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CONFIDENTIAL
REPUBLIC OF GHANA
PUBLIC EXPENDITURE REVIEW: 1992-94
RETURN ro AFRCA
September 29, 1992
Western Africa Department
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This report is based on the seventh in a series of annual public expenditureconsultations conducted since 1985 between the Government of Ghana and theWorld Bank. On this occasion, the Commission of the European Community andthe United Kingdom Overseas Development Administration were also associatedwith selected areas of the review.
The consultations were carried out in the course of a core mission that visitedGhana in November/December 1991 and a follow-up mission, in April/May 1992.The November/December consultations were held in conjunction with discussionsof planned capacity-building assistance from the Economic Management Supportproject for public finance and civil service management.
The core mission consisted of Jon Walters (task manager), Mavis Ampah(manufacturing), Edgardo Barixidiarain (cross-sectoral issues), Nicholas Bennett(education), Gillian Holmes (UK ODA consultant-health), Ravi Kanbut (poverty
focus), Peter Landymore (EEC), Leo Maraboli (mining), 'Mampil, Pankaj
(infrastructure), William Roach (water), Klaus Schmidt (EEC), Kiran Singh
(agriculture), Hiroshi Ueno (infrastructure), and Peter Ware (consultant-water).Josephine Woo (education) contributed from headquarters and Gene Spiroprovided aid pipeline data from a September 1991 mission to Ghana. 'Me
contribution on the energy sector, prepared by Gene Spiro, is based on the Ghana
Energy Sector Review (1992).
Definitions or terms used
consolidated fund: the sum of government revenues other than funds provided by donors for
specific projects and programs and those earmarked to specific funds (e.g., the Road Fund).
recurrent budget: the sum of personal emoluments (item 1) (plus related charges such as
pensions, social security, etc., which are classified as transfers), operations and maintenance
(items 2-5), subventions (item 6), and interest (amortization appears as a financing item).
development budget: in Ghanaian budgetary nomenclature this reflects all expenditures which
are classified as capital items and funded from domestic revenue. These are subdivided into items
7 (construction), 8 (equipment), and 9 (other capital). In this report the scope of the term is
extended to include externally-financed capital expenditures. The development budget is also
divided into the sectors which are part of the three-year rolling public investment program (PIP)
and non-PIP sectors, which have not yet been incorporated into the PIP.
The sectors which are included in the PIP are grouped into the productive sectors (agriculture,
industry, lands and natural resources), the economic/lnfistructure sectors (water, transport and
communication, energy, roads and highways, works and housing), the social and admInistrative
sectors (education, health, local government, PAMSCAD, information) plus culture and
multisectoral projects. The rn-PIP sedors include trade and tourism, youth and sports,mobilization and social welfare, interior, office of the PNDC, justice, foreign affairs, defence,and extra-ministerial departments.
net lending: loans and equity (in public enterprises) financed from domestic revenue (in whichcase it is presented net of loan repayments and dividends on equity) or financed from donor
assistance.
capital budget: the sum of the development budget and net lending.
special efficiency: a category of expenditures related closely to the adjustment program, largelyconsisting of terminal benefits to public servants.
narrow budget expenditures: the sum of the recurrent budget, special efficiency, and the
domestically-financed portions of the development budget and net lending.
broad budget expenditures: the sum of narrow budget expenditures and externally-financed
expenditures (including onlending from external funds to parastatals, but excluding thecounterpart funds to import support--the latter appears as a financing item for program loans, andas part of "total revenue and grants" for program grants).
REPUBLIC OF GHANA
PUBLIC EXPENDITURE REVIEW: 1992-94
CONTENTS
EXECUTIVE SUMMARY ....................................... i
INTRODUCTION .............................................
THE FISCAL FRAMEWORK .................................... 2
GENERIC IMPLEMENTATION ISSUES ............................ 5
I. MAKING FISCAL RESTRAINT SUSTAINABLE ................... 5
Il. IMPROVING EXPENDITURE REPORTING ...................... 6
I11. INTRODUCING MORE ECONOMIC ANALYSIS INTO THEBUDGETARY PROCESS ................................... 9
IV. BUDGET ANALYSIS: THE COST OF THE PUBLIC ENTERPRISESECTOR ............................................. 11
V. BUDGET ANALYSIS: THE POVERTY FOCUS OF PUBLICEXPENDITURE .. ........................................ 13A. Background .. ....................................... 13B. The Guidelines for the 1992 Budget and the 1992-94 PIP .... .. .*. .. ... 13C. Analyzing the Poverty Focus of Public Expenditures: The Broad
Framework ......................................... 14D. Progress in Analyzing the Composition of Public Expenditures ......... 15
1. Information at the Center ............................... 152. Information at the District Level ........................... 17
E. Next Steps: Studies .................................... .18F. Next Steps: Process .................................... 20
SECTORAL ISSUES .......................................... 21
I. HEALTH SECTOR ....................................... 21A. Primary Health Care Policy ............................... 21B. Sources of Revenue for the Public Health Sector .................. 22C. Comparison of Budgeted and Actual Recurrent Expenditures for 1990
and 1991 .... ....................................... 22D. Comparison of Budgeted and Actual Public Investment Program
Expenditures for 1990 and 1991 ............................. 23E. Comparison of the 1992 Recurrent Budget Submission and Actual Allocation . 24F. Comparison of the Proposed and Actual Public Investment Program, 1992-94 25G. Allocations for Primary Health Care .......................... 26H. Donor Financing in the Health Sector ......................... 27
TABLE OF CONTENTS (contd.)
I. Summary and Recommendations ............................ 271. 1992 Recurrent Budget ................................ 272. Investment Expenditure and the 1992 PIP Budget ............... 28
3. Donor Financing ..... .. ............................ 29
II. EDUCATION SECTOR .................................... 29A. Background ......................................... 29
B. Recurrent Expenditures in 1990 and 1991 ...................... 30
C. The 1992 Recurrent Budget .. .............................. 30
D. The 1992-94 Public Investment Program ....................... 31
E. Major Issues .... ..................................... 31
F. Recommendations ..................................... 33
M. AGRICULTURE SECTOR .................................... 33
A. Summary Assessment ..................................... 33
B. Recurrent Expenditures .................................... 34
C. Public Investment Program.................................. 38
D. Aid Pipeline for Agriculture ................................. 40
E. Aid Coordination........................................ 41
F. Coordination of the Agriculture Budget ........ ............... .. 41
G. Staff Retrenchment ..................................... 41
H. Recommendations .. ................................... 42
Annex A: Table 1: Subsector Shares-Recurrent Budget ................ 44
Table 2: COCOBOD Fourth Draft Recurrent Budget ........... .44
Table 3: MOA Recurrent Expenditures ................... . 45
Table 4: Aggregate Pattern of Approved Recurrent Expenditures,1992 .. ................................... 45
Table 5: MOA FY92-94 PIP .......................... 46
Table 6: Subsector Shares Based on the PEP ................ 46
Annex B: Priority Objectives and a Budgetary Action Plan for 1992 ........ .47
IV. THE MANUFACTURING SECTOR.............................. 50
A. Background .. ....................................... 50
B. CompositionoftheSector .................................. 51
C. Budget Performance in 1991 ................................. 51
D. Proposed Capital Budget for 1992-94 ......................... 52
E. Special Issues ........................................ 52
F. Recommendations .. ..................................... 53
V. MINING SECTOR ........... ........................... 53A. Background ......................................... 53
B. Strategy .. .......................................... 53
C. Environmental Conditions ................................ 54D. Budget 1992-94 ....................................... 55E. Special Issues ........................................ 55
VI. POSTS AND TELECOMMUNICATIONS ........................ 56
A. Sector Background ..................................... 56
TABLE OF CONTENTS (contd.)
B. Sector Performance .................................... 56C. Sector Constraints ............................... ...... $6D. Organization and Management............................... 57E. Sector Objectives ..... .................................. 58F. Sector Strategy ....................................... 58G. Capital Expenditure Program . .............................. 59
1. Telecommunications . ................................. 592. Postal ............................................ 59
VII. INFRASTRUCTURE .. ..................................... 60A. Financing Overall Infrastructure Programs and Generic Issues .......... 60
1. Past Budget Performance . .............................. 602. Finalized PIP for 1992-94 ............................... 613. Generic Issues in Infrastructure Expenditure ................... . 61
B. Roads, Highways and Other Transportation ...................... 631. Subsectoral Issues ..................................... 632. Capital Budget Proposed in December 1991 ................... . 643. Finalized Capital Budget in May 1992 ...................... . 65
C. W ater Supply ........................................ 661. Overview ........................................ 662. Subsector Objectives and Strategy .......................... 673. 1990 and 1991 PIP Performance ........................... 684. Public Expenditure Program . ............................ 68
D. Works and Housing ...................................... 691. Background......................................... 692. Capital Expenditure ................................... 693. Issues in Budgetary Process .............................. 70
VIII. ENERGY SECTOR .. ..................................... 70A . Introduction ... ........... .......................... 70B. Overview of Energy Demand, Supply and Pricing .................. . 71
1. Pricing Policies . ................................... 72C. Subsector Findings . .................................... 72
1. Electric Power . .................................... 722. Upstream Hydrocarbons ............................... 753. Downstream Hydrocarbons ............................... 75
D. Conclusion ............................................ 77
TEXT TABLES
1. Financial Flows between Government and 14 CORE PEs: 1987-89 ......... .122. Estimated and Actual Expenditure Returns on PIP Projects in Education
by Regions, 1990........................................ 18
TEXT FIGURES
1. Capital Expenditures by Sector, 1988 and 1992 ...................... 32. 1992: Recurrent Expenditures by Sector .......................... 4
TABLE OF CONTENTS (contd.)
STATISTICAL APPENDIX
TABLES
1. Ghana: Key Economic Indicators ............................... 80
2. Ghana: Macroeconomic Framework-Public Sector Budget (Millions of Cedis) . 81
3. Ghana: Macroeconomic Framework-Public Sector Budget (Percent of
Current Price GDP) ........................................ 82
4. Ghana: Summary of 1991 Recurrent Budget ....................... .83
5. Ghana: Summary of 1991 Actual Recurrent Expenditure ............... . 84
6. Ghana: Summary of 1991 Recurrent Budget ....................... . 85
7. Summary of 1991 Development Budget .......................... 86
8. Summary of 1991 Actual Development Expenditures .................. 87
9. Summary of 1991 Development Budget .......................... 88
10. Public Investment Programme 1992-1994: Planned Expenditure ............ 89
11. Ghana Aid Pipeline Summary Disbursements by Sector ................. 90
12. Ghana Aid Pipeline Summary Disbursements by Type of Assistance ......... 91
13. Public Investment Programme 1992-1994 Funding Status: Analysis of
Sources of Funding for 1992 ................................. 92
14. Public Investment Programme 1992-1994 Funding Status: Analysis of
Sources of Funding for 1993 ................................... 94
15. Public Investment Programme 1992-1994 Funding Status: Analysis of
Sources of Funding for 1994 ................................. 96
FIGURES
1. Breakdown of Total Expenditure, 1988 and 1992 .................... 98
2. Capital Expenditures by Economic Classification, 1988 and 1992 .......... 99
3. Current Expenditures by Economic Classification, 1988 and 1992 .......... 00
EXECUTIVE SUMMARY
* The report builds on the extensive dialogue on public expenditure management issuescarried out between the Government of Ghana and the Bank since the beginning of theEconomic Recovery Programme in 1983. It attempts to highlight areas of. publicexpenditure management which are of priority concern, particularly with the approachof parliamentary democracy in 1993.
* Public expenditures in 1991, and in the 1992 budget, continued the trend in recent yearsof fiscal restraint, increasing public savings, and avoiding monetary financing of thefiscal deficit. This policy was designed to bring inflation down to low levels, without anexcessive crowding out of credit to the private sector, or a dampening of GDP growth.Indeed, in 1991 GDP growth of 5 percent was recorded, and by the end of 1991 inflationhad fallen to 10 percent per annum from 36 percent at the end of 1990.
* Broad objectives on the composition of public expenditures remained the same in 1991,and in the 1992 budget, as in previous years. Civil service costs were controlled byreductions in staffing levels and incentives were improved, particularly for seniorstaff.]/ Operations and maintenance expenditures were focussed on the priority sectorsand were increased by 5 percent in real terms, although this remains insufficient. Thepublic investment program continued to emphasize increasing levels of real expenditure,particularly on social services and infrastructure, and rehabilitation of existing capitalstock received priority.
* Tax revenue rose from 11.6 percent of GDP in 1990 to 13.6 percent in 1991, and isexpected to remain at that level in 1992. This reflects mainly the increase in petroleumproduct taxation implemented during the course of 1990. The gains of past years'improvements in collection efforts were sustained, but no further major improvementsappear to have been achieved. However, the enhancement in incentives to promoteproduction, savings and investment was significantly advanced by tax reforms in 1991and 1992.
* The achievement of macroeconomic stability with high GDP growth in Ghana under theEconomic Recovery Program has been due, to a considerable extent, to theappropriateness of fiscal policy. The setting of fiscal policy has taken place within thecontext of financial programming, carried out with technical assistance from the Bank andthe IMF. Ghanaian officials have undergone training in the relevant macroeconomicskills, and significant expertise now exists in financial programming and monitoring.This expertise needs to be more effectively institutionalized, so that the eventual reductionin technical assistance does not disrupt the programming process, thereby underminingthe macroeconomic gains attained so far.
At the time of writing (September 1992), a new pay structure was under consideration.Early indications were of a further decompression of relativities, a restructuring of thegrading system, and an across-the-board increase of such a magnitude as to raise seriousquestions about the sustainability of the fiscal framework in the absence of largecompensatory measures.
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The decreased reliance on external assistance for the setting of appropriatemacroeconomic policies will coincide with a new constitutional framework. Thetransition to civilian rule and a parliamentary system can be expected to have substantialfiscal implications. On the one hand, parliamentary scrutiny of public expenditures andincreased public accountability should inject more rigor and transparency into the
management of public finances. On the other hand, parliamentary pressures for "pork
barrel" spending will sometimes be difficult to resist. Demands to increase the salaries
of civil servants, and to provide them more effectively with funds to carry out their work
programs, may also exert upward pressure on budgets. The move to greater democracyin the political system may even undermine tax compliance. All these developments will
take place against the background of uncertainty over the future levels of aid flows and
potential revenue shocks from volatile commodity markets. Public finance management
systems need extensive reinforcement if the transition to parliamentary rule is to be
beneficial for fiscal policy.
* One key area in which reinforcement is urgently required is in the compilation of
information on actual expenditures. In Ghana, actual expenditure data are produced in
a piecemeal fashion and with long delays. As a result, the Ministry of Finance and
Economic Planning is deprived in its crucial budgetary oversight function of the
aggregated management information it requires. In consequence, draconian and across-
the-board expenditure limits are often necessary during the budget year in order to
achieve critical macroeconomic targets. These targets are being attained at considerable
microeconomic cost; budgets become decreasingly coherent and consistent as the yearprogresses, and the subsequent year's budget is undermined as a result. In years wherethere are substantial revenue shortfalls or unexpected expenditure requirements,adjustment to these shocks is unnecessarily costly.
* Part of the solution lies in creating an appropriate incentive structure for thoseresponsible for filing expenditure returns. Responsibility for this failure is likely to bequite diffuse, so an effective sanction would be a delay on the release of budgeted funds
to the department concerned, until it is current in its returns. The institution of such a
procedure should be combined with an informational campaign to raise awareness of the
effects of the current failure to report.
* The other part of the solution lies in the Controller and Accountant-General'sDepartment. The capacity both to control expenditures and to report on them to MFEPmust be enhanced. This will require an acceleration of the computerization of the
Department, and more effective organization and training of its data processing capacity.This enhancement could usefully take place within the framework of a performanceagreement between MFEP and the C&A-G's Department specifying, inter alia, target
reductions in reporting delays and making budgetary provisions (including external
financing) for further computerization.
* Another broad area in which much remains to be done is in budget formulation.Economic analysis of the budget to review the policies implicit in it, and to evaluate theoutcomes of projects and programs, is still fairly rare. Budgeting consists largely oflisting allocations and subsequently controlling expenditure against those allocations-ensuring internal consistency or value for money plays a minor role. The reportillustrates this point with two detailed examples concerning (i) the burden imposed on the
government budget by the public enterprise sector; and (ii) the process by which public
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expenditure could be better targeted towards poverty alleviation. Both cases suggest aneed for substantial reorientation of key areas of the budget.
However, in some areas substantial progress on evaluation of the budget is being made.For example, the Management Services Division of the Office of the Head of the CivilService has conducted a series of management reviews of departments, focussing onstaffing levels, but also evaluating the appropriateness of operations and maintenanceprovisions. The Audit Service has initiated a series of performance audits of specificdepartments for the first time in more than ten years. The Policy Analysis Division(PAD) of MPEP has commenced a poverty analysis of public expenditures. All theseprograms need to be substantially expanded, which will require significant capacity-building. PAD should play a key role in budget analysis beyond the poverty focus issue,as should planning units in line ministries. In addition, much greater use could be madeof the expertise of local consultants and university academics. Moreover, greaterattention by high-level decision makers to the results of budget evaluations wouldsubstantially increase their effectiveness.
* In the health sector, the very slow rate of improvement in health status indicators pointsto an urgent need for an operational strategy to implement the Government's primaryhealth care policy. It also underscores the need for accelerated implementation of theinvestment program and for much greater integration in the sector's budgetary process.
* In the education sector, investment resources are being spread too thinly, with aproliferation of small projects. Certain non-salary recurrent items are underbudgeted,most notably the subvention to the universities. In contrast, the share of the capitalbudget allocated to tertiary education is excessive. The Ministry of Education has oneof the best systems for monitoring actual expenditures, but the data are not sufficientlyutilized.
* Within the agriculture sector, the previous imbalance in allocations in favor of the cocoasector has been partly corrected. However, allocations for activities that would be moreappropriately carried out by the private sector, such as provision of credit and farminputs, are still too high. The sector's budgetary process is to be integrated in the nextbudgetary cycle in the forum of the Agricultural Policy Coordination Committee.
* In manufacturing, the Ministry of Industry, Science and Technology should articulatemore detailed objectives and strategy for achieving these objectives. More detailedanalysis of support and research projects should be initiated to promote appropriateindustrial development research.
* A key issue in the mining sector concerns the delays in joint venturing of the SGMC'smines in the face of financial insolvency. There is a need to ensure adequacy of sectoralinstitutions to meet their increasingly complex responsibilities, with sectoral growth ofsurface mining and gold leaching, increased importance of small-scale mining, andintroduction of sound environmental practices. Finally, budget allocations to SGMC andGNMC need careful scrutiny.
* In the post and telecommunications sectors, facilities are inadequate both in quantityand quality. The challenge is to transform one inefficient utility into two fully
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commercial operations (one for each sector). This will require management reforms,staff reductions, financial restructuring and tariff increases.
In the infrastructure sectors (transportation, water supply, works & housing) certaingeneric issues arise. Most infrastructure investment, maintenance and operation in Ghanais undertaken by public sector institutions lacking in efficiency and reliability. Continuedefforts to improve administration, staffing and finance in the Ghana Water and SewerageCorporation (GWSC) are required. Efforts to improve the capacity of the GhanaHighway Authority (GHA) and the Department of Feeder Roads (DFR) are essential tothe future of the country's road network. Successive urban development projects havesought to strengthen the administrative and financial capacity of local governments, butmore is needed.
* Closely related to institutional development, cost recovery is essential to the sustainabilityof infrastructure investments, providing for both operation and maintenance as well as
providing for funds for future investment. Major innovations have been made in cost
recovery from highway users in Ghana, with the establishment of a Road Fund from
petrol taxes, the proceeds of which are dedicated to road maintenance works. However,
challenges remain in efforts to ensure efficient water pricing (through tariffs), urban
infrastructure pricing (through property taxes) and transport pricing (through user fees
such as gasoline taxes). The pricing of infrastructure services can also have importantenvironmental implications.
* Many infrastructure parastatals are suitable for private operation. Urban solid waste
management operations in many cities and some port operations can often be moreefficiently operated by the private sector. In many countries, the management andmaintenance of water supply systems have been leased or contracted out to private firmswith large improvements in efficiency and financial viability. These options should be
considered in Ghana as well.
* In the energy sector, there are some major issues in the areas of pricing and investment.
The commercial viability of the power utilities, and their effectiveness in service delivery,
require the phased removal of the currently large subsidy implicit in tariffs which are setwell below long run marginal cost. In the petroleum retail market, considerations of taxrevenue argue for a substantial increase in the retail price of petroleum products. Certainproposed investments in the sector should either be reconsidered due to expected lowreturns (bitumen production, part of the planned expansion in petroleum storagecapacity), or should be undertaken only with private sector capital due to the level of riskinvolved (refinery expansion, exploration/development of hydrocarbons).
INTRODUCTION
1. This report presents the findings of the Bank's review of the 1992 budget and the 1992-94public investment program. Moreover, it analyzes the underlying processes by which these plansare prepared and implemented. The report builds on the extensive dialogue on public expendituremanagement issues carried out between the Government of Ghana and the Bank since thebeginning of the Economic Recovery Programme in 1983 (in the context of formal publicexpenditure reviews, policy framework papers, economic reports, adjustment credits, technicalassistance and investment projects, etc.). In light of the substantial documentation of.the resultsof this dialogue, particularly in the PERs published annually since 1985, this report does notpresent a comprehensive review of public finances in Ghana. Instead, it attempts to highlightcertain areas of public expenditure management which are of priority concern, particularly withthe approach of parliamentary democracy in 1993.1/
2. The report is divided into three main sections. The first gives an account of the fiscalframework and the objectives of fiscal policy underpinning the budget and the public investmentprogram. The second part addresses a number of generic budget implementation issues andillustrates them in two areas, namely: the budgetary burden of the public enterprise sector andthe poverty focus of public expenditure. The third part consists of detailed sector reviewsfocussing both on sector expenditure programs and on the processes by which they areimplemented.
1/ Presidential and parliamentary elections are scheduled fbr November 3 and December 8,1992 respectively; the first government of the Fourth Republic is scheduled to take officeon January 7, 1993.
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THE FISCAL FRAMEWORK
3. In 1991, the Government of Ghana spent an estimated 466.2 billion cedis, equivalent to
19.8 percent of GDP or US$ 1.26 billion. This was financed 76 percent by domestic revenue,16 percent by foreign grants, and 8 percent by net borrowings. The 1992 fiscal framework
envisages a similar scenario with expenditure equivalent to 19.7 percent of GDP, financed 75
percent by domestic revenue, 17 percent by foreign grants, and 8 percent by net borrowings.
4. This scenario was to yield a slight decrease in the overall budget deficit from 4.8 percent
of GDP in 1991 to 4.7 percent in 1991. However, the recurrent budget surplus (excluding
foreign grants) was to increase from 3.2 percent of GDP to 3.8 percent, and the narrow budget
surplus (excluding foreign grants) from 0.1 percent to 0.6 percent. Moreover, the overall deficit
of 126.4 billion cedis projected in 1992 was intended to be overfinanced by foreign grants and
net foreign borrowings (to a total of 198.9 billion cedis) to allow the Government to be a net
creditor to the domestic financial system to the tune of 72.5 billion cedis or 2.7 percent of GDP.
5. In short, 1991 expenditures and the 1992 budget continued the trend in recent years of
fiscal restraint, increasing public savings, and avoiding monetary financing of the fiscal deficit.
This policy was designed to bring inflation down to low levels, without an excessive crowding
out of credit to the private sector, or a dampening of GDP growth. Indeed, in 1991 GDP growth
of 5 percent was recorded, and by the end of 1991 inflation had fallen to 10 percent per annum
from 36 percent at the end of 1990.
6. Broad objectives on the composition of public expenditures remained the same in 1991
and 1992 as in previous years.2/ Civil service costs continued to be controlled by reductions
in staffing levels (with a net reduction of 6300 public servants in 1991, and planned
redeployments of 9800. in 1992) abd incentives were improved, particularly for senior staff.J/Operations and maintenance expenditures continued to be focussed on the priority sectors
(education, health, and agriculture) and were increased by 5 percent in real terms, although this
remains insufficient. The public investment program continued to emphasize increasing levels
of real expenditure, particularly on social services and infrastructure, and rehabilitation of
existing capital stock continued to receive priority.
7. Planned public sector investment (including net lending) in 1992 continued the
concentration on the infrastructure sectors, with an increase in allocations to these sectors to 59
percent of the total, from 56 percent in 1991. As in previous years, the productive sectors
followed with 18 percent of the share in 1992, down from 20 percent in 1991, the social sectors
2/ Figures 1 and 2 in the text, and Figures 1 through 3 in the Statistical Appendix, show
comparisons between 1988 and 1992 in the functional and economic breakdown of public
expenditure.
I/ In 1991, the pre-tax compression tatio (ratio of highest to lowest civil service salary) roseto 10.1 from 9.4 in 1990. On a more meaningful, after-tax basis it rose to 9.2 from 6.7.
At the time of writing (September 1992), a new pay structure was under consideration.
Early indications were of a further decompression, a restructuring of the grading system,
and an across-the-board increase of such a magnitude as to raise serious questions about
the sustainability of the fiscal framework in the absence of large compensatory measures.
-3-
Figure 1
1988: Capital Expenditures by Sector 1/(percent of total)
ProductiveEcon./Inf rastructure 17
54
Non-PIP10
Social/Admin.19
1992: Capital Expenditure by Sector 1/(percent of total)
Productive18
Non-PIP6
. ---- OtherEcon/Infrastruct. 3
Social/Admin.14
1/ Classifications differ slightly between the 1988 and 1992 presentations, since the former is based onthe aid pipeline and the latter on the PIP. See "Definitions of terms used* for sectoral breakdown.
-4-
was to receive 14 percent, unchanged from 1991, and multisectoral and cultural projects receive
3 percent, also unchanged from 1991. Allocations for non-PIP projects fell to 6 percent of the
total in 1992 from 8 percent in 1991. The emphasis of public investment continued to shift
towards the provision of supportive services and away from directly productive activities, in a
manner broadly consistent with the objectives of the 1992-94 Policy Framework Paper.
Figure 2
1992: Recurrent Expenditures by Sector "(in percent of total)
Social/Admin.. 56.6 Econ/infrastruct.
Productive
Non-PIP27
Other7
11 See 'Definitions of terms used' for sectoral breakdown. Comparable data for 1988 are not available.
8. Tax revenue rose from 11.6 percent of GDP in 1990 to 13.6 percent in 1991, and is
expected to remain at that level in 1992. This reflects mainly the increase in petroleum product
taxation implemented during the course of 1990 (which increased petroleum tax revenue from 1.3
percent of GDP to 3.3 percent in 1991). The gains of past years' improvements in collection
efforts were sustained, but no further major improvements appear to have been achieved.
However, the enhancement in incentives to promote production, savings and investment was
significantly advanced by tax reforms in 1991 and 1992: personal and corporate income tax rates
were substantially lowered, as was dividend taxation, and the excessive protection afforded by
the taxation of imports was significantly reduced.
-5 -
GENERIC IMPLEMENTATION ISSUES
I. MAKING FISCAL RESTRAINT SUSTAINABLE
9. The achievement of macroeconomic stability with high GDP growth in Ghana under theEconomic Recovery Program has been due, to a considerable extent, to the appropriateness offiscal policy. The setting of fiscal policy has taken place within the context of extensiveconsultation with the Bank and the IMF, supported by a series of standby arrangements, andadjustment credits and facilities. The formulation of financial programs, incorporating consistentfiscal, monetary and exchange rate policies, has thus taken place with substantial technicalassistance from the Bank and the IMF. This is expected to continue in the near term, in thecontext of enhanced consultation with the IMF combined with the preparation of a tripartitePolicy Framework Paper, and of continued adjustment lending by the Bank.4/
10. At the same time, Ghanaian officials have undergone considerable training in the relevantmacroeconomic skills, and significant expertise now exists within MFEP and the Bank of Ghanain financial programming and monitoring. This expertise now needs to be more effectivelyinstitutionalized so that the eventual reduction in technical assistance does not disrupt theprogramming process, thereby undermining the macroeconomic gains attained so far. Thesolution adopted in many countries is the creation of a joint technical committee of the ministryof finance and the .central bank to formulate economic forecasts, propose appropriatemacroeconomic policies to key decision-makers and monitor the outcome of those policies. Thekey output of such a committee would effectively be a draft financial program, prepared at anappropriate juncture in the budgetary process. An economic monitoring committee was createdin Ghana three years ago, chaired by the Governor of the Bank of Ghana, but its tasks appear tobe largely restricted to monitoring and short-term forecasting. The mandate of this committeeshould be extended to include medium-term financial programming. In addition, the work of thebudget and investment programming divisions of MFEP should be more effectively integratedinto the macroeconomic programming exercise. This would help improve the efficiency ofbudget choices made within the ceilings set by macroeconomic objectives, particularly in periodsof fiscal restraint. Further capacity-building in specific skills may be required.
11. The decreased reliance on external assistance for the setting of appropriatemacroeconomic polices will coincide with a new constitutional framework. The transition tocivilian rule and a parliamentary system can be expected to have substantial fiscal implications.On the one hand, parliamentary scrutiny of public expenditures and increased publicaccountability should inject more rigor and transparency into the management of public financesand bring about greater efficiency in the use of scarce resources. On the other hand,parliamentary pressures for "pork barrel" spending will sometimes be difficult to resist.Similarly, demands to increase the salaries of civil servants, and to provide them more effectivelywith funds to carry out their work programs, may also exert upward pressure on budgets. Themove to greater democracy in the political system may even undermine tax compliance. All thesedevelopments will take place against the background of uncertainty over the future levels of aid
/1 At the time of writing (September 1992) it is not yet clear whether the Government ofGhana will request the continuation of enhanced consultation with the IMF and thepreparation of a Policy Framework Paper beyond 1992. Adjustment lending by the Bankis currently expected to continue through 1994, albeit on declining basis.
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flows and potential revenue shocks from volatile commodity markets. In short, public finance
management systems need extensive reinforcement if the transition to parliamentary rule is to be
beneficial for fiscal policy.
H. IMPROVING EXPENDITURE REPORTING
12. The compilation of actual expenditure data on a timely, reliable and comprehensive basis
is fundamental to the efficient functioning of public finance management. First, it allows the
implementation of budget plans to be monitored, and corrective action to beinitiated promptly
whenever this is shown to be necessary. Secondly, it facilitates the costing of both new programs
and the next phase of ongoing programs. Thirdly, it permits evaluation of the cost-effectiveness
of public expenditures. Fourthly, if the data are published, this greatly enhances the
Government's accountability for its expenditure of public resources.
13. In Ghana, actual expenditure data are produced in a piecemeal fashion, with long delays,
and are not published in any detail. Although some departments, such as the Ministry of
Education and the Ghana Highways Authority, do compile relatively high quality data, most do
not. Moreover, the Ministry of Finance and Economic Planning is deprived in its crucial
budgetary oversight function of the aggregated management information it requires. The causes
of this are a combination of technical constraints and an inappropriate incentive structure.
14. The problem is not primarily one of system design. Departments are supposed to file
monthly expenditure returns with MFEP showing commitments made by budgetary subhead and
subitem. The Controller and Accountant-General's Department is supposed to submit monthly
budget advice to MFEP to the same level of disaggregation for payments made (checks issued)
on items 1 through 6.1 In addition, the Expenditure Monitoring Unit (EMU) of MFEP,
prepares monthly statements, derived from the treasuries of the C&A-G's Department, on items
2 through 5. MFEP, as controller of items 7 though 9, has, in principle, similar data on capital
budget execution on a monthly basis.&/ The PIP Unit, the Debt/Aid Management Unit, and
the International Economic Relations Department (all of MFEP) and some sector ministries
maintain data on aid-financed expenditures, which is being progressively integrated into the
budgetary system.
15. In practice, departments frequently do not submit their expenditure returns on a timely
basis. The only sanction appears to be that failure to do so by the time of the budget hearing
towards year-end may affect the subsequent year's budget allocation. The C&A-G's Department
now produces statements for item I within days of the end of each month, but is currently
I.1 See the introductory "Definitions of terms used" for definitions of these items.
61 In May 1992 the responsibility for controlling items 7 to 9 (i.e., processing the
certificates approving payments for capital budget expenditures) was decentralized to the
sector ministries responsible for the projects in question. MFEP now makes budgetary
transfers to the sector ministries on a quarterly basis. It is too early to assess the effects
of this change on MFEP's monitoring capacities.
-7-
experiencing delays of 4 to 6 months on its budget advice on items 2 through 5.2/ The EMUexperiences only a two-month delay but its coverage is partial and its data do not yet appear tobe widely used within MFEP. Data on items 7 through 9 are available within MFEP also withabout a 2 month delay but are sometimes only disaggregated to the departmental level (within thistime period), not to the level of individual projects (but see footnote 7). Information on capitalexpenditures financed by external loans is reasonably comprehensive and timely, but the capacityto generate data on financing from grants or the counterpart funds to import support, or ononlending from external sources to parastatals, is still limited.
16. Clearly, the most serious problem is the delay in producing reliable and comprehensivedata on expenditure under items 2 through 5. In order to ensure that fiscal control at themacroeconomic level is not thereby jeopardized, a balance is monitored in the Bank of Ghana.This balance reflects total expenditures on items 2 through 5 on the basis of checks clearedthrough the payments system. If it becomes apparent from this single figure that the overallbudget provision for items 2 through 5 is being exceeded then corrective action is taken.
17. The sequence of corrective action taken in 1991 is illustrative, and is broadly consistentwith the practice in previous years. In the first quarter, when expenditures are usually relativelylow, expenditure was authorized at 75 percent of one quarter of the 1990 provision (the 1991budget not yet being finalized). This limit was extended into the second quarter since it wasbecoming apparent that expenditure on items 2 through 5 was excessive. By mid-year theproblem had become more serious, and from the beginning of the third quarter, expenditure waslimited to one third of one quarter of the 1991 provision, and this limit remained in force untilthe end of the year. The combined effect of these limits gave an average limit of 43 percent ofthe 1991 provision (which represents a more severe compression than has been usual in recentyears). However, some exemptions were allowed on a case-by-case basis so the effective limitwas somewhat higher than 43 percent, but substantially below 100 percent. Nevertheless, byyear-end, actual expenditure on items 2 through 5 was estimated at close to 101 percent of thebudgetary provision.
18. The need for such draconian and across-the-board expenditure limits in order to achievemacroeconomic targets, stems from insufficient control of expenditures at the level of individualtreasuries and departments combined with poor information at MFEP on the sources ofoverexpenditure.l/ In addition, the limits have to be particularly restrictive because the mainsource of information, the Bank of Ghana balance, cannot give any indication of commitmentsunpaid or checks unsettled.
19. One of the most serious results of this practice is a widespread perception that fundsactually provided for items 2 through 5 are not related to the budgeted levels. Although this is
2/ Item 6 (subventions) does not present a control problem of this nature because amountsbudgeted under this line item are transferred to their recipient entity at the beginning ofeach quarter.
I In past years, expenditure limits have on occasion been induced by revenue shortfalls(which appears to be the case again in 1992). However, in 1991, revenue was anestimated 0.5 percent above the budgetary target-although unexpected disruptions inrevenue flow (e.g., stemming from delays in cocoa shipments) may have temporarilynecessitated expenditure limits during the year to avoid monetization of the deficit.
-8-
an exaggeration, it is an understandable one, given the recourse to expenditure limits, their
frequent variation and the nontransparent manner in which exemptions are granted. As a result
of this perception, there appears to be considerable demoralization in the system, since many
services are underfunded and the planning of activities becomes very difficult. Partly in
consequence, recurrent budgets are often ill-prepared and submitted very late. Indeed, since
services are often not being provided at a normal level, estimating the cost of so doing becomes
all the more difficult and budgets are thereby undermined. Similarly, evaluating the cost-
effectiveness of service provision becomes very difficult if that service is rarely provided on a
normal basis. In addition, in light of the perceived unpredictability of expenditure provisions,
the filing of expenditure returns is not always considered to be a worthwhile activity and is
therefore not done on a regular basis-this of course creates a vicious circle.
20. A similar problem arises in the case of capital expenditure. Although MFEP is much
better informed on payments under items 7-9 than under items 2-5, it is poorly informed on
commitments made under those items. This is well illustrated by the experience in the roads
sector in 1991, in which the sector ministry contracted for work to a value well in excess of the
budget. In consequence, arrears of more than C20 billion had accumulated by the end of the
year, and work on many projects came to a halt for lack of funds. This was clearly highly
disruptive to project implementation and to the cash flow of the contractors, and as such must
have raised project costs substantially and undermined the development of the indigenous
contracting industry. Examination of the 1992 roads program shows that a similar mismatch
between work programs and funding may occur this year. Indeed, at the beginning of 1992,
contractors were reported to be very cautious about commencing work on government contractsuntil financing was assured. In principle, this problem could be avoided by better communicationof commitments to MFEP to ensure that work programs would not be in excess of budget
provisions.2/ In practice, however, the cooperation of the sector ministry cannot be assuredin a system in which the legitimacy of the budgetary process is being questioned by its
demoralized participants.
21. In essence, crucial macroeconomic targets are being attained at considerable
microeconomic cost; budgets become decreasingly coherent and consistent as the year progresses,
and the subsequent year's budget is undermined as a result. In years where there are substantialrevenue shortfalls or unexpected expenditure requirements, adjustment to these shocks is
unnecessarily costly. If public services are to be more effectively provided and if the expected
returns to public investments are to be realized, this must be overcome. Indeed, the introductionof parliamentary authorization and scrutiny of public expenditures in 1993, makes reform all the
more urgent.
22. Part of the solution must lie in creating an appropriate incentive structure for those
responsible for filing expenditure returns. Failure to comply with the regulations in this regard
could be sanctioned by surcharging the individual official concerned. However, in practice the
responsibility for this failure is likely to be quite diffuse, and a more practicable and effective
sanction would be a delay on the release of budgeted funds to the department concerned, until
2/ The decentralization of certificate approval described in footnote 7 may assist in ensuringthat sector ministries do not contract for work in excess of budgets. However, the
possibility of doing so and then presenting MFEP with a fait accompli still exists under
the new system.
-9-
it is current in its returns. The institution of such a procedure should be combined with aninformational campaign to raise awareness of the effects of the current failure to report.
23. The other part of the solution lies in the Controller and Accountant-General'sDepartment. The capacity both to control expenditures and to report on them to MFEP must beenhanced. This will require an acceleration of the computerization of the Department, and moreeffective organization and training of its data processing capacity. This enhancement couldusefully take place within the framework of a performance agreement between MFEP and theC&A-G's Department specifying, inter alia, target reductions in reporting delays and makingbudgetary provisions (including external financing) for computerization.
24. As far as data on commitments and disbursements of external assistance are concernedthe issue appears to be partly one of poor communication between MFEP and the donors, andpartly one of poor information flow within MFEP. Donors often complain that the Debt/AidManagement Unit requests data that has already been provided to the donor desk officers of theInternational Economic Relations Department of MFEP; MFEP complains that donors are notalways willing to provide the data requested. Clearly, channels of communication need to befacilitated and all involved made aware of the importance of this data to the budgetary process.Since most donors are represented in Accra, and local offices either possess the necessaryinformation or could obtain it fairly easily, establishing an information system should not bedifficult. Technical assistance in the design of such a system is available from theConnonwealth Fund for Technical Cooperation. The programming of budget allocations fromthe Consolidated Fund in counterpart to external financing is unlikely to improve significantlywithout such an information system
M. INTRODUCING MORE ECONOMIC ANALYSIS INTO THEBUDGETARY PROCESS
25. The rehabilitation of Ghana's public finance management since the beginning of the ERPhas made enormous progress. Broadly speaking, public finances have been effectively managedto ensure that fiscal -policy does not induce macroeconomic instability and a wide array ofprogramming, budgeting and management information systems have been put in place. Thebudget is a reasonably effective control tool at an aggregate level, 'white elephant" projects arerare, and the basic provision of essential services has usually been funded.19/
26. However, allocations between sectors and between line items tend to be based onextrapolations of past trends modified by the need to respond to donor-funded initiatives or tocivil service salary demands. Economic analysis of the budget to review the policies implicit init, and to evaluate the outcomes of projects and programs, is still rare. In short, budgeting inGhana consists largely of listing allocations and subsequently controlling expenditure against thoseallocations-ensuring internal consistency or value for money plays a minor role. Donor fundingis contracted without sufficient analysis of the availability of the counterpart funding necessaryfor effective implementation of projects. Little has been done to correct the growing mismatchbetween the capital stock and the recurrent resources provided to operate and maintain that stock.Ceilings presented to line ministries in budget guidelines are based mainly on past allocations and
JQ/ These successes are extensively documented in previous public expenditure reviews andelsewhere.
- 10 -
make little allowance for changing priorities-in consequence sector ministries often make little
attempt to prepare budgets thoroughly or even to keep budget submissions close to the guideline
ceiling. MFEP is therefore often obliged to make last-minute cuts during budget preparation,
with important implications for intrasectoral allocations, but based on minimal expertise or
familiarity with the sector. Social sector expenditures have been relatively well-protected from
budgetary austerity, but the composition of those expenditures to ensure an adequate focus on
poverty alleviation has not yet been comprehensively analyzed (see below). Manpower budgeting
has had some effect on reducing staffing levels in the core civil service and controlling them in
the teaching service, but the Ghanaian public service remains large by African standards.U/Moreover, progress is being undermined by a lack of attention to pay relativities and employment
levels in other services supported by the budget, particularly the subvented agencies (of which
there are approximately 150). Direct subventions to public enterprises have been successfully
reduced, but there has been little analysis of the apparently large and growing indirect flows to
the sector (see below).
27. However, in some areas substantial progress on evaluation of the budget is being made.
For example, the Management Services Division (MSD) of the Office of the Head of the Civil
Service has conducted a series of management reviews of departments, focussing on staffing
levels, but also evaluating the appropriateness of operations and maintenance provisions. MSD
is planning a series of functional reviews designed to evaluate options for the provision of
common services (e.g., cleaning, security), including contracting out to the private sector. The
Audit Service has initiated a series of performance audits of specific departments for the first time
in more than ten years. The Social Dimensions of Adjustment desk of the Policy Analysis
Division (PAD) of MFEP has commenced a poverty analysis of public expenditures (see below).
All these programs need to be substantially expanded, which will require significant incremental
resources and capacity-building. PAD should play a key role in budget analysis beyond the
poverty focus issue, as should planning units in line ministries-this will require increased staffing
and training. In addition, much greater use could be made of the expertise of local consultants
and university academics. Moreover, greater attention by high-level decision makers to the
results of budget evaluations would substantially increase their effectiveness.
28. In addition, some improvements have been made in the presentation of public finance
data. The backlog of government accounts from 1981 through 1989 was cleared in 1991,
although the Auditor-General's reports on those accounts have only been published through
1985._2/ By mid-1992, the preparation of a "broad-based" budget, steered by the Budget
Improvement Working Group, was well advanced. This is intended to incorporate all sources
of revenue, categories of expenditure and sources of financing. This single document will
summarize information hitherto spread across 37 documents, and will include data on essential
elements such as past actual expenditures and manpower ceilings previously not made available.
The wide dissemination of this document, and of the government accounts, would provide
JI Although the size of the public service (excluding public enterprises) has been reduced
by 10-15 percent since the beginning of the ERP, an estimated 330-350 000 staff remain.
This estimate is subject to a significant margin of error due to poor information on
staffing levels in the subvented agencies and security services.
12/ The Auditor-General's Department has, however, audited the accounts through 1990.
The procedure in Ghana is that the Department reviews the draft accounts, giving
extensive comments, and then publishes a report on the final version.
- 1i -
invaluable information to civil servants, the private sector, the donor community, and ultimatelyto members of parliament.1/
29. In the sections which follow, two illustrations are presented of the need to introduce moreeconomic analysis into the budgetary process. In the first illustration, the burden imposed on thegovernment budget by the public enterprise sector is briefly described. In the second, the processby which public expenditure could be better targeted towards poverty alleviation is analyzed.Both cases suggest a need for substantial reorientation of key areas of the budget, but in neithercase has enough analysis yet taken place within the Government. However, in both cases, suchanalysis will require the collection and collation of more reliable, comprehensive and timely data.
IV. BUDGET ANALYSIS: THE COST OF THE PUBLIC ENTERPRISE SECTOR
30. One of the successes of public enterprise reform in Ghana has been the steady declinesince 1986 in the outflow of direct subsidies from the government budget to the publicenterprises. However, a broader analysis of the relationship between the public enterprise sectorand the budget presents a somewhat different picture. Indirect subsidies in the form ofunserviced loans, unremunerated equity contributions, arrears and exemptions on tax liabilities,and the assumption of debt service in cases of default remain very high and may even begrowing. Table I below shows some of the financial flows, from 1985 through 1989, betweenthe budget and 14 core enterprises (which together represent an estimated two thirds of publicenterprise sector value added)..L/
31. As the table shows, direct budgetary subventions (item 6) are of declining importance butloans are growing in real terms, whilst there is very little repayment. Similarly, dividends onequity are rarely paid even where profits are being made. It is likely that profits are frequentlybeing used to recapitalize enterprises but this nevertheless represents forgone revenue to thebudget. 'Tax arrears, calculated by applying the company tax rate to declared profits, are largeand growing, whilst the value of tax exemptions is even larger. The servicing by governmentof guaranteed loans made to public enterprises is also considerable. If the analysis were extendedto include, inter alia, implicit subsidies from subeconomic pricing in the utilities sector (seebelow..) and budget contributions to public enterprise capital expenditures the burden would beeven larger.
3/ However, this "broad-based" presentation of the budget will only be sustainable ifreliable projections of aid flows continue to be produced. Hitherto, the Bank has playeda significant role in producing credit-by-credit projections, but this capacity needs to bemore effectively internalized by MFEP (this relates to the discussion in para ..
JAI The enterprises in question are Cocobod, Ghana Oil Company, Ghana NationalProcurement Agency, Ghana Post and Telecommunications Corporation, Ghana RailwaysCorporation, State Shipping Corporation, Volta River Authority, Electricity Corporationof Ghana, Ghana Ports and Harbours Authority, Ghana Water and Sewerage Corporation,Tema Oil Refinery (formerly GHAIP), Ghana National Petroleum Corporation, GhanaSupply Commission, and Ghana Airways Corporation. The data are from Ghana: PublicEnterprise Sector Review (green cover report: 10048-GH), October 25, 1991.
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Table lt Financial Flows between Government and 14 CORE PEs: 1987-89
(In Million Constant 1985 Cedis)
1987 1988 1989
A. Direct Flows
From Government to Ps
1. Subventions 541 94 82
2. Equity contributions 85 90 38
3. Loans 870 1,127 1,678
Total direct flows from Govt. to PEs 1,496 1,312 1,800
From PEs to Government
1. Direct taxes paid 372 131 0
2. Dividends paid 9 17 6
3. Loan repayment 0 10 9
Total direct flows from Pts to Govt. 381 158 15
Net direct outflow from Govt. to PEs 1,115 1,154 1,785
B. Indirect Flows
From Government to PEs
1. Tax arrears 428 967 2,191
2. Tax exemptions 4,548 1,759 4,410
3. Dividend arrears 532 269 653
4. Payment by Govt. due to defaults on 955 930 1,543
guaranteed loans
Total indirect flows from Govt. to PEs 6,463 3,925 8,797
Net outflow from Govt. to PUs 7,579 5,078 10,582
TOTAL GOVERNMENT EXPENDITORS 57,931[ 64,257 62,682
Source: Estimated from data provided by the Ministry of Finance andEconomic Planning, the Department of the Controller and AccountantGeneral, the Internal Revenue Service and the State EnterprisesCommission.
32. This analysis, based on partial data, shows a very significant drain on the budget-abudget already under pressure from priority development projects, operations and maintenance
expenditures and public service salary demands. It also indicates a substantial advantage being
given to the public sector against potential private sector competition. However, consolidated
data on the budgetary burden imposed by the public enterprise sector are not being generatedwithin the Government, nor are data on the contribution of this sector to the real economy.MFEP and the State Enterprises Commission should be given the responsibility of producing and
interpreting such budgetary data on a regular basis; the Ghana Statistical Service should begindisaggregating its national accounts data to show the contribution of the public enterprise sector.A detailed program of phased reduction of this budgetary burden could then be formulated.Implementation of this program could be systematically monitored, with regular reports being
channelled to senior decision makers in MFEP and the sector ministries concerned.
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V. BUDGET ANALYSIS: THE POVERTY FOCUS OF PUBLIC EXPENDITURE
A. Background
33. The level and composition of Public Expenditures are an important determinant ofprogress in the alleviation of poverty. The World Bank's World Development Report 1990:Poverty found that countries which have managed to achieve a sustained and significant reductionin poverty (whether measured by an income criterion or by achievements in basic needs such ashealth and education), have done so by following a two-pronged strategy. Firstly, they have putin place policies that encourage growth which uses the assets of the poor (mainly their labor).Secondly, they have followed a regionally broad-based pattern of public expenditure, directedat basic health, education and infrastructure. It should be emphasized that these are expendituresdesigned to help the poor increase their standard of living on a permanent basis.
34. In the framework of ERP, GOG has increased the level of public expenditure. This hasbeen made possible by increases in development assistance and by revenue increases, which havein turn resulted from policy and administrative reforms undertaken during ERP. The increasein expenditure has been reflected in the social sectors, as well as in agriculture and infrastructure.Despite this record, uncertainties remain. The extent to which there has been improvementallocation of expenditures within these sectors, to primary education and health care in ruralareas, for example, is unclear. Also, the large gains in government revenue brought about byadministrative improvements will naturally no longer be available to the same extent, so thatincreases in expenditure will be more limited. This means that greater attention will have to bepaid to the composition of these expenditures, in particular, to their poverty focus. GOGrecognized this explicitly in their Letter of Development Policy for the Program to PromotePrivate Investment and Sustained Development:
35. "In order to improve the poverty focus, analyses by region and program (basic education,primary health care, agricultural extension) of the distribution of current and capital expenditurehave begun. On the basis of these, budget guidelines will be developed to increase the relativeshare of expenditure going to the poorer regions; and to programs benefitting the poor."
36. The role of an adequate information base, on the composition of actual public expenditureat a disaggregated level, cannot be overemphasized. Without this, policy formulation on thepoverty focus of public expenditures is not possible. Also, public support for the ERP may beundermined if public expenditure cannot be further oriented towards the poor, and cannot beshown to be in the process of being reoriented.
B. The Guidelines for the 1992 Budget and the 1992-94 PIP
37. The latest guidelines have little to say on poverty focus so far as the recurrent budget isconcerned. On the PIP, the poverty focus appears in the criteria for evaluating social sectorprojects. According to the guidelines, these projects "will have to fall under one or more of thefollowing categories:
(a) strategic social, projects with relatively minimal recurrent expenditure for theGovernment Budget;
(b) projects with high effective employment and income generation potential locatedin rural areas;
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(c) relatively low cost social projects aimed at improving the quality of life in the
rural areas;(d) social projects capable of attracting community participation."
38. On the so called "productive and economic infrastructure" projects, either the ERR is
used or, where this is not applicable, a number of other criteria such as export orientation are
used. Poverty focus is not an explicit criterion, although the following guideline is provided for
all projects:
"In the process of selecting projects, Sector Ministries must give adequate
consideration to the regional distribution of projects to ensure equitable and
balanced development of all regions."
39. While the guidelines go some way towards giving consideration to poverty focus, there
is clearly more to be done. First, poverty focus has to be brought into the recurrent budget
guidelines as well. Second, a quantitative framework has to be developed whereby the past
expenditure, recurrent and capital, on key programs and areas can be monitored and then
translated into a method for assessing budget submissions.
C. Analyzing the Poverty Focus of Public Expenditures: The Broad Framework
40. At the outset, it has to be recognized what central guidelines and controls on public
expenditure can and cannot achieve. They cannot influence the micro level design of projects
or government operations, which is the ultimate determinant of the efficiency with which every
unit of public expenditure is translated into the product or service to the public, including poverty
alleviation. What they can achieve is the allocation and reallocation of expenditure to relatively
broad categories, and influence the final outcomes through this instrument, taking as given the
pattern of use and disbursement of funds within each category. This is why it is important to get
an understanding of what does indeed happen to expenditure once it is allocated to a category,
and to monitor the composition of actual expenditures across categories.
41. As a first cut at the problem, the poverty consequences of increasing expenditure in a
particular category can be assessed through where that expenditure takes place. The spatial
composition of expenditure is an important determinant of its poverty focus, because poverty in
Ghana has an overwhelming spatial pattern. Ghana's poverty profile shows that the incidence
of poverty in rural areas is several times that in urban areas, and poverty is particularly
concentrated in the three northern regions. A first step would be to assess what fraction of any
given category of expenditure takes place in which areas. Moreover, we know that certain
programmatic categories of expenditure are particularly well focussed on the poor-examples of
these are primary health care, primary education and agricultural extension services for small
farmers. Another step would be to identify what fraction of total expenditure flows to these
categories.
42. With this information, the following table, given in schematic form, can be constructed.
Each cell in the table would contain the actual expenditure for a given year. From the historical
pattern of expenditure, budget guidelines for expenditure can be drawn up on a number of criteria
(eg., the expenditure on program I in region II is not to fall below its historical norm, or is to
increase by x percent). -The quantitative guidelines can themselves be represented in terms of the
above matrix. Budget submissions can in turn be converted into this format, to be compared with
the historical patterns and the guidelines.
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Spatial Totalareas I II III Rest programs
1.
2.
3.
Rest
Total
43. It should be clear that much needs to be done before the above schema can be convertedinto an operational tool for influencing the poverty focus of the public expenditure programs.Most important, the criteria to be used in modifying the historical pattern have to be formulated.But a prerequisite for any progress in this area is that a table such as the above can be constructedfor the actual expenditures on the recurrent and development budgets during the previous years.
D. Progress in Analyzing the Composition of Public Expenditures
44. As noted above, in its letter of development policy GOG undertook to begin the analysisof the distribution of current and capital expenditure by region and by program. Thisresponsibility is delegated to the Policy Analysis Division (PAD) of MFEP. Within PAD, thework has been given to the SDA Desk.
45. The SDA Desk has conducted several exploratory studies. The first batch of theseattempt to analyze the poverty focus of expenditure in health, agriculture and education frominformation available centrally. The general conclusion is that the data base is extremely poor,and that it is not really possible to get a reliable account of the composition of actual expendituresat a level of disaggregation that will enable their poverty focus to be assessed. However, thelittle that we know about the pattern seems to suggest an urban bias. A second batch of studiesattempts to put together information available at the district level for six districts. Theconclusions here again are not too encouraging. Although there appears to be informationavailable at the district administration, it is poorly compiled and coded, and it is not clear whetherthe information is consistent with that reported at the center, and whether the format in onedistrict can be made consistent with that in other districts.
1. Information at the Center
46. The PAD study, "Some Aspects of the Poverty Alleviation Focus of Public Expenditure"draws the following conclusions on the overall availability of data for the purpose of the analysis:
"Figures on actual expenditure in 1990 on the district level are available from theExpenditure Monitoring Unit of MFEP (EMU) only. EMU's data, however, sofar only cover recurrent expenditure. Moreover, since data available do notcover all the districts in the three northern regions and, if they exist at all, areoften incomplete, these data could not be used for the purpose of this analysis.The reason for this data gap is that, up to now, the EMU has been bothunderstaffed and underequipped for its tasks.
- 16 -
"Figures on actual recurrent and capital expenditure collected and processed are
available on the regional level only, not on the district level. Unfortunately,these data are not complete in the case of the Upper East and the Upper WestRegion.
"The available data do not lend themselves to analyze the poverty focus and the
spatial distribution of public expenditures on the district level.
"In Ghana, development expenditure is centrally monitored by MIFEP. Payments
for investments are released by the Controller and Accountant General in
batches......The CAG does use a regional code for expenditure. This is how far
development expenditure could be disaggregated in principle. But centralized
programs are booked under the ministries concerned. This means that actual
payments cannot be spatially disaggregated from the national accounts, neither
on district level nor on regional level."
47. These conclusions are drawn from the detailed studies commissioned on health,
agriculture and education. The health study started with the recognition that work on actual
expenditures was not possible. It thus had to "resort to government's intentions, i.e., the budget
estimates, to interpret its policy". The study focussed on the 1991 estimates of the 1990-92 PIP,
for which "the planning unit of the MOH has submitted a list of investments disaggregating every
program to small portions of investment (normally between 05 million and e50 million) and
giving the exact location, wherever possible. From this list the regional distribution of intendedinvestments has been compiled. The study presents a number of very interesting tables, anddraws the following conclusions, among others:
..Preventive medicine receives little attention, curative medicine practically all.
"...The scarce funds are concentrated on the country's capital. Little is beinginvested in the regions. The main dichotomy in the health structure is: the
capital versus the rest of the country.
"...The dichotomy is due to the choice of technology. A minute fraction of the
funds is earmarked for basic medicine, by far the largest chunk for hightechnology medicine.
"...There is no spatial poverty focus in the health development budget. Theunderendowed regions do not receive a large share of the investments than those
which are better off. There are,however, some special investments earmarked
for Upper East and Upper West in an attempt to establish some of the normal
facilities there.
"...It is as yet impossible to find out the actual capital expenditure."
48. The agriculture study tried to collect disaggregated data on actual expenditures by eachdepartment of the Ministry of Agriculture. A look at the tables in the data appendix to the study
reveals many-mostly-gaps. Even from the three Departments from which some information
could be obtained-the departments of crop services, agricultural engineering services and the
irrigation development authority-the returns were seriously incomplete. From other departments,
no information could be secured at all for a variety of reasons. As the study notes, "The
- 17 -
conclusion one immediately makes is that it is difficult and quite impossible to state anythingtangible about the actual expenditures as regards information from the relevant departments." Theconclusion is strengthened by the further finding that the CAG and EMU did not have availablecomplete returns from the Upper East and Upper West Regions. In the absence of data onactuals, the agriculture study resorted to an analysis of the 1990 estimates of the 1990-92 PIP.From this analysis, it infers the following:
The above conclusions lead to the fact that it is impossible to compareestimated expenditure to the corresponding actuals. But one fact remains; thatfrom the public expenditure analysis on Agriculture PIP, though the threeNorthern Regions come under 11 out of the 13 subsectors, the percentage sharein terms of public expenditure (i.e., from both local and foreign funding) israther small."
49. The PAD study of public expenditure in the education sector is remarkable in that itactually has a table (Table 2 below) giving both estimated and actual expenditure on PIP projectsby region. This is such an unusual set of figures to have that it is perhaps worth recording here.If the figures are to be believed, one feature stands out. This is the large discrepancy betweenestimates and actuals-the actual is 60 percent of the estimate overall, and the ratio ranges froma low of 14.2 percent for Eastern Region to an overspending high of 125.0 percent for the VoltaRegion. These discrepancies warn us about the pitfalls in using budget data to analyze thecomposition of expenditure. However, whether we take the budgeted or the actual figures, thediscrepancies between the regions is large. In particular, Upper West, Upper East and theNorthern Regions seem to do badly. Between them they have 19 percent of the total populationbut only 11.6 percent of the actual PIP expenditure.
50. Further analysis of the PIP for 1990-92, looking, for example at the number of projectsby district, strengthened the study's hypothesis of an urban bias in the PIP. Even within theNorthern Region, the bias is towards urban areas, and this is reflected in the poor performanceof rural districts in terms of size of class, classrooms per school or classes per class room.
2. Information at the District Level
51. Given the difficulties of obtaining information about the regional and programmaticdistribution of actual expenditures, the PAD team decided to commission studies of what wasavailable at the district level. Six districts were chosen for study. The results varied, but theoverall pattern is well reflected in the findings for Tamale district. For health:
" Financial data on recurrent expenditure and income at the district level werenot readily retrievable due to the poorly organized filing system. In the absenceof this information the ministry was able to provide data on recurrent expenditure(estimates and actual) and capital expenditure for the Northern Region....
"A check in the national capital at the Ministry of Health, Accra for data onrecurrent expenditure proved,futile. The office does not collect such data at thatlevel. The office was however able to provide information on actual capitalexpenditure for Tamale district for 1990 and 1991....
"There is no basis for determining the viability of the information obtained inAccra and in Tamale because the latter provided estimates, whereas the former
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Table 2: Estimated and Actual Expenditure Returns on PIP Projects
in Education by Regions, 1990(In Million Cedia)
Paid/Estimated Amount est.
Regions allocation paid (%)
Greater Accra 1,452 329 22.6
Central 2,613 2,917 111.1
Volta 1,886 2,376 125.0
Eastern 3,588 509 14.0
Upper West 484 326 67.3
Western 1,857 904 45.6
Upper East 746 307 53.2
Northern 583 437 75.0
Ashanti 1,837 865 47.1
Brong Ahafo 1,597 999 62.6
Total 16,647 9,987 60.0
provided the actual expenditure.'
52. For education, there is a similar story. Ie Ministry of Education in Accra could not
provide information at the district level. It did provide information on actual recurrent
expenditure for the Northern Region for 1990. When these figures were cross-checked with the
regional office in Tamale, there appeared to be major discrepancies. The same was true of actual
capital expenditures to September 1991.
53. A general problem with the district level route to getting information on the spatial flow
of central government expenditure is that the budgets of the districts are only partly linked to
central government. Districts have their own sources of revenue, and have expenditures which
are not necessarily reflected in the national PIP, and certainly not in the recurrent budget.
Disentangling the various components is a daunting task. It is one that will have to be faced
eventually when decentralization is in full flow. But it is not a task that can be undertaken
quickly.
E. Next Steps: Studies
54. The PAD study is a useful first step in establishing a benchmark data set that can speak
to the question of the composition of actual public expenditures, recurrent and capital. It has
shown up the problems that exist. But more work is clearly needed. This can be usefully
classified into two parallel sets of activities, one based on collecting information at the center,
and the other based on information at the district level.
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55. Central information:
(a) (i) Further work on the composition of actual expenditures using data fromCAG. The objective here would be to exploit the CAG's coding systemto the fullest, and obtain a complete set of accounts for 1990 initially,and 1991 eventually, disaggregated at the minimum by region using theCAG coding system. While particular attention should be paid to the
- three key ministries of education, health and agriculture, the objectshould be to do a compositional analysis of total government expenditurefor 1990 and 1991. Accompanying the analysis should be an account ofthe problems (conceptual and operational), in using the CAG's codingsystem for our purposes.
(ii) One of the studies also noted that a district level breakdown of recurrentexpenditures was in principle available from the EMU, but that at thetime of the study not all the returns were in for 1990. A follow upshould be attempted, to see if a district level breakdown of actualrecurrent expenditures can be obtained for 1990 and (possibly) for 1991.
(b) (i) The problem with the above is that the CAG's coding system may not befine enough to provide us with a programmatic breakdown ofexpenditure. For this, we will have to go to individual ministry's codingmethods. Clearly, education seems to offer the best bet, from theexperience to date. An attempt should be made to get a regional andprogrammatic breakdown of actual recurrent and PIP expenditure for1989, 1990 and 1991-in other words, an attempt should be made toproduce the matrix introduced earlier, for the education sector, for thepast three years.
(ii) Experience to date suggests that health will not be as easy as education.But one of the studies found district level information (for Tamale) onactual capital expenditure for 1990 and 1991. Is this informationavailable for other districts? A study on this front would be useful.Following on from this year's PER of the health sector, it would beuseful if this study laid out the nature of the problem in obtaining aprogrammatic breakdown of actual recurrent and capital healthexpenditures.
56. District information:
(a) As a follow up to the work already done on the district level, data could becollected on district level budgets and actuals, in a consistent and systematicformat, for an enlarged sample of districts. This exercise would contribute to thelong term goal of achieving an integrated system of local and nationalexpenditure accounts. The information could be used to analyze the povertyfocus of the district level expenditures themselves-following the schemasuggested for the national level.
(b) An important part of the collection of district level information would be to getan assessment of achievements and problems in the areas of health, education and
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infrastructure, through the development of socio-economic indicators. Some
work on this has already been done, and it should continue, in coordination with
the National Development Planning Commission.
F. Next Steps: Process
57. The SDA Desk in PAD, under a time constraint and with limited manpower resources,has made a good start in meeting GOG's commitment to analyze the poverty focus of public
expenditures. The above studies should be entrusted to them, with a time frame of 6 to 9
months, so that progress can be reviewed at the time of the next Public Expenditure Review. Of
course, the issues raised here are closely linked to the more general question of budget
improvement and expenditure monitoring, and the Budget Improvement Working Group has been
set up to discuss this. It would be useful if the SDA Desk could provide input to this group, for
two reasons. Firstly, any new procedures, coding schemas, etc., should be checked in terms of
their ability to provide the sort of information that a poverty focus analysis would require.
Secondly, the desk has valuable experience with various inconsistencies and shortcomings of the
present reporting system, and they will get even more experience as they launch into the studies
identified above.
58. All of the above applies to actual expenditures. An important issue for the Budget
Improvement Working Group to bear in mind is that the budget submissions should also ideally
be coded in such a manner as to allow a regional/programmatic analysis to be done, comparing
the composition of the submission with that of the actual for the previous year. One step towards
achieving the ideal is that the 1992 development budget project listing includes a column to show
the districts/regions covered by each project. The Budget Improvement Working Group should
examine the feasibility of extending this innovation to the recurrent budget.
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SECTORAL ISSUES
1. HEALTH SECTOR
59. The main objectives of this chapter are (i) to analyze actual expenditures in 1990 and thefirst half of 1991; (ii) to review the Ministry of Health's 1992 recurrent budget submission andthe proposed 1992-94 investment program; and (iii) to compare the submissions with theapproved budget estimates. Special attention was paid to the process of programming, disbursingand monitoring health sector expenditures.
60. The key issues highlighted are:
(a) lack of attention to the development, implementation and monitoring of a primaryhealth care strategy;
(b) inadequate data on health sector expenditures for 1991 and even for 1990;(c) poor rates of implementation and completion under the Public Investment
Program;(d) the use of the recurrent budget submission as a "bidding tool";(e) insufficient transparency in the budgeting and monitoring of expenditures on
drugs and surgical dressings;(f) the disjointedness of the overall process of planning, budgeting and monitoring
health sector expenditures, activities and outcomes.
A. Primary Health Care Policy
61. The Ministry of Health (MOH) adopted a policy of Primary Health Care (PHC) in 1978,with the aim of extending the coverage and quality of essential health services to the generalpopulation. The Government has remained firmly committed to this policy, with the MOHprioritizing the rehabilitation and construction of PHC facilities and the extension of primaryservices throughout the 1980s and early 1990s. Over recent years, attention has also been paidto improving the planning, management and delivery of PHC services.
62. Despite the considerable progress in extending coverage since 1978, health status indiceshave barely improved and marked inequalities persist in mortality and morbidity rates betweenrural and urban areas, and between different regions. Only 65 percent of the Ghanaianpopulation has access to modern health services, and this figure masks gross geographicalinequalities. Overall utilization of outpatient facilities was estimated at 0.35 attendances perperson per annum in 1987; less than one third of the rate in 1977. It is reported that theprevalence of endemic diseases such as malaria, yaws, tuberculosis and guinea worm are on theincrease, and rates of infant malnutrition and maternal mortality remain disturbingly high.
63. Reasons for poor utilization of primary health care facilities relate to the frequent non-availability of drugs and the indifferent quality of services provided. The MOH is conscious thathealth status indices are not improving as rapidly as coverage indicators might predict. Officialsattribute this to external factors which constrain the effectiveness of preventive and promotivehealth interventions. More importantly, little attention appears to have been paid to translatingthe 1978 Primary Health Care policy into an operational strategy with clear goals and indicatorsof achievement.
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B. Sources of Revenue for the Public Health Sector
64. Reflecting the fortunes of the economy and the fluctuating value of the cedi, the MOH's
budget allocation fell from $10.20 per capita in 1978 to a low of $1.30 per capita in 1983. It
has increased steadily since that time, but the allocation of $6.20 per capita in 1990 was still
significantly below that of 1978. Even so, the MOH has captured between 8-11 percent of the
national recurrent budget over the last five years, which is higher than the share allocated to
health care in many developing countries with a similar per capita GNP.
65. Analysis of health sector income during 1991 indicates that recurrent and capital
expenditures financed from the Consolidated Fund accounted for 68 percent and 10 percent of
total sector income, and fees and donor assistance for an estimated 6 percent and 15 percent,
respectively. These figures should be treated with caution, however, given that domestic
allocations for recurrent and investment expenditure were not fully released during 1991, and data
on health fees and donor assistance are incomplete. Patient fees, other than for drugs, have not
been revised since 1985, even though the consumer price index has risen by almost 400 percent.
Fees now constitute a relatively small proportion of total health sector income. Figures for donor
assistance capture only grants, loans and technical assistance recorded by the MFEP and the
World Bank in its "Aid Pipeline'.
66. Revenue is also generated through the sale of drugs and dressings. Dispensing facilities
are allowed to keep the funds collected from drugs and dressings and for immunization services,
but regulations governing expenditure are vague and variously interpreted. It is illegal for healtt
stations to spend income from drugs, and some appear to hoard the funds in non-interest bearing
bank accounts. Others interpret the regulations more liberally, using the funds to purchase
additional drugs from private pharmacies and to undertake routine facility maintenance. At the
moment, the Central Medical Stores supplies drugs free of charge to Regional Medical Stores and
health stations, if and when they are in stock, and sets prices centrally. Drug prices were
increased in March 1990 and were due to be revised again before the end of 1991. Many
facilities had, however, already increased their prices ahead of the authorized increase.
67. Formal introduction of the "Cash and Carry System" was delayed this year whilst the
MOH attempted to gain a better picture of the income that could be generated from drug sales
at facility level. Cash and Carry will essentially establish a nationwide revolving drugs fund;
rather than supply drugs free of charge, Central Medical Stores (CMS) will sell them to Regional
Medical Stores and to individual health stations. The facilities will then dispense them at full cost
and use the income to buy replacement stocks from CMS. Mechanisms already exist to exempt
patients on poverty grounds. These are rarely used, however, and some observers maintain that
the majority of free drugs are consumed by MOH staff and their immediate families. In
November 1990, the government decreed that all civil servants should be treated free of charge,
but no mechanisms were established to compensate the MOH for the resulting loss of income.
C. Comparison of Budgeted and Actual Recurrent Expenditures for 1990 and 1991
68. Compilation and analysis of actual recurrent expenditure within the health sector is
virtually impossible. Regional Health Offices and other spending offices are given little incentive
to submit monthly expenditure returns to the MOH. Moreover, accounting staff seconded from
the Controller and Accountant General's Office (C&AG) to the MOH prepare detailed accounts
for headquarters only, and do not compile data by program, Region or spending head for the
health sector as a whole. The Office of C&AG does, however, record expenditure by Item for
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all sectors of government. At the time of the mission (November 1991), the C&AG was able tosubmit accounts detailing health sector expenditure by Item and Head for 1990, and by Item forthe first four months of 1991. Comparable data were not available from the MOH or MFEP.This is partially due to poor communications between C&AG accountants, MFEP treasuryofficers, and MOH administrative staff, and partially because of the lack of importance attachedto expenditure and output data by the MOH itself.
69. Comparing the 1990 budget estimates with the C&AG's information on actualexpenditures for 1990 indicates that just over 90 percent of the approved allocations for Items 1-6were spent. Expenditure on Personal Emoluments (Item 1), which is directly controlled by theOffice of the C&AG, exceeded the level budgeted by just under 3 percent. Expenditures onItems 2 to 5 were all below budgeted levels, and Item 6 (subventions) exceeded the budgetedlevel by 18.4 percent due to salary increases in mid-1990.
70. Data on recurrent expenditures for 1991 were only available for January to April and hadnot been "cleaned". It is anticipated that there will be underspending against budgeted allocationsdue to the tight 33.3 percent expenditure limits imposed on Items 2-5 by the C&AG during thethird and fourth quarters of 1991.15/ District health officers usually manage to negotiate"expenditure authorizations" which allow the expenditure-or "drawing"-limits to be waived.This year, however, the limits were more strictly applied, although drugs and dressings wereonce again formally exempted.
71. Apart from the above restrictions, much of the underspending can be attributed to laterelease of funds from MFEP. Financial Encumbrances (FEs) rarely reach outlying districts untilsix weeks into the quarter, and district treasury officers seldom allow advance commitments tobe made against budgeted allocations. In order to ensure that the funds are maximally utilizedbefore the end of the quarter, district health officials tend to vire allocations across Items (2-5)and between subheads under Head 163. Because the accounts compiled by C&AG do not takefull account of this viring, they often bear little relation to expenditures actually incurred.
D. Comparison of Budgeted and Actual Public Investment Program Expenditures for1990 and 1991
72. Information detailing expenditure under the Public Investment Program (PIP) for 1990and for the first three quarters of 1991 was available by sector from MFEP, and by Item fromC&AG. MFEP estimate that the MOH spent 90 percent (05.2 billion) of its 05.8 billion PIPallocation in 1990. This is a much higher than the estimates compiled by C&AG based onexpenditure by Items 7-9. Printouts from the C&AG's office indicate much lower rates ofdisbursement for Items 7-9 than for recurrent Items 1-6 during 1990. Expenditure under Item9: Other Capital Expenditure, for example, totalled only 45.8 percent of the budgeted allocation.This is attributed to late release of funds and poor rates of project implementation. The fact thatthe two sets of expenditure figures from MFEP and C&AG do not correlate very closely isworrying, and again serves to highlight the lack of importance attached to monitoring andcontrolling public sector expenditure.
j5/ However, data for the whole of 1991, that became available in mid-1992, showedunderspending of only 3 percent on items 2-5 in the health sector.
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73. Despite a PIP allocation of only 3.7 billion in 1991, compared with C5.8 billion in
1990, M[FEP officials estimate that PIP expenditure in 1991 will again be slightly below the
budgeted allocation. Once again, this is attributed to delayed release of funds following MFEP's
mid-year budget review, and continued slow rates of project implementation. MOH officials at
HQ were not in a position to comment on whether any capital works had been completed in 1990,
or would be completed before the end of 1991.
74. The paucity of information within MOH headquarters about rates of capital project
implementation, expenditure and completion is a matter of serious concern. Regional health
officials cite numerous examples of projects which were started over ten years ago but have never
been completed. The poor rates of implementation tend to be attributed to contractual and
payment problems created by the Architectural and Engineering Services Cooperation (AESC).
The AESC serve as the government's consultants on all PIP projects-awarding contracts, setting
fee scales, monitoring progress and authorizing completions. Their involvement at all stages of
project implementation leaves the public investment program subject to delay and manipulation.
E. Comparison of the 1992 Recurrent Budget Submission and Actual Allocation
75. At the time of the mission, hearings on the health sector recurrent budget had not taken
place. The following observations are based on a comparison between the 1992 budget
submission and the MFEP Guidelines. The Guidelines were, in fact, adopted unamended as the
approved 1992 Final Allocation.
76. The MOH submitted a recurrent budget for 1992 totalling 073.5 billion-253 percent
above the MFEP budget guideline, and final allocation, of C29.1 billion. Proposed expenditure
on personal emoluments (Item 1) was 29 percent above the guideline/ final allocation, whilst the
submissions for travel and transport (Item 2), general expenditure (Item 3), and maintenance,
repair and renewals (Item 4) exceeded the guidelines/fnal allocations by 63 percent, 98 percent
and 115 percent, respectively. Proposed expenditure on Item 5 (other current expenditure) was
047.4 billion-over 4 times the Item guideline/final allocation, and 63 percent above the 1992
indicative budget ceiling for the sector as a whole.
77. The 1992 submission exceeded the 1991 Final Allocation by 187 percent in nominal
terms. Excluding Item 5, the largest increase was requested for Item 4-Maintenance, Repair
and Renewals. The MOH justified this on the grounds that the 10 percent "norm" had resulted
in inadequate allocations for routine maintenance of existing and new facilities over the previous
two years. MFEP officials indicated that this norm was likely to be relaxed in 1992, with greater
efforts made to allocate funds on the basis of realistic maintenance needs. The request for Item
2-Travel and Transport was 86 percent above the 1991 final allocation, due to an expansion
in the size of the MOH vehicle fleet and a large increase in the price of petrol, which came into
effect in January 1991. The MOH's request for Personnel Emoluments (Item 1) was based on
existing staff in post and anticipated employment of new graduates. (Over the next few years,
the MOH is likely to come under increasing pressure from the Office of the Head of the Civil
Service (OHCS) to redeploy staff from overstaffed tertiary hospitals to less popular district
hospitals and health stations. Without wider reform of pay and conditions in the public sector,
however, it is unlikely that this pressure for redeployment will be popular or successful.)
78. The MOH's submission for Item 5-Other Current Expenditure was composed
principally of funds for drugs, dressings, chemicals, medical instruments and equipment (Head
160-General Administration). The request of 047.4 billion was substantially above the 1991
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allocation of 1 11.5 billion, and exceeded the final 1992 allocation by C36.5 billion. The MOHrequested 4.3 billion for drugs, (4.3 billion for dressings and 08.0 billion for chemicals andconsumables, and expected to carry over CIA billion worth of unpaid debts from 1991. Itactually received C 10.9 billion. The request for drugs was based on demand estimatesextrapolated from 1989 morbidity and mortality data using standard treatment regimens. It is notclear how the estimates for surgical dressings, chemicals and consumables, and pharmaceuticalraw materials were generated. The request of (Z5.9 billion for medical equipment and storesshould have been classified as capital expenditure and included in the PIP submission.
79. Whilst the "bidding" purpose of the budget submission is accepted, preparation of abudget which exceeded the MFEP Guidelines (and Final Allocation) by 252 percent is difficultto understand. Justifications prepared in support of requests for Items 1-4 were plausible, butpoorly presented. The main problem lay in a general unwillingness to prioritize between therequested increases. This encouraged the MFEP to adopt the Guidelines as final allocationswithout any amendments. The budget preparation process within the MOH was thus a timeconsuming but rather nugatory exercise.
F. Comparison or the Proposed and Actual Public Investment Program, 1992-94
80. At the time of the mission, the proposed 1992-94 PIP for the health sector had beensubmitted to MFEP and the second preliminary budget hearing was due to take place. Thefollowing analyses are based on a comparison of the PIP submission and actual PIP budget for1992-94 (published in April 1992). Information relating to external project financing is presentedwhere available, but many of the estimates of Official Development Assistance (ODA) includedin the 1992-94 PIP submission and budget are little more than optimistic "guesstimates".
81. While the MFEP's indicative budget ceiling for the 1992 health investment program was05.0 billion, the PIP submitted by the MOH totalled 10.9 billion. The first MFEP budgethearing took into account additional requests from Regional Health Offices, Korle Bu and KomfeAnokye Teaching Hospitals, all of which had lobbied MFEP officials for their entire capitalproject portfolios to be taken into consideration. As a result, the MOH's PIP submission for1992 was revised up to C15.2 billion by MFEP. Approved PIP funding for 1992 totalled 013.2billion.
82. The original 1992 PIP submitted by the MOH incorporated 20 projects, all of which werenominally ongoing. Seventeen projects received funding under the 1992 PIP, and the SolarPower for Health Stations project (MED.014) was included for funding under the 1993 and1994 programs. Institutional Strengthening of Health Services (MED.002) was included inthe 1992-94 PIP, but not allocated any domestic funds as it was assumed that funds would beforthcoming from donors. Development of Ridge Hospital (MED.025) was excluded from theProgram altogether.
83. Of the 17 projects funded under the 1992 PIP, 11 will be financed entirely from theConsolidated Fund at a total cost of (Z2.1 billion, and 6 will be co-financed by donors, withcounterpart domestic resources totalling 13.2 billion. Official Development Assistance (ODA)totalling C5.6 billion has been made available for Primary Health Care Strengthening(MED.001); MCHIFamily Planning Program Support (MED.003); Construction of NewHealth Stations (MED.007); and District Hospitals Rehabilitation Project (MED.008). Anadditional C2.4 billion of foreign commercial assistance has also been made available for
- 26 -
MED.003, MED.008, as well as for Regional Hospitals Rehabilitation (MED.009), and Health
Support Services Rehabilitation (MED.014).
84. Investment in Korle Bu Teaching Hospital will be supported under Revitalization ofKorle Bu (MED.023) and Teaching Hospitals Rehabilitation (MED.010), and Health SupportService Rehabilitation (MED.014). The African Development Bank is co-financing
rehabilitation works at Korle Bu and Komfe Anokye Teaching Hospitals (MED.010), with
investment in the maternity block, fevers unit and polyclinic at Korle Bu totalling IZ126 millionin 1992. Revitalization of Korle Bu (MED.023) is to be funded entirely from the ConsolidatedFund, and includes rehabilitation work on seven of the first floor theaters, the intensive care unit,the diagnostic center, the national thoracic and cardiovascular center, the electronic maintenanceworkshop, and repair of diagnostic imaging equipment. The estimated total cost of this project
is C4.4 billion. 2725 million has been allocated for 1992, with nothing earmarked so far for
1993 and 1994. Korle Bu submitted a supplementary request for replacement of some of its
diagnostic imaging equipment, for which 700 million was allocated under MED.014. The PIP
allocation to Korle Bu in 1992 thus totals almost C3 billion-23 percent of the overall PIP budget,
and almost one third of the domestic budget. In addition, Korle Bu has requested recurrent
running costs of 03.1 billion in 1992-almost double the budget allocated in 1991.
85. Q:140 million has been allocated from the Consolidated Fund for the Construction of a
New Regional Hospital at Cape Coast (MED.02 1), despite the lack of a proper feasibility study.When approached by the mission, neither the Italian Embassy nor Spanish Embassy would
confirm that they had promised additional funds, despite indications to that effect from MFEP.
The mission concluded that it was neither desirable nor feasible to earmark domestic resources
for the construction of a new regional hospital at Cape Coast until grant funding for the projects
had been secured, and proper feasibility studies, including simulations of the recurrent cost
implications, had been undertaken.
86. Overall, the mission was impressed with the MOH's PIP budget submission, which was
prepared during an election year when health officials had come under pressure from local
politicians to'construct bigger and better health facilities. It was disappointed, however, by the
MOH's over-optimistic projections of ODA disbursements contained within the 1992-94 PIP
budget estimates, and its inability to match PIP requests with stated intrasectoral priorities.
Although the MOH's primary health care strategy is premised on an effective referral system,
the large capital and recurrent budget requests for Korle Bu seem grossly out of line with sector
priorities and policy objectives.
G. Allocations for Primary Health Care
87. Classification of primary health care expenditure was agreed between the MOH and
World Bank in 1989. The percentage PHC component of each recurrent program and PIP project
was estimated, and actual expenditures aggregated to give a rough indication of the MOR's
commitment to its PHC policy.
88. Using the agreed classification, the mission noted that recurrent resources requested for
PHC in 1992 totalled C14.8 billion, or 20 percent of the overall submission. The actual
allocation for PHC totalled C9.3 billion-32 percent of the approved final allocation.
89. The percentage of domestically financed investment earmarked for PHC under the 1992PIP totalled only 17 percent (C876 million). This is considerably below the allocations of 40
- 27 -
percent and 31 percent in 1991 and 1990, respectively. If one includes proposed donor financingfor 1992, however, PIP allocations in support of PHC rise to C6.3 billion or 48 percent of theoverall total.
90. The current definition of PHC expenditure is rather arbitrary, relying on an estimate ofthe resources committed to, but not necessarily spent on, PHC activities. Spending patternssuggest that the 1978 PHC policy is in need of review. A revised definition which takes intoaccount the management, administration and referral systems required to deliver PHC serviceseffectively, may help the MOH think more strategically about its PHC policy and objectives. TheMOH might then be in a position to establish budget allocation and performance targets insupport of an operational PHC strategy.
H. Donor Financing in the Health Sector
91. Donors finance an estimated 17 percent of total investment and recurrent costs in thehealth sector mostly through programs such as maternal and child health, family planning,immunizations, communicable disease control, HI-V prevention, training of community healthworkers, water and sanitation, and health promotion. Data on commitments and disbursementsfor grants, loans and technical assistance are compiled by the Aid Management Unit of theMFEP, as well as by the World Bank in its "Aid Pipeline". Unfortunately, this information isnot fully comprehensive; for example it excludes expenditure by WHO on their regular and extra-budgetary activities, such as the National AIDS Control Program. It also excludes commitmentsby agencies who channel funds through WHO such as UNDP. The MOH has not updated itsdatabase on external assistance beyond 1990.
92. Of particular concern is the volume of donor resources committed to the health sectorwhich are not captwed in the MOH's recurrent budget estimates. USAID, for example, hasrecently committed the cedi equivalent of $13 million over three years for activities related tomaternal and child health and family planning (mch/fp). It is anticipated that a large proportionof these funds will be used to augment recurrent resources for training and supplies. The$3 million allocated for 1992 is not, however, reflected anywhere in the recurrent budgetsubmission. As a consequence, no clear picture emerges of the total recurrent resources availableto the health sector, and important sustainability questions are left unaddressed.
I. Summary and Recommendations
1. 1992 Recurrent Budget
93. The mission was disappointed by the unprioritized and inflated recurrent budget requestsubmitted by the MOH for 1992. This contained no clear indication of expenditure priorities orallocation targets, and prompted the MFEP to adopt its Guidelines entirely unamended as finalallocations. The budgeting process thus proved to be a time-consuming yet ultimately fruitlessexercise for the MOH.
94. The paucity of data on: (i) actual expenditures in relation to budget allocations, and (ii)the effects of expenditure restrictions on the quality of health services provided, left the MOHill-placed to justify a budget which exceeded the MFEP guideline by 253 percent. The missionwas particularly concerned about the request for drugs and dressings, which the MOH had notproperly justified. On the other hand, it was pleased to note that the increased request for Item2 was based on a reasonable estimate of the fleet size, utilization rates and vehicle running costs,
- 28 -
and for Item 4 on a fairly comprehensive assessment of the rehabilitation needs of its capital
stock.
95. The mission welcomed the MFEP's decision to relax the 10 percent budget norms for
maintenance, renewals and repair. Although budget norms were designed to rationalize the
budgeting process, their strict application had resulted in chronic underfunding of maintenance
in relation to the actual physical condition of MOH health facilities.
96. Given the fact that district medical officers vire funds between budget heads, spending
often bears little relation to approved allocations. As a consequence, it is not particularly useful
for the mission to make recommendations about the desired size of allocations for primary health
care activities. Instead, the mission feel that it would be useful for the MOH to develop a clearer
picture of sector spending patterns to support its request for recurrent resources.
97. The mission recommends that:
(a) the MOH collaborates with the C&AG and MFEP to generate better data on
recurrent expenditures
(b) the MOH sets clear priorities in relation to its overall request for increasedrecurrent resources;
(c) the MOH justifies its request for drugs, dressing, chemicals and reagents more
explicitly, and reclassifies laboratory equipment under capital expenditure
(Item 9);
(d) the MOH refines the definition of primary health care agreed with the World
Bank in 1989, and establishes targets for recurrent resource allocation to PHC
over the next three years;
2. Investment Expenditure and the 1992 PIP Budget
98. The mission was concerned about the poor rates of PIP implementation and the lack of
accessible data on investment expenditure by project and subcomponent. Explicit objectives
relating to new capital works and rehabilitation have not been developed by the sector, monitoring
of ongoing projects is nonexistent, and there is no information about estimated dates of projectcompletion.
99. The balance between investment in tertiary facilities and expenditure on secondary and
primary facilities in the 1992 PIP budget is out of line with the MOH's policy of extending
primary health care services. In broad terms, the mission endorses the MOH's attempt to
complete ongoing projects rather than initiate new construction or rehabilitation projects. It was
disturbed, however, by the disproportionate volume of new investment in Korle Bu.
100. The MFEP's decision to accept supplementary requests from Regional Health Offices and
the two large teaching hospitals, after the MOH had submitted a budget reflecting its own
priorities, is worrying. A clearer picture of the capital and recurrent resources committed by
donors would assist the MOH and MFEP to calculate the counterpart funds required from the
Consolidated Fund, and the recurrent resource implications of new capital works.
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101. The mission recommends that:
(a) the MOH appoints an officer to monitor physical implementation of, andexpenditure on PIP projects;
(b) the MOH reviews proposed investment allocations to tertiary health facilities,especially Korle Bu Teaching Hospital;
(c) the MOH develops a broad-based budget which identifies investment andrecurrent resources committed by donors, and counterpart funds required fromthe Consolidated Fund;
(d) the MFEP concentrate on issues related to the intersectoral balance of PIP funds,and leaves intrasectoral allocation decisions to be determined by the MOH.
3. Donor Financing
102. The mission recommends that the MOH and Health Local Aid Group establish a centraldatabase of external assistance to the health sector. This should include information on donorcommitments by project and program, disaggregated by investment and recurrent Items.Projected commitments and disbursements should be provided for a three year period, and therecurrent cost implication of externally financed projects should be estimated. This will help theMFEP as it attempts to establish a Broad-Based Budget capturing all forms of external financein 1993.
I. EDUCATION SECTOR
A. Background
103. Until the mid-1970s, Ghana had one of the most developed and effective educationsystems in Western Africa. Concomitant with the economic decline of the 1970s was a seriousdecline in the quality of education. School enrollments, once among the highest in sub-SaharanAfrica, stagnated or declined at all levels with respect to the school age population. There wasa mass departure of trained teachers from the country, which resulted in their replacement byuntrained personnel. Budgetary allocations to education dropped sharply between 1979 and 1985,making it difficult for Government to provide the necessary resources for an education systemwith expanding access. The proportion of GDP devoted to education declined from 6.4 percentin 1976 to about 1 percent in 1983 and was budgeted at 1.7 percent in 1985.
104. In 1987 Government embarked on an educational reform program with the overallobjectives being to: (a) expand access to primary schools especially in the North and other areaswhere enrollments have been persistently low; (b) improve quality, efficiency and relevance ofeducation; (c) reduce the length of pre-university schooling from 17 to 12 years; (d) makeeducational financing more efficient and equitable; and (e) strengthen planning and administration.Financing for the program was supported by IDA and other donors. In the past few yearsremarkable progress has been made, including increased enrollment growth, better allocation offinancial resources, introduction of the new junior secondary school (JSS) curriculum, broad-based provision of education staff training, the development and supply of instructional materialsto basic education schools throughout the country, and strengthened school-based supervision.
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105. The sector's share of the total government recurrent budget (excluding interest payments
and transfers) rose from an average of 27 percent in 1984 to 33 percent in 1987 and 34.7 percent
in 1990. Education accounted for about 6 percent of the development budget in 1987 and 1988,
up from about 3 percent in 1984 and 1985. Changes in the distribution of expenditures among
the levels of education have been significant and in line with the policy implications of the
reforms. Between 1985 and 1988 there was a significant shift towards primary and middle/JSS
schooling and away from both senior secondary and higher education. The share of basic
education in the total education budget increased from 44 percent in 1984 to over 60 percent in
every year since 1987, while the share of tertiary education fell from 18.6 percent in 1985 to
14.1 percent in 1988 and further in subsequent years. Allocation to non-salary items grew from
less than 12 percent of the recurrent education budget in 1986 to 18 percent in 1988 and 22
percent in 1989. This increase in non-salary recurrent costs (e.g., on instructional materials) is
in line with the objectives of the reform to improve educational quality.
B. Recurrent Expenditures in 1990 and 1991
106. In 1990 the recurrent budget for education was I53.4 billion, of which 67.8 percent was
allocated for personnel emoluments. Subventionsto universities, the National Service Secretariat,
and miscellaneous institutions totalled 16.3 percent. The remaining 15.9 percent was allocated
to Items 2 to 5, with 10.2 percent for supplies and stores (Item 5). Very little (eO.7 billion, or
1.3 percent of the education budget) was allocated for maintenance, repairs and renewals (Item
4).
107. Total actual recurrent expenditures on education in 1990 were 10.7 percent higher than
budgeted. Expenditures on personnel emoluments were 16.3 percent higher than budgeted, while
expenditures for Items 2-5 were substantially lower than allocated. Expenditures on tertiary
education were 36.8 percent above the budget level, while expenditures on technical and
vocational education were 68.7 percent lower than budgeted. Actual expenditures were also
higher than the budgeted levels in the case of primary education (by 28.2 percent) and junior
secondary (by 40.2 percent). For some items and categories of expenditures, actual expenditures
have diverged significantly from planned expenditures showing in the 1990 budget. In some
cases the divergence is attributable to civil service salary increases, inflation or restrictions
imposed by the Ministry of Finance on certain expenditure categories. In other instances
divergences are not explained by.these general phenomena (e.g., shortfall in expenditure for some
vocational training categories), but merely by an imperfect budgetary system.
108. In 1991 the education budget was nominally 35.2 percent higher than the 1990 budget
and 28 percent higher than actual expenditures in 1990, but its share of the total government
recurrent budget (excluding interest payments) was slightly lower than in the previous year.
Within the education budget the share for Item 5 was slightly higher while those for Items 2 to
4 were reduced, and the shares of personnel and tertiary education remain about the same.
Actual expenditures in 1991 are not yet available.
C. The 1992 Recurrent Budget
109. Education's share of the total government recurrent budget in 1992 (excluding interest
payments) is 37.3 percent, compared to 32.9 percent in 1991 and 34.7 percent in 1990. The bulk
of the education budget, about 68.5 percent, is allocated for personnel emoluments. Subventions
for tertiary education and miscellaneous bodies absorb another 15.7 percent, leaving only 9.3
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percent for supplies and stores, 1.6 percent for travel and transport, 3 percent for generalexpenditure and 2 percent for maintenance, repairs and renewals.
110. The share of basic education (including allocations for primary, junior secondary and non-formal education, and pro rata allocation of overheads) in the 1992 recurrent budget for educationis about 65 percent. Two points should be noted about the recurrent budget for 1992. One isthat the EC has provided funds earmarked for basic education under Item 5 and for maintenanceof MOE facilities under Item 4. The other is that the allocation for tertiary education in the 1992recurrent budget (07.1 billion) is less than the estimated actual expenditures for tertiary educationin 1991 (C10.8-12.2 billion).
D. The 1992-94 Public Investment Program
111. The total development budget for education in 1992 was £5.4 billion, representing about7.5 percent of the government's total development budget for the year. Of the total foreducation, 33.5 percent is allocated to the rehabilitation and construction of buildings andinfrastructure, including the provision of furniture and equipment, for second cycle institutionsand another 1.7 percent for institutional development of junior secondary schools. Technical andvocational education receives a share of 6.1 percent, and a similar amount is allocated to thediploma awarding institutions. The three existing universities together absorb 27.0 percent of thedevelopment budget for education, while the University of the North by itself takes up 7.6percent. The rehabilitation of first cycle educational institutions is allocated only 90 million,or barely 1.7 percent of the total for education. The remaining 16.3 percent was spread amongvarious institutions under MOE, including 4.0 percent for the rehabilitation and construction ofregional and district educational offices, and 3.0 percent for institutional strengthening of MOE.
112. The current budget allocations represent a drastic reduction from the original MOEproposal, which amounted to C12.7 billion excluding the proposed University of the North(UON), or 016 billion including UON. These amounts compare with the MFEP indicativeplanning figure of 05.3 billion for education. In MOE's original proposal, 37.8 percent was forhigher education excluding UON (but including the diploma colleges and polytechnics), or 50.7percent including UON. In the drastically reduced budget, tertiary education (including UONand the diploma colleges but excluding the polytechnics) still absorbs 40.7 percent of the totaldevelopment budget for education.
113. The current proposed PIP for 1993 indicates substantial increase for secondary educationincluding a foreign cost provision equivalent to £1.5 billion. The proposed PIP for 1994 seemslargely incomplete at this stage.
E. Major Issues
114. A major achievement of the government in the past few years is that it has been able tomaintain the share of basic education in the total recurrent budget for education at or above 62percent. However, there are several issues that need to be addressed:
(a) . The PIP reflects that there continues to be a prol(feration of small projects, mostof which were begun many years ago and should be consolidated. Most of theprojects in the PIP are determined by investment decisions taken a decade ormore ago, and do not reflect the needs of the ongoing education reform program.For example, the MOE has been following a policy of deboardinization for the
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past eight years but still dormitories are being completed at secondary schools.
Similarly it has been decided that all diploma awarding colleges be moved to
Winneba, but still PIP investments are taking place in St. Andrews College,Ashanti Mampong and other diploma colleges far from Winneba. The scarce
resources are divided among far too many subprojects, as a result very few
projects are allocated more than C20 or Q30 million and very few subprojects are
ever completed. Moreover, there is no real consideration of the foreign donor
support to the PIP in determining what government allocations should take place,and thus some levels of education receive substantial donor support and
substantial government allocations, while others (for example, rehabilitation of
primary schools) receive almost no allocations from anyone.
(b) Tertiary education has continued to receive a very high proportion of the capital
budget for education. In previous years the share of tertiary education has been
above 30 percent; in the 1992 PIP, its share has reached 40 percent. There is
need to resist the constant pressure to spend more and more on tertiary
education.
(c) On the other hand, there is a shortjll in the 1992 recurrent budget subventions
for universities: only 7.2 billion was allocated against an estimated need of
011.2 to 12.2 billion. The additional amount is necessary to cover the
authorized salary increase granted to university staff last year. However, despite
repeated attempts to draw government's attention to this matter, there has not
been any action to correct the inconsistency.
(d) Further improvement in- the budgetary process is desirable. The MOE has
developed a good system to monitor actual expenditures, but unfortunately' does
not make much use of the data collected. Analysis of actual expenditures againstbudgeted allocations indicate that actual releases tend to exaggerate imbalancesalready in existence with the budgetary process. Obviously there is little point
in monitoring expenditures if nothing is done about imbalances as they appear.
There is need for MOE to develop a system whereby data on actual expenditures,
to be monitored on a quarterly basis, could be used to impact on future
expenditures in the same fiscal year.
(e) Allocation for non-salary itens in the recurrent budget. In 1992 efforts by the
EC have ensured that the maintenance budget for MOE under Item 4 be
increased from C1.6 billion to C2 billion and that an additional C3 billion under
Item 5 be secured for basic education. Nevertheless, there is still a tendency for
personnel emoluments to be increased at the expense of other categories of
expenditure. Over the past few years the allocation for Item 5 has been gradually
reduced from as high as nearly 20 percent to 9.3 percent this year. There is
need to increase allocation for basic and secondary levels and for basic
maintenance of education facilities. To control the increase in personnelemoluments, it would be necessary not only to resist the pressures for general
increase in salary levels but also to watch carefully the levels of other
subventions in the MOE, especially with the National Service scheme where there
should be the strictest control over those who are employed for a second or
subsequent year. People who are needed urgently for more than one year should
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be taken over in the regular establishment rather than by inflating the number ofservicemen and women, jeopardizing the overall viability of the program.
F. Recommendations
115. Allocations in the 1992 recurrent budget for education should be adjusted so as toincrease resources for (a) the basic maintenance of education facilities under item 4; (b) provisionof instructional materials for basic and secondary levels under item 5; and (c) subventions touniversities by at least (4 billion to adequately cover staff salary increases authorized last year.
116. Allocations in the 1992 public investment program for education should be adjusted,reducing the share of tertiary education to less than 30 percent of the total, the savings therebyachieved to be used in expanding capacity in senior secondary schools (ED002 and ED005), andin rehabilitating first cycle institutions (ED006).
117. In reorganizing the PIP process, it is suggested that at least 50 percent of existing
subprojects be frozen and receive no allocation, and that all existing subprojects are re-evaluatedto see to what extent they are supportive of education reform objectives. Government resources
should be devoted to those subprojects which are over 85 percent complete, and which can becompleted in 1992. All ongoing contracts should be renegotiated as fixed term fixed pricecontracts. Only a limited number of projects should be financed at any time, and only when two
projects are complete should one other be allowed into the PIP.
118. To improve the budgerary process and to reduce divergences between the amountsallocated and actually spent, it is recommended that a systematic monitoring process of actualexpenditures be put in place. MOE should carry out regular budget monitoring on a quarterlybasis, and effectively use the budget performance data to affect future expenditures in the samefiscal year.
III. AGRICULTURE SECTOR
A. Summary Assessment
119. Ongoing improvement notwithstanding, progress with strengthening budgetary planningand performance in the agriculture sector remains slow. Most striking, in consequence, is theunsustainable pattern of expenditures, in both the recurrent and capital budgets, and a near
absence of monitoring and evaluation. That budgetary management is, at present, unsatisfactoryis due, in some part, to weak budgetary planning and management at the level of the MFEPwhich then extends to the sector level where such capacity is, in any case, poor. The main issuesmay be summarized as follows. First, the continued enforcement of outdated and excessivebudgetary control by the MFEP has dampened initiatives down the line to strengthen budgetarydiscipline. Second, because of inadequate budgetary provision for recurrent expenditures, beyondemoluments, the delivery of even the most basic agricultural services is undermined and is madeworse by ad hoc cuts in approved budget provisions in the course of the year. Third, the patternof development expenditures is unsustainable on account of overinvestment in housinginfrastructure, and credit and farm inputs, at the cost of expenditures for operational investment,institutional capacity building, and agricultural education and training. Finally, priority settingin recurrent and development expenditures is still insufficient even when it comes to fieldactivities inextricably tied to seasonal factors, and to agricultural research which, by and large,
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is indivisible. The absence of priority planning is compounded by the relative inflexibility of
annual work plans making it difficult for departments to cope with budgetary cuts..16/
120. Budgetary cuts continue to be imposed each year, aggravating, in the process, existing
low morale, and leaving staff with reduced enthusiasm toward budgetary planning and execution
of work plans. Irregular and untimely budgetary releases have added to the problem.
Furthermore, even with the considerable delay that the Budget, both recurrent and development,
is approved, data on actual expenditures for the previous year are not available at the time of
budget hearings. This precludes timely performance analysis, and reduces the budget exercise,
in sector departments to an accounting procedure rather than ensuring accountabiity for the
purposes for which the allocations were initially approved. Given the sector's relatively large
public investment program, this overall budgetary situation does not augur well for sector
performance, especially as incentives for private investment progressively gain strength. The
ongoing civil service reform will, it is anticipated, introduce some balance in the pattern of
expenditure allocation between emoluments and non-wage funding. However, an effort, beyond
this, to significantly improve budgetary planning, monitoring and evaluation, and the pattern of
allocations, will still be required. Without this improvement, the 4 percent growth forecast by
the Medium Term Development Strategy (MTADS) will be difficult to achieve, and accelerated
growth difficult to envisage.
121. At present, the capacity for budgetary management in almost all of the agriculture sector
institutions is in urgent need of strengthening. Even though the MOA is reported, in this respect,
to be better than other sector ministries, there is considerable scope for improvement as is the
case with the Forestry Department (FD) and the Game and Wildlife Department (GWD) of the
Ministry of Lands and Natural Resources (MLNR), and with the agricultural research institutes
of the Ministry of Industry, Science and Technology (MIST). A major shortcoming, particularlyin the Ministry of Agriculture (MOA), is the insufficient rationale for shifts in emphasis withinthe recurrent budget and, in the case of the PIP, for changes, with unclear rationale, in projectnames, descriptions, implementation periods, etc., especially in those projects identified for
further PER review. Also serious is that in about half of the 1992-94 PIP by size of investment,
public expenditures are earmarked for activities which would be more appropriate for the private
sector.
B. Recurrent Expenditures
122. Subsector Shares. The pattern of recurrent spending across the agriculture sector
(cocoa, non-cocoa, forestry and agricultural research) continues to be strongly dominated by the
cocoa subsector. There is, however, clearly in evidence an encouraging declining trend in theshare of the cocoa subsector. The changing relative importance of the main subsectors, with and
without cocoa, based on approved recurrent budgets may be seen from Annex A, Table 1. The
positive direction, as is portrayed by the changing shares (between 1990, the year immediately
preceding the MTADS, and 1991 and 1992, the first two years of its implementation) is, by and
1/ In instances where attempts are made to address priorities, budgetary cuts render theseefforts, and the agencies concerned, delinquent for overspending. This was reported for1991, when, given the necessity for lead time, essential procurement was initiated, civil
works contracts concluded, and other priority commitments undertaken. In the case ofthe forestry subsector, in addition, the FD had been forced by the onset of the rains to
proceed with the planting of seedlings for the rural forestry program.
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large, consistent with the MTADS. The MTADS strategy aims at agricultural diversification,private sector led growth, cost-effective delivery of basic agricultural support services, andcomplementary investments, both intra- and inter-sectoral. The diversification away from cocoais illustrated by the 5 percent decline in the relative share of the cocoa subsector, and an almost25 percent increase in the agriculture sector excluding cocoa. With respect to the latter, theGovernment's concern over environmental degradation as well as its recognition of the need tostep up technological progress to accelerate and sustain growth, is reflected in the significantincrease in the allocative shares for the forestry subsector and agricultural research. This wasmade possible by the additional recurrent funding on account of two IDA-financed projects whichbecame effective since 1990-the Forest Resource Management Project in 1991 and the NationalAgricultural Research Project in 1992. However, for non-cocoa crops per se, the 25 percentdecline in share, over the past three years, can have two broad interpretations, one positive, andthe other unclear. In view of the agricultural strategy being pursued, if, on balance, the 25percent decline in share is on account of a relinquishing of the role of the public sector inproduction, processing and marketing, the trend is clearly positive; however, if it is due to areduced share in allocations for MOA divisions responsible for essential agricultural services, thedecline is perplexing and is explored further in the next paragraphs.
123. Recurrent Expenditure Performance in 1991 and Some Comments on the 1992Approved Budget. Inadequate budgetary provision for operating expenditures other than items2-5, aggravated by budgetary cuts and untimely and irregular releases, rendered expenditureperformance in 1991 disappointing. Departments were instructed to operate on 75 percent of the1990 approved budget for items 2-5 through June, and 33.3 percent of the 1991 budget for theremainder of the year. As a result, there was inadequate funding for travelling and transport(item 2), general expenditures such as certain utilities, telecommunications, accommodation,printing, insurance, etc. (item 3), maintenance, repairs and renewals (item 4), and supplies andstores (item 5). Emoluments, however, were fully funded, but this does not ameliorate the factthat salary levels and structure are less than conducive to attracting and maintaining qualified andcompetent staff in sector agencies. Further, in spite of a Directive by the Office of the Controllerand Accountant General (C&AG) allowing Department Heads to vire between items, fieldTreasuries continue to ignore the directive in implementing budgetary cuts and drawing limits,worsening an already poor funding situation, especially for the MOA, FD and the GWD. Forall the MOA technical departments, with the exception of those comprising the MOA Secretariat,recurrent expenditure returns show that for the first six months of 1991, only 34 percent of thetotal approved budget for 1991 had been spent. Of this, almost 75 percent was accounted for byItem 1, emoluments.
124. Most severely affected by the unsatisfactory funding situation was field extension, treeplanting, on-farm research trials, and on-station agricultural research, all of which had come toa near stand-still by the middle of the year. Planning, monitoring and evaluation were alsoadversely affected with the MOA unable to estimate agricultural growth for 1991 based on fullcoverage through field monitoring and evaluation, carry out essential market surveys, and proceedwith the Agricultural Census. In the forestry and game and wildlife subsectors, expenditurereturns for the first nine months of the year show that, while almost 85 percent of the 1991approved budget had been spent, as much as 95 percent of this expenditure had been used tofinance Item 1. Forest protection, nursery development (especially for rural forestry), and thetraining of foresters were among the activities most seriously affected in the forestry subsectorby the insufficient operational funding.
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125. The 1992 approved recurrent budgets for the sector as a whole convey mixed signals.
Most encouraging, is the COCOBOD budget (fourth draft) the quality of which, for the first time,
can be reported to have improved significantly. At the same time, developments reflected by the
individual non-cocoa budgets are not as encouraging. Discussed below are the salient features
of the approved recurrent budgets for the cocoa and non-cocoa subsectors:
(a) cocoa: because of the 15.5 percent shortfall in cocoa production from theexpected 290,000 tons to 245,000 tons, the positive trends in the functionalallocation of the COCOBOD Budget, illustrated in Annex A, Table 2, may bealtered slightly with final approval, but only, it is envisaged, as a result ofaccommodating overhead costs. These trends, compared to previous years, areclearly encouraging and support sector strategy. The escalation, observed inCOCOBOD's 1990/91 budget, in the allocation for direct costs, primarily for
cocoa evacuation, appears to have been reversed in 1991/92, and the share forquality control (inspection and fumigation) increased. As regards indirect costs,the allocation for cocoa extension and research has risen and that for HQexpenses has been markedly reduced. The latter was made possible byretrenchment of 25 percent of the 8,700 staff earmarked for such action, and to
whom End of Service Benefits (ESB payments) have not been fully made. In
fact, what so far has been paid is only 50 percent of the estimated gratuity bill(based on salaries as of December 31, 1990, when ESBs were frozen), and
nothing so far on severance. As regards the gratuity bill itself, in the 1991/92Budget, a provision for C10.4 billion has been made to honor gratuity payments,the breakdown of which is as follows: "retrenchment" payments 50 percent,
twenty five percent "general gratuity" 48 percent, and "normal gratuity" 2
percent. The estimated C16.6 billion for basic salary costs and relatedallowances, paid through September 1991, is not of the targeted retrenchment;accordingly, as an outcome of the current retrenchment exercise no furthersavings in this expenditure category are envisaged in future. The retrenchmentbill will, however, with the practice of factoring in cost-of-living increases each
year, grow with each delay in settlement. The savings from the significantly
lower allocation for COCOBOD's coffee and cocoa plantations deserve a
comment. With the divestiture of more than 50 percent of the plantations, over
the last few years, the budgetary provision has declined by more than 65 percentfrom last year. Also encouraging is the entire removal, from the COCOBODBudget, of the expenditure allocation for the Cocoa Processing Company (CPC).This was enabled by COCOBOD's ongoing attempts to arrange for the divestitureand/or possible joint ventures of the companies concerned;
(b) non-cocoa: worrisome aspects in the recurrent budget for the MOA concern
first, subventions and second, expenditures to finance critical agricultural
services, while those in the case of the FD, GWD and agricultural research
institutes concern the severe imbalance in the pattern of expenditures with
insufficient funding for items other than emoluments. These concerns are brieflydiscussed below:
(i) non-cocoa crops: first, in spite of the fact that the three area projects(VORADEP-Upper East and Upper West, and URADEP) are now fullyabsorbed in the relevant divisions of the MOA (previously havingaccounted for almost 65 percent of subventions), the allocation for
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subvented organizations has increased by more than 10 percent comparedto 1991. This amplified subvention budget is earmarked for expendituresfor the Bast Fibres Development Board, presently on the DivestitureImplementation Committee (DIC) list, and for the Grains and LegumesDevelopment Board, not on the DIC list, but whose seed multiplicationfunctions are a candidate for eventual divestiture. At issue, is itsmandate, which seeks to "establish its own farms for the production ofFoundation and Certified seed of the cereals and legumes .... " TheGovernment's policy in the seed subsector is to replace public sectorproduction of certified seed with that by the private sector, and toencourage the production of foundation seed by research institutes. Thethird recipient of subventions is the Ghana Irrigation DevelopmentAuthority (GIDA) for which a sharp increase has been sanctioned in spiteof its continued weak technical and absorptive capacity. A fullmanagement and financial audit for GIDA for the last two years has yetto be carried out. Continued postponement of the audit, and thereforealso of any recommended measures, including restructuring, which couldbe fundamental to strengthening implementation capacity, can onlydampen the prospects for successful investments in irrigationinfrastructure, the need for which is becoming more and more critical.
The second concern has to do with the allocations for the MOASecretariat vis-a-vis MOA key technical departments. Thus, as may beseen from Annex A, Table 3, compared to the 1991 approved budget,the share in allocation for the department for Policy Planning andMonitoring and Evaluation (PPMED) has been reduced as has that forother technical departments such as animal health, extension services andengineering services. The rationale for these reductions is not clear sincethese are contrary to the Government's agreed strategy for growth. Thelarge increased proportions for the Secretariat (from 21.1 percent to 26.6percent) and for the Crop Services Department (from almost 17 percentto almost 20 percent) is also not clear. The latter has outdated terms ofreference (drafted at a time when Government's strategy supported activeinvolvement by the public sector in credit and input distribution), andwhich as a matter of priority, as was suggested by the PER last year,require revision; furthermore, its terms of reference duplicate those ofother MOA departments. Within the Secretariat, general administrationaccounts for 65 percent of the approved budget, training and manpower22 percent, regional directors 13 percent, and the budget unit a mere 0.2percent;
(ii) forestry and game and wildlife and agricultural research: theunderfunding of items other than emoluments constitutes a seriousbottleneck to: (i) protection, conservation and management of both theforest resource and the game and wildlife resource, the latter being themost important source of animal protein for Ghana's rural population;and (ii) progress in agricultural research where laboratory experimentsplanned for the year are either discontinued or not started. The severityof the operational underfunding is evident from Annex A, Table 4. Thepattern of expenditures differs significantly between these MLNR
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departments on the one hand, and those of the MOA on the other, with
the pattern for the latter considerably more favorable. The MOA is one
of three Ministries selected, in 1989, for estimating expenditures on
items 2-5 using norms proposed by the Budget Task Force. The widelydifferent pattern in expenditures is explained by the use by the MLNR(for the FD and GWD) and the MIST (for the agricultural researchinstitutes), of norms prior to the work of the Budget Task Force. These
norms tend to emphasize emoluments, that is, item 1. For agricultural
research, inadequate funding for items other than emoluments raises the
fundamental question of the adequacy of operational funding for properly
conducted research experiments, and the prospects, therefore, for
technology generation and more productive agriculture. Unless more
adequate operational funding is also provided to the relevant agricultural
departments and institutes in the MLNR and MIST, respectively, the
urgent attention crucial for addressing environmental and technological
constraints to raising agricultural productivity will not be possible, and
the opportunities for sustained growth jeopardized, and perhaps, lost;
C. Public Investment Program
126. Size. Of the recently approved PIP for 1992-94 (excluding COCOBOD) amounting to
slightly over C1,035 billion, the budgetary provision for the agriculture sector amounts to C83.7
billion or 8 percent. This includes game and wildlife and the IDA-financed agricultural research
project, but excludes cocoa and the MIST agricultural research institutes. The MOA portfolio
of C64.7 billion accounts for 6 percent of the total, and the MLNR (forestry and game and
wildlife) portfolio of C19 billion for 2 percent. For 1992, the PIP is of the order of C259billion, in which the provision for agriculture (including forestry and game and wildlife) is C25
billion or about 10 percent of the total. Individually, the allocation for non-cocoa agriculture
(MOA) is C16.5 billion (6.4 percent), and for forestry-and game and wildlife C8.8 billion (3.4
percent). The 1992 MOA portfolio, numbering 87 projects compared to 79 in the 1991 PIP, has
been kept somewhat in check with the addition of 8 new projects as opposed to 16 last year. The
forestry and game and wildlife portfolio consists of 12 projects, 8 of which are components of
the IDA-financed Forest Resource Management Project. For COCOBOD, the 1991/92 Capital
(Draft) Budget is of the order of C6.3 billion, of which Cocoa M (the IDA-financed Cocoa
Rehabilitation Project (CRP)), amounts to C4. 8 billion. In addition to the CRP, the PIP approved
by the MFEP lists four other ongoing projects for COCOBOD, but, since no funding is shown
against any of these, it is difficult to comment on this portion of the COCOBOD portfolio.
Within the MOA, as may be seen from Annex A, Table 5, almost 50 percent of the investmentin each year of the 1992-94 PIP, is earmarked for the Secretariat (much of it for staff housing
and buildings). The second largest item in the MOA's PIP is irrigation. While investments in
irrigation are important to raising agricultural output, there remains the concern, expressed in the
discussion on the recurrent budget, of the weak implementation capacity of the Ghana Irrigation
Development Authority (GIDA). Meanwhile, the minuscule proportion of investment approved
for agricultural training, and for policy planning and monitoring and evaluation, is disconcerting.If the sector's weak implementation capacity and poor planning and monitoring, including
budgetary planning, monitoring and evaluation are to be strengthened, these allocations would
need to be revisited and increased to levels which can permit such strengthening.
127. Subsecror Shares. The Government's strategy for agricultural diversification, illustrated
by the recurrent budget analysis, is also upheld by the PIP, as is evident from Annex A, Table
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6. The share of the cocoa subsector has, since last year, fallen by 40 percent, and that of non-cocoa increased by more than 20 percent./ This notable progress reflects the Government'sdemonstrated commitment to sector policy reforms over the last several years and to whichfurther commitment has been made through the agricultural sector adjustment program.However, as will be observed later, especially in the case of non-cocoa agriculture, these positivetrends in budgetary allocation, do not, at this stage, fully reflect sector policy as espoused by the
A MTADS, particularly on credit and input subsidies and marketing. The relative slowness of theprogress in the non-cocoa subsector, compared to cocoa, is indicative of the reality of theagricultural reform and diversification process, given the inherent difficulty of achievingprivatization, civil service restructuring, and subsectoral diversification.
128. MOA Portfolio. Of the total 1992 PIP cost of C25 billion for the MOA, FD and GWDportfolio, the foreign currency cost amounts to C17.4 billion or 70 percent. About 15 percentor I23.8 billion is to be financed from budget sources/counterpart funds, C19.7 billion or 79percent by concessionary assistance (ODA), leaving C1.5 billion or 6 percent to be financed fromother sources. In the three year 1992-94 PIP, ODA accounts for 81 percent, budgetary sourcesfor a slightly larger share, 18 percent, and only 1 percent is to be completed from other sources.The proportion of ODA assistance secured is about 72 percent for the MOA, and 68 percent forthe forestry subsector.
129. That the quality of the MOA portfolio requires close scrutiny and streamlining as a matterof priority, noted in the 1991 PER, is reiterated by this PER. Poorly performing projects whichhave been extended well beyond their original implementation periods, and which have still nottaken off, should be closed, and others which are at variance with sector strategy should beredesigned. Projects in the latter category, accounting for more than 50percent of the 1992-94PIP, include projects or components where public expenditures would finance input supply,agricultural mechanization services and repair, production and distribution of certified seed,production of crops, the import and distribution of fertilizer, expansion of public sector farms,and provision of agricultural credit, etc. Apart from such public sector involvement, theseprojects or components also, in varying degree, support credit and input subsidies which, theGovernment intends to remove. Furthermore, many projects require the organization by thepublic sector of farmers into groups rather than leaving such grouping as a voluntary step to betaken by the farmers themselves. ./ Thus, within the development budget, items 7(construction works) and 9 (other capital expenditure) together account for more than 90 percent,as was also the case in 1991. Of the 1990 actual expenditures for the MOA (almost 89 percentof the approved estimate), items 7 and 9 accounted for 88 percent, and for the first nine monthsof 1991, 85 percent. The fact that staff housing dominates item 7, and farm inputs and ruralcredit, item 9, all of which would be more appropriate for the private sector is worrisome. Twoproject examples, accounting for about C65 million, are the Sorghum Project (DCS 023/92)which has as its objective, "the production and processing of white sorghum into malt for thebrewing of beer," and the project entitled New Farmers' Organization (MOA 011/91). In thefirst example, public funds are to be used to pursue an objective which cannot be considered an
17/ The non-cocoa budgets include provision for major donor-funded projects which have,or are soon, likely to come on-stream.
fa/ This approach, which has not worked well in the past, particularly in the case of thecocoa subsector, has resulted in a general apprehension by farmers to form themselvesinto groups/associations for production, processing, marketing and trading.
-40-
essential public good. At issue, in the second example, is the use of public funds to establish a
monopoly for input supply contrary to the Government's reform strategy which is to encourage
private sector competition.
130. On compliance with MFEP Guidelines for completing PIP project profiles, some progress
is in evidence, but much remains to be done in respect of Guidelines that require the calculation
of rates of return (where applicable) and recurrent costs of investments proposed, identification
(and possibly also the quantification of beneficiaries), and assessment of investment impact on
output, employment and foreign exchange. A troubling feature in the 1992-94 PIP project
profiles is their alteration. In several cases, the names, project descriptions, and implementation
periods have been changed, without mention or justification, de-emphasizing, in effect, the fact
of cost and time overruns. In other cases, sunk costs and/or foreign exchange costs, clearly
presented in the 1991 profiles for the same projects, have been excluded, resulting in
underestimation of the external financing secured and/or foreign financing gap to be closed.
Implicitly, the design and nature of the projects themselves would then have been altered raising
questions as to their continued eligibility and inclusion in the PIP. An overall shortcoming in the
MFEP Guidelines is that investments to strengthen institutional capacity under projects cannot be
gauged. As the private sector gains momentum, it is the agricultural support services which will
be most critical to raising agricultural productivity. It would be useful to know, therefore, to
what extent the projects in the PIP provide for strengthening these services by funding
institutional and implementation capacity enhancement in sector agencies. Physical targets, such
as the number of buildings rehabilitated or built, etc., can only be considered a means for
achieving the growth objective whereas the objective itself can be greatly compromised if the
capacity to provide the agricultural support has not been sufficiently developed. Since
institutional development is a relatively slow process, it is important that budgetary provision for
it be sustained at desirable levels in the coming years and disbursements and results be closely
monitored. Accordingly, it would be useful to itemize this expenditure category separately,
perhaps as Item 10, with local and foreign technical assistance distinguished.
D. Aid Pipeline for Agriculture
131. The 1992 planned disbursements for the agriculture sector (MOA) are estimated at
US$65.4 million of which 22 percent is in the form of grants, a sharp decline from about 60
percent last year.12/ The proportion of grant aid is only slightly higher in the case of the
forestry subsector, for which the 1992 planned disbursements are of the order of US$10.8
million. While budgetary data on disbursements for items 7 through 9 for 1991 are not available,
preliminary data for 1990 for agriculture show that 4 percent of the total cost (original
commitment) of the project aid-pipeline amounting to US$587.3 million had been disbursed. In
view of this, and the fact that performance in 1991 is not expected to have been very much
better, a doubling to 11 percent in 1992 (and an increase to almost 40 percent for 1992-94 period)
would appear difficult. If it is to be attained, it will require a firm commitment to the provision
and release of necessary counterpart funding through regular and timely monitoring. By donor,
15 percent of the total cost commitment is to be funded by bilateral donors, and 85 percent by
multilateral donors. If the contraction of grant aid for agriculture continues (more than 60
percent decline since last year), sector portfolios, including the sizeable one for the MOA, will
necessitate a reexamination for eligibility based on revised criteria.
12 Source: World Bank Western Africa Department,-Ghana Aid Pipeline, dated May 15,
1992.
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E. Aid Coordination
132. A key purpose of aid coordination in Ghana's agriculture sector is the need to ensuresupport by donors to the Government's development strategy. This support, to be meaningful,should be reflected not only in the approval and consent to the investment aspect of developmentprojects, and budgeted counterpart funding, but also, and more importantly, in the policy actionsimplicit in the investments and funding. Some degree of uniformity on the application of policieson subsidies on inputs and credit, and the subject of cost and credit recovery, is becoming moreand more important, in view of the efforts being made to reduce economic distortions throughmacro and sector policy reforms. Budgets should consider, therefore, the investment and policyaspects of projects as integrated investments when it comes to their approval.
F. Coordination of the Agriculture Budget
133. On the question of the agriculture sector budget, no effort was made, during budgetpreparation, to present the 1992 individual sector budgets for the MOA, MLNR, MIST andCOCOBOD to the Agricultural Policy Coordination Committee (APCC) for discussion prior tosubmission to the MFEP. Given the fragmentation and dispersal of sector institutions and lackof a single sector budget, the Government has now decided, in the context of the agriculturesector adjustment programme, on APCC as the forum for sector-wide discussion on the budgetaryimplications of intra-sectoral trade-offs, on operationalizing sector strategy, and on determiningfunding requirements for complementary investments in feeder roads, and storage, among others.The budget, as a result, would no longer be confined and the level of coordination called for bythe MTADS and enabled by such coordination could greatly strengthen budgetary planning andthe monitoring of public expenditures to ensure compliance with strategy. Coordination on aregular basis will be vital for improved management of public expenditures within the sector asa whole, particularly in the context of accelerated growth. Active involvement by COCOBODin the coordination process will also be critical. In the past, there has been a tendency, as theyear progressed, for expenditure shifts in the COCOBOD budget to favor commercial rather thanagricultural support activity. Finally, the coordinated agriculture sector budget will need toensure measurable improvement in planning and monitoring public expenditures for povertyalleviation. For this purpose, the project and programme beneficiaries, particularly theeconomically most disadvantaged, will need to be clearly identified by region in both thenarrative statements supporting the recurrent budget and in the project profiles comprising thePIP.
G. Staff Retrenchment
134. Various options are being explored to facilitate the financing of COCOBOD'sretrenchment bill. Since an inter-Ministerial Report on staffing and retrenchment for astreamlined COCOBOD was completed in July 1991, the PER does not call for a new study atthis stage. Only to the extent that the Report does not incorporate cocoa sector reforms will itrequire some amendment. This should be undertaken without delay so as not to hold backimplementation of the retrenchment programme now well under way. For the purposes of anyprospective financier for the retrenchment bill, an audit of the funds used for financingretrenchment hitherto would be useful. As regards the MOA, a review of staffing needs has beenundertaken by the Management Services Division for the Head of the Office of the Civil Service.Much of the proposed retrenchment is in the context of a unified extension service. Furtherdecisions on MOA staff structure would also need to take into account the quality and quantityof other essential agricultural support services such as monitoring and evaluation, and training.
- 42 -
A similar management review was also undertaken for the Forestry Department. It is important
that genuine requirements for incremental staffing, to enable the delivery of the forest subsector
strategy, particularly that related to protection and conservation, sustained yield management,
rural forestry, training of foresters, forest products research and other aspects, be given
appropriate consideration in the civil service restructuring.
H. Recommendations
135. The Government has a clear overall policy and strategy for the agriculture sector as
enunciated in the MTADS. It is the budget, then, that must bear a large part of the burden of
delivering the envisaged sector objectives. To facilitate the process, some workable suggestions
are proposed below, and are supported by a list of Priority Objectives and Budgetary Action Plan
for 1992 (See Annex B):
(a) to strengthen budgetary discipline, responsibility for intra-departmental
allocations and revisions therein, on each occasion of a budgetary cut, should bemade to rest with the Heads of Departments, and the implementation of all
revised allocations should be promptly carried out by the Treasuries;
(b) for coping with budgetary cuts and strengthening budgetary discipline, it is vital
that the MOA designate key staff in the Budget Unit for full-time training in
budgetary management for the next two to three budget cycles;
(c) to ensure the funding and completion of at least the most important tasks asopposed to a large number of tasks being under-funded, disrupted and leftincomplete, it is suggested that MOA departments draw up work priorities notonly within each department but more importantly across departments;
(d) to strengthen the technical and implementation capacity, a financial and
management audit to be conducted urgently for the Ghana Irrigation Development
Authority (GIDA) for 1989, 1990 and 1991;
(e) operational funding for items 2-5 should be improved in the FD, GWD,agricultural research institutes, the Cocoa Research Institute of Ghana, and theForest Products Research Institute (FPRI);
(f) to ensure adequate funding for operation and maintenance, all PIP project profilesshould be complete with recurrent cost estimates of proposed investments based
on a common methodology that can be easily followed and uniformly applied by
all sector agencies;
(g) to monitor progress in strengthening institutional and implementation capacity,budgetary provision for recording technical assistance (separately for foreign and
local) should be considered, perhaps as Item 10;
(h) to achieve some measure of integration in the planning, execution and monitoringof public expenditures, among all agriculture sector agencies, a regular budgetary
process, within the forum provided by the APCC should be formalized, so thatkey sector agencies, including COCOBOD, can debate and decide upon pertinent
- 43 -
sector issues and trade-offs across the entire sector, and the resulting prioritiesreflected in internally consistent budgetary proposals; and
(i) screening for compliance with the priorities of the MTADS as well as those ofthe agriculture sector adjustment program and policy objectives should be carriedout as part of an intra-agency review, within the context of the APCC, prior tosubmission of proposals to the MFEP.
-44- Annex A
Table 1: Subsector Shares--Recurrent BudgetLa(Percent)
1990 1991 1992
Cocoa (80.2) (76.9) (75.2)
Non-cocoa 76.6 (15.2) 66.2 (15.3) 59.4 (14.7)
Forestry 9.2 (1.8) 18.6 (4.3) 18.3 (4.5)
Research 14.2 (2.8) 15.2 (3.5) 22.3 (5.5)
Total 100.0 100.0 100.0 100.0 100.0 100.0
Source: MOA, PD, GWD, MIST, and COCOBOD.
Notes:(a) Based on approved recurrent budgets.(b) Figures in brackets denote sector shares with cocoa included.
LA Fourth Draft Budget--final not yet available.
Jable I: COCOBOD Fourth Draft Recurrent BudgetL&(Percent)
1991/92 1990/91
Evacuation (PBC) 28 34
Inspection (PID) 6 5
Processing (CPC) 0 0
Marketing (CMC) 0 0
Extension (CSD) 35 23
Research (CRIG) 2 3
Head Office 28 33
Plantations, Ltd. 1 2
Total 100 100
Source: COCOBOD.
LA Includes expenditures for Cocoa III (cocoa
Rehabilitation Project).
-45- Annex A
Table 3: MOA Recurrent Expenditures(Percent)
1991 1992Approved Approved
Secretariat La 21.1 26.6PPMED 7.4 5.9Crop Services 16.7 19.6Fisheries 4.6 5.1Animal Health (AHPD) 17.2 16.9Extension Services 29.5 23.3Engineering Services 3.5 2.6
Total 100.0 100.0
Source: MOA. Summary of Recurrent Expenditure byProgrammes and objects.
fLa Includes General Administration, Budget Unit,Training and Manpower, and Regional Services.Subventions are included under GeneralAdministration.
Table 4: Aggregate Pattern of Approved Recurrent Expenditures, 1992 a(Percent)
MOA PD GWD RI /b
Emoluments 41 96 83 79Travelling & Transport 16 2 4 10General Expenditure 16 1 6 6Repair & Renewals 10 0 2 2Other Expenditure 17 0 6 3
Total 100 100 100 100
Source: MOA, MLNR (PD and GWD), and MIST.
La Aggregated for the MOA and the MLNR departments and sub-departments,and for the research institutes.
Lb MIST agricultural research institutes.
-46- Annex A
Table 5: MOA rY92-94 PIP(Percent)
1992 1993 1994 1992-94
MOA /a 43 40 40 41
DCS 5 3 8 6
Fisheries 2 2 3 2
Animal Health (APD) 5 8 8 8
DMT 12. 11 2 8
PPMED 1 1 0 0
Extension 21 21 18 20
Training 1 1 1 1
Subventions 1 1 1 1
Irrigation 9 12 19 14
Total 100 100 100 100
Source: MOA. Summary of Recurrent Expenditure by Programmes and Objects.
/a Includes General Administration, Budget Unit, Training and Manpower,
and Regional Services. Subventions are included under General
Administration.
Table 6: Subsector Shares based on the PIP(Percent)
Approved Approved Projected1991 1992 1995 LA
Cocoa 35 20 17
Non-Cocoa 45 52 55
Forestry, and Game and Wildlife 20 28 28
Total 100 100 100
Source: MOA, MLNR and COCOBOD.
LA MUTDS projected shares adjusted for agricultural research which would
account for 10 percent.
-47- Annex B
Priority Objectives and a Budgetary Action Plan for 1992
136. Given below are the priority objectives and list of priority actions to be taken by sectoragencies prior to the next budget:
(a) MOA: the priority objective is to streamline the MOA portfolio and bring itwithin the MOA's implementation capacity, and ensure consistency in recurrentand PIP expenditures with agreed sector strategy and policy :
(i) comprehensive assessment of the previous year's recurrent and capitalexpenditure performance and results;
(ii) in-depth review of the terms of reference of each MOA department andsubvented organization;
(iii) redrafting of terms of reference, where necessary, of each MOAdepartment to mirror the activities and focus of the MTADS;
(iv) review allocations for the PPMED and the Budget Unit within the MOAwith a view to their increase to levels that can enable significantstrengthening of the functions expected of each;
(v) financial and management audit for the Ghana Irrigation DevelopmentAuthority for the last three years;
(vi) simplify the design and implementation of complex programs andprojects and where necessary close them;
(vii) complete or redesign long-started projects before approving new projectproposals;
(viii) estimate recurrent cost implications of proposed investments;
(ix) show separately in the approved PIP, funding for the operation andmaintenance of civil works and equipment and technical assistanceseparately for foreign and local;
(b) MLNR: the priority objective is to initiate, for the FD and the GWD, greaterbalance in operationalfinding and to appropriately qualify capital expenditureswhich are of a recurring nature:
(i) monitor and evaluate previous year's budgetary performance, recurrentand PIP;
(ii) introduce new norms for estimating recurrent expenditure on items 2-5;
(iii) clearly demarcate all recurrent expenditures (including those currentlybeing capitalized) not funded by donors, and provide a breakdown (andphasing, where relevant) of such expenditures in instances where they arefunded either in full or in part by donors;
-48 - Annex B
(iv) estimate recurrent costs of proposed investments for inclusion in PIP
proposals;
(c) COCOBOD: the priority objective is to monitor progress on staff retrenchment
and recurrent and capital expenditures for commercial activity:
(i) monitor retrenchment program and fulfillment of COCOBOD'sobligations for payment for retrenchment in the form of a quarterlyprogress report;
(ii) along with budgetary proposals for FY93, as an indication of the
progress made during the year on promoting both competition and
privatization, two lists, one showing the incremental numbers (and salient
features) of private traders and processors registered in coffee and cocoa,and the other, the numbers and particulars of actual and prospective
owners of COCOBOD processing capacity and plantations;
(d) MIST: the priority objective is to ensure greater balance in operational funding
and to correctly estimate non-routine recurrent expenditures related to agricultural
research experiments, for the agricultural research institutes under the purview
of.MIST and for COCOBOD's Cocoa Research Institute of Ghana (CRIG):
(i) monitor and evaluate recurrent and PIP performance of previous year;
(ii) introduce new norms for estimating routine recurrent expenditures onitems 2-5;
(iii) in addition to the above, formulation of a proposed method for estimatingthe recurrent costs specifically related to the series of researchexperiments planned for the year; and
(iv) presentation of recurrent cost implications of investment proposals,routine and experiment-linked.
137. Across all sector agencies, 1993 recurrent and PIP budgetary proposals are to be
reviewed for the following:
(a) addressal of issues concerning poveny, women and the environment in both the
recurrent budget proposals and PIP project profiles ;
(b) progress withfiscal decentralization in the MOA, and the possibility of its early
introduction to the FD and the GWD. The work of these latter departments has
important economic implications for the rural economy through their familiaritywith local environmental problems of soil erosion and progress with tree plantingand other environmental measures. Besides, NGOs work in close cooperationwith the FD and the OWD and are in close touch with the economicallydeprived. Early decentralization would prove invaluable in identifying these
target groups and in the assessment of, and planning for, the poverty focus of
public expenditures; and
-49- Annex B
(c) progress with introducing, within each Ministerial department, measures formonitoring expenditures. It is suggested that computer formats and files be set-up, within each sector agency, to record departmental expenditures and releaseson a fortnightly basis. This budgetary database should form the basis in thepreparation of draft budgetary proposals.
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IV. THE MANUFACTURING SECTOR
A. Background
138. Sector Overview. Ghana's manufacturing sector ought to play a more significant role
in the country's industrial development and accelerated growth program. The Government'sefforts at institutional, financial and structural reforms have had a limited impact primarily
because of the extent of deterioration the manufacturing sector has experienced in the last twenty
years. Efforts to resuscitate the manufacturing sector have included increased access to foreign
exchange, a relaxed price control system, a reduced tax burden, and various incentives to effect
stronger private sector participation in the economy.
139. More recently, the Government's 1992 budget proposal has made a I12 billion provision
for an enterprise restructuring program. The Government is also pursuing a divestiture program
which is aimed at transferring resources to, and subsequently strengthening the private sector.
These reforms have been, and continue to be aimed at creating a more internationally competitive-sector which can substantially boost foreign exchange earnings, reduce dependence onmanufactured imports, and generate employment for the country's growing labor force.
140. These reforms have had some positive effects which have included a modest increase in
manufacturing share of real GDP from a low of 7 percent in 1983-to 10 percent in 1991, and an
increase in contribution to recorded employment from 10 percent in 1984 to about 14 percent in
1988.2/
141. Nonetheless, sector performance is still for the most part, at 1960 levels; and severe
bottlenecks continue to plague the manufacturing sector which include:
(a) low capacity utilization rates-a result of obsolete or underutilized plant andmachinery. Average recorded capacity utilization rate is 41 percent. Agro-based
industries have relatively higher capacity utilization rates of 60-70 percent while
pharmaceuticals and garment industries maintain a low rate of 20-22 percent.
(b) limited access to credit-a more prudent banking system has emerged as a resultof financial sector reforms, and while the effects of these reforms have beengenerally positive, banks are increasingly cautious with their lending programs.The need to control inflation has also contributed to the restriction of money incirculation.
(c) high cost of production inputs-a significant number of these enterprises are
highly import-dependent and adversely affected by exchange rate fluctuations.
This problem is further compounded by the fact that the sector still has
inadequate backward and forward linkages to other sectors such as agriculture.
(d) enormous devaluation of the cedi-this has inflated the value of past debts andresulted in the placement of over 50 percent of manufacturing enterprises underthe Non-performing Assets Recovery Trust (NPART).
2,Q/ Limited information on employment statistics. Latest available figure is for 1988.
Information Source: Quarterly Digest of Statistics, September 1991.
- 51 -
(e) uncompetitive product price and quality-most of the enterprises in this sector arevery small and cannot capitalize on economies of scale. Production is alsogeared primarily towards a domestic market and does not compare favorably withinternational quality standards.
B. Composition of the Sector
142. The sector's activities are fairly diversified and can be grouped into three maincategories-consumer, intermediate and heavy goods industries. The first group which includesfood processing, beverages, tobacco, textiles and garments also plays a relatively important rolebecause of a higher contribution to manufacturing value added and employment. Intermediateand heavy industries include chemicals, petroleum refining, non-metallic mineral products, basicand fabricated metals, electrical goods and transport equipment.
143. The manufacturing sector is also characterized by a large public enterprise component.The Government currently holds ownership interest (wholly state-owned and joint state-privateenterprises) in some 300 enterprises which span from manufacturing to tourism. The PublicEnterprise (PE) Sector is characterized by high losses and low productivity, and has generallybeen a drain on government resources.2d/ At least 250 of these enterprises, 76 percent oftotal PE portfolio, are currently under the auspices of the Non-Performing Assets Recovery Trust(NPART) and require some form of restructuring or bailout.
C. Budget Performance in 1991
144. Projects in the Public Investment Program (PIP) portfolio of the Ministry of Industry,Science and Technology (MIST) divide into two broad categories-support/research servicesprojects and commercial projects. In 1991, budget releases for the 23 support/research servicesprojects appear to be on the decrease, with approximately 50 percent of total approved budgetfor support/research services released as compared to the 1990 figure of 60 percent. About halfof the projects received only a quarter of their approved expenditures. Only four of the projects-Ghana/Cida Grains Project, Industrial Research institute, Animal Research institute andGhastinet-were allocated funds during all 4 periods. Most of the other project allocationsoccurred during the last 2 quarters of 1991. Two projects (Animal Research Institute and theInstitute of Aquatic Biology) however, exceeded their budget allocations for 1991.
145. General under-expenditures are attributed to untimely releases of budgetary resourceswhich are in turn explained by delays in finalizing the sectoral budgets as well as unpredictablegovernment revenues.
146. The budgetary resources for the commercial projects are divided into budget counterpartfunds and net lending. The 1991 capital provision of 0626 million is a substantial reduction fromthe 1990 figure of 1,602 million. The reduction is very much in line with government strategyto reduce outflows to state owned enterprises. Of the three projects which received funding fromnet lending sources, only the NICOM Fluorescent Tube project received it's full budget provisionof 0291 million. Total capital released as a percentage of budget provision was 77 percent.
21/ Resource outflow has reduced somewhat as the Government continues to pursue itsdivestiture program.
- 52 -
147. About 96 percent of the Ministry's recurrent budget allocation for 1991 (I2,963 million)was for subvention. Actual subvention expenditures for the period was 02,546 million of which
Personal Emoluments constituted approximately 90 percent. In both the development and therecurrent budgets, priority disbursement appears to have been given to projects with foreign
assistance components.
148. The problem of inadequate information on actual expenditures still persists, and does not
permit any meaningful evaluation of the financial performance of projects in the manufacturing
sector.
D. Proposed Capital Budget for 1992-94
149. The Government's strategy of downsizing state-owned commercial enterprises is reflected
in the allocation of resources in the 1992-94 public investment program. The budgeted allocation
of investment funds to state-owned manufacturing enterprises, whether through direct investment
or net lending out of budget resources has been decidedly reduced. Approximately 64 percent
of budgetary resources allocated to industry is earmarked for suppoit services and research
projects, the objective being to create a more formidable foundation for business development.
Net lending for commercial projects has been restricted to two projects-Nsawam Cannery
rehabilitation and the Fluorescent Tube project. About 85 percent of commercial projects funding
is expected to be generated from ODA, commercial and own sources. No resources are allocated
to any new state-owned commercial projects.
150. It is difficult to make any meaningful conclusions about the level of funding for
research/support agencies, given that quite a few of them have substantial revenues accruing from
services offered to the public which they do not declare to the Government for fear of budget
reductions.
E. Special Issues
151. A major problem still exists regarding data on the manufacturing sector. The ministries
involved have so far been unable to develop a comprehensive information database on the sector.
In addition, there is no articulated set of objectives or strategy for the sector, nor any detailed
plan of action for achieving sector objectives. The result is that it becomes difficult to draw any
meaningful relations, or for that matrar, measure performance in any practical way.
152. The current composition of MIST-industry and science/technology-makes it difficult to
focus on any of the two sectors. There is no clear-cut strategy regarding allocation of resources
between industry on the one hand, and science and technology on the other. While it is possible
that research on the latter feeds into industrial development, it is necessary to point out that
scientific research does not necessarily translate into industrial development. In fact a heavy
emphasis on scientific research may actually draw resources away from industrial research and
development.
153. Quite a number of the research units receive significant revenues from services rendered
which are not captured in the budget process. It is, therefore, difficult to make any conclusions
regarding the level of funding.
- 53 -
154. There appears to be some duplications in functions. GRATIS and DAPIT could, forexample, capitalize on economies of scale by merging their technology development functions.Likewise the Food and Crop Research Institutes which could provide complementary research.
F. Recommendations
155. The Ministry of Industry, Science and Technology should articulate more detailedobjectives and strategy for achieving these objectives.
156. More detailed analysis of support and research projects should be initiated to promoteappropriate industrial development research. Such an analysis should place emphasis on prioritysupport/research projects for which additional funding would be justified.
157. Capital and operating budgets for most of the institutions providing support services toindustry as well as for research institutes need to be increased to enable effective operations andpromote stronger support for the industry.
158. Finally, a more thorough analysis of resource outflow from Government to themanufacturing sector would have to include budgetary allocations to projects and support serviceswhich fall under the Ministries of Trade and Tourism and Finance and Economic Planning.
V. MINING SECTOR
A. Background
159. The mining Sector continues to be a major contributor to the economic development ofGhana. During 1991, it accounted for about 20 percent of export earnings and employed over20,000 persons in the larger mines, and approximately 30,000 people in small scale and artisanalmining activities. Gold is the main sectoral product, accounting for 83 percent of mineral exportsby value, and for about 85 percent of formal sectoral employment. Since 1985, the investmentin large-scale gold projects has exceeded US$500 million. Accordingly, its production has grownsteadily, paralleling improvements in overall country economic and investment conditions.
B. Strategy
160. The Government strategy for mining aims at increasing sectoral output and strengtheningsectoral institutions to in order to support sector development. In this regard, IDA has providedcontinued support and funding to rehabilitate and develop the mining sector, including theongoing Mining Sector Rehabilitation Project. Its execution period was designed to cover fouryears, starting in mid-1988, for which total financing requirements were estimated at US$120million. Funding was raised from IDA (US$40 million), EIB ($12.5 million), Caisse Central(US$10 million) and ADB (USS27.5), with the balance to be provided by SGMC, joint venturesand the Government. The objectives of this project were centered on: (i) redeeming the threeGovernment-operated mines of SGMC (at an estimated cost of US$114.5 million); (ii) attractingprivate investors; (iii) providing support to agencies in the mining sector; (iv) providing limitedtechnical assistance to the small-scale mining of gold and diamonds; and (v) encouraging thedevelopment of informal markets for small-scale mining. In turn, the approach agreed with theGovernment to rehabilitate SGMC's mines consisted of: (i) expanding ownership of the minesto potential joint venture partners; (ii) establishing joint ventures for those mines for which
- 54 -
reasonable bids are received; and (iii) executing the joint venturing process at a timely pace to
allow prompt start-up of rehabilitation work.
161. Generally, the implementation of the Government's strategy is progressing well, with the
exception of SGMC. As mentioned above, good progress is observed in attracting foreign
investment for new gold production, and in small-scale mining whose output is increasingly being
traded through the Precious Minerals Marketing Corporation. An area of particular success has
been the advancement in divestment of Ghana Consolidated Diamonds. Also, some progressalthough slower, is noted in the improvement of sectoral agencies concerned with health and
safety, geological survey, environmental controls, and regulatory framework.
162. . On the other hand, the sector strategy concerning SGMC has undergone serious delays.
Initial slippage took place on proposed rehabilitation and joint venturing due to lack of decisions
and commitments from the Government. Subsequently, rehabilitation was detained by difficulties
on procurement, engineering and hiring of expatriate staff. These resulted in shifting the project
focus from rehabilitation into inadequate efforts of virtual operational sustenance and funding of
consumables. The activation of steps to improve mining operations of SGMC ultimately resulted
in failures. This led to Government decisions by July 1991, to halt financial drains and losses
from SGMC, which in turn induced the discontinuation of rehabilitation efforts, and to place
added emphasis on achieving the joint venturing of SGMC's mines and the down-scaling of its
support facilities and services. The down-scaling is progressing well, with reductions and
closures of offices in London, Accra and Takoradi.
163. The joint venturing of SGMC's mines, however, is progressing very slowly due to lack
of decisions and commitment from the Government, and to inordinately protracted procedural
steps. Currently, joint venturing endeavors are based on several attractive offers received by theGovernment in mid-February. The Divestment Subcommittee for the mining sector evaluatedthese bids, selected one firm for joint venturing the Tarkwa and Prestea mines, and issued areport with its evaluations and recommendations in early May; the selected firm although
incorporated in Europe is fully owned and managed by a South-African mining company. The
Subcommittee's findings remain under consideration by authorities responsible for divestiture,
with a formal decision expected by end-June. Such a decision and its timing are appearingprogressively clouded by concerns vis-a-vis political considerations. This timing is increasinglycrucial for the future of the mines because: a) the mines are entering into financial insolvency;b) the tranching of IDA's credit is becoming operational; and c) the materialization of insolvencyand tranching problems would restrict flexibility from IDA to support an eventual re-activationof efforts to divest the mines.
C. Environmental Conditions
164. Very little attention was given in the past to effects from mining on the environment.The results are serious health hazards, from water contamination and air pollution from mines
using chemicals to process ore, or with poisonous substances released. Additionally, land
degradation has resulted from surface operations and deposit of waste products after processing.These effects, while generating disputes from adjacent populations, have been relatively localized
around the mines. However, the Government now gives high priority to addressing these issues,
including those caused by small-scale miners, since they originate frequent discontent and disputes
between the involved parties.
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165. Accordingly, Environmental Impact Assessments (EIAs) are being prepared for newconcessions and projects, to provide for rehabilitation of mined areas. Also, the EnvironmentalProtection Council (EPC), is collaborating with the Minerals Commission in the establishmentof sectoral environmental standards and guidelines that will cover all mining operations. Theirmonitoring and compliance will be the responsibility of the Mines Department, under Ministryof Lands and Natural Resources. However, such activities will be difficult to address for small-scale miners, because these are hard to control, and lack means to incur extra costs for landreclamation. An effective environmental monitoring unit is clearly needed in the MinesDepartment to ensure implementation of EIAs and compliance with environmental standards, tobe promulgated in early 1993. Additionally, further strengthening of sectoral institutions isneeded to ensure adequate ability to execute other tasks, including health and safety inspections.
D. Budget 1992-94
166. The mining segment of the investment budget of the Ministry of Lands and NaturalResources is very small, and is disproportionate to the large investments taking place in the sectorby private firms. The main items that appear in the public budgets for 1992-94 concern SGMCand GNMC. Krst, on SGMC during 1992, a total of E4,151 million (including 03,251 millionin foreign exchange) are budgeted for the rehabilitation of SGMC's Tarkwa, Prestea and Dunkwamines. This total amount increases to C3,375 million (including 2,538 in foreign exchange)for 1993, and is non-existent in 1994. These budget provisions need clarification since the minesare either in a joint venture or closure course, which should decrease hard currency requirementsand contributions from the Government. The difference of 0900 million in local currency couldbe explained as requirements for personnel reductions. Second, on GNMC during 1992, a totalof Q1,211 million (including C1,058 million in foreign currency) is assigned for rehabilitationof the mines and nodulation plant. This allocation is increased to C2,707 million in 1993(including C2,450 million), and to C1,818 million in 1994 (including Q01,541 million in foreignexchange). A commitment of C5,736 million from public resources is rather substantial whenonly replacement investments and modest rehabilitation are needed. This merits closer scrutinyof: objectives, alternative options, supporting rationale and justifications in technical andeconomic terms, and a review of respective feasibility work.
167. In regards of the sectoral institutions some increases are clearly in order for: a) theMines Department -if it is going to undertake any meaningful work and contribution indevejopment of small scale mining, and in meeting its functions as field environmentalenforcement agency for the mining sector; and b) the Geological Survey to reflect addedrequirements for geological support in the development of small scale mining.
E. Special Issues
168. A key sectoral issue concerns the joint venturing of the SGMC's mines vis-a-vis theirforthcoming financial insolvency, and evolutions in the political environment, which mayintroduce further delays in the divestiture process. Another important issue concerns the needto ensure adequacy of sectoral institutions, such as the Geological Survey and the MinesDepartment to meet their added and more complex responsibilities, which are caused mainly bysectoral growth of surface mining and gold leaching, increased importance of developing small-scale mining, and introduction of sound environmental standards and practices. This raises theurgent need of completing environmental studies, with particular focus in regards to small-scalemining, and to socio-economic effects resulting from past extended contamination and pollutioncaused by mineral industries. Finally, public budget allocations to SGMC and GNMC need
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careful scrutiny. In the case of SGMC this appears complicated by issues concerning nationality
of joint venture partners, political developments, and the financial situation of the mines.
VI. POSTS AND TELECOMMUNICATIONS
A. Sector Background
169. All public investments in the sector are managed by the Ghana Posts and
Telecommunications Corporation (GPT), an autonomous government-owned corporation
established by decree in November 1974. GPT provides all public telecommunications and postal
services in Ghana. In addition to public telecommunications services, dedicated networks exist
to meet the specialized requirements of the police, military, railway and civil aviation services.
Private users also operate radio link services in areas inadequately served by the public network,upon obtaining a license issued annually by GPT. GPT also carries out some regulatory functions
such as setting equipment standards and granting of equipment type approvals. Management of
the frequency spectrum is carried out by the Ghana Frequency Registration Board.
B. Sector Performance
170. Telecommunications facilities in Ghana are inadequate both in quantity and quality.
Ghana is now implementing the Second Telecommunications Project (STP) which aims at
supporting a program of improvement in sector and entity management, the quality of service and
financial performance. The Government of Ghana (GOG) has singled out the telecommunications
sector as one of the essential infrastructure sectors that need urgent rehabilitation and expansion.
The GOG his recognized that sustainable economic growth needs an efficient flow of information
which can best be achieved through an accessible and reliable telecommunications system.
171. The ongoing telecommunications project is focussed towards the physical rehabilitation
of some of the existing assets and effecting the necessary institutional reforms at sector and entity
levels to ensure that improved service quality is achieved and sustained. At the end of this
project, now scheduled for end of 1994 because of a two-year start-off delay, substantial
improvements are expected in the quality of service, financial performance and overall efficiency
in the management of the sector. Some of these improvements have already been achieved such
as an increase in the ratio of working lines from 50 percent to 70 percent since 1987, an increase
in the call completion rates from 20 percent to 50 percent for STD services and from 15 percent
to 35 percent for international services, and an increase in the collection ratio from 30 percent
to 90 percent. GPT made profits for five years successively from 1987 to 1991, the most recent
prior year in which profits were made having been 1980. Due to the limited manpower and
financial capacity of GPT, the size of the ongoing project had to be very much curtailed at the
design stage. Thus, only about 40 percent of the network is actually being rehabilitated. The
ongoing project does not also cater for the ever rising demand for telecommunications services
which has recently been accelerated by increased economic activity. By the end of this project
the expressed demand is expected to exceed 140,000 lines against an installed capacity of only
76,000.
C. Sector Constraints
172. The overall poor performance of the sector and inadequacy of facilities have been due
to:
|*
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(a) lack of sector and operating policy which would, inter alia, define GPT'sfinancial and administrative autonomy, and the framework in which service canbe provided by other organizations.
(b) lack of proper management capacity and trained manpower to maintain theexisting facilities efficiently, to plan and implement development programs andto implement the proposed commercialization program. These have resulted inweaknesses in planning, operations and maintenance, financial management,billing and collection, procurement and project management; and
(c) lack of local and foreign funds which has limited GPT's ability to procureessential equipment and materials for maintenance and expansion. This hasmainly been due to poor financial performance of the Ghana Posts andTelecommunications Corporation (GPT), and the relatively low priority accorded,until recently, to the telecommunications sector by the GOG.
173. To overcome some of the current institutional deficiencies and to develop an informationbase for detailed planning and implementation of the proposed project, the ongoing projectconsists of a large component of technical assistance which includes the employment ofconsultants to design and assist in implementation of appropriate sector and management reforms.
D. Organization and Management
174. GPT falls under the supervision of the Ministry of Transport and Communications(MOTC), which is responsible for approval of investment programs, budgets and changes intariffs. Under the decree establishing GPT, the Corporation has limited control. over staffremuneration which has to fall within the framework of all parastatal organizations. In addition,dependence of GFr on the Government to service part of its foreign debt has further erodedGPT's autonomy and made it function as if it were a government department. This has not beenconducive to the efficient operation of GPT, especially when there is lack of consistentdevelopment and operational policies from the government. The Board of Directors has also beenconsistently weak-and is in fact currently suspended.
175. OPT's organization structure and procedures are inadequate to manage the current assetsand the vital rehabilitation program, or to administer a viable and sustained growth of the sector.GPT's present management systems are not only inadequate, but also fragmented. Because ofthe lack of management information systems, management is unable to obtain pertinentinformation when needed. Planning is virtually non-existent in GPT at the moment. The poorquality of services is partly due to the lack of proper operations and maintenance systems.Substantial improvements are required in management information systems, planning, operationsand maintenance, finance, billing and collection, procurement and project implementation.
176. GOG has recognized the need to strengthen GPT's operations and organization; improveefficiency to maintain and operate the existing network; undertake rehabilitation; and plan forfuture expansion. GOG has decided to split OPT into separate legal entities for postal andtelecommunications services and to strengthen these entities to make them more responsive to theneeds of individual sectors. Consultants have proposed modalities for the split and theGovernment is at an advance stage of implementing them. Two separate public corporations forpostal and telecommunications services will be created instead of the present single posts and
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telecommunications corporation. The creation of these corporations is expected to give more
autonomy to the two sectors and the mandate to operate on more commercial basis.
E. Sector Objectives
177. A well functioning communications network has been identified by the GOG as beingstrategically crucial to the success of Accelerated Economic Development. The GOG is awareof the need to optimize the utilization of existing assets through the execution of effective
rehabilitation programs and installation of appropriate maintenance systems. The main sector
objectives are to:
(a) improve the quality of service and operational efficiency through networkrehabilitation and expansion, installation of an effective operations andmaintenance program, and improved management and staff developmentprograms;
(b) ensure that installed assets are optimally utilized through installation ofcomplementary assets; and
(c) improve sector financial performance to eliminate existing GOG subsidies andeventually generate revenues for GOG.
F. Sector Strategy
178. The ongoing project only partially addresses the sector's problems of undersupply andpoor quality of service. Since adequate supply of a well functioning telecommunications networkis strategically crucial to the success of the Accelerated Economic Program, GOG has assigneda high priority to improvement and development of the sector. GOG is aware that Ghana's futurecompetitiveness in the international market will very much depend on its ability to access andexchange information globally. In line with the world trend, Ghana will have to revolutionize
its ways of conducting business to ensure that the comparative advantages brought about by the
information technology are fully exploited for the rapid economic development of the country.A prerequisite to the achievement of this objective will be the establishment of adequate goodquality telecommunications services. This will involve undertaking massive mobilization ofmanagerial, technical and financial resources. However, given the sector's present developmentconstraints, it is unlikely that these resources can be mobilized under the present monopolisticsector structure. Sectoral and management reforms will be necessary to ensure that theenvironment is conducive to attracting capital from all available sources especially the privatesector. The GOG is aware of the need to implement sector and management reforms necessary
to ensure private participation and full commercialization of the sector. GOG's strategy for
improving the performance and developing the sector include:
(a) consolidation of institutional reforms and management improvements initiated inthe ongoing project aimed at full commercialization of GPT;
(b) articulation of a sector policy and regulatory framework appropriate tocommercial operation and development of the sector including drafting thenecessary legislation to facilitate participation by other organizations (public and
private) in the provision of service;
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(c) improving the quality of service offered to subscribers through appropriaterehabilitation programs;
(d) increasing facilities through expansion programs in areas where the demand andexpected financial returns are high; and
(e) assisting GPT to become financially self-sufficient through appropriate financialrestructuring and setting appropriate tariff levels.
G. Capital Expenditure Program
1. Telecommunications
179. The Second Telecommunications Project (Credit 1946-GH), defines the annual capitalinvestments over the next two years. The GOG and OPT have agreed that any investmentexceeding US$1.0 million outside this program has to be agreed with IDA. Based on this, themain part of the GPT 3 year investment program 1992-94, is the ongoing SecondTelecommunications Project. The only item on the program that has not been discussed withIDA is item PTC/016/92-Telecommunications facilities for District Centers. This item has beenincluded to facilitate the Government's plans to de-centralize.
2. Postal
180. The postal investment program contained in the 1992-1994 PIP has been trimmed toinclude only those urgent items required for rehabilitation.
a. Costs
181. The annual costs (million cedis) of the three year telecommunications and postal programsas estimated by the Government approved PIP are summarized below:
1992 1993 1994 1992-94
Item F T L F T L F T L F T
Telecom. 1,186 8,766 9,952 1,889 23,664 25,DB0 359 1,280 1,639 3,434 33,237 36,671Postal 338 221 559 228 473 701 228 74 302 794 768 1,562
Program totaL 1,524 8,987 10,511 2,117 23,664 25,781 587 1,354 1,941 4,228 34,005 38,233
b. Issues
182. Loan Portfolio. The main issue with GPT remains to be its large loan portfolio. Theforeign loans alone stand at about US$170 million equivalent. Currently, the Government issupporting OPT to service some of these loans. The Government will need to continue with thisarrangement until FY93 when the financial situation of GPT is expected to have improvedsufficiently to meet all its debt obligation. The project also includes financial restructuring whichhas not been worked out yet.
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183. Staff Costs. Staff costs have grown substantially over the past two years due to increase
in salaries and benefits. To cut down on these costs will need a drastic reduction of staff at GPT
which is now over-staffed by about 30 percent (about 2000). Although GPT has commenced the
retrenchment exercise under its own resources, given its large debt and development
requirements, it will take a very long time before the retrenchment exercise is completed.
184. Postal Service. Postal services continued to incur losses during FY91 and are likely to
continue in FY92. This loss is being subsidized from telecommunications services. As part of
the Second Telecommunications Project, the GPT is being split into separate postal and
telecommunications entities and each entity reorganized for full commercial operation. The split
has been re-scheduled for beginning of July 1992. Since the direct subsidy from
telecommunications will not be available to the postal entity, the Government will need to
continue providing development funds to the postal until the financial performance of the postal
entity improves substantially.
185. Recommendations. To resolve the above issues, the following is a summary of our
recommendations:
(a) The size of the postal and telecommunications PIP should continue to be limited
to avoid further accumulation of debt and drain on meager government financial
resources;
(b) Investments in the postal sector must be associated with a comprehensive plan to
improve management;
(c) Government should continue supporting GPT for postal investments; and;
(d) GPT should consider seeking Government's assistance in mobilizing funds for
retrenchment costs.
VII. INFRASTRUCTURE
A. Financing Overall Infrastructure Programs and Generic Issues
186. The package of structural adjustment policies succeeded in increasing economic growth
to 5 percent per annum between 1986 and 1991. In this process it was recognized that many
public sector functions of Ghana should be absorbed by the private sector, but that continued
public investment in infrastructure would be a necessary underpinning to private sector
development and more rapid economic growth. The importance of infrastructure investment is
reflected in the public investment program where some 61.5 percent of investment is dedicated
to infrastructure (including power and telecommunication) with about 44 percept for roads and
transport alone.
1. Past Budget Performance
187. Within the narrow budget government financed capital expenditure increased from 12
percent of total government expenditure in 1984 to 19 percent in 1990. Within broad government
expenditure, capital expenditure has increased from 12 percent in 1984 to 36 percent in 1990.
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188. Within capital expenditures, infrastructure expenditure (excluding telecommunication andenergy) has steadily increased. In the narrow budget, total infrastructure (consisting of roads andhighways, other transportation, water supply and urban and housing) increased from 46 percentin 1987 to 59 percent in 1989, roads and highways decreased from 40 percent in 1987 to 33percent in 1989, and water supply has increased from 2 percent to 3 percent.
189. Within the capital expenditures, transportation subsectors account for the largest share.In the 1991 narrow capital expenditure program, roads and highways account for 39 percent,other transportation 6 percent, water 3 percent, urban and housing 4 percent, totaling 52 percent.Within the broad capital expenditure program in the same year, roads and highways account for21 percent, other transportation 23 percent, water supply 7 percent, urban and housing 4 percent,totaling 55 percent.
190. Infrastructure PIP is heavily leveraged by foreign donors finance. Within the 1991 broadcapital expenditure program, the secured foreign finance accounts for 83 percent of water supplysubsector, 58 percent of urban and housing subsector, 35 percent of roads and highways, and 92percent of other transportation subsectors.
2. Finalized PIP for 1992-94
191. The finalized PIP of five subsectors in infrastructure are summarized below: (a) roadsand highways, (b) other transportation, (c) water supply, (d) works and housing (excluding water)and (e) local government.
1992 1993 1994
GOG PIP G0 PIP GOG PIP
Roads & Highways 30,474 56,526 36,878 77,811 41,991 87,725
Transport & Telecom. 2,878 46,935 3,455 77,055 3,637 115,872
Water Supply 2,493 12,762 3,659 24,738 4,035 26,663
Works & Housing Exc. Wat. 8,185 10,871 10,782 13,502 12,458 14,996
Local Government 2,838 4,170 2,887 4,393 2,591 3,716
Note:GOG - funding by GOG.PIP = total public investment program including external financing.Unit - million cedis assuming 1992 prices.
3. Generic Issues in Infrastructure Expenditure
192. Design Efficiency. In light of the high level of infrastructure investment require andstrained financial resources, efficiency in investment is essential. Hence, high rates of return andlow cost design are the important criteria in choosing priority projects/programs. Following thesetwo principles, the priorities in resource allocation in infrastructure services normally go: firstto operation and maintenance; second to rehabilitation of existing facilities; and the last to newinvestment. New investment projects have to be critically examined and also the maintenancecost of those new investments should be estimated and accounted as costs in choosing investment.
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193. Capacity Building and Institutional Development. Most infrastructure investment,maintenance and operation in Ghana are undertaken by public sector institutions. In many cases,these institutions are lacking in efficiency and reliability. Management capacity building andinstitutional development are essential to ensure proper operation and maintenance ofinfrastructure investment. This is especially true in the case of water supply. Continued effortsto improve administration, staffing and finance in the Ghana Water and Sewerage Corporation(GWSC) are required. Efforts to improve the capacity of the Ghana Highway Authority (GHA)and the Department of Feeder Roads (DFR) are essential to the future of the country's roadnetwork. Successive urban development projects have sought to strengthen the administrative andfinancial capacity of local governments. Many attempts to improve infrastructure administration,however, are constrained by lack of autonomy in the agencies making it difficult to set tariffs andimprove financial performance by themselves.
194. Private Sector Participation. Given the difficulties with public management of mostinfrastructure services, many countries are exploring ways of increasing private sectorparticipation. Many infrastructure parastatals in Ghana are suitable for private operation.Infrastructure services with constant return to scale (such as bus, truck and some bargeoperations) can be operated efficiently by the private sector. Urban solid waste managementoperations in many cities and some port operations can often be more efficiently operated by theprivate sector. In many countries, the management and maintenance of water supply systemshave been leased or contracted out to private firms with large improvements in efficiency andfinance. These should be considered in Ghana also.
195. In promoting private participation and efficiency of infrastructure parastatals, there aretwo concerns: (a) the role of the Prices and Incomes Board (PIEB) in price and salary decisionsfor parastatals; and (b) the role of the Ghana Supply Commission (GSC) in procurement of goodsby parastatals. The question of how parastatals with proven procurement capacity can becomeexempt from the requirement to use the Ghana Supply Commission, has to be studied.
196. Pricing and Cost Recovery. Closely related to institutional development, cost recoveryis essential to the sustainability of infrastructure investments, providing for both operation andmaintenance as well as providing for funds for future investment. Major innovations have beenmade in cost recovery from highway users in Ghana, with the establishment of a Road Fund frompetrol taxes, the proceeds of which are dedicated to road maintenance works. Major challengesremain in efforts to recover the cost of water supply and in increasing urban property valuationsand tax receipts to recover the cost of urban services. Efficient water pricing (through tariffs),urban infrastructure pricing (through property taxes) and transport pricing (through user fees suchas gasoline taxes) are important in this regard. The pricing of infrastructure services can alsohave important environmental implications.
197. There are so many projects that are old and receiving small amounts every year and thatconsequently have not been completed after several years. If not completed, those projects cannotyield any benefits and their economic returns will be substantially reduced. It is necessary toreduce the number ofprojects and complete them quickly. This will yield benefits quickly andincrease projects' rate of return substantially.
198. Many ministries and specialized agencies made budget requests which were much higherthan the ceilings suggested by MEFEP's Guidelines, although what they finally received wasalmost the same amount as indicated in the Guidelines. It is a waste of time and energy to repeatthis cycle of over-requests and reduction. To solve this problem, prioritization of projects is the
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key. It is recommended to separate a budget request into two parts: the priority request whichis strictly within the ceiling and the reserve request whose amount is limited to 50 percent of theceiling and that can only be financed if MFEP agrees the projects are of high priority if revenueimproves.
B. Roads, Highways and Other Transportation
1. Subsectoral Issues
199. Transport Subsector as a Whole. Ghana would need to invest annually about US$140million in the transport subsector assuming the past trend of economic growth continues. Thishuge investment is needed mainly to clear past backlogs. The present level of domestic resourcemobilization should make this target achievable by 1998. For example, annual road maintenancecosts will stabilize around US$60 million from 1998, while the present level of cost recoveryfrom road users slightly exceeds this level.
200. The capacity for implementing subsectoral programs exists as far as programs areimplemented through contracting-out to the private sector, as most of these works are done bylocal and foreign contractors, supervised by local and foreign consultants, with overallsupervision from MRH agencies which do have the necessary competence. In the future,however, there should be increased emphasis on strengthening domestic institutions and domesticconsulting capacity. Financial sustainability is achievable in most of the subsectors by about1995, but to achieve it continuing the current efforts in strengthening institutions is necessary.Transport parastatals like the Black Star Shipping Lines, the three state bus companies and GhanaAirport Authority, however, may continue to face financial problems, unless drastic measures aretaken to reorganize them or to privatize some part of them.
201. Roads and Highways. Road rehabilitation remains a large task because of the size ofthe network, deteriorated present condition, high engineering design costs and high investmentcosts. Basic policies to tackle this are: (a) to continue the phased road program for trunk roadrehabilitation supported by the Transport Rehabilitation Projects with the objective of improvingroad conditions from about "30 percent good" in 1988 to about "68 percent good" in 1998; (b)to launch an 8-year national feeder road rehabilitation and maintenance program, focussing onremoving critical bottlenecks in rural accessibility (c) to continue and increase the share of theRoad Fund to finance part of road maintenance costs. There is a need for the Road Fund to beincreased over time from US$18-20 million per annum to US$65-70 million.
202. Railways. It is expected that GRC will not require further revenue subsidies by 1993,and that it would fully cover debt service charges by 1994. Any delay in the availability oflocomotives and the resolution of other problems would postpone the achievement of thesetargets. It would be important for the government to provide immediate assistance for fundinglocomotives, releasing agreed budget provisions, and assisting the railway in staff retrenchment.
203. Ports. Commercialization and partial privatization are the major issues. The Ministryof Transport and Commufication (MOTC) would like to privatize the container handling part ofGhana Ports and Harbors Authority (GPHA). It could be leased for 5-7 years. The MOTCshould also consider more ways to increase port efficiency through private sector participationin other areas (e.g., stevedoring and port labor). In the GPHA itself, management assistance islikely to be necessary for at least two more years. It would be important to assign and trainadequate counterpart staff. Port tariff increases should be monitored through a cost index system
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to avoid potential tariff increases due to the monopolistic nature of port management. It would
be important to assess additional container handling facilities.
204. Public Transport. Transport parastatals such as Omnibus Services Authority, City
Express and State Transport Corporation perform functions similar to those performed by private
sector enterprises and with constant returns to scale. They should be considered for privatization
or be exposed to competition from the private sector. The provision of adequate credit to the
private sector which operates 90 percent of public transport might be necessary.
2. Capital Budget Proposed in December 1991
Ministry of Roads & Highways
205. The total program proposed by the three road agencies (GHA, DFR and DUR) in
December 1991 was too large to be realistically accommodated within annual budgets and the
PIP. This program amounted to IZ164.9 billion total investment in 1992: with C67.2 billion
from government budget, C23.4 billion from own funds (road fund and COCOBOD
contributions), and 074.4 billion from ODA (converted at £390 per dollar).
206. However, all the proposed projects were of high priority and would yield high economic
returns. The total program is a part of the US$0.6 billion road rehabilitation investments
estimated to be required in the near future. Further screening and selection was therefore
difficult.
207. To reduce the proposed program down towards the level of C29 billion in the guidelines,
the following reduction was proposed by the PER mission in December 1991 using criteria such
as foreign funding availability, degree of completion and reduction of excessive scope:
(a) Foreign portion finance by ECGD for Kintampo-Tamale-Makango Road Construction (003/86) 8.20 bil.
(b) Reduction of Kumasi City Roads Rehab. (014/86) 3.00 bil.
(c) Deferment of Daboase Junction-Takoradi Road Rehabilitation (036) 2.55 bil.
(d) Reduction of Sefwi Area Road Rehabilitation (051) 1.50 bil.
(e) Reduction of Anwiankwanta-Yamoransa Road Reconstruction (007) 1.50 bil.
(f) Foreign financing of Bogoso Bawdia-Ayamfari Road Rehabilitation 1.00 bil.
(g) Foreign financing of Jukwa-Twifu Praso Road Rehabilitation 1.40 bil.
(h) Foreign financing of Logistic Support Program 1.40 bil.
(i) Deferment of Nkrumah Circle Flyover 1.00 bil.
(j) Reduction of Kumasi-Tepa Junction Road Reconstruction 1.00 bil.
(k) Deferment of Kaneshie-Mallam Road Reconstruction 1.00 bil.
(1) Deferment of Accra City Center Improvement 2.00 bil.
(m) Deferment of Ring-Road West Extension Reconstruction 1.00 bil.
(n) Reduction of Tepa Junction-Sunyani-Berekum Road Reconstruction 0.80 bil.
(o) Reduction of Yamoransa-Takoradi Road Repair 0.70 bil.
With these reductions, the total would have become £143.9 billion; with £37.6 billion from the
Government budget, £23.4 billion from own funds, and £82.9 billion from ODA.
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3. Finalized Capital Budget in May 1992
208. The Government has accepted the recommended budget reductions and moreover reducedallocations to many projects further. As a result, the finalized capital investment program fundedby the Government budget for 1992 is reduced to £30 billion, about 45 percent of the Decemberproposal. This amount is about 41 percent of the Governmental capital expenditures for 1992,which is about the standard percentage in the past. This amount is reasonable in light of thebudget constraints the Government is facing. Accordingly, the roads and highways PIP for 1992has been reduced to 057 billion or to about 22 percent of the total PIP. The share is almost thesame as that of 1991, which was 21 percent.
209. However, almost all projects proposed in December are funded in the finalized budget,even though the allocations are small (less than half in most cases), and five new projects havebeen added to the December proposal. In this way limited financial resources to this subsectorhave been spread thinly over too many projects as in the past. As a result, many projects willtake a very long time to implement and costs will rise considerably. In short, the budget hasbeen reduced but the prioritization in the program has not been adjusted accordingly. About halfof the budgeted projects for 1992 started in or before 1988. The number of projects should berestrained, and sizes of projects should be reasonably small so that they can be completed withinone or two years with the maximum of three years in order to achieve early benefits and costreduction.
210. Periodic Maintenance and Backlog Clearance. These should be treated as highestpriority as they are basically a deferred maintenance program critical for the road network, andits priority is a commitment under TRP road components. Government's performance in meetingthis commitment during 1991 has been very good, particularly in the regular release of road fundproceeds; release of funds from topping up from budget was however erratic, causing delayedpayments to contractors.
211. The December program included the periodic maintenance and minor works program(backlog clearance) under TRP series funded under IDA credits and government funds (throughroad fund and budget topping up). The road fund and budget topping-up were proposed tocontribute about C10.3 billion for these programs for highways, urban roads and feeder roads.The May program, however, includes no funds from the road fund and topping-up and havereduced substantially the ODA contribution to these programs. This is a serious problem whichwill create a deterioration of existing road stock.
212. Sole Sourcing and Variation Orders. The 1992 program includes some major projectswhich were awarded during 1991 to contractors on sole-source basis, as variation orders ofexisting contracts (examples: existing Kintampo-Tamale Reconstruction Project; to which wasadded Tamale City Roads Rehabilitation and Tamale-Makongo roads, at an additional cost ofabout £15 billion; similarly, a major variation order has been issued on the Tepa-Sunyani-Berekum contract). Government should try to award future contracts through competitivebidding, as this will bring better prices, and the possibility of eligibility under foreign fundedprojects.
213. Urban Transportation. Since the urban transportation situation in Accra is gettingworse as the economy is picking up its growth, the GOG and the Bank have agreed to preparean Urban Transport Project for Accra. It is at its study stage in 1992 and there expected to besome investment starting in 1993 and increasing in 1994. However, the Governmental budget
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for studies in 1992 and some investment in 1993 and 1994 are not shown in the final May
budget.
214. Design Standards. Recent projects show higher unit costs due to higher standards being
specified for the road works. For example, new designs show more double-surface treatment
than single-surface treatment of bituminous roads; more asphalt-concrete surfacing on heavy
traffic roads; and generally better geometry and better drainage systems. In other words,rehabilitation is also including some basic upgrading of standards. This policy is appropriate and
cost-effective, but unit costs (per km) have gone up about 40-50 percent on this account.
Other Transportation under M.O.T.C.
215. Transport Parastatals. As regards the December proposals for transport parastatals, we
made the following comments:
(a) GPHA. The project for new container berth (C9.3 billion) should be subject tothe feasibility study proposed in 1992 proving its viability; its start, at any rate,could be postponed to 1993.
(b) GPHA. Similar comment applies to the outer fishing harbor at Tema (8.4b).(c) Black Star Shipping Line. The proposal to sell old ships is sound, but the
proposal for buying new ships is questionable, and deserves close scrutiny from
the point of financial viability, in view of the poor past performance record ofBSL.
216. Urban Transportation. As mentioned in the Roads and Highways section, the
Governmental budget for Accra Urban Transport Project also is necessary for this subsector but
does not appear in the May budget.
C. Water Supply
1. Overview
217. The urban water supply and sewerage subsector in Ghana is managed by the Ghana Water
and Sewerage Corporation (GWSC). GWSC is a corporation wholly owned by the Government,as established under the Ghana Water and Sewerage Act of 1965. GWSC operates under the
general direction of the Ministry of Works and Housing. It is governed by a board of directors
appointed by Government of Ghana (GOG). GWSC is also responsible for rural water supply.
218. The effects of the neglect of urban water systems, which partly resulted from the
economic crisis of the late 1970s and early 1980s, are still widespread despite efforts on the part
of the Government to improve this essential service. In some areas, water system production
remains severely depleted because of lack of maintenance and renewal of essential parts. Water
shortages are made even more severe by a continuing sharp increase in urban population levels.
219. Although GWSC is striving to improve maintenance levels its efforts are severely
constrained by the Government's reluctance to allow water tariffs to be consistently increased to
keep pace with inflation, to provide sufficient revenue to enable GWSC to adequately repair and
maintain its water supply and distribution systems and to finance a portion of its investment
program. An equally severe constraint, which adversely affects both GWSC's operating and
maintenance performance and its capacity to implement a meaningful investment plan, is its
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inability to recruit capable senior level staff to fill existing vacancies and to improve itsmanagement, financial, and technical efficiency. Substantial improvements in GWSC's salarylevels and conditions of service will be necessary if GWSC is to successfully compete with theprivate sector in attracting the level of senior staff required to achieve the improvementsdesperately needed in GWSC's management ability.
220. Data regarding urban and rural levels of water service contained in the 1984 census andthe Ghana Living Standards Survey are not consistent. It is probable that the apparentdiscrepancy may have arisen because many of the GWSC systems operate below design capacity,and numerous other reporting anomalies. However, although accurate data on service levels arenot yet available, it is clear that a significant portion of the population does not have access topiped water systems and that the-systems which do exist are generally of poor quality and areunreliable. Many consumers carry water over long distances or purchase it from vendors. Poormaintenance, deterioration of equipment through age and neglect, shortage of replacement partsand electric power cuts contribute to the extremely poor reliability of most of the systems. Waterquality suffers severely from the effects of these deficiencies with serious health implications.
221. The total installed capacity of GWSC's piped water systems is about 450,000 m3 per day.This is quite low for a total estimated population served of 5.3 million. About 70 per cent of theinstalled capacity is in the larger urban systems of Accra-Tema, Kumasi, and Sekondi-Takoradi.These three systems serve about 2.3 million people or 43 per cent of the total populationreceiving piped water.
222. In addition to the piped water supply systems which mainly serve urban and semi-urbanareas, GWSC is responsible for the operation and maintenance of some 7000 water points fittedwith hand-pumps which serve rural communities. This highly centralized approach is inefficientand contributes to GWSC's financial difficulties. Increased community participation, includingvillage level operation and management and local contribution to the capital cost of improvedwater supply and sanitation facilities, is essential if there is to be a significant increase in the levelof access by rural dwellers to safe water supplies. This will involve a major restructuring of therural water supply subsector. A rural water supply subsector study has been completed. Itaddresses the issues impacting rural water supply development in Ghana and proposes a policyframework for future investments in this area.
223. The water supply subsector has large needs in institution strengthening, rehabilitation, andin extending distribution systems to connect potential consumers who are, as yet, not connectedto a water supply system. There are also large, long-term needs for capacity additions inresponse to population growth. The totality of these needs is well beyond the financial andinstitutional capabilities of the sector in the medium term, and a long-term strategy has yet to beformulated.
2. Subsector Objectives and Strategy
224. One of the elements of the Government's economic recovery program is to reform publicenterprises by increasing their autonomy, with the objective of creating effectively managed,financially viable institutions. For the water sector, the GWSC strategy is its development to alevel whereby it can provide access to reliable supplies of water of acceptable quality and ataffordable prices for both urban and rural consumers.
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225. The principal elements of GWSC's strategy to achieve its objectives for development of
the subsector include:
(a) Further institutional strengthening to build up GWSC as an effectively
functioning organization;(b) Satisfactory maintenance of existing systems to prevent further deterioration;
(c) Decentralization of decision making within GWSC to regional management;
(d) Manpower rationalization to develop a more effective, better qualified workforce;
(e) Rehabilitation and limited capacity expansion of existing systems (where
expansion is economically justified) and provision of satisfactory maintenance to
sustain restored/increased capacity;(f) Improved revenue generation by more efficient billing and collection practices
including identification of illegal connections and increased metering;
(g) Strengthening demand management through a consumer awareness campaign, an
expanded leak detection program and a more rational tariff structure; and
(h) Expansion of distribution systems and capacity expansion to accommodate
population growth.
226. In June 1989, IDA approved a US$25 million credit to support a US$125 million Water
Sector Rehabilitation Project (WSRP), also including limited capacity addition and technical
assistance, which is fully in line with the above statement of objectives.
227. GWSC is required to cover its recurent expenditures and part of its capital expenditures
through tariff revenues. It does not receive a government subvention to assist in covering its
recurrent expenditures. The 1992-94 PER for GWSC thus addresses only expenditures under the
PIP.
3. 1990 and 1991 PIP Performance
228. Actual expenditure for 1990 in the public investment program in the water subsector
financed from donor aid and Government resources was 46 percent of the amount budgeted. The
actual release of Government's own resources for the water subsector amounted to 01.7 billion
compared to the budgeted level of C2.9 billion. GWSC found it difficult to make up this
shortfall with its own resources as it was constrained from raising water tariffs further.
229. Tlhe estimated expenditure for 1991 in the public investment program in the water
subsector financed from donor aid and government resources is about 75 percent of the amount
planned. The estimated release of Government's own resources (including those of GWSC) for
the water subsector is 03.1 billion against I4.4 billion budgeted, or 71 percent. Although this
is a substantial increase over the 1990 expenditure, further large increases are unlikely due to
constraints in raising water tariffs coupled with limitations in the implementation capacity of
GWSC and limited Government funding of the water subsector. GWSC does not have an
effective method of monitoring expenditures arising from direct payments by donors. This tends
to present an inaccurate expenditure profile.
4. Public Expenditure Program
230. Gowrnment finding for 1992 (C2.5 billion) propose in December 1991 is reasonable,
while projections of Government financing in future years show large and probably unsustainable
increases. The combined effects of GWSC's poor financial performance and heavier reliance on
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Government funding coupled with GWSC's management constraints will seriously erode itsability to carry out the investment program in the future.
231. Finalized Government funding for 1992 (C2.5 billion) is reasonable. Major reductionsfrom the proposed funding in December 1991 were made in Rural Water Supply Scheme I (Hand-pump, WTR 008/86) and GWSC Assistance Project from CIDA (WTR 011/91). These areacceptable since the administrative capacity of GWSC will not be enough to spend all of the fundproposed in December 1991. On the other hand, other programs have-increased by small marginso that the total funding remain the same as that proposed in December. Proposed Governmentfunding for 1993 and 1994 is also reasonable.
D. Works and Housing
1. Background
232. The budget for the Ministry of Works and Housing (MWH) covers two subsectors: watersector and works and housing. This section examines only the works and housing subsector.
233. The size of MWH (measured in terms of Government budget expenditure) is small. Asit is expanding its activities in urban and hydrological fields, however, MWH's importance isgradually increasing. MWH's role, is changing from its traditional one of construction andmaintenance of Government buildings to a policy and investment agency in the urban, housing,and hydrological fields. The total budget of MWH has increased from 1.6 percent (03.1 billion)of the Government budget in 1989 to 2.4 percent (08.0 billion) in 1991.
234. MWH covers five areas: (a) urban whose share in the MWH capital budget was 5percent in 1991; (b) housing 14 percent; (c) hydrology 25 percent which handles drainage, floodmanagement, and river and coastal management; (d) engineering services to other Governmentagencies, 11 percent, and (e) works, 45 percent which includes construction and management ofGovernment buildings. In terms of MWH's PIP in 1991 (010.8 billion), the urban sector's sharewas 12 percent (01.3 billion), housing 9 percent (01.0 billion), hydrology 10 percent (01.1billion), engineering service 6 percent (00.6 billion), and works 63 percent (I26.8 billion).
2. Capital Expenditure
235. Government-funded Capital Expenditure. MWH's capital budget has increased from5 percent (02.5 billion) of total actual capital expenditure in 1989 to 9 percent (06.6 billion) in1991. The capital budget has increased as a share of the total MWH budget from 79 percent(02.5 billion) in 1989 to 82 percent (06.6 billion) in 1991.
236. Within the Government funding for 1992 in the finalized budget, the largest allocationsare for Keta Coastal Protection (01.2 billion), AESC Logistic Support (00.9 billion), and theallocation for Rehabilitation of Government Bungalows and Public Buildings (00.6 billion) byPublic Works Department (PWD).
237. Keta Coastal Protection is expenditure for ongoing works. Keta Lagoon is now an issuein terms of environmental concerns, since the lagoon is unique and important for migrating seabirds, vegetation, and fish, the Ministry of Land and Natural Resources intends it to berecognized as an environmentally concerned water surface by the international RAMSARConvention. It is recommended that the Ministry of Works and Housing should consult with the
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Environmental Protection Council of Ghana and the Ministry of Land and Natural Resources to
seek for less destructive way of implementing the civil works planned for 1992. The projects
planned for 1993 and 1994 for Keta Protection should be delayed until the completion of an
environmental study being prepared for 1993. Also, hydrological and morphological studies
should be undertaken before the implementation of new civil works to ensure the feasibility of
those works in preventing coastal erosion of Keta.
238. Government funding for AESC Logistic Support for 1992 was reduced by about 25
percent from the December 1991 proposal. This is consistent with the Bank's recommendation.
However, AESC's activities are most suitable for the private sector and a serious effort should
be made to privatize the AESC activities. Therefore, the Government funding for 1993 and 1994
should be reexamined after the completion of the restructuring study of AESC.
239. Government funding for PWD for 1992 is reasonable in terms of past expenditures.
The level of funding for 1993 and 1994 are increasing in the finalized plan, which should be of
concern to the Government. The activities by PWD (rehabilitation and maintenance of publicbuildings and housing) are also suitable for private sector. The activities should be studied to
seek possibilities for private sector participation and housing stock divestiture. The study alsoshould examine PWD's efficiency.
3. Issues in Budgetary Process
240. Improvements that can be made for budget preparation would be (a) compilation of past
expenditure data and (b) computerization. Monitoring and ex-post evaluation of expenditures arevery weak or non-existent.
241. Recurrent and Capital Budget for AESC. Even though a Government parastatal,AESC is supposed to be a financially independent institution whose expenditure includingrecurrent and capital should be financed through its service charges. However, its clients areall Government agencies and all AESC's charges are paid through MWH's budget. This
budgeting and payment procedure creates unaccountability of both AESC and client agencies and
inefficiency in AESC. After its capital restructuring, AESC should be paid by individual client
agencies based on services they request from AESC. For this purpose, each client agency mustallocate its funds for AESC services within its capital budget. Of course, this is an intermediatemeasure in the process towards the final privatization of AESC as recommended in the previoussection.
VIII. ENERGY SECTOR
A. Introduction
242. Given the considerable uncertainty regarding future economic growth rates and
corresponding energy needs, supply-side planning must be flexible and adaptable such thatinvestment risk will be managed economically. Particularly in the context of the Government'sdesire to pursue a high growth strategy, the energy sector should facilitate the achievement of thecountry's overall objectives.
243. There is a choice to be made among objectives of an energy strategy, i.e., self-sufficiency, the saving of foreign exchange, or the promotion of economic efficiency. Ghana's
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priority in the late 1970s and early 1980s was self-sufficiency. In this period world oil priceswere abnormally high and an over-valued exchange rate masked the real value of imported capitalcommitted to these policies. Now, given a highly competitive international energy market,coupled with low risk of prolonged supply disruption and a market-determined exchange rate, themost appropriate objective of Ghana's energy strategy is the achievement and maintenance ofeconomic efficiency in the production and consumption of energy resources, whether domesticor imported. Accordingly, the review recommends measures and policies designed to enhanceeconomic efficiency in the supply of and demand for energy, given world prices or domesticresource costs, whichever is relevant.
B. Overview of Energy Demand, Supply and Pricing
244. During the period 1983-1989, demand for end-use energy grew at a rate of 4.8 percentper year, while GDP grew at an average rate of 5.7 percent per year. This indicates that theenergy intensity of Ghana's economy, which is the amount of energy used per unit of GDP, hasdecreased over this time period. While non-agricultural GDP has been growing at a much fasterrate than agricultural GDP over the period 1985-1990, which would argue for an increase inenergy intensity, the greater impact has been administered by a population growth rate that islower than that of GDP. This, however, applies largely to woodfuels; with respect to non-woodfuels, growth of demand for petroleum products, at 4.5 percent per year, has been only slightlylower than GDP growth (within the aggregate, demand for gasoline grew by 7.8 percent per yearfrom 1983 to 1990), while electricity demand grew by 7.5 percent per year over the same period.With respect to non-wood fuels, therefore, the energy intensity of the economy has beenincreasing moderately.
245. A key issue for the future is the ability of the energy sector to continue to meet the needsof a growing economy. Given a projected decline, over the period 1992-1995, in the share ofthe agricultural sector from 42 percent to 39 percent and a corresponding increase in the shareof the industrial sector from 15 percent to 18 percent, and assuming a 3 percent populationgrowth rate over the decade, energy intensity is likely to decrease, and energy demand growthwill be less than that of the economy as a whole. Resultant projected energy demand growthrates over the coming decade are considerably below those observed for the period 1983-1990,due in part to the element of rebound from the low levels of economic performance andconsumption existing in 1983. Gasoline demand is expected to grow slowly because of increasedgasoline prices in line with international values, the reduction of Governmental vehicle fleets andthe limited absorptive capacity of the road network for vehicular traffic. Kerosene will bedisplaced increasingly by electricity for lighting.
246. In light of this projected growth in energy demand, it is vital to the continued economicdevelopment of Ghana that energy prices reflect the real costs of the resources consumed, so thatconsumers will make economic choices with regard to the types and amounts of energy productsthey use. In addition, maximization of the economic efficiency of supply arrangements andconsumption in each subsector will minimize the resource costs of energy required to sustaindevelopment. Finally, management of environmental impacts, especially of increased woodfuelconsumption, will require vigilance. These requirements have implications for productionprocesses, trade arrangements, institutional arrangements (corporate, regulatory andgovernmental) and the policy framework for economic management of the sector.
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1. Pricing Policies
a. Petroleum
247. The world oil price is currently in the range of $20/bbl, and little real sustained increase
of oil prices is expected over this decade. Ghana's prices for petroleum products are sufficient
to recover the costs of importing crude and converting it into products. The review suggests that,
to the extent needed to manage the oil import bill, to prevent growing pressure on the
transportation infrastructure, to mitigate any incentive for unofficial border trade of gasoline
between Ghana and neighboring countries (where gasoline prices are much higher), or simply to
raise revenue, the Government could increase taxes on petroleum products.
b. Electricity
248. At present, prices charged for electricity in Ghana are well below LRMC. At issue is
the length of the transition period over which electricity tariffs will be increased to reflect LRMC,
and the cross-subsidization between categories of consumers, insofar as rates for some tariff
classes are further from -LRMC than others. Given the very large up-front investment of
imported equipment, materials and services needed for electricity supply, it is particularly
important to set economic tariffs for electricity in order to prevent over-consumption of and over-
investment in this commodity. Tariffs must also be adequate to meet the minimum financial
requirements of the Volta River Authority (VRA) and the Electricity Corporation of Ghana
(ECG) to enable them to provide an expanding and reliable electricity supply, fundamental to
further development and diversification of the economy. The review commends the Government
for initiating a tariff adjustment, effective 1992, and recommends that electricity tariffs be further
adjusted to reflect real resource costs.
C. Subsector FIndings
1. Electric Power
249. Demand and Supply Balance. There is presently a high rate of current load growth
relative to existing supply, and there is a risk of excess demand from 1994 onward if new
capacity were not commissioned by then. It is thus necessary to evaluate the potential
contribution of demand management and tariff increases to reducing the apparent capacity
shortfall emerging over the next two years, and to calculate the economic implications of either
proceeding with or delaying capacity investments until the future of the Volta Aluminum
Company Ltd. (VALCO) and the Communaute Electrique de Benin (CEB) capacity requirements
will have been resolved. VRA has much of this work under way. Large energy imports from
neighbors do not seem feasible over the coming several years.
250. Over the longer term, there is a wide range in the plausible electricity demand growth
rate, and a corresponding range of incremental capacity needed by 2000. There is no explicit
assumption about either demand management or the impact on the demand of tariffs reflecting
LRMC. This highlights the importance for VRA and ECG of keeping the supply/demand balance
under annual review and begin prepared to respond flexibly to changing conditions, which
essentially amount to: seeking out and implementing economic measures of demand management,
exercising flexibility in the timing of new power plants and undertaking periodic review of the
appropriate generation technology. It is thus necessary for both utilities to strengthen and
maintain compact, but competent, in-house planning groups, incorporating skills in economics,
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system planning, modeling and data management. Ghana and VALCO may be reviewing thetariff and other related matters in the context of their contract extension negotiations. The valueof the water in the reservoir to Ghana and to VALCO will be a major factor influencing theirnegotiations. The outcome of these negotiations could have important implications for powersector supply arrangements.
251. International trade in electricity can contribute to both demand and supply on Ghana'ssystem. On the demand side, Ghana should continue to export electricity to neighboringcountries, provided that the export price continues to exceed the LRMC of supplying these loads(as is now the case). On the supply side, it would behove Ghana, especially for short-term needs,to carefully evaluate the possible contribution of trade with neighboring countries to meetingenergy or capacity shortages which could emerge over the next several years. As the timing ofexternal capacity or energy needs could differ between Ghana and her neighboring utility systems,Ghana could be importing electricity at some times of the year and exporting it at others. VRAand neighboring utilities have been discussing the availability of power and energy from Coted'Ivoire and Togo/Benin. Supply from these sources appear very limited, at least in the mediumterm. The scope for direct electricity trade between Ghana and Nigeria requires carefulcomparative analysis; alternatively, there may be a future role for Nigerian natural gas in fuellingelectric power plants in the Western African region.
252. In order to enhance system reliability and service quality and to connect additional loadswhich may be economic to serve with grid energy, VRA has a number of transmission projectsat various stages in the planning process. Each will need an economic evaluation as part of animplementation decision.
253. National Electrification Scheme. While this is an economic project in aggregate, somecomponents of the NES will likely yield higher returns than others. It is recommended to phasein the program starting with the load centers yielding the highest returns (generally those closerto the grid and with larger demands), giving the other load centers more time to develop larger,more remunerative markets. The Energy Sector Review contains an outline of a detailedprocedure for assessing the viability of and prioritizing the connection of individual centers aspart of the NES implementation strategy. The Bank has recently initiated a review of the methodfor calculating consumer "willingness to pay*, which is one important element of this procedure.
254. Institutional Arrangements in the Power Sector. There are problems in three mainareas, the severity of which differs between VRA and ECG. The first is planning capability andcoordination which, for both, requires improvement in load-forecasting and system expansionplanning, as well as the coordination of this planning between them. The second area isefficiency of utility operations, in which ECG in particular faces serious challenges to improveupon its performance in connections, service reliability, reduction of technical and non-technicallosses, billings and collections. Third, regarding the utilities' financial strength, while VRA isin good financial condition at present, its future financial health depends upon the availability of
. water in Lake Volta, the incremental costs of its investment program, proceeds from sales toVALCO and neighboring countries, and the domestic tariff. As domestic demand increasesrelative to VALCO and export demand, the level of the bulk supply tariff for sales to ECG will
* become increasingly important to VRA's financial strength. The retail tariff is a matter ofparticular urgency for ECG, whose financial solvency is precarious, partly because of itsoperating problems, but mainly because the tariff is below the cost of service.
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255. In this light, structural changes are required which will establish a distribution of roles,responsibilities and authority between the Government and the utilities; establish that utilityoperations are put on a sound commercial basis; establish effective coordinating mechanisms
between the utilities; and develop a mechanism for setting utility tariffs which operates at arm's
length from the Government and which recognizes LRMC and commercially accepted financial
performance criteria as the basis for tariff levels.
256. The review notes the suggestion that ECG's substantial financial and other corporatedifficulties could be resolved by affiliating the two utilities thus facilitating the integration of
power sector planning and consolidation of financial behavior into one corporate concern.
However, such a merger implies over-centralization and remoteness, cross-subsidization which
would smother important financial signals about performance and economic efficiency, and
obstacles to new entrants into the power supply industry. As longer-term measures for permanent
improvement in sectoral effectiveness and efficiency, there may be considerable merit to creating
decentralized private companies out of VRA and ECO, as well as a small number of independent,
regional distribution companies, provided that appropriate regulatory mechanisms are deployedto ensure that they serve the public interest with respect to tariffs, terms and conditions of service
and investment programs.
257. The Government is advised to devote urgent attention to developing a commercially
oriented corporate environment for ECG. This would include a package of measures for dealing
with company-specific matters, corporate autonomy and the regulatory environment. Regional
distribution subsidiaries of ECG could be created, responsible for their own connections, billings
and collections, with a nationally regulated price arrangement which has built-in efficiency
incentives through some form of performance-related profit retention. The main thrust of such
arrangements will be to achieve technical and commercial efficiency improvement by re-orientingcqrporate philosophy and management practices, in respect of developing and implementingperformance objectives, corporate strategy, employee accountability and responsibility for
achieving these objectives, incentives for good personal and corporate performance and sanctionsfor poor performance. It is recommended that the utilities develop coordinating committees on
specific matters for which there will be mutual benefit from improved information flow, resource
sharing and synergy.
258. With regard to tariffs and tariff-setting institutional arrangements, the Government has
made an important step in the right direction with the tariff increase of January 1992. However,
further tariff increases are essential to achieving appropriate levels of electricity demand and
utility financial performance. Insofar as the LRMC of generation constitutes only about 27percent of low-voltage LRMC, this recommendation is largely unaffected by the timing of new
generation capacity. It is particularly important that the process of setting electricity tariffs be
depoliticized, so that necessary price adjustments can occur in a routine and timely way at
minimal political cost to the Government. The development of an autonomous, public regulatory
process is one approach for doing this. Alternatively, a formula could be deployed for
automatically adjusting the tariff for changes in costs induced by changes in international and
domestic inflation and devaluation of the cedi. The tariff-setting process would include explicit
performance criteria and utilities could be given incentives to outperform the efficiency targetsset for them in the tariff. Depoliticizing the tariff-making process is not only essential for the
financial health of the utilities, but also constitutes the basis for enforcing accountability of the
utilities.
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2. Upstream Hydrocarbons
259. Ghana has a long-standing interest in the development of local hydrocarbons to reduceits dependence on uncertain international oil markets. However, based on current estimates ofproductive capacity from the Salt Pond and Tano reservoirs, unless there were additionaldiscoveries, domestic productive capacity would meet only a small and declining proportion ofdomestic oil requirements.
260. At present, there is no natural gas market in Ghana. A market could be developed,particularly in the electric power sector, but consumption could vary within a fairly wide range.The current outlook for demand, supply and prices of oil and natural gas indicates a long periodof adequate supply on world markets. Therefore, because the downside risk is considerable, itis difficult to recommend that the public sector devote its scarce resources to the development ofexisting reserves; however, it is not unusual for "reserves growth" to occur once a region isdeveloped and begins producing. Often, through the process of development and production,more oil or gas is found than was anticipated. For this reason, Ghana should encourage privaterisk capital to develop these fields, as other countries are doing. In light of the competitiveenvironment surrounding international capital and technology in this industry, it may be usefulfor the Government to reexamine and, if indicated, reconfigure its incentive package in light ofinternational competitive conditions-comparing its prospect/risk profile and incentives relativeto those of competing countries. Ghanaian National Petroleum Company (GNPC) has a key roleto play in this process. In addition, the Government should cooperate with the regional nationalgas study now being undertaken, part of which will assess the feasibility of building a natural gaspipeline from Nigeria to Ghana, to serve mainly power plant loads, but also some smallerindustrial loads in Ghana, Togo and Benin.
3. Downstream Hydrocarbons
a. Demand
261. Ghana's demand for hydrocarbon products is expected to grow at about 2.4 percent peryear between 1990 and 2000. Fuel oil demand is expected to be stagnant, while Diesel demandgrows at 2.4 percent per year, kerosene at 0.2 percent, motor-car gasoline at 1.6 percent andLPG at 14 percent, the latter from a very low base in 1990. These projections are based on theviews of marketing companies and they could be on the low side, especially with respect togasoline. The high growth of LPG demand reflects the Government's program to increase thepenetration of LPG in residential cooking.
262. At these demand levels, a major refinery expansion would still require a firm exportmarket to underpin its viability, because the minimum economic scale of suitable secondaryprocessing technology is considerably larger than what Ghana needs to satisfy new domesticrequirements.
b. Supply
263. Refinery Expansion. Indications are that by 1995, Ghana will have to either importproducts or expand the refinery. The refinery expansion would require an investment in therange of $160 million. Such an expansion would generate large exportable surpluses of products(even if demand for gasoline grew at 4 percent per year), except for fuel oil, which would beunder-supplied domestically. Hence, a major implication of this refinery-expansion option is a
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much greater exposure of Ghana's refining industry to the international hydrocarbon products
trade. Commercial analysis indicates that the viability of a major refinery expansion is very
sensitive to the spread between crude oil and petroleum product prices. Applying historical
averages of crude: product price ratios to a $18/bbi crude price yields a slate of product prices
which would make the refinery expansion marginally viable at 12 percent real discount rate in
incremental capital costs. It would only take a product price decline of less than 5 percent over
any given year to turn the project from being marginally viable to decisively negative for that
year.
264. Short of a major refinery expansion, there are several efficiency improvement measures
which could improve the productivity of the existing plant. In order to evaluate these options
with reliable information on plant and machinery, it is necessary to perform a test run on the
refinery. The test run is also required to evaluate the viability of expanded processing capability
either with the existing capacity, or major capacity expansion. Also, more detailed technical
analysis is necessary to confirm the advisability of these measures.
265. Bitumen Production. Technical and economic considerations counter-indicate the
advisability of investing in a bitumen plant, proposed at about $18 million for 41,000 tpy (tons
per year) capacity. Presently, Ghana's refinery is configured to run light Nigerian crudes which
are unsuitable for bitumen production. The process would involve the running of high sulfur
Middle East crudes, yielding an insufficient output of light products relative to Ghana's
requirements. There would also be some risk of product quality problems and equipment
corrosion. Ghana enjoys a transportation cost advantage of about $15 per ton buying crude form
Nigeria rather than from the Middle East. There are therefore serious doubts about the overall
advisability of the investment required for a bitumen plant. It would appear preferable for Ghana
to import bitumen in bulk using the existing bulk storage and distribution facilities at Takoradi.
It is therefore recommended that, prior to investing in a bitumen plant, Ghana update the 1983
BEICIP study, taking into account all of the associated costs and risks, relative to the status quo
whereby bitumen is imported and Nigerian crude is used to produce the required product slate.
266. Product Handling and Transportation. Recommendation for investment in product
handling and transportation facilities are based on the most cost-effective way of serving markets
distant from the refinery. Marketing terminals are needed at Kumasi (expansion and
modernization of the existing depot) and Buipe (taken care of under Credit 1819). Proposed
terminals at Accra Plains and Mami Water are too close to the refinery to be cost-effective. The
refinery has adequate storage capacity, and timely transportation from the refinery is feasible.
The newly-built loading gantries at the refinery should be able to move all the products the
refinery can produce (even after an expansion) given an efficient scheduling of truck loading in
order to avoid congestion.
267. The proposed pipeline from Tema to Akosombo would be a convenient and technically
efficient way of moving products from the refinery to Akosombo and Jupong. The capital
investment in the pipeline and associated storage tank at Akosombo would be in the range of $11
million. Results drawn on comparative analysis vis-a-vis a tanker truck option indicate that, apart
from rate of return considerations, other important factors favoring the pipeline include relative
safety, reliability, reduced product losses and a lower potential for environmental contamination
for the pipeline over the tanker truck option.
268. LPG Marketing Program. The Government has embarked on a strategy of developing
a market for LPG, to displace the use of charcoal in domestic cooking. The objective of the
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program is laudable, insofar as it is intended to reduce pressure on the forestry resource andprovide a more efficient cooking fuel. In order to promote this fuel, the Government is pricingit very competitively and providing the LPG cylinders to consumers who pay for the cylindersthrough an amortization fee included in the LPG price. However, further analysis is requiredwith regard to the retention rate of the existing stock of cylinders, their recycling rate, thenumber of new cylinders needed over the coming years, and the safety of the cylinders andburner valves, and the reliability of the safety inspection program.
269. Commercial Structure. Improvements in efficiency and reduced costs in refining andproduct marketing can be achieved via price regulation by a governmental body based onefficiency norms, exposure to competition, and privatization in conjunction with competition orregulation. Where competitive forces can work effectively to discipline market behavior, andthere are no overriding externalities, competition is preferable to regulation. In Ghana, onlyGNPC can import crude oil, and only Ghana Italian Petroleum Company, Ltd. (GHAIP) canimport products. Competition may be stimulated by allowing the private sector to import andmarket products. The Government is urged to encourage this kind of competition as a means ofinducing increased efficiency in the subsector, whether parts of it remain in public or privatehands. The major savings from competition in the refining sector would be reduced cost of crudepurchase and reduced refinery own-use and losses.
D. Conclusion
270. Government energy policy should emphasize conservation and efficiency improvementin all forms of energy production and consumption. Given that investment of resources inappropriate programs is usually a small fraction of the resources needed to create additionalsupply, the cost-effectiveness is very high.
271. Attaining and maintaining energy prices which reflect the economic value of the resourcesbeing consumed is a fundamental requirement of a sustainable energy strategy. In Ghana, specialattention needs to be focussed on the electricity subsector: capital intensity and import intensityare uniquely characteristic of this subsector, implying particular importance of presentingconsumers with price signals that are reflective of the value of the resources being consumed.
272. The public sector should refrain from investing its scarce resources in risky or marginallyprofitable energy ventures, leaving this role to the private sector. For example, in the upstreamand downstream petroleum subsector several hundred million dollars worth of proposedinvestments would be exposed to a relatively soft and well-supplied international hydrocarbonmarket. The Government of Ghana must in this light assess the sector's comparative advantageand financial depth to be a risk-taker in this market, or whether it would be preferable to be abuyer in a buyer's market. The latter approach could be complemented by policiesaccommodating and inviting others to risk capital for new ventures on the basis of a mutuallyacceptable scheme for sharing the rewards of any successes.
273. In the interest of improved productivity, efficiency and lower prices to consumers, theGovernment should foster private sector participation and competition to the extent feasible.Where conditions of natural monopoly prevail, de-politicized forms of economic regulation aresuggested.
274. In general, the most important roles for the Government in the energy sector are: (i) toestablish policies and procedures which allow and encourage energy producers and consumers
- 78 -
to behave efficiently, (ii) to help develop and disseminate innovative and socially economicenergy initiatives where necessary in lieu of the private sector and where possible for handingover to the private sector, and (iii) to implement economic and reasonable environmentalregulations surrounding the production and consumption of energy.
275. International trade in energy should be pursued where it will enhance the efficiency ofenergy supply arrangements, but avoided where the risks of exposure and potential losses areperceived to be high.
- 79 -
STATISTICAL APPENDIX
Table 1-80- -É
KEY ECONOMIC INDICATORS
Acua prel. Projectd1988 1989 1990 1991 - 1992 1993 1994
GDP Growth Ra 5.6 5.1 3.3 5.0 5t
GDY Growth Rate a/ 5.1 2.9 2.5 4.7 5.3 5.7:GDY/Capita Growth R" b/ cI 2.3 0.2 -0.1 2.0 2.6 . 3. . 3
Total Consumption/Capia Growth Rae c/ 0.9 1.0 1.1 0.8 2.0 1. & 2.1Private Cons./Capita Groth Rata d 0.5 1.0 2.0 0.1 2.3 1.6 2.0
CPI Groth Pa b/ 31.4 25.2 37.2 18.0 8.0·, 5.0 - 5.
Dcbt Service (US$ min) d/ 651.2 516.6 372.6 323.5 2.9 298 325.3.
Debt Servicc/X0S e/ 68.0 58.1 38.0 29.5 4 4 22.0
Debt S=rvicW/GDP 12.5 9.8 6.4 5.1 4.0 3.
Gross lavestment/GDP 14.2 15.5 16.0 16.5 <78 190 200
Domeri Savings/GDP 5.5 5.9 6.0 7.9 9 5 5 3.:
Natioaal Savings/DP f/ 9.3 9.7 7.6 9.5 ffim
Public lnvestmmnt/GDP g/h/ 8.0 7.9 7.3 8.2 -- 6 9--1- 2
Public Savings/ODP 4.0 3.2 1.8 3.4 3 44 45$
Private Investmen/GDP b/ 6.1 7.6 8.7 8.3 9 2 99 108'
Prlivate Savings/GDP 5.3 63 5.9 6.0 7.3 ....7 0 2
Ratio of Public/Privae Invsma 1.31 1.03 0.83 0.98 0.93 .91 6
Government Revenue/GDP / 13.5 13.6 12.6 15.0 1 1
Government Expandtur/GDP g/ 18.9 18.9 18.1 19.8 9 g 9$
Overall D~iGDP 5.3 5.3 5.5 4.8 4
Export Growth Rate [/ 6.4 11.6 6.1 10.2 .3 .t
Exports/GDP i/ 10.5 11.2 11.5 12. i 2. 2 12
import Growth Rate i/ j/ 0.2 2.0 7.8 2.6 3 3 4.5 3.0
Imports/GDP i/ j/ 13.4 13.0 13.6 13.3 13 13.5 132Current Account (US$ lmn) k/ -264.4 -314.3 -4845 -441.9 454 ,-44t3 403
Current Accunt/GDP k/ -5.0 -6.0 -8.4 -7.0 5 3
Terms of Trade (bnder) 94 78 71 68
NOTE: Figures ar. rounded. Growth ratus and eport and import rados ae shown In oman t pries.
a/ GDY-GDP adjusted for change in the tarms of Utde.
b/ Yearly average.c/ Based on Goveramt of Ghana's populad powt rtcsa--.
dl Includes IMF but excludet arrr pay=nte.t/ Exports of goods and service.
fi Excludes gants.g/ Includes net lnding and capital Øpadittre finen through extras projct ald.
h/ Staff estimatas.1/ Incudes goods and nat~r swves.J/ Using c.Lf. data.
kl Excludes ofcial rants.
,& ， 『
懺 〔〕〕珊：■
Table 3-82-
GRAN,#- MAMOECONOMIC FRA~OIM - PUBLIC SWTOR BUDOET
CDP)
pyojw"
P= C SE= R BUDGET 1984 1919 1990' 1991 1992 1993 19"
TOTAL RZVM<m 131 13.6 12.6 15.013 S'
A. T« "V m ILS 11.5 13.3
LójL Dimt T~ 3.9 3.2 2-9 ------- ------
b~ Tam 9.1 Ló - ------
CM« L2 1.4 ------Pw~ 1.1 3 3
5.8
B. 1.0 is
og** ~ 0: Nom-Cø~ Y,~ 11.2 11.4 11.2 13
. .......... ...
TOTAL VW12MMM-' 15.9 16.9 1*.1 19.5 191
A. c~ x~ =ow 10.6 10-5 10.44.5 ---- --
4 -w" ADd 5~ 4.7 4.4 4.3 4.4ý,
b. ~~ ~ « ODS 2J 2J 2.4 id
Nymffim .3 1.4 L*0.5 0.1
- To Non 2~ u~ 0.6 0.6 0-5 L2
- To Pia swtor Rde= 0.0 0.0 0.4 OJ ..0.4
- Te R" a worid 0.6 0.3 0.3 0.6
13 1.40.9
c- Traw" (0Wm to Pdyato) 0.9 0.9 0.9 LO
a. C4~ 2~ 7.8 7.3 9.2 9.1. -"P2
JL Devg~ E~ ofts. 4.9 5.0 5.9
- pin~ ft=
AW Cmw~ ~ (1) il 2.4 2.6
- P~ t Aid Pie~ 3.0 2.2 2.6 3 4
* PMJUL L"w iJ 1.0 1.1
* P~ t 0~ 1.3 L2 IJ 1-5
b. Net Lo~ . L2 2.6 2.3
. P»JW AM Pie~ Li 2.3 1.8 LI:
- Odm 0.6 ej 0-5 ej
c. 5~ Effic~ 0,3 0.7 0.4 0.4. 4
Ck~ Acc~ såvings 2.7 2.5 1.9 3.4
OvmU Daficit ~ ed Dof.) al -5.3 -5.3 -5.5 _4.11 7
Deficit X4~ 0~ bi -3.7 -33 -3.0 4
Du= MNA24CINM 3.3 3.3 5.3 4.9
Da~ r~ . -0.6 -LI -li -2-2
p~ to Cwm~ 0.5 0.4 ej 0.2
b. Mø~ to ovi .L3 -LI
0.0 -0.9seclDr R~La,
5.9 7.0IL F~ 1~ . 3.4 --- --- -7.2
3.2 2J 2-5 3.2 .7, 6."'
4.0 3.1 3.1 2.2
2-7 3.7 3.1 2.2 LZ,
1.0 1.4
Koft-C4o",~ Ga 0.1 0.0
ADB pro~ 0.0 0.0 0.0 010
b. G~ 23 3.2 32 3.2
Ld 1.7 L7 1.16,LI 1.5 1-5 1.314=
4. ~ ~ tg Zed d WOM -3.6 -31
~0. wwM., tlr~ MW Bemmak r~ md Bæk øaffeød,-døe
al 0~ ceffid~ suming ium ia~ f~
ae VMU E4 ~ p~ t ~eL
W 0~ ~~ fim ing i~ c=ludom f~ må~ 0~ datc ~w&
Ohana, Summary of 1991 Recuden< Budget([kenund ccdi4
Perscoua TraveliUg & Ocaenal Muancce Oiher CwanScectr Tokl Tnu~s Tranqpost Expendlure Rcpfit & Renwala 2hpendmite SubventlmAt~rcultur 6970244 3924023 671359 662729 134519 735822 821792Landamadauak Esarweu 2425810 1953272 81179 31656 18736 33479 30458Engy 16481 7406 450 2540 1480 m05 0Tcede and Tmurim 1983513 236668 3028 45830 5032 21783 1643912iades. 2clea ad T"nk. 2896672 24093 6m 3577 865 a65 2860504Wek and H~ubg 1632199 1012005 90651 16779 438915 51954 21195Ra and Highwaya 5065634 384261 221064 23526 12624 173902 4250257Tranpod and ch-ao•- imm n 1175670 547492 40671 31603 22924 36973 1176000Bucatifn 72032941 4475822 1164942 1427996 115600 *1165660 11982921 00Y~tandSpo , 1338690 12171 116 1347 1140 641942 680204Healb 25577449 9696559 650000 2200000 700000 10034530 2096360MobItatIon and SocIal Wdaf 1553388 874602 121373 18927 14468 97491 366527hisadr 14135452 10571560 605933 404036 80035 2417298 49590Local O rnmes 066161 7413819 330592 126573 23522 84501 87154Oflc f th P.N.D.C. 1260468 169143 164462 67802 31709 120352 0Iufouadlec 2792123 315946 39~ 15994 5016 24681 2290516Admiadm of Jus~is 366930 216112 24753 20050 4630 7930 95455rocga Affaln 6660012 4321947 284306 1690739 144113 185802 33015pnnce and Ec mc Plan g 2654125 1176741 1173s 193096 46753 21700 909000Defenc 9654432 7012108 717353 222338 342865 1326949 162819ExaMln ItAdal Depdomea 411547 2038569 130231 69630 29561 210912 1109637CnalOnnrnmen Servicus 1224984 - - - - 10362046 186938Tdal 185397925 101091319 5790573 7336818 2901584 34145677 33431954
-84- Table 5
l'
1 -
x - J
0<1 1
j
Ghana: Sufamfg of 1992 Recuaat u4tinmmand da>
PersonaI Taavelq & General Maitna~ce Oer~ C~renL8ecler Toal Emalanse.ot Tanapon Expendiur Repairs & Renewal8 ExpndIlIure SubvenioaAgricutumo 651&368 30250 766220 756370 176352 139791 95890$
Lands and N4atuan Ressures 20r7811 2225005 121435 61854 24518 46289 32870Enery 11310 7953 450 2657 3000 200Trade and Toum 552503 25922 34561 32306 5743 2486 175793Indmulcs. &eec~ md Tch. - 3210491 3479 724 40&2 913 917 3161912Works ad Houaing 1865776 3159526 103460 19150 500932 59295 23413Road and HIgbways 5301579 393074 210m3 25323 14188 113437 4545014Tra~spaat *nd Caml" dfl 1627121 247239 64413 36061 11030 9945 1257556EUaem $1796494 5593352 1299000 2473679 1611061 7605462 128i3940Yoh ad Spots 1477412 17400 2152 1537 1301 732646 727376Healk 2904014 11110034 9m102 25101152 791908 1452375 2241743MoUbzadan d Soc WeLfa m 1717151 1002093 141190 OM120 130 147979 391946Ihlerior 16465315 12120604 710559 46e125 142944 297754 53029Leal ~vgermet 3750693 8014267 y71304 144457 264 96441 91378O 9ice "f th P.K.D.C. 12413377 4345846 199441 512149 133515 2915902 3606454Inforesisn 301996 400318 50m4 41445 5725 342298 2449364Admi ntIon of Just 371531 204194 27000 22200 5230 10032 102075PoseIp Affikn 7469691 4636500 342499 2055081 175740 224566 35305Fianc aød Econolo pa~ 2969010 1341276 134485 220390 53359 240471 972039Defe~. 11030119 8034261 19~603 233754 391311 1216183 166000E~rtrMW"1sezta Depateuts 3933&49 2251122 169516 70910 15550 17542 1324129lIln Cmgalss a malus 1163814 54594 35654 34665 19450 266455 752996
<nearul vecis Servke. 15550526 2041515 1- 1126166 1675773Total 219255000 11931000 7372066 9856164 4134391 41106379 37155000
＼。��뻑� ㅣ．!-
-87- Table 8
Tow comu~W~ Pm~ Cap. £9.
9m29 24427 måig
10~ 35~ 1~6 ~14
Ekumy ly~ 940375 14~ 2~
TmM ad T~m 9~ -
bd=~ sck~ med T" IMM 7~ 4~ 6~
Wwb and ~ v w6w 6w10*9 10~2 19~
~ ad R~ya 2WIM 22DUM 2~ sim
Tra~ ad Conom~am 36=12 1413519 IWIX13 1180
E40~ 39917% 3451147 517574 2307
Y~ ud spou 1~ L~ 1137
"MOZ 21~ 10~ 260157
Mobil~ am ~ W~ 12%W 1~
b~ 23m0 23MO
~ o~ cm 217MI 1461111 5u757 12~
0~ 4d u p.N.D.C 9~ PV~
Z~93 13LMI M262
7~ MW
Z~ 236499
70~ and E~Mit 64ZW 4 m 1~
Dd~ 116~ 6~ 2
9~ lik~ Depu~ 30~ 3m84 26Mp~CAD~ dm@. 91M 43M
NCC 3 42313n
om ~1 IMIN MS
Tow 60~ 45423105 Un431 65~9
ii WCIUW waw.
-88- Table 9
emary of 1992 Dcvelomt Budret(~ Pes) -
Sector Total Constome Laip., Plas te
worta & Paminr c.p. EBp
Agrulur , 3510000 NA NA NA
La"d and N~nfal Re~~urce, 2539000 NA NA NA
E13000 NA NA NA
Trad and To~ra 300n 300 0 0
b s, sls nd Tch. 32000 NA NA NA
Work and Hu~lag 1/ 1067000 NA NA NA
Road aM Hghways 30~N000 NA NA NA
Tranpo and umm ~icatlcs 291000 NA NA NA
znde 3440000 NA NA NA
Yc~ and spt 3WO 3000 0 0
Hanah 5134000 NA NA NA
MobUata and Socia W~Wan l221 120~ 0 0
nt« 7000 20000 0 50000
Laloermms 2300 NA NA NA
OM. of tho P.N.D.C. 1240300 1240300 0 0
Informa~ec 1711000 NA NA NA
A&Minito of Jsues 30 320 0 0
F~tga Affah 167900 167900 0 0
Ira and B--aic Plaa 340000 340000 0 0
De~m 143700 1257000 200 0
E Miimlaa Dep~an 639600 63900 0 0
PAMSCAD 27100 NA NA NA
Mar Se. 160000 NA NA NA
NCC 543000 NA NA NA
G~al Gideriena Uri 11~00 133O 1616300 100
Total 7500000 NA NA NA
1/ nlud&s Watm.
iO~i00 I
I 1* E]
ii iii
-90- Table 11
Oha~ Ad Pipelim &m~Dwban 1992Disbsmn by Ss In MS M[llon-
U~fm 1991 im92 Lm- 1m
Agdculbrn 22.9 38.1 44.7 54. 65.0
BoP/Prm 273.4 238.0 245.0 139.7 [50.8
Bridge 0.3 1. .5 5.3 7.6
Eduaiam 43 11.7 1.8 2DA 20.&
Eurg 40.6 55.1 56.7 48.2 58.9
pom, 49.1 35.9 42.8 30. 26.3
PCru.y 13.6 12.1 12. 10.1 9.9
Hsith 11.4 17.1 19.3 21.0 26.1
Indubuy 26.3 43.4 52.4 55. 42.1
PFMWAD 2.2 2.5 2. L5 0.0
Por 15.2 63 5.4 LO 8.0
Ruway 6.1 163 19.0 16.4 5.I
Rod 19.7 32.2 38.1 66.4 773
Soiel £.4 6.4 6. 4.6 5.1
T.aåLd. .. i.e 35.6 33.1 43.6 43.5 37.1
pc ... ,..a.ia. 4.8 lsj 18.0 27.1 25.1
Tmu~potatin 15.1 16.4 29.7 33.9 40.3
Unid=~nn 0.0 0.0 0.0 4.3 a.
U~ba 1.2 3.1 7.1 30.1 15.0
Wa~. 25.3 31.2 315 38.6 60.2
Total projec 1/ 250.6 343.0 412.0 4743 514.1
- Ond ta! 573.1 616.9 699.1 694. 6912
flars fTtal! Pmtol Dsb~rmeCa 1990 1991 1992 1993 i
Agriculu 9.1 1L1. 10.8 11 12.6
Bridgu. 0.1 0.5 1.3 1.1 1.5
EducaLis 1,1 3.4 4.6 43 4.0
Emtay 16.2 16.1 13.8 10.2 11.1
Po.y 54 3. 3.0 2.1 1.9
Hmti 4.6 £.0 4.8 4.4 5.1
ladsty 10 12.7 12.7 11.7 .3
PA11SCAD 0 0.7 07 u 0.0
Pa 6.1 i L 13 1.7 1.6
Railway. 2.4 4.7 4.6 3. 1.1
R^ade 7.8 9.4 9.2 14.0 15.0
geciat 2.2 1.9 1.6 1.0 1.0
Teh~ Al i.. 14.2 9.8 10.6 9.2 7.2
Telamiations 1.9 4.5 4.4 351 4.9
Transp~ortatim 6.3 4.8 7.2 .2 7.9
U Sdm~nS 0.0 0.0 0.0 0.9 1.7
Udban• 0.5 0.9 1.7 2.1 2.9
Wa~s 10.1 9.1 7.6 .1 17
Towa pi~ 110. 100.o l00.0 100.o 11P.0
-91- T le 12
Gick Aj Pipel sar 1Doua~ur IMDiaUr me by T» ci(~uhm in $US Millions
218.4 211.4 245.O 250.4 225.4
Proct , 44.2 55.7 U3.9 95.4 115.2Program 83.4 71.8 69.0 78.8 41.1Poad 43.1 29.9 36.3 24.5 20.3T . Amia 30.1 28.7 32.0 29.9 22.1O-Ladi (SOEA) 17.5 25.3 23.3 21. 26.7Ou-Ling (Pr
Q~ S 359.7 405.6 454.8 444.0 465.9
Prj4 76.8 119.1 126.9 10.7 209.3Prog a 194.9 166.3 176.0 110.9 109.3
&usd 6.0 6.0 .0 6.0 6.0Tak. A~id 5.5 5.0 11.6 13.6 15.0Oh-Ldi (0E) 68.1 93.9 1138.3 125.9 111.7
a-Zading(Priv) 14 13.3 16.0 17.0 14.1
RADTOTAL 578.1 616.9 699.$ 694.5 691.2
Projt 121.0 174.8 210.9 266,1 324.5Program 278.4 233.0 245.0 189.7 150.8Fod 49.1 35.9 42.8 30.5 26.3Tadkl Aist 35.6 ».7 43.6 43.5 37.1OM-Laa (SoN) 85.6 119.1 141.6 147.7 13.4O-Ladi (Puv) 8.4 15.3 16.0 17.0 14.1
1 Pigura fur 1991-1994 diusa ar Z Rivs ad ame mbjct la m ~vs.
PUBLIC STHEN PROGRAmw 1992 - 1994FUNDJNG STATUs - AmlTSIl Of SOURCES OF FUING FOR 1992
(1U MILLION CDIll>S~UJARY 1ap~E A.0/92
i 11 IETMT RESOURCES 1 OTHER ~U5CES OFUNDING
1 1 i |.t FOREWN jGM~.?lRCIAL OW omEstjsiCOR äM IPMMED ECURED Fl |1COT FUNDS LENDING 11 SECUMD i em FU$ boROIIITOTAL 11 PROJEt|EXPElfI- |--- 1---1 - , ---...FIANExchng Rit@ UStl n 392.5 Cedis i INERIUE 19921 FC i LC i FC LC i FC i LC 1 FC LC 1 FC LC i FC LC i C LC FC LC ICENG
1 PMOUCIWESECTCS 1 1 1 1 1 fi 1 1 i i m i i m l i1I~sAcLT=C 16493 1 1127611308141 I 1 3511 1 1 1 l 1 9'1 l l 11 164931llNDUSTAT -1 258 24 1 11 1 1 338 2958 1 98 1 127 11 4743 1 l 1 1 1 113 1 1207 11 124581L^I O SATMAL REOAES 1 22774 120741107 1 0 114031 2136 1 10011 31 1236136145931 131 1 11 22774 1 1
iPRlDUCIlE SECTOR TOTAL$ 1 51 r1 26193 23941 294 1 45 117411 s1 981 22711 48261 1 236 14671 25311 27 11517251
1EOSIC/IMFRASIRUCIESETORS 1 1 1 1 1 I ij 1 1 l 1 1 11 1i i1UATER 12762 792 586 22 12493 1 1069 1 12762
l S £ C A 4 29 1 219 11548 I || St 1 1 1 1 ~2 1 442 1 74 1 11 46935JENERG 1 1 32ff 2 d 634551 1 | l 1 s 1 300 111621 i 1 192 64711 1152 11 326791IRDS AND "IGHI 1 56526 U23 2946 1 | 16784 23n0 1 1 11 1 1 l m3 l 1 56526 lOum AMD HOUI 1 s71 1062 1524 fl 521 764 l1 1 1i 1 i 1 1 10 1 1 0 108711--------------------------------------------------------------------------------------------------------------------------------1ECIeiMFRAsucmE sc ios i 1593 i z569 9793 22 1 117284 j 38129 11148 1 1213 1 1 1 1 a994 196 1 74 1242 1597 73I
1EDMom 140611 3124 38604 1 11 5440l |l 1 1 1693 1 [ 14061 lJKALTH 13161156 1 11501 46441 1 11 23811 1 1 l 1 1 1 1131611l"^ oluE' N1" 1 41 m1 31 1 11000 11410 124 i s l 1 1 1 1 1 3w 1 1 114 17011 1 10061 164 3261 1111 271 1 il 1 1 1 1 124511 1110061
IIFCIITIN 17881 1 1 65211361 1 1 1 1 1 1 11 17M8--------------------------------------------------------------------------------------------------------------------------------li"' sAn a¡ i - tr a l i i i liss l us l I il | | | | | -tre1 -- -..-
PustiC INVESIENT PoGRsM 1992 - 1994FUNOMO STATUS - AMALYSI* OF SUURCES OF IUNDING FOR 1992
04I NILLION CEOMSSt~IEART TAOLE A.0/92
OA 11 OUGETAKT *ESCES il OITER SNCES OF FUNIMI
| V ~ME i NET DfREIGNCCE~CIAt M na* sisEcTR SR. MPEANND i SECURED FtN IPMT RDS LENING S.CEi FIN FUND$ MRRGWIIITOALP-JI XEG ------- l-----------1 ------------- i----------- ------------ l----------- --------------- --------- NN-
l Exchwn" 9820 uss1 - 392.5 C.dl . NMER IltE 19921 MC LC FCK LC 11 LC i telfC LC 11FC I LC FC M lC FCI LC lFC LC 1C[liGI.............................................................. ................... . .............................................
lSCA 1ETR1tL 34186 15I 4161 1900 1562 113929 2301 11493 1 1} 1 1 341861
965 422 l3
9IjNJLISECIORAL
12844 3321 11293 111 16 3200 1505 19 1 12844I III,! 1606i1 11 sai I":1 III124-----------------------------------------------------------------------------------.-
ISEC OR ~ T OIAL l Z5 493 1111 20 163 8 1 ~ 11 59 19H l MI4 98 J29 5 1 1162 1 343 12 53 1 3MI I Z l 1 74 1 49 1 2 v4J
uL? 11 l i l l l l l 11 l I uts l sk il l l l l u? l l ml 1 1060f£ Il I et fe l l l 1 | |sei | zis m o Ikas m a L 6mr m sml9s0 Il o|stz in DL i z U M e|~sw5 l1
5s1 u|1s n0% 1sa |onm
9i |u s 11 t l 1 RI sl Rm 111 [tig lWm 1 OK inms 1 19 l 1 61 t mi ~ 1~kl Res l 1<9t 1 £s0 1 ai l 9~t l i IW01 lans Mianm1VNIu moIn
0611 11 l l l m 1 m 1 1l Iesålnnll l %st l m ai le o1m l le swu,M5 I11911 1l 1 1 99*9 li 1 1 1 09t 1 e Il 11 6I 9 Ö O 1 1 W l 1 l6or MZIY i m heu 1 1 SLI I a[ ss1oul
eus, 11 4i 1 1 us li 1 mol11191 * 1 2 l 09 « 6 9 k2 111 6M Ms A9inNlisu I n la gm lmlusjon nMl Isesni e i 1 uu i Isas iima nooulEsou 1 mIEuc I~Kv1nuIgmu 11 1 I ni Iisa I izl 1 I 1 Ist«1 5i IsIi m [W? 166 dti 1 1 Znl
i 1 1 1 1 1 1 1 1l 1 1 1 I I 1 1 1 1 1
mi l I tm l 9s o nu on1 S f1u1fra il 1 kf9i r6i 625l vi ¥as 013. S 3lnc N I
uzm 1 l l un 1 1 m wr st um I sgn u lm1 2 u mals*1r II 1 s It sI 1 1 1 lim 1' IunIet| ||å li zo li> la se 92 slu 1 1 mns-vu amv2296 L 0s fuil 1 ol eW 1 |L m 1 zt 96 1 1tsnf50421 1 i utZZz 1m5 o I Il 1miov
DN3l I 1 aI 1 i l i l 1 l n l n 1 1 l 1 l , l l 3 1 1 l 3 tE mnl o1 1N i wi Z 1w a hisn a ~te3rale u-11N1m ------- ------- l------l - ------ ------- -------- 1 . _-.---- -- ..--- --- - -I i o«3x313rm dm~ili $mo31I ut11 13*00lh 5131131113~,11 81911 3f3* sii4131IMJwu l A11~ OI*utAp
mvacll onsvou sen 1 i1 e anumons mNIGNn 10 men wéIs3 ~ 1 0313 N1 o n ouww I 1 m um11 o1- I I - limHN-j931m1II oninumiåamwcmnuo I:hmsua amun fl vas1
16/01 lU0 ~ A3l1omll
(slo32 NoiTm NI)1661 101 51^nl 30 S321in01 *0 115XTM • 11111M 51NIMA
t661 - 661 38AGd I0N1313 I 3iUnd
PUBLIC INlWETiNE PROGRAMW 1992 ,-1994
FIDING STATUS - ANAL$i OF $WCES OF FUNDING FOR 1993S~T latu A.0/,3 <I0 MILLION CEO[S)
SIONY *13 AØ~I~ tvJCT:~:::. SEES II ~------ -------------------...-------1riBUGTttRSUNE 1 E sRCEI F FUlKim IN
SEC.R MMT PA Mi IC T FOREIM CuMMERCiAL DEomiCPÆJEC ~P=E- ---.. D C- FPART f~lSI LENDING SE CUED FI" fUS BøRRWING ilmP*OJECT1EXEND1I-i------- ------- .......-....... -.......-----------------------........----------s-1FIN- 0EX nh. Rate US$1 . 39Z.S Cadi* NU ER IURE 1993 FC i FC LE l i LC FC LC fC i IC FC i C FC LC FC -C INsISMC1AL ÆCTOIRTOTALS l i 252a1 1 253312Z61B1 409111 isz liei 40 11746 1 13"41 I wl 1 50
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IW URl I f 652IMNiSECTORAL 3368 I52 1170 I 4 Ia" i15
IScvæ Suv TOA i i 3""" 11(4132 1130" l 279JU 18175 111~ 5z i ai 1971 3663 11130321 360 1376 1 775 112094128ZM41 21 66~11 346
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PUBLIC INUESTNY P*OGRA~U 1992 1994FUVDING STATUs MALThhs OF scJECES ØF FNING FO 1994
AiH MILLION CEDI$)W~SIY IABLE A.3194
I I IK ETMT RESUCES OtsE $JCES OF FUSI G
I I IET i NET FO1EIGN COM ERCIAL i M i DOMST1CSECIOR SUM«tM l PLANNEØ i SES E F IC'Mi FUløS itEN ING SECtER» FTSM i FUNDS i NORMING 11oTALI PROJECIEXPENII- •.- ... - ...... "-"-" " ---- " - i -- FINAM -I xchnge Rate USst - 392.5 Ced6 le NM ERITUE 1941 FC LC I FC i LC il FC i LC iFC i I C l FC i LC i FC i LC } FC LC i FC LC ICEN G II- -- ---- ---- ---- --- ---- ---- ---- --- ----.... .... .. -.... .... .... . -.-... .... .... .... ... .-.. .... .... .... ... .... .-.. .... ... .... .... .... .. ISOCIAL SECTCI TOTALS 22813 1920 1795 1 405 767 581 13415 42?4 1 I 560 l 1 .I 22813I-------------- ------- ----- --- 3 3----------------------- ----------- -15 24------------------
1C0LIUME I 7 1I57 I 787j I I I I I I 1IHL ICOA 9822 485 lom84 inz 118; I I39æ17101 I I I 11 4------------------------------------------------------------------------------------------- --------- -----------------------------------ISECIOS P~URy TotL I 1 42~189fu3 19530 1 53101 18em 11116u5 1 83076 1 27 11955 112991 i 350 1125419 111818 15693 124138 1 18Ml 11428896 I.... ... .... ... .... ... -... ... .... ... .... . -..... -.. ... -... .... ... ... .... ... .... ... .... .. -.. -. ... .. -. ... .... ... .... ... .... ... ...
-98- Figure I
1988: Breakdown of Total Expenditure(percent of total)
Current56
Special Efficiency2
Capital (Dom) 1/ Capital (Ext) 2/18 24
1992: Breakdown of Total Expenditure(percent of total)
Current54-
Special Efficiency3
Capital (Dom) 1/17 Capital (Ext) 2/
2e
1/ Dom**tically financed.2/ Externally finanoed (by donore).
99 Figurg 2
1988: Capital Expendituresby Economic Classification 1/
Development (Dom) 2/35
Development (Ext) 3/37
Net Lending (Ext) 3/21
Net Lending (Dom) 2/7
1992: Capital Expendituresby Economic Classification 1/
Development (Dom) 2/34
Development (Ext) 3/40
Net Lending (Ext) 3/22
J' Net Lending (Dom) 2/4
1/ In percent of total capital expenditures.2/ Domaestlcally financed.
3/ Externally financed (by donors).
-100- Figure 3
1988: Current Expendituresby Economic Classification 1/
Wages and Salaries45
Transfers
Items 2-5 2/24
Subventions13
Interest Payments11
1992: Current Expendituresby Economic Classification 1/
Wages and Salaries42
Items 2-5 2/22 Transfers
10
SubventionsIrterest payments 13
13
1/ In percent of total current expenditures.2/ Operations and Maintenance.
г.
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4
