustainabilityinstitutional development and technical will itself imply giving priority to relievingassistance. those institutional and governance con-

straints that are now the binding constraints• Get at the root causes of inadequate ex- to private sector development, which is nec-

penditure management. essary to maintain growth and to achievethe ultimate objective of poverty alleviation.

• Do not oversell Ghana as a success case.The Bank's current strategy focuses on

• Beware the downsides of aid dependency. portfolio implementation and private sec-

tor development. The emphasis on im-* Develop new aid coordination policies plementation is appropriate insofar as

and practices. implementation capacity has replaced pol-

icy distortions and resource scarcity as theFor making Bank instruments and processes binding constraint to public investmentmore effective: and to the cost-effective delivery of crucial

* Get in-house ownership of, and account- public services. So far, however, Ghana'sability for, the Bank's own strategy. (and the donors') approach to capacity

building has emphasized the supply side

* Put more "evaluation" into country assis- (increasing the volume of skills throughtance strategies. more donor-financed training programs)

and has neglected the demand side, that is,* Change the skill mix of staff to better meet the institutional context and governance

the skill requirements of the strategy. conditions that determine how effectivelycapacities are utilized.

* Reassess the mix of Headquarters vs.Resident Mission assignments. Ghana's underutilized human capacities

and the poor "ethos of the bureaucracy" areThe remainder of the chapter expands upon arguably more important constraints to thethese recommendations and their rationale. effective functioning of government than theNone of the recommendations is directly scarcity of skills per se. A strategic emphasiscontrary to the Bank's current strategy, and on institutional development will thereforefor most it may be even said that "the Bank serve to focus attention on the binding con-is already doing that." But the outcomes to straints to better public sector management,date described in Chapters 3-5 suggest that as well as to private sector development.additional movement in the recommendeddirections is still warranted. Ghana's overstaffed and poorly functioning

public administration and parastatal enter-Design of Bank strategy prises are impediments to private sector de-

velopment in several ways: throughe Focus the strategy on sustainability, financial crowding out, through the "unlevel

institutional development, and playing field" between public and privateeconomic governance. firms, through de facto monopolies, through

rent-seeking, obstruction, and harassmentGhana has been doing well by some criteria by public officials, through the inefficientbut not in terms of several "sustainability in- delivery of infrastructural and other public

119

goods and services, and through the "sig- tihty rate; productivity growth and Strc-*-'- -ior pupui policies and tural change in agriculture; total and private

intimidating practices are not yet perma- domestic savings rates; "genuine" savingsnently relegated to the past. rate; private investment ratio and annual

rate of private investment growth; exportThis review therefore recommends that the growth rate, especially of nontraditional ex-Bank strategy pay more attention to these ports; primary school enrollment rate andand other "behavioral" and political econ- criterion reference test scores; and the gov-omy dimensions of Ghana's development, ernment revenue to GIDP ratio. Trends inincluding the factors that give rise to the val- these indicators are not encouraging.ues and attitudes of the principal actors onthe economic scene and how they interact The Bank recognizes that there is a close re-with each other. The focus on institutional lationship between governance and sustain-development, governance, and sustainabil- ability. Hence, the sustainability indicatorsity will help to ensure that these behavioral should include a subset of governance indi-dynamics are taken into account. One exam- cators to complement the more traditionalple in shifting the public/private line would economic ones. Relevant governance indica-be to explore more "populist" approaches to tors would include: the predictability, open-privatization (for example, vouchers, lotter- ness, and competence of policymaking; theies) that take into account Ghana's legacy of professional ethos of the bureaucracy; ac-Nkrumahism and prevailing fears of change countability of the executive branch of gov-in ownership. Another example would be to ernment; participation of civil society inanalyze more explicitly the prospective win- public affairs; rule of law; and incidence ofners and losers from the next steps in the ad- civil disturbances. Given the low productiv-justment agenda, and adjust the strategy ity in the public service and the link be-accordingly. tween the "ethos" and the productivity of

the civil service, the government might wishBoth the pacing and sequencing of future to institute periodic attitude surveys of civilpolicy measures need to be analyzed in a servants to monitor progress in developingpolitical economy context. It is often said by the needed "ethos."Bank staff, for example, that Ghana's politi-cal reformns, involving a greater role for the The Bank's country assistance strategyParliament, may slow decisions and actions needs to pay more attention to the implica-in the short to medium term. But insofar as tions of movements in these indicators andthese broaden ownership and improve the to what the Bank and other donors can do toprospects of sustainability, they will serve to help improve the indicators.accelerate development in a longer run. TheBank needs to more explicitly build the anal- This study has emphasized the importanceysis of such factors into its country assis- of monitoring performance at the micro astance strategies. well as macro level. In education, for exam-

ple, the performance of the educational re-* Monitor performance against sustain- form program appears satisfactory when

ability and micro-level indicators. measured by expenditures on education, orgrowth in enrollment. But at the micro,

Key indicators of the sustainability of classroom level, recent criterion referencegrowth and poverty alleviation include: fer- test results suggest that little learning is hap-

120

pening in the classroom. The need for timely The strategy should address the linkages be-micro-level monitoring should be recog- tween rapid population growth (3.0 percentnized in all sectors. per annum, with a total fertility rate of 6.1),

slow agricultural growth, declining agricul-The "sustainability indicators" can usefully tural productivity, and environmental dete-serve both to focus the dialogue on key rioration. The poor in Ghana are dispro-strategic issues, options, and trade-offs and portionately rural and located in the north-to provide benchmarks for judging the ex- em region, where the nexus problem is mosttent to which the BanKs assistance strategy pronounced. Dealing with the linkages isis succeeding or not in achieving its most therefore critical to the poverty alleviationimportant objectives. strategy. It is also critical to the avoidance of

tribal strife such as occurred in the northernHowever, because most of the sustainability region in February 1994-which appears atindicators shown in Table 5.8 are essentially least partly attributable to the growing"outcome" indicators (as distinguished from scarcity of fertile land and consequent ten-"policy" or 'intermediate" indicators), they sions over land rights. The linkages orare not recommended as "triggers" for the "nexus" issues have been relatively ne-determination of Bank (or other donor) glected over the years by both the govern-lending levels, at least not in the short run. ment and the Bank, and should beOther indicators that monitor specific gov- addressed in future strategies.ernmental policy or programmatic actionsare better suited to that purpose. Ghana elected not to participate in the

UNDP-financed program to assist AfricanOver a medium-to-longer term, sustainabil- countries in developing their own nationality indicators may be relevant as "develop- long-term perspective studies (the NLTPSment effectiveness" indicators, since one program). This was a surprising decision.might expect some correlation between the The Bank should urge the government to getlevel of donor assistance and the country's into the NLTPS process-or somethingperformance as reflected in the sustainabil- equivalent-involving debates among con-ity indicators. But the level of Bank lending stituencies regarding Ghana's long-term de-should take into account many other consid- velopment options.erations such as the country's absorptive ca-pacities and the levels and types of * Make the Bank's strategy 'morefinancing available from other official and strategic" and longer term.private sources.

The Bank's current country assistance strat-* Develop a "nexus strategy" and sectoral egy papers have their origins in CPPs and

action plans. CSPs that tended to be "advocacy papers."In those earlier documents, regional staff

Enhanced attention to institutional develop- and managers typically made a favorablement, governance, and sustainability issues case-within some bounds of credibility-should be built into sectoral strategies. The for each country's aidworthiness, creditwor-process used in preparation of the medium- thiness, readiness to pursue appropriateterm agriculture strategy could serve as a policies, and ability to absorb and use effec-model collaboration so as to ensure govern- tively both Bank loans and nonlending re-ment and stakeholder ownership. sources. Projections were required by Bank

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operational directives 'to-) represent nost " priority setting, realicm about vAie ____

c u:c&m.es, Lui -it practice the projec- can accomplish in both the short term andtions tended to reflect several optimistic bi- longer term, defining appropriate leadershipases; the Ghana CPPs/CSPs shared these and supporting roles, and pursuing thebiases. Bank's comparative advantages vis-a-vis the

government and other donors.The country assistance strategy documentsof recent years are more in the nature of true Achieving objectivesstrategy documents than the early CPPs andCSPs, but they could and should be made * Build on Bank comparative advantages."more strategic" if they are to address head-on questions such as: Which long-term and Many donor representatives interviewed forshort-term constraints are most binding? this study felt that the Bank's greatestWhat are the critical "sustainability issues," strengths and its comparative advantagesand what can donors do about them? Which vis-a-vis other donors lie in the areas of ESWrisks can be managed and which cannot? and ESW-based policy dialogue, "macroHow are lessons of past experience being level" aid mobilization and coordination,heeded? What "critical masses" of and adjustment lending. There was also aBank/donor lending and nonlending ser- majority view that the Bank has been leastvices can improve the prospects of getting effective in projects and policy dialogue in-significant "breakthroughs" on the binding volving institutional development (includ-constraints? And what are the Bank's com- ing free-standing technical assistanceparative advantages in assisting Ghana? Fu- projects and technical assistance compo-ture strategy papers should focus, more so nents) and in rural projects. These responsesthan in the past, on assessing risks and on were broadly consistent with this report's re-elucidating options (especially regarding views of project performance and the effi-risks to be taken or avoided) for the Bank's cacy of other instruments.senior managers and the Board.

But in specific projects and activities "theStrategy papers should also focus more on Bank" is mainly the set of individuals thatelucidating options for the Bank's senior represent the Bank at any particular time andmanagers and for the Board regarding the place, and efficacy depends greatly upon in-various types and levels of risk that may or dividual skills. Thus, for example, somemay not be warranted. This is not the same Bank Resident Mission heads were seen toas presenting high and low lending scenar- have been highly effective at policy dialogueios contingent upon the country's adopting while others were less so. Bank staff havingmore or fewer reforms, or improving its ab- similar or identical titles come with highlysorptive capacity by more or less. varied experiences and skills. A lesson of ex-

perience is that great care needs to be takenThe strategy should also assess whether to fit the right persons to the right jobs, on athere are possible "critical masses" of Bank case by case basis, especially in the case oflending and nonlending services that can Resident Mission staff and above all in theand should be mobilized and concentrated case of the head of the Mission.upon getting "breakthroughs" on the coun-try's binding constraints. Above all, sharp- Insofar as the binding constraints haveening the strategic focus has to do with changed from those where the Bank has been

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most effective to those where it has been least and prognostics so compelling that thereeffective, the Bank needs to focus on ways to emerges a shared perception of problemsovercome its relative weaknesses as well as to and needed solutions that will warrant Bankbuild upon its established strengths. (See also financial and technical support.below on changing the skill mix.)

. Reach out, and listen, to broader con-* Focus the dialogue (and related ESW) stituencies within and outside Ghana.

on hard choices and options.At present, there is excess demand in Ghana

This report concludes that Ghana's unfin- for information on the economy, and espe-ished agenda of reform needs to be imple- cially for assessments of policy and programmented more expeditiously in the near options/alternatives. Official documents, in-future. There is, however, some tension be- cluding those of the Bank, currently have atween the goals of rapid implementation very restricted circulation and few people,and Ghanaian ownership, probably best ex- even within the government, have seen a pol-emplified in the area of public service re- icy framework paper. This demand will growforms. This tension reflects in turn the with the transition to democracy, with a newgovernment's multiple objectives-social Parliament, local assemblies, and other con-and political as well as economic-objec- stituencies with responsibilities and account-tives that are sometimes complementary, abilities whose fulfillment depends on bettersometimes conflicting. information about the economy.

It follows that the government/Bank dia- The Bank should play an important role inlogue should be focused largely on the hard helping to meet this demand by disseminat-choices and options, and that Bank ESW (or ing reports and encouraging the govern-more appropriately, joint government/Bank ment to discuss Bank and jointly authoredESW) should be geared to illuminating the reports with broader audiences. Within tighttrade-offs and elucidating the options. The ESW resource constraints this may requiregovernment cannot be compelled to deepen fewer studies and more "outreach" func-and accelerate implementation of its unfin- tions. But many Ghanaians in governmentished agenda of adjustment, or to give and in the private sector indicated that whatgreater priority to the sustainability issues. they most want is for Bank reports to dis-The lesson is clear that conditionalities cuss policy options, and the pros and cons ofimposed on unwilling and unpersuaded those options, to inform public debate-notgovernments are often futile, if not counter- have Bank staff disseminate and defend pre-productive. The "tension" between the packaged messages.needs for ownership and accelerated actionsneeds to be addressed through ESW and di- Thus, the outreach should be a two-wayalogue geared not so much to presenting the street, and involve more listening by BankBank's prescriptions for action as to assess- staff to views and concerns of Ghanaians,ing implications of alternative courses of and others. Bank reports could gain by cit-action-including the likely adverse impli- ing more non-Bank sources, including seri-cations of too-gradual action. ous critics of the Bank. Annotated

bibliographical references in Bank reportsThus, the Bank's response should be an ac- would be a useful way of alerting readers totive one that serves to make the diagnostics this substantial non-Bank literature.

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There has been a great deal of collaboration rnal training, appointments to advisoryirl recent years betwro P,--n s-_ff X.d rtuups or task torces, and so on) are allo-Ghanaians (academics and consultants as cated. Another distorting factor has been thewell as government officials) in producing dominance of short-term, product-, andmajor studies such as "2000 and Beyond" event-oriented objectives over longer-termand the medium-term agricultural strategy objectives that are more "process oriented"This collaboration has generally been fruit- and geared to institutional development, ca-ful. Other donors have collaborated in pacity building, and learning-by-doing. Thepreparing public expenditure reviews and Bank should encourage the government toother studies. This collaboration often re- convene a local consultative group to focussults in longer production times, and some- on these issues and to come up with antimes in compromises that Bank staff are agreed action plan.uncomfortable with. While no rigorousstudy of the costs and benefits of these col- * Get at the root causes of inadequatelaborative efforts could be made, anecdotal expenditure management.evidence strongly suggests that such collab-oration, although sometimes costly in the A major cause of slow project disburse-short run, is likely to be cost-effective in the ment/implementation has been the non-long run. availability of counterpart funds, a problem

that stems more from inadequate expendi-* Develop a more strategic approach to ture management (loose correspondence be-

institutional development and technical tween budgeted and actual expendituresassistance. due to weaknesses in Ghana's budget execu-

tion, accounting, and monitoring systems)Ghana lacks a coherent strategy for civil than from revenue shortfalls. This has beenservice and parastatal sector reform and it raised at successive country implementationis a matter of highest priority for the Bank reviews that have concluded with assur-to assist in formulating it. The strategy ances that the underlying problems wouldshould recognize that the "root causes" of be addressed. At the same time, the Bankthe problems (overstaffing, low productiv- has relaxed its requirements that the govern-ity, rent-seeking behaviors, lack of motiva- ment finance increasing shares of local ex-tion) may lie in the environment and penditures, over time, on several projects.governance frameworks in which the insti- This was an expedient response to the prob-tutions function. lem of slow project disbursement, but went

against sustainability and accountability ob-A related need is for better coordination of jectives. It is recommended that no furtherdonor policies and practices on technical as- compromises of this type be made with thesistance, much of which is ineffective. Atten- sustainability objectives.tion needs to be given in particular tominimizing the "negative externalities" of A recent public expenditure review has fo-many technical assistance projects. These ex- cused on the expenditure control problems,ternalities include distortions in incentive and the government is reportedly preparingstructures due to the multiple scales of a strategy and action plan to address them.donor-financed salary supplements and by The Bank and other donors should give highthe nontransparent way in which technical priority to ensuring that the necessary ac-assistance-financed benefits (vehicles, exter- tions are taken without delay.

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* Do not oversell Ghana as a success case. measured by aid as percentages of GDP, sav-ings, or import capacity. Negative effects

The Bank has often proclaimed Ghana to be may include "Dutch disease," donor-driven

a case of successful adjustment, and put it agendas and budgets, and distortion of be-

forth as an example to other African coun- haviors. But there are no clear-cut criteria for

tries. This has served a useful purpose, but it judging how much aid is enough, too much,

may have contributed to some slackening in or too little. From the government's stand-

Ghana's own efforts from around 1989. point, given that aid is available on highly

While the Bank certainly did not intend to concessionary terms, there is incentive to

send a message to the authorities that they maximize the flow, even if the rate of return

could rest on their laurels, a substantial on the additional resources is low.

number of Ghanaians (as well as non-Ghanaians) interviewed suggested that the The Revised Minimum Standard Model

effusive praise of Ghana by the Bank had framework has been a standard tool used by

some such effects. This report could not at- Bank staff for estimating resource require-

test to the validity of these perceptions. Nev- ments and the "financing gap." To the many

ertheless, given the large unfinished familiar shortcomings of using an account-

adjustment agenda and the challenge of ing consistency model as a normative instru-

mnaking the gains sustainable, the possible ment, it may be added that estimating the

costs of overselling Ghana as a success case "foreign exchange gap" is now less relevant

should be borne in mind when the Bank to Ghana because of its floating exchange

uses Ghana as a model of success in its ex- rate. Attention should be put instead on the

ternal relations activities. consolidated public sector deficit. But with

big gaps in information, departures from ef-This report does not purport to proffer spe- ficiency in expenditure, and poor correspon-

cific guidelines for putting this injunction dence between budgets and expenditures, a

into practice. The main general guideline is "resource requirement" approach to deter-

that Bank staff and managers need to con- mine the "right level" of foreign aid is notsider not only (a) the real benefits of giving very helpful.credit where credit is due (as it has been tothe Ghanaians for their considerable The more useful approaches are micro and

achievements) and of pointing out to the sectoral, and involve the identification of ex

other African countries the benefits that ad- post and ex ante rates of return on actual

justment has brought to Ghana; but also that and prospective projects, taking account of

(b) there is a potential downside to giving limited implementation capacities. Ghana

rise to perceptions that the Bank is overrep- has been fortunate in having enough exter-

resenting Ghana as a success case, as that nal financing resources to be able to push its

may have adverse effects on Ghana's resolve absorptive capacities to the limit. But theand/or the Bank's credibility. record of declining project implementation

and slow disbursement on donor projects

a Beware the downsides of aid points to the conclusion that this limit has

dependency. been passed in some areas.

This report has flagged several aspects of The project-level impacts and the "behav-

Ghana's dependency on foreign aid. At the ioral aspects" of the aid flows discussed in

macroeconomic level, aid levels are high, as this report suggest that the Bank (and other

125

donors) should (a) define the trajectorY main problemns of differing donor standardsalong which Ghana's hieh aid - - .r piciuzellleni, disbursement, accountingwill be reduced; and (b) treat the depen- and reporting, paying of salary supplements,dency effects of aid as costs, including for and so on. Overproliferation of projects andexample costs of delays in undertaking civil project management units and of donor mis-service and parastatal sector reforms that sions overextend the government and makemight have been forced by a lesser availabil- it too donor-oriented-a manifestation of theity of aid. Donors also need to pay more at- dependency syndrome remarked above.tention to the behavioral dimensions of the These concerns and issues add up to an "aiddependency. coordination problem." The sheer size of aid

and the large presence of the donors makes* Develop new aid coordination policies aid coordination quality control important.

and practices. The overarching issue is to make the totalityof resources, Ghanaian and aid-financed, as

This report concludes that a lack of aid co- productive as possible.ordination is more of a problem than thegovernment, the Bank, or other donors per- Making Bank instruments and processesceive it to be. Annual Bank-led Consulta- more effectivetive Group meetings were particularlyuseful in the mid-1980s in providing a * Get in-house ownership of, andforum for Ghanaian and Bank advocates of accountability for, the Bank's ownlarger aid to make their case. These and strategy.subsequent SPA meetings (the latter not at-tended by Ghanaian representatives) have One of the more surprising findings (fromremained as useful aid mobilization fo- statements made by Bank staff and man-rums. But they do not serve much as in- agers) of this study is that there was weakstruments of aid coordination. in-house ownership of the Bank country as-

sistance strategies articulated in the 1990True aid coordination (that is, coordination and 1993 country strategy papers. Owner-that focuses on improving the quality of aid) ship of the 1985 CPP seems to have beentakes place through a few local groups orga- greater. The Ghana country team was partic-nized by sector; these are rated (by the ularly cohesive in the mid-1980s but hasdonor representatives) as having mixed suc- been somewhat less so since then. The largecess. Costs are low but benefits are hard to turnover in Bank managers and senior staffassess. Several donors want these groups to since the 1987 Bank reorganization has beenbe made more effective, but specific propos- disruptive to both strategic continuity andals for how to do so seem to be lacking. The in-house ownership.Bank could usefully play a more proactiverole in developing such proposals, without The lack of ownership of the last two CSPsnecessarily infringing upon the inclinations stems partly from the fact that they wereof other donors to playing leading roles in prepared in the Country Operations Divi-sectoral coordination. sions, and reflected views and preferences

not fully shared by sectoral staff who wereProgress has been made, including through invited to comment on draft CSPs but feltthe SPA, to harmonize procedures for import that their comments were not much heeded.finance and to untie some aid. But there re- Also, one division chief remarked of the

126

1990 strategy paper that "the CSP strategy mally be in the form of movements in keywas endorsed by senior management one indicators, for example, of portfolio perfor-day but the next day it was back to business mance, actions to improve aid coordinationas usual." At the time, this meant giving and ESW dissemination, and so on. Thehigher priority to getting new projects adoption of such performance indicatorslaunched than to getting ongoing projects should not however imply a reduction in theimplemented satisfactorily, flexibility needed by Bank managers to

manage effectively.The gap between officially sanctioned strat-egy and implementation reflects not only Increased accountability for country strate-that some staff responsible for its implemen- gies implies a need for the country assis-tation may not "own" the strategy, but also tance strategy to be frank and forthrightthat there were no processes to ensure ac- about the risks inherent in the strategy, andcountability at the country strategy level. how it proposes that these risks be man-The only formal mandated monitoring of ac- aged-if in fact the Bank can do anything totions and outcomes was the provision that manage the risks. This path would allow theeach CSP should review recent performance Board discussion of CASs to focus on whichin light of the previous CSP's objectives. risks the Board thinks the Bank should take,Such review sections, however, tended to be how risks should be minimized or managed,short and perfunctory (not just in the Ghana and, given these risks, what results shouldCSPs), and so the monitoring and account- the Regions be accountable for.ability mechanisms remained weak.

* Put more evaluation into countryThe Africa Region recognized the need to assistance strategies.build better in-house ownership of the 1994country assistance strategy and used a more A corollary of the above recommendation onparticipatory process in preparing it. The accountability for Bank strategy implemen-Region notes that a new role of country tation is that CASs should contain a moreteams in strategy formulation is improving substantial section on self-evaluation of thethe process and providing more sectoral and Bank's successes and failures in achievinginstitutional focus to the strategy. It may the targets/objectives of the previous strat-nevertheless be useful to conduct periodi- egy paper. The section should make clearcally some kind of in-house survey to assess which assumptions underlying the pasthow much of a "CAS ownership problem" strategy paper proved right or wrong (andpersists in the Region, and to determine the reasons) and how lessons derived fromwhat more could be done to solve that prob- evaluating the past strategy have been ap-lem. The responsibility of Bank managers plied to the proposed current/future strat-and staff to adhere to the approved strategy, egy. In addition, it would be desirable forand to be accountable for outcomes, is now the Bank and the government to conduct exenhanced by the Board's role in defining the post evaluations of the CAS in a similar waymechanisms for monitoring and account- to that of project evaluations (through im-ability of CAS documents. The Regions plementation completion reports).should, however, propose to the Board, aspart of each CAS, what results from the u Change the skill mix of staff to betterBank's strategy should be used as perfor- meet the skill requirements of themance indicators. These results would nor- strategy.

127

The strategy shift of the 1990s and the If the stratexy were to he focused especiallyvhaiiged~ pre' ica' econory in Ghidna imply a on the institutional development, gover-need to change the skill mix of those responsi- nance, and sustainability issues as recom-ble for designing and implementing the strat- mended, this would put a premium on staffegy. The appropriate mix of skills and and consultants with considerable field ex-experience to enter into dialogue with a few perience, private sector or NGO experience,technocrats at the center of government about private sectoral managerial experience, andexchange auction systems in the mid-1980s is institutional development skills. The in-not the same required to enter into dialogue creased emphasis on dissemination, out-with tribal elders in rural areas about local- reach, and listening would also call forlevel governance and institutional issues. Un- staff and consultants with attributes rele-derstanding the systemic problems that vant to performing those functions mosthinder the effectiveness of institutional devel- effectively.opment/technical assistance projects, and theinteractions of interest groups involved in pri- a Reassess the mix of Headquarters vs.vate sector development, is a challenging Resident Mission assignments.task. And it takes special skills to engage inparticipatory poverty assessments and to dia- The above strategy would constitute a sig-logue with new parliamentarians about op- nificant change in the Bank's modustions for solving "nexus" problems. Yet these operandi, with a premium put on field skillsare among the skills that will be needed to de- and understandings based upon field expe-liver what the new challenges require. Re- rience. The new priorities would also seemcruitment, retrenchment, and retooling to call for a shift in favor of staff in the Resi-criteria need to be adjusted accordingly. dent Mission vis-a-vis Headquarters.

128

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Supplement

Introductory note 138Management response 139Committee on Development Effectiveness (CODE) response 140

137

Introductory note

Feedback of evaluation results within the World Bank

Each study by the Bank's independent Operations Evaluation Department is reviewed by theBank's management before being discussed by a committee of the board of executive directors.Management provides a detailed response to the recommendations outlined in the study. Thisresponse is discussed by the committee and, together with a record of actions promised andtaken, is recorded in a "policy ledger" accessible to all Bank staff. The Bank's executivedirectors have requested that all published studies by the Operations Evaluation Departmentinclude a synopsis of the management response and the committee's findings.

138

Manageme-nt response

Bank management, responding to the study, agreed that Ghana's policies should seek toencourage private sector growth by accelerating privatization, increasing competition in thefinancial sector, liberalizing the cocoa and petroleum sectors and sustaining macroeconomicstability; support institutional development by improving public expenditure management andrestructuring the public service; and promote agricultural growth while protecting the environ-ment. As to OED's recommendation that the unfinished adjustment agenda be implementedfaster, management noted the tension between the goals of rapid implementation and Ghanaianownership. The Bank plans to support measures that govemment itself develops for publicservice reform, provided they can be expected to achieve the goal of a leaner and more effectivepublic service: this strategy is consistent with supporting a program that is both Ghana-ownedand sustainable. On consultation with broader constituencies, management noted its plans forpublic dissemination of the results of the Bank's economic and sector work, and for supportingworkshops for parliamentarians and the public at large. On public expenditure management,inanagement noted that a financial management technical assistance project now in preparationwill support implementation of expenditure monitoring and accounting systems in 16 minis-tries. On aid dependency and coordination, management noted that donors' impact andinfluence on government's choices remains large, even if declining. The govemment nowcoordinates aid in some subsectors, and it led the development of the public expenditureprogram which has become the basis for all donor support. Future Bank economic and sectorwork will examine the potential for reducing aid dependency. As to the skill mix of Bank staff,management noted that it is paying special attention to institutional development skills in itsrecruitment policy.

139

Committee on Development Effectiveness(CODE) response

The Committee on Development Effectiveness of the Bank's board of executive directorsdiscussed the study on July 5, 1995. Members highlighted the following issues: the need forgreater borrower participation in preparing the Bank's country assistance strategies; differ-ences between management and OED on the proper pace of institutional development; aiddependency and ways of improving domestic resource mobilization; ways to strengthen aidcoordination; and the need to be realistic about the time needed to implement reformprograms and achieve sustained supply responses.

Noting that many of the findings, conclusions, and recommendations could usefully beapplied to other countries and regions, the committee subsequently sent the Bank's Presidenta list of generic issues for discussion. These included:

• the Bank's propensity to underestimate the time required, especially in countries withweak institutional capacities, to implement reform programs and achieve sustainedsupply responses;

n the need for country assistance strategy to reflect the country's political economy;

• the need to consider costs as well as benefits of rapid trade liberalization, to designprograms flexibly, and to monitor their effects so as to enable mid-course corrections;

u the need for advice and support in the financial sector to address root causes, not justsymptoms, of problems;

n the need for an adequate method of defining and measuring the minimal acceptabledegree of "ownership" needed for success in individual operations, and for consistent,thoroughgoing efforts to promote partnership and borrower participation in Bankoperations;

n the need for high quality, judiciously timed, economic and sector work and for thoroughanalysis of proposed operations;

• skill mix, staffing, and work location issues.

140

The committee also asked the Director General, Operations Evaluation, for a summary of OEDfindings on the need to broaden the Bank's skills mix, and the desirability of greater involve-ment by resident missions in the Bank's operational work. That summary was delivered to thecommittee on July 26, 1995.

141

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