Country Profile 2007

Ghana

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Comparative economic indicators, 2006

Gross domestic product Gross domestic product per head (US$ bn) (US$)

Nigeria 116.7 Mauritania

Ghana Senegal

Senegal Nigeria

Burkina Faso Benin

Mali Ghana

Benin Mali

Niger Burkina Faso

Mauritania Guinea

Guinea Togo

Togo The Gambia

The Gambia Niger

Guinea-Bissau Guinea-Bissau

0.0 5.0 10.0 15.0 20.0 0 200 400 600 800 1,000 1,200 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.

Gross domestic product Consumer prices (% change, year on year) (% change, year on year)

Mauritania Guinea 30.0

The Gambia Ghana

Burkina Faso Nigeria

Ghana Mauritania

Nigeria Benin

Niger Guinea-Bissau

Mali

Benin Burkina Faso

Guinea Togo

Guinea-Bissau Senegal

Senegal Mali

Togo The Gambia

Niger

0.0 2.0 4.0 6.0 8.0 10.0 12.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.

Country Profile 2007 www.eiu.com © The Economist Intelligence Unit Limited 2007 Ghana 1

Contents

Ghana

3 Basic data

4 Politics 4 Political background 5 Recent political developments 9 Constitution, institutions and administration 10 Political forces 11 International relations and defence

12 Resources and infrastructure 12 Population 14 Education 15 Health 17 Natural resources and the environment 18 Transport, communications and the Internet 24 Energy provision

26 The economy 26 Economic structure 27 Economic policy 30 Economic performance 31 Regional trends

31 Economic sectors 31 Agriculture 35 Mining and semi-processing 39 Manufacturing 40 Construction 41 Financial services 42 Other services

44 The external sector 44 Tra d e i n go od s 45 Invisibles and the current account 46 Capital flows and foreign debt 48 Foreign reserves and the exchange rate

50 Regional overview 50 Membership of organisations

53 Appendices 53 Sources of information 54 Reference tables 54 Population 54 Nominal gross domestic product by expenditure 55 Gross domestic product by sector 55 Government finances

55 Interest rates 56 Money supply 56 Prices and earnings 56 Mineral production 56 Main trading partners 57 Balance of payments, IMF series 57 Net official development assistance 58 External debt, World Bank series 58 Exchange rates 58 Foreign reserves

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Ghana

Basic data

Land area 238,537 sq km

Population 21.2m (2003, IMF estimate)

Main towns Population in millions (2000 population and housing census, Ghana Statistical Service) Accra (capital) 1.65 Kumasi 1.17 Ta mal e 0. 2 0

Climate Tropical

Weather in Accra Hottest months, March, April, 23-35°C; coldest month, August, 22-27°C; driest

(altitude 27 metres) month, January, 15 mm average rainfall; wettest month, June, 178 mm average rainfall

Languages English (official), Twi, Ewe, Fante, Ga, Hausa

Measures Metric system

Currency Cedi (C)=100 pesewas. Average exchange rate in 2006: C9,174:US$1. Exchange rate at end-August 2007: C9,321:US$1

Time GMT

Holidays January 1st, March 6th (Independence day), Good Friday, Easter Monday, May 1st (Labour day), July 1st (Republic day), December 6th (Farmers’ day) December 25th-26th

Politics

Ghana is a unitary republic with a multiparty democratic system under which executive power is vested in a president who is elected by universal suffrage every four years. When John Agyekum Kufuor and his New Patriotic Party (NPP) won the presidential and parliamentary elections of 2000, they brought to an end the administration of Jerry John Rawlings, who had run the country as a military ruler from 1981 to 1992, and for the subsequent eight years as a constitutionally elected president. Mr Kufuor and the NPP went on to win the elections in December 6th 2004, largely as a result of a reasonable economic performance in their first term. The next presidential and parliamentary elections are to be held in December 2008.

Political background

British colonialism The British originally came as traders. However, in the late 19th century the scramble for Africa led Britain to invade the Ashanti kingdom in 1874 and declare the Gold Coast a British colony, which, after a struggle, it controlled by 1901. The Gold Coast became one of Africa’s most successful colonial economies, based on peasant cash-crop production, mainly of cocoa, and on gold mining, which was largely controlled by foreign interests. Farmers’ initiatives and local familiarity with international trade also helped to bring relative prosperity.

The road to independence Educated elites who were excluded from politics by the colonial state dominated the early political movements. After the second world war other social groups also became involved; for example, ex-soldiers who had fought for the British in the war demanded a role in the administration and business opportunities in the colonial system. By 1949 nationalists had split into moderates and radicals, the radicals supporting Kwame Nkrumah’s Convention People’s Party (CPP). Backed mainly by young people and poorer sections of the middle class, the CPP won the country’s first election in 1951. In 1957 Ghana became the first Sub-Saharan African country to gain independence. The CPP government was ostensibly socialist, and laid down the basis of Ghana’s current industrial infrastructure, although its policies alienated cocoa farmers and influential private-sector businesses. In 1964 it introduced a one-party state. Nevertheless, the legacy of Kwame Nkrumah, as “father of the nation”, remains important: even today, several political parties lay claim to the Nkrumahist tradition.

Political instability and the Ghana experienced nine changes of government, including four military coups,

descent into corruption between 1957 and 1981, but escaped the violence that afflicted many other African states. Poor economic management and perceptions of corruption have been the most common sources of dissatisfaction. In contrast with much of Africa, ethnicity has played a relatively minor role in mainstream political conflicts. In 1966 an economic crisis and rumours of cuts in the military’s resources prompted Ghana’s first (bloodless) military coup, by conservative generals, who formed the National Liberation Council (NLC). They handed over power to the laisser-faire Progress Party (PP) after elections in 1969. The PP, led

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by Kofi Busia, continued the NLC’s economic reforms. However, a fresh economic crisis brought another military coup in January 1972. The younger left-wing colonels of the National Redemption Council, led by the late General Ignatius Acheampong, reversed the PP’s policies in favour of a quasi-socialist programme. In July 1978 other defence chiefs in the National Redemption Council who favoured a return to civilian rule removed Mr Acheampong. Before elections could be held, however, younger officers staged a fresh coup on June 4th 1979 and formed the Armed Forces Revolutionary Council (AFRC), led by a 32-year-old junior officer, Jerry John Rawlings. The left-leaning AFRC set itself the limited mission of flushing out corruption and handing over to a new civilian administration, which it did in September 1979, to the People’s National Party (PNP). However, the PNP, led by Hilla Limann, failed to deliver either a better economy or cleaner government, and the soldiers, again led by Mr Rawlings, staged a second coup on December 31st 1981.

The PNDC: a military The new Provisional National Defence Council (PNDC) government was

technocratic regime initially radical and socialist in complexion. Dismissing party-based politics as corrupt and divisive, it founded a military technocratic regime in which Mr Rawlings and other military men focused on domestic security and fighting corruption. Three former military heads of state, including Mr Acheampong, were summarily executed, three high court judges were killed (allegedly by members of the ruling party) and many individuals associated with former regimes were forced into exile. Socialist economic policies were implemented and all large bank accounts were frozen and investigated for tax fraud!a move that continues to affect popular confidence in the banking system today.

Socialist rhetoric and free- The regime had been in power for less than two years when Ghana suffered a

market reform severe drought and 1.2m Ghanaians were expelled from Nigeria and returned home. Desperate for hard currency, some PNDC members sought a deal with the IMF. This set off an internal struggle won by those in favour of reform, and the radicals went into silent opposition. Although it continued to espouse socialist and anti-imperialist rhetoric, the PNDC went on to implement one of Africa’s first and longest-running structural adjustment programmes, beginning in 1983. This stabilised the economy and brought several years of growth, but alienated some of the PNDC’s allies. In the late 1980s Mr Rawlings held “party- less” local elections, which were intended to pave the way for a system of party-less democracy, but the idea was shelved in response to demands for multiparty reform from bilateral donors.

Recent political developments

Multi-party democracy is In November 1992 the PNDC held Ghana’s first multiparty elections for more

introduced than a decade. Mr Rawlings won the presidential race under the banner of a new political party he had founded, the National Democratic Congress (NDC). The opposition claimed fraud and boycotted the parliamentary election in December, leaving the NDC with complete control of parliament. In the 1996 elections, the opposition were determined to compete with the NDC at the polls; the NPP, drawing its support mostly from the south, and the People’s

Convention Party (PCP)!a grouping of smaller parties claiming the Nkrumahist tradition!therefore formed an alliance. However, the president and the NDC were still able to win the elections, having fought well-organised campaigns, which capitalised on their control of the state-owned media and patronage networks. The NPP and PCP won a total of 66 seats, which despite leaving the NDC with a workable majority, gave the opposition an important base on which to build its support for the next election.

Presidential elections Votes ('000) % of total 1992 Jerry Rawlings (NDC) 2,327 58.3 Albert Adu Boahen (NPP) 1,213 30.4 Other 449 11.3 Total 3,989 100 1996 Jerry Rawlings (NDC) 4,092 57.5 John Kufuor (NPP) 2,807 39.5 Other 210 3.0 Total 7,109 100 2000a John Kufuor (NPP) 3,132 48.2 John Atta Mills (NDC) 2,896 44.5 Other 475 7.3 Total 6,503 100 2004 John Kufuor (NPP) 4,524 52.5 John Atta Mills (NDC) 3,850 44.6 Other 440 2.9 Total 8,814 100.0 a As neither John Atta Mills nor John Kufuor polled 50% in the first round of voting, a run-off election was held; Mr Kufuor won 56.9% of the vote and Mr Atta Mills won 43.1%. Source: Ghana Electoral Commission.

Rawlings cedes power to In 2000 the NPP and its presidential candidate, Mr Kufuor, managed to

Kufuor and the NPP capitalise on their performance in the 1996 poll, winning a closely contested election. Mr Kufuor and the NPP offered a fresh alternative to the NDC, which despite fielding a new presidential candidate, John Atta Mills, was tainted by association with Mr Rawlings. An increasing intolerance for Mr Rawlings was evident, reflected in accusations that his previous regimes were behind wide- scale human rights abuses in the past. Although the NDC still held the support of its strongholds!mainly in the north!a large swing vote had emerged that was concerned primarily with national economic issues, and the NDC’s poor performance on managing the economy lost it much support. The emerging nationalisation of Ghanaian politics was a significant development in the maturing of the country’s democracy, and this was the first time in Ghana’s 43-year post-independence history that an incumbent government had been changed through the ballot box. After 20 years in power, many had feared that Mr Rawlings would refuse to give up the presidency, but a relatively smooth transition followed. Ghana’s growing democratic tradition contributed to perceptions that the country is a role model within the West African region.

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Legislative elections Seats in parliament 1992 National Democratic Congress (NDC) 189 National Convention Party (NCP) 8 Other 3 Total 200 1996 National Democratic Congress (NDC) 133 New Patriotic Party (NPP) 61 Other 6 Total 200 2000 New Patriotic Party (NPP) 100 National Democratic Congress (NDC) 92 Other 8 Total 200 2004 New Patriotic Party (NPP) 128 National Democratic Congress (NDC) 94 Other 8 Total 230

Source: Ghana Electoral Commission.

The NPP retains power Mr Kufuor and the NPP went on to win the presidential and parliamentary elections again in December 2004, with the NDC and its candidate again being their closest rivals. The fact that the swing vote moved largely in favour of the NPP showed that the electorate still holds feelings of disenchantment over the NDC’s performance in office, and with Mr Rawlings. Although the NPP had been unable to produce a visible improvement in living standards in its first term of office, the electorate appeared to give it credit for success in stabilising the economy, with the hope that there would be more tangible benefits produced in its second term. However, this has created high expectations that the NPP must deliver these benefits in its second term, or face losing the next election (Mr Kufuor is only permitted two terms in office). This makes implementing reforms that result in increased short-term economic hardship politically difficult, as was illustrated by the decision to delay reforms to fuel pricing!which would involve a hefty increase in prices!until after the December election.

The NPP launches an After assuming office, the NPP government secured its position by taking

investigation into the past control of the security machinery and purging it of a number of Rawlings supporters. The new regime also initiated an investigation into the human rights abuses committed by post-independence regimes. The National Reconciliation Commission (NRC) was established in September 2002 with the mandate of producing a comprehensive report on past abuses, which it finally delivered to Mr Kufuor in October 2004 (and was only made public in April 2005). The main findings of the report were that most of the abuses were committed when military regimes were in control, particularly those headed by Mr Rawlings, the AFRC and the PNDC, and that most abuses were carried out by security personnel. Although some of Mr Rawlings’ supporters claimed that the NRC

had conducted a witch-hunt, the report was officially projected as a vehicle for national reconciliation, with no intention of leading to prosecutions, which most Ghanaians appeared to accept in principle. Nevertheless, the NDC has been tainted by the report’s findings, as Mr Rawling’s previous regimes were heavily implicated in the report. In the meantime, the report recommended that compensation be given to the victims!paid for by the government!and Mr Kufuor has agreed to this. Based on the NRC recommendations, C13.5bn (US$1.5m) was set aside to compensate victims. Disbursements started in October 2006; four years after the NRC completed its hearings. Victims received between C1.9m and C30.4m depending on the extent of abuse. In addition to monetary compensation, non-financial assets of victims that were unlawfully confiscated by the state are being returned.

Extension of the vote to Since coming to power, the NPP has been courting the Ghanaian diaspora, with the diaspora a view to maximising the economic contribution they could make to the country, enticing them to return home and, also, to create a favourable relationship between them and the NPP. Importantly, the diaspora is widely believed to support the NPP, and given that recent polls have indicated that the party has reached the limit of its ability to expand its support base within the country, obtaining support abroad from the 3m diaspora (equivalent to 15% of Ghana’s population) may be the best strategy to expand the party’s base. Unsurprisingly, the NDC has been against extending the vote, citing numerous technical difficulties and its fear that staff at diplomatic missions abroad are largely from the ruling party, which might encourage electoral fraud in favour of the NPP. This partisan dispute reached a head when the NPP government introduced the Representation of the People (Amendment) Act (ROPAA). The main aim of the ROPAA is to enable Ghanaians resident abroad to register and vote in public elections in the country. However, following the introduction of the act to parliament, the NDC minority boycotted parliamentary discussions on the Bill and galvanised public support to demonstrate on the streets of Accra in an attempt to halt its passage into law. They argued that the Electoral Commission faces severe administrative difficulties such as a lack of logistics, personnel and, most importantly, the absence of a database of Ghanaians resident abroad. They say that this will result in electoral manipulation by the government. Regardless of the opposition, the NPP passed the Bill by virtue of its parliamentary majority and it was signed into law in February 2006. The modalities of implementing the law now rest with the Electoral Commission (EC) of Ghana. The EC has announced plans to embark on a four-nation tour before the end of 2007 to learn from countries in Asia, Europe, the Americas and Africa that conduct Diasporan votes. Important recent events

March 2002 Nearly 40 people are killed in a rare outbreak of ethnic violence in the northern town of Yendi following the murder of the king of the influential Dagomba tribe, the second most important king in the country after the Ashanti king.

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September 2002 The National Reconciliation Commission (NRC) begins hearing cases of human rights abuses during the periods of military rule. February 2004 The former president, Jerry Rawlings, testifies before the NRC. His appearance only lasts 25 minutes and entails limited questioning. December 2004 Mr Kufour and the NPP win the elections, in a closely run contest, defeating the NDC candidate, John Attah Mills, in a re-run of the 2000 election. April 2005 The NRC’s report is published, which claims that most of the human rights abuses committed in the past took place in the time of Mr Rawlings’ military regimes. February 2006 The Representation of the Peoples (Amendment) Act is signed into law after bitter partisan political fighting. The amendment gives non-resident Ghanaians the right to vote in elections. May 2007 In order to stand in the 2007 presidential elections, nine members of the cabinet resign from government, prompting a major reshuffle. Constitution, institutions and administration

Constitutional changes Ghana’s first constitution at independence in 1957 was based on the UK system of multiparty parliamentary democracy. However, it was changed within three years when Ghana became a republic. In 1964 the CPP government instituted a one-party state and the 1960 constitution was amended. Constitutional arrange- ments were further transformed under seven more changes of government. The present constitution, which established the Fourth Republic, was introduced in 1992, when Ghana held its first multiparty elections since 1979. Much of it is based on the US system, vesting executive power in a president who is elected by universal suffrage every four years. Tenure is limited to two terms. The cabinet is appointed by the president, and is approved by the legislature. From the 2004 election, the number of members of parliament (MPs) in the single parliamentary chamber has been raised to 230, from 200, reflecting the growth in population since the previous level was set, in 1987. MPs are elected on a first- past-the-post basis. Candidates represent parties or may stand as independents.

Well-respected judiciary The chief justice, who is nominated by the president and approved by parliament, heads the judiciary. The judiciary is seen as largely independent of political influences, but there have been some accusations from the NDC that the judiciary is biased towards the government. This is not surprising con- sidering that when it was in opposition the NPP also considered the judiciary biased towards the then NDC government. The courts are used extensively for civil, business and criminal cases. In 2001, as part of a process to speed up judiciary processes, the chief justice established Fast Track High Courts. Ghana’s

judiciary is relatively well respected and independent, but its reputation continues to suffer from the political interference of previous decades.

Political forces

Ghana’s political right Historically, there have been two political traditions in Ghana: Nkrumahist and

returns to power Busia-Danquah. The NPP traces its ideological roots to Abrefa Busia and J B Danquah, two key opponents of Kwame Nkrumah, and is a right-leaning political force committed to a market-based economy. Since independence, the Busia-Danquah group has held elected political office only once before now, in 1969-72, when it was known as the Progress Party (PP) and led by Mr. Busia. The PP government was overthrown in 1972 by pro-Nkrumah military forces led by General Acheampong, confirming the historical dominance of left-of-centre politics in Ghana. When Ghana returned to constitutional rule in 1992, the Busia-Danquah tradition re-emerged as the NPP. The NPP boycotted the 1992 parliamentary election after alleging that the bitterly contested presidential election was rigged. The absence of the party from the first parliament is believed to have stalled the party’s efforts to expand its base from the Ashanti region. However, since 1996 the NPP has been a strong force in parliament, which was expanded upon to give majorities in 2000 and 2004. However, the NPP may have reached the limit to which it can extend its domestic support base, and widening the ballot to the Ghanaian diaspora may be its best strategy to gain more votes. Although the electorate appears to have given the NPP government credit for stabilising the economy in its first term of office, it has high expectations that tangible benefits be delivered to the population in its second term. Key political figures

John Agyekum Kufuor President; after losing to Jerry John Rawlings in the 1996 election, he subsequently won the 2000 and 2004 elections. He is well respected in the country and has developed a strong international image. Mr Kufuor has become a leading represen- tative of Africa in global forums and is heavily involved in conflict resolution within West Africa. Alhaji Aliu Mahama Vice-president; before being chosen as running mate to Mr Kufuor in the 2000 election, he was little known in Ghanaian politics. He was selected to be Mr Kufuor’s vice-president in the 2004 election. After two full terms as vice-president, he is among the candidates looking to take over from Mr Kufuor, who will step down in accordance with the two-term presidential limit prior to the 2008 polls. John Atta Mills Vice-president in 1996-2000 and presidential candidate of the National Democratic Congress (NDC) in the 2000 and 2004 presidential elections, which he lost both times to Mr Kufuor. Mr Mills has been re-elected for the third time as the NDC presidential candidate for the upcoming 2008 elections.

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Jerry John Rawlings Head of state after seizing power in 1981; elected president in 1992 and 1996. He has struggled to find a role since standing down and continues to wield considerable influence over the NDC, of which he is chairman for life. His previous military regimes were heavily implicated in the National Reconciliation Commission’s report, which may be weakening his popularity within the NDC. Kwadwo Baah-Wiredu Minister of finance. A chartered accountant, he has been in parliament since 1996 and was the former minister of local government, rural development and environment, as well as a former minister of education and sports. Nana Akufo-Addo Mr Akufo-Addo competed against Mr Kufour for the New Patriotic Party (NPP) presidential nomination for the 2000 election. Since then Mr Akufo-Addo has been the ministe r o f fore ign a ffai rs in M r Kufo ur"s government. With Mr Kufour standing down before the 2008 election, Mr Akufo-Addo is one of the leading candidates for the NPP presidential nomination and resigned from the cabinet in May 2007. Alan Kyeremanten Mr Kyeremanten has emerged as another of the favourites to win the NPP presidential nomination for the 2008 election. Mr Kyeremanten served as minister of trade and industry in Mr Kufour"s most recent government until his resignation in May 2007. His close relations with Mr Kufour, as well as the fact that he comes from the same tribal group have led commentators to believe that he is the president"s favoured candidate. The opposition After dominating the political scene since 1992, the NDC became an opposition party after losing the 2000 elections. The party was created from the PNDC, a military regime government that came to power in 1981 after overthrowing a constitutionally elected government. The founding father and leader of the party, Mr Rawlings, and other prominent members of the party lay claim to the Nkrumahist ideology. The NDC draws its support from the Volta region and northern Ghana. Its credibility and public image have been tainted by allegations of fraud and corruption involving ex-ministers and senior government officials, as well as its association with Mr Rawlings, whose previous military regimes were heavily implicated in the NRC’s report. Splits in the party came into the open in 2006, when Mr Obed Asamoah left the party to form the breakaway Democratic Freedom Party (DFP). This party may attract some disenchanted NDC supporters in the run-up to the 2008 election. However, following the defection of Mr Asamoah, the NDC has appeared more unified that previously, nominating Mr Mills with minimal infighting in 2006.

International relations and defence

Ghana has developed a The NPP has historically been a pro-Western party, following policies

leading role under Mr Kufuor supporting liberal democracy and free enterprise, and the government has received strong support from key Western donors since the smooth transition of power at the last election. The NPP was rewarded in this strategy, when in 2006 it was awarded over US$500m as a part of the US government"s Millenium

Challenge Account, demonstrating the country"s strong relations with the US. Mr Kufuor has also taken on a high regional profile. Mr Kufuor was appointed to the rotating chairmanship of the Economic Community of West African States (ECOWAS) in January 2003, and nominated president of the African Union in 2007.

The military Although Ghana’s military has been heavily involved in politics throughout the country’s history, it is firmly under civilian control today. Relations between the military and civilian leaders are strong. In the 1990s the military underwent significant professionalisation, although the NRC’s recent report has suggested that this needs to be furthered. Meanwhile, the military is now actively involved in international and regional peacekeeping efforts. Under the auspices of the UN, Ghanaian troops are in Liberia and Côte d’Ivoire.

Military statistics, 2006 Army 10,000 Navy 2,000 Air force 1,500 Total 13,500

Source: International Institute for Strategic Studies, The Military Balance 2007.

Resources and infrastructure

Population

Population (m) Total 18.9 Male 9.4 Female 9.5 Urban 8.2 Rural 10.6

Source: Ghana Statistical Service, 2000 Population and Housing Census.

Population growth has slowed The final data from the 2000 population and housing census, released in March 2002, revealed a total population of 18.9m and a population growth rate of 2.7% per year since the last census in 1984. Although this rate is lower than that for West Africa as a whole, which was 2.9% over the same period, it is high in comparison with the 2% average for less developed countries. However, population growth is slowing in Ghana because of a decline in the fertility rate!which is estimated at 4.5 children per woman, the lowest in West Africa! and relatively stable mortality rates. According to World Bank data, average population growth declined from 2.8% between 1985 and 1994 to 2.2% between 1995 and 2002. Population growth in 2005 was estimated by the IMF to be just under 2.1%. A large number of Ghanaians also live abroad, believed to be around 3m, and there have been concerns that an increasing number of people are emigrating, although there is little evidence to verify this. The 2000 census yielded a population density of 79.3 persons per sq km. Ashanti is the most populous region, containing 19.1% of the total population,

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followed by Greater Accra (15.4%). However, Greater Accra is the most densely populated region with 895.5 people per sq km, followed by Central and Ashanti regions. The proportion of the population under 15 years old has declined to 39.9% from 45% in 1984, according to the UN Development Programme"s Human Development Report 2005. According to the same report, the number of elderly people (those older than 64) has fallen to 2.8% from 4.3% in 1984. However, this percentage is forecast to increase to 4.3% by 2015. This improving trend is attributed to improvements in health and life expectancy. The predominant ethnic group is the Akans, who constitute 49.1% of the population, followed by the Mole-Dagbon (16.5%) and the Ewe (12.7%). The labour force is estimated at 9m, of which 50.4% are male and 49.6% female. The agriculture, animal and forestry sector is the largest employer, at 49.2%, followed by sales and services at 18.2%.

Population by region, 2000 Total Rural Urban Population density a Annual growth rateb Western 1,924,577 1,226,159 698,418 80.5 3.2 Central 1,593,823 995,418 598,405 162.2 2.1 Greater Accra 2,905,726 358,042 2,547,684 895.5 4.4 Volta 1,635,421 1,194,337 441,084 79.5 1.9 Eastern 2,106,696 1,378,782 727,914 109.0 1.4 Ashanti 3,612,950 1,759,885 1,853,065 148.1 3.4 Brong Ahafo 1,815,408 1,136,628 678,780 45.9 2.5 Northern 1,820,806 1,337,016 483,790 25.9 2.8 Upper East 920,089 775,807 144,282 104.1 1.1 Upper West 567,583 475,735 100,848 31.2 1.7 Total 18,903,079c 10,637,809 8,274,270 79.3 2.7 a Persons per sq km. b 1984-2000. c Does not sum in source. Source: Ghana Statistical Service, 2000 Population & Housing Census.

The fifth round of the Ghana Living Standard survey reported a decline in poverty levels from 40% to 28.5% in 2006. This is based on a poverty line of C3,708,900 (US$403) per year. However, the decline was not evenly distributed geographically. Unlike previous years, the reduction in poverty for the 2005/06 report was concentrated in the central and coastal zones, but not in the Greater Accra Region. Other regions such as Eastern and Central experienced significant declines in their poverty levels. The living standard survey signalled higher poverty levels in the Greater Accra region, increasing from 4.4% in 1998-99 to 10.6% in 2005-06. This was attributed to rural-urban migration from poorer regions to Accra. For instance, net migration per 1,000 persons went up to 310,000 in the Greater Accra region in 2005, compared with outflows of 332,000 and 219,000 in the in the Upper West and Eastern regions respectively. Although poverty levels in the rural areas fell in line with overall downward patterns, poverty still remains a rural phenomenon. The percentage of rural population below the poverty line declined from 64% in 1991-92 to 50% in 1998-99 and further down to about 39% in 2005-06. However, rural income per head fell from 90% to 86% of the national average. The regions with the lowest income per head!the poorest areas of the country!are Northern, Upper West, and Upper East regions. Within the rural areas, incomes were higher in the forest zones than in the coastal and savannah zones.

Education

Literacy rates improving Until the 1970s Ghana had one of the most highly developed education systems in West Africa. It declined after 1975, along with the rest of the economy. In response, the government has undertaken a restructuring of the organisation and financing of the education system. This has been a major challenge. The 2000 Ghana Living Standards Survey indicates that 41% of females and 21% of males aged 15 and above were illiterate in 2000, compared with 58% of females and 36% of males in 1985, and that about 32% of all adults have never been to school. However, these figures appear to clash with the World Bank that released literacy figures for Ghana of just 66% for men and 50% for women in 2004. Enrolment rates have improved recently, largely on account of Ghana’s commitment to the attainment of universal access to primary education by 2015!a Millennium Development Goal (MDG). Estimates from the Ministry of Education and Sports show improvements in gross primary enrolment rates from 78% to 91% between 2003 and 2006.

Education indicators (% of the population) 2003/04 2004/05 2005/06 Primary school gross enrolment ratio Males 81.4 86.2 94.3 Females 75.3 80.3 87.8 All 78.4 83.3 91.1 Secondary school gross enrolment ratio Males 69.7 74.6 79.0 Females 61.3 65.6 69.5 All 65.6 70.2 76.1 Source: Ministry of Education and Sports.

Disparities in education occur According to the Ministry of Sports and Education, the gross primary education enrolment rate reached 91.1% in the 2005/06 academic year an improvement from 83.3% the previous year. The increase is partly the result of an increase in female enrolment from 80.3% to 87.8%. This represents the partial fruition of government attempts to improve female schooling by providing scholarship and other incentive schemes. There are also regional variations in the level of education that are not captured in the statistics. For example, northern parts of the country also have the lowest female enrolment, because of the predominance of Muslims and lower-income families: female enrolment was as low as 65.4% in Northern region in 2004-05. The government has therefore also been trying to resolve this and in 2003 61% of the 685 classrooms constructed were in the north of the country. The number of teachers is also increasing, but is still insufficient, as many of the better-qualified ones are taking higher paid jobs in Europe. However, because of this, reforms aimed at the teaching profession were implemented in 2004. These included the construction of residential facilities, the introduction of scholarship programmes for trainee teachers, and the facilitation of distance-learning programmes for teachers in tertiary institutions during school holidays.

The overall objective of the government is to achieve universal education by 2015. As a means of achieving this, a capitation grant!which is a contribution

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of C30,000 (US$3.25) per pupil!is paid by the government to public primary schools in deprived districts. The grant is aimed at limiting the need for district assemblies to charge levies on items such as school repairs, sporting and cultural activities. These levies have long been identified as barriers to school attendance, especially for children in the rural areas. Additionally, the government has begun a "school feeding programme", which provides one meal per day to every child in school.

Tertiary education in Ghana There are six public universities: the University of Ghana, Kwame Nkrumah University of Science & Technology, the University of Cape Coast, University College of Winneba, University of Development Studies and the University of Mines and Technology. Demand for tertiary education is high and growing, but supply has lagged behind demand because of a number of issues including frequent strikes by lecturers and teachers, student demonstrations, and reforms to the educational sector that have reduced basic and secondary education from 13-17 years to 12 years. The backlog and the inadequacies of some of the programmes offered in the public universities have led to the creation of private universities. There has also been a general decline in the quality of graduates from most public universities, mainly because of a lack of effective tutoring and large class sizes. In addition, most of the public tertiary institutions may have to take a closer look at their curricula if they are to continue to be relevant to industry and the country as a whole. There are three medical schools in Ghana, one dental school, six polytechnics and 38 teacher training colleges. The main private universities are Central University College, Methodist University College, Valley View University, Islamic University and the Ashesi University College. These institutions create avenues for higher education and are easing some of the pressure on the tertiary sector, but the cost!private schools charge US$500-US$2,500 per semester depending on the facilities offered!serve as a deterrent to most potential students. The curriculums of the private universities are geared more towards business and information technology (IT) courses, whereas the public institutions focus more on the arts and sciences.

Health

A mixed record As in other developing countries, the health services in Ghana are severely under-resourced and health spending has historically been low. According to the World Bank publication, World Development Indicators 2006, healthcare expenditure was just 1.2% of GDP in 2003 compared with 1.3% in Nigeria and 2.1% in Senegal. The government estimates that only 58% of the population has access to health services, with coverage heavily skewed in favour of urban areas. Nonetheless, some aid officials contend that the quality of health services has improved during the past decade, thanks to the expansion of primary healthcare and the introduction of some cost-recovery measures, which have put the system on a firmer economic footing. Some services, particularly immunisation, are certainly improving. The percentage of children immunised against diphtheria, polio and tetanus increased from 43% in 1993 to

76% in 2003 and up to 85% in 2005. This level is still slightly below the Poverty Reduction Strategy Paper target of 90%.

Access to healthcare, 2003 Region % Western 46.9 Central 67.2 Greater Accra 80.9 Volta 49.5 Eastern 60.1 Ashanti 69.0 Brong-Ahafo 53.8 Northern 35.0 Upper East 26.7 Upper West 30.4 Total 57.6

Source: Government of Ghana, Poverty Reduction Strategy Paper annual progress report.

Life expectancy increased from 50 years in 1970 to 60 years in 2003. Infant mortality was 64 per 1,000 live births in 2003, down from 102 per 1,000 live births in 1970. The main causes of death in infants are lack of protection against preventable diseases and contaminated water. In addition, some 25% of children suffer from malnutrition, which is predominantly a rural phenomenon in Ghana, and is particularly acute in the savannah zone.

NHIS registration coverage by region, 2005 % of population Estimated population Number registered registered Upper East 963,448 75,675 7.8 Upper West 561,866 60,304 10.7 Northern 1,790,417 281,992 15.8 Brong Ahafo 1,968,205 592,923 30.1 Ashanti 3,924,925 1,105,196 28.4 Western 2,042,753 427,904 21.3 Central 1,687,311 372,562 22.4 Greater Accra 3,576,312 608,074 17.0 Eastern 2,274,453 416,393 18.3 Volta 1,636,462 459,256 28.1 Total 20,425,652 4,400,279 22.0

Source: Government of Ghana, Poverty reduction strategy paper 2005 annual progress report.

A National Health Insurance Scheme (NHIS) was established in August 2003 by the passage of the National Health Insurance Bill by parliament. This facilitates the establishment of district mutual health insurance schemes in every district in the country and of private health insurance schemes that may be commercial or mutual in character. It is now compulsory for all Ghanaians to join one of these schemes. Previously Ghanaians relied on a “cash and carry” system of user fees for the provision of health services. The district mutual and private mutual health insurance schemes are to operate as companies limited by guarantee, while the private commercial health insurance schemes are to function as limited liability companies. Membership of a district mutual health insurance scheme is to be by application. Each of these is to be operated for the

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exclusive benefit of the enrolled members and will receive subsidies from the National Health Insurance Fund. The Health Insurance Act does not clearly outline the benefits that membership of a district mutual health insurance scheme will confer; these are likely to be decided by each individual scheme, as is the case with private mutual insurance projects. The NHIS is to be funded mainly by a 2.5% increase in value-added tax (VAT; the National Health Insurance Levy), introduced on August 1st 2004, and contributions from the public-sector workers’ pension fund scheme. It is envisaged that by the end of 2005 the premiums paid by the members of the various schemes will make them self-financing.

HIV and AIDS UNAIDS, the body co-ordinating the international fight against AIDS, estimates that there were 320,000 people aged between 15 and 49 living with HIV/AIDS in Ghana at the end of 2003. With an adult infection rate of only 2.9% in 2003, the epidemiological situation in Ghana has not reached crisis proportions and it appears not to be out of control, as is the case in many Southern African countries. The government is taking the threat posed by the pandemic seriously and has committed 15% of the healthcare budget to HIV/AIDS. It has also been reported that international companies are conducting AIDS drugs trials in Ghana, along with a number of other countries, although the results of these trials have not been concluded.

HIV/AIDS in Sub-Saharan Africa, 2005 ('000 unless otherwise indicated) Ghana Senegal Nigeria South Africa People with HIV/AIDS 320 61 2,900 5,500 Children (aged 0-14) 25 5 240 240 Adults (aged 15-49) 180 53 2,600 5,300 Women 180 33 1,600 3,100 Adult infection rate (%) 2.9 0.9 3.7 18.8 AIDS deaths in 2005 29 5 220 320 No. of orphans 70 25 930 1,200

Source: UNAIDS, 2006 Report on the Global Aids Epidemic.

Natural resources and the environment

Endowed with a number of Ghana is endowed with a number of natural resources, including arable land,

natural resources forests and sizeable deposits of gold, diamonds, manganese and bauxite. Several lakes and rivers offer opportunities for hydroelectric power plants to complement Ghana’s vast Lake Volta plant. Ghana’s location on the west coast of Africa also permits extensive fishing in the Atlantic Ocean. The climate is tropical with temperatures generally in the range of 21-300C. The northern savannah regions experience wider variations in temperature than the southern coastal areas. There are two rainy seasons, from March to July (main season) and from September to October. Annual rainfall in the south averages 1,900 mm but varies throughout the country, with the heaviest rainfall in the south- west. The hottest months are March and April, when the temperature can reach 35°C and it is extremely humid. The wettest month is June, when average rainfall is estimated at 178 mm, after which the main food harvest arrives.

The high forest in the south-west extends over 82,000 sq km and covers 34% of the country; it is Ghana’s main source of wood and timber exports. According to the World Bank, the total forest area fell by an average of 1.7% per year between 1990 and 2000. Gold is concentrated in Ashanti and Western regions, although there are also sizeable deposits in Central and Brong-Ahafo regions. Lake Volta, which supplies the Akosombo dam, lies to the south-east in the Volta region, but spreads north and north-west into Northern region. Much of the country’s food is produced in the north. Cocoa, the main cash crop, grows in all the regions south of Northern region. Individual farmers who use traditional land-use methods such as slash-and-burn cultivate both cash and staple crops. Mechanised plantation farming is not common in Ghana. Accra and some parts of Central region are prone to flooding!in Accra this is caused by the improper disposal of waste, which chokes the main drains in the city. Accra is also built on a faultline and thus experiences occasional earth tremors.

Oil is discovered In June 2007 UK oil company, Tullow Oil, announced that it had made a "significant oil discovery" at its Mahogany-1 well in the West Cape Three Points licence offshore of Ghana. The licence is shared by a number of oil companies, with Tullow holding a 22.9% stake, and US companies, Andarko Petroleum and Kosmos Energy, each holding 30.9% and acting as the technical operator and operator respectively. The Ghana National Petroleum Company (GNPC) also has a 10% stake in the operation. Speculation as to the size of the find has, so far, ranged from 300m barrels to 700m barrels. However, the well was drilled in an area known as the Tano basin and the geological structure of the basin continues through to the neighbouring Deepwater Tano licence bordering Côte d"Ivoire, in which Tullow also owns a 49% stake. This led to speculation that a further discovery could be made in the Deepwater Tano licence, and this was confirmed when a further discovery was found in August 2007. Estimates of the oil contained in the structure are now between 1bn and 1.5bn barrels. However, commercial extraction will not begin until 2011 at the earliest.

Transport, communications and the Internet

Infrastructure needs At independence in 1957 Ghana had one of the most developed road networks

investment in the developing world, but during the 1970s the transport system and ports deteriorated severely and the telephone network barely functioned. Since the early 1980s major repairs to roads, ports and highways have been carried out, and the national electricity grid has been extended to most parts of the country, particularly northern Ghana. However, much more investment is needed and more projects are expected in the coming years. During the past decade, the government has directed a significant part of its aid and capital budget to much- needed improvements in the country’s infrastructure, but it is now increasingly looking to the private sector to fund new projects.

Roads are being improved Road transport is the principal domestic carrier, accounting for around 98% of freight moved. However, Ghana lacks a well co-ordinated public road transport system. The Ghana Private Road Transport Union, which is responsible for a major part of the road transport system, has not provided sufficient public

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transport to meet the needs of commuters and this has resulted in a proliferation of private cars on the road. This has worsened traffic congestion and is one of the reasons for non-punctuality at the workplace. The increasing number of vehicles on the road has also increased the number of traffic accidents. For instance, the number of vehicles involved in road accidents increased from 15,000 in 1998 to 17,000 by 2004. The increasing numbers of road accidents prompted parliament to institute a National Road Safety Commission (NRSC) under the Road Traffic Act 2004. The aim of the commission is to provide educational guidelines on road safety, as well as to fix well-known accident hotspots on the road network. Despite the inception of the road safety educational campaign, the number of vehicles involved in accidents remains high and was at 4,581 in the third quarter of 2005. The government is in the process of instituting a public transport system, one of the benefits of which, it is hoped, will be the easing of traffic congestion. Buses running under the government’s Metro Mass Transit fleet increased from 17 in October 2002 to 580 in December 2006. Coverage areas of the current fleet of buses has broadened from nine to 11 major metropolitan and district centres and they convey an average of 3.3m passengers per month with free rides for all school children. Private-sector operators are also increasing provision, boosted by the removal in 2003 of the import duty on buses that seat more than 30 passengers. Usage of motorcycles and bicycles as alternative means of transport is gaining popularity in the Southern parts of the country!a phenomenon already in existence in the Northern sectors. Between 2003 and 2006 registration of motorcycles has increased by over 100% compared with motor vehicle registration of 16%. The outbreak of conflict in neighbouring Côte d’Ivoire has increased the traffic through Ghana’s ports, which has caused a large number of extra lorry journeys, damaging the road network. The road infrastructure has also suffered from an influx of refugees crossing the border, heading north to Burkina Faso, Niger and Mali. Transit traffic of heavy goods vehicles increased from 3,342 in 2000 to 3,872 in 2004. This has necessitated the redesign of some major road networks to handle heavier axle load limits. The total network of highways is 39,409 km long, out of which 11,653 km are paved and 27,756 km unpaved. Spending on roads has picked up under the New Patriotic Party, emphasis having been placed on improving the existing network.

Number of vehicles registered by category 2003 2004 2005 2006 Motorcycle 8,777 14,462 15,136 17,654 Private motor vehicles (up to 2,000 cc) 20,564 20,333 22,949 23,810 Commercial motor vehicles (up to 2,000 cc) 5,110 7,642 6,686 7,204 Motor vehicles (above 2,000 cc) 7,778 7,189 8,715 10,403 Buses & coaches 2,916 4,882 5,585 6,609 Othersa 2,929 5,040 5,348 6,134 Total 48,074 59,548 64,419 71,814 a Includes cargo trucks, agricultural, construction and mining equipment. Source: Ministry of Road Transport.

The railways The railway system, which consists of a triangular network connecting Accra, Kumasi and Sekondi-Takoradi and covers 953 km, continues to suffer from delays and long journey times, despite efforts to rehabilitate parts of it in recent years. For example, travelling by rail from Takoradi to Accra (296 km) may take one or more days, whereas by road it takes a maximum of four hours. In 2003 the government announced ambitious plans to extend the rail network to link up with Burkina Faso, Côte d’Ivoire and Togo, as well as a connection to Tema port, but attracting finance for the project is proving difficult. Aside from finance, factors such as the encroachment of commercial activities along most railway tracks pose serious challenges for potential investors in extending the railway system. A Technical Advisory Committee on Railway Lands has been set up to handle the issues involved in land encroachment and to formulate guidelines for operations in the proposed Ghana Railway Company. The government is currently rehabilitating the 30-km Accra-Tema rail line so that commuter services can begin. The project will be completed and opened, several months behind schedule, by the end of September 2007 and is likely to boost rail usage. The government has also signed a Memorandum of Understanding with SNC Lavalin!a Canadian firm!to rehabilitate rail lines in the bauxite mining areas. The condition of the rail network used to transport bauxite and manganese has been a major source of concern for the mining industry.

Railway traffic (freight; '000 tonnes) 1999 2000 2001 2002 2003 2004 Cocoa 2,673 1,908 1,440 1,161 1,128 1,878 Timber 6,035 5,504 4,086 4,030 4,632 3,308 Bauxite 36,595 39,817 58,514 65,529 54,642 48,099 Manganese 44,440 65,236 86,478 91,701 118,466 118,882 Others 7,559 3,281 5,206 5,748 7,836 4,262 Total 97,302 115,746 155,424 168,169 186,704 176,429 Passengers ('000) 1,469 844 599 1,543 2,340 2,556 Passengers (km, '000,000) 129 83 62 61 85 80

Source: Ministry of Ports, Harbours and Railways.

The ports are handling Between 1994 and 2004, container traffic and transit cargo ships increased

more traffic tremendously, prompting huge infrastructure developments at both Tema and Takoradi ports to facilitate operations. The dredging of Quay 2 and its extension by 200 metres at the Tema port was completed in 2005. The extension brings the total length of the quay to 500 metres and provides enough space for a new container terminal in order to improve container handling at the port. This has helped to reduce the turnaround time for ships, which is now estimated to be among the quickest in West Africa. Tema handles the bulk of imports; Takoradi handles most exports. Tema and Takoradi have benefited from a significant increase in traffic since the outbreak of civil conflict in Côte d’Ivoire, which forced that country’s landlocked northern neighbours!Burkina Faso, Mali and Niger!to seek alternative routes. At Tema port, cargo traffic recorded 887,325 metric tonnes in 2006. The transshipment market also recorded higher increases, from 71,083 metric tonnes in 2004 to 327,648 metric tonnes in 2006.

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The government plans to capitalise on the increased traffic flows and establish the ports as regional trade hubs. An inland terminal, situated at Boankra, near Kumasi is under construction in order to facilitate import and export traffic to and from Northern Ghana and transit countries. The site was chosen because it is almost equidistant from both the Tema and Takoradi ports and has good transport links to both. Its completion will help to reduce clearance procedures and improve storage space at the main ports. Inland water transport on Lake Volta is less efficient, mainly because of inadequate port and navigation facilities, as well as intermittent drops in the water level. Overall, there are 1,293 km of waterways on the Volta, Ankobra and Tano rivers. The Volta Lake Transport Company (VLTC) facilitates both cargo and passenger movements between north and south-eastern Ghana. The cargo transported across the lake includes agricultural products, cement and construction equipment. Additionally, over 1m litres of petroleum products are ferried across the lake to the northern parts of the country each year. The government intends to secure financing from private sources to chart navigational fairways and remove tree stumps, which are a major cause of accidents on the lake.

Ghana Airways ceases Ghana is well served by international airlines, including Lufthansa, KLM, British operations Airways, Kenya Airways, Alitalia and Emirates. The national carrier, Ghana Airways, which had been set up shortly after independence, is no longer in operation. The airline became heavily indebted owing to poor management, excessive political interference and under-capitalisation, and its flights were suspended in July 2004!it subsequently went into liquidation. The collapse of the airline has seriously hampered connections to other West African states. However, in late 2004 the government entered into a venture with Ghana International Airlines (GIA), a US-based consortium, to establish a new airline. The government intends to transfer some of the assets of the defunct Ghana Airways to the company, in return for a 30% stake in the venture. In October 2005, the new GIA embarked on its maiden flight to the UK. The airline has just one Boeing 757, which flies daily from Accra to London-Gatwick. GIA is in the process of acquiring another Boeing for the resumption of West African routes. From Accra’s Kotoka international airport there are direct flights to Europe, the US, Southern Africa and most countries in the West African sub-region. An expansion of the airport was completed in early 2003. The airport is now capable of handling over 120,000 passengers per year (its previous capacity was 68,000 passengers, 50% less than Abidjan in Côte d’Ivoire). The government hopes that the airport expansion will allow Kotoka to become an international hub, particularly as Abidjan is losing trade as a result of the civil conflict in Côte d’Ivoire. The expansion programme, which cost more than US$100m, included the extension of the runway, the modernisation of the terminal building, the upgrading of communications facilities and the installation of closed-circuit television, a baggage identification display system and a front information display.

More mobile than The telecommunications system in Ghana has improved considerably fixed-line subscribers following years when there was a lack of investment. The introduction of

mobile phones has opened up multiple new business opportunities for providers and allowed the ailing telecommunications sector to bypass the outdated and unreliable fixed-line infrastructure, providing a more reliable and accessible service. This has been enhanced by keen competition between telephone providers. Mobile-phone users now far outnumber fixed-line services and the subscriber base has grown rapidly, from 12,766 in 1996 to over 5m in 2006. There are currently four licensed service providers: Areeba, One Touch, Tigo and Kasapa. The Areeba service, with 2,585,467 subscribers at end- 2006, is the largest provider. The owner of Areeba, Investcom, was bought in June by South African telecoms giant, MTN. Other international investors in the sector include Hutchison Whampoa and Millicom LLC. Telenor of Norway was appointed to replace Telekom Malaysia as the manager of Ghana Telecom in late 2002, although this resulted in a legal challenge by Telekom Malaysia (over the government’s right to terminate their management contract with the firm, and to reduce Telekom Malaysia’s presence on Ghana Telecom’s board), which delayed Telenor’s plans for expanding domestic services. In December 2006 the government declined to renew the management contract of Telenor following intense public outcry against high salaries (estimated at US$40m over three years) and management style. Subsequently, an interim management board was announced to replace the Norwegian management team. The government has also finally bought Telecom Malaysia"s 30% stake in Ghana Telecom at a cost of US$100m through an arbitration settlement. Ghana Telecom therefore reverted back to state- owned status. However, plans are underway to sell 51% of the shares to a strategic investor with technical expertise in the telecoms industry and the financial capabilities to push the company forward. In addition, the government intends to offload its 66% shares in Westel (the second fixed-line provider) to a strategic investor in the latter part of 2007. Regional distribution of fixed-line services is heavily skewed, with two-thirds of subscribers in Greater Accra. Ghana Telecom is also expected to provide an additional 750,000 mobile-phone subscribers. The government has designed an extensive telecommunications strategy, which seeks to increase the number of fixed-line telephone providers and improve universal access to telecommunications facilities in the communities and among diverse population groupings. Under the strategy, the country is zoned into five areas and two licences will be issued to strategic investors per zone. The overall objective of this programme is to reach 20% of the population, including at least 10% in the rural areas by the year 2010.

Telephone subscribers, 2006 Service (providing company) Fixed line Payphone Mobile Total One Touch (Ghana Telecom) 357,577 11,364 877,106 1,246,047 Areeba (Scancom Ltd) 0 0 2,585,467 2,585,467 Tigo (Millicom) 0 0 1,304,120 1,304,120 Kasapa (Hutchison Whampoa) 0 0 200,104 200,104 Westel 2,768 165 0 2,933 Capitala 500 0 0 0 Total 360,845 11,529 4,966,797 5,338,671

Source: National Communication Authority.

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The Internet There are currently over 30 Internet service providers and in 2005 there were an estimated 200,000 Internet users in Ghana, mainly in urban areas. Adoption of the Internet in Ghana has been relatively slow, owing to the expense of computers, telephony and dial-up costs, and because there is limited content in relevant languages. However, Ghana is connected to the SAT3/WASC/SAFE fibre-optic submarine cable, which extends around Africa to Europe and Asia, and became operational in mid-2002. The full integration of this facility will provide Ghanaians with direct communication services to most African states, as well as high-quality links to international destinations. Ghana Telecom (GT) is the sole provider of the international link provided through the SAT3/WASC/SAFE fibre-optic submarine cable to Internet Service Providers (ISPs) and international companies. Varying capacities ranging from 64 kbps (kilobytes per second) to 2 mbps (megabits per second) are offered through lease. However, poor domestic services and high pricing have prevented Ghanaians from taking full advantage of this, including the cable’s broadband capability. Instead, most ISPs resort to VSAT (fixed satellite very small aperture terminal) services offered by the National Communication Authority (NCA) at high prices. Application and Authorisation licence fees for public and corporate users are US$12,000 and US$11,500, respectively, with an annual renewal licence fee of US$4,000.

Telecommunications indicators 2003 2004 2005 2006 Main lines 291,000 313,300 314,000 356,400 Main lines (per 100 inhabitants) 1.37 1.47 1.45 1.58 Mobile phones (per 100 inhabitants) 3.74 7.93 7.98 23.09 Internet users 250,000 368,000 401,300 609,800

Source: International Telecommunications Union.

The media Since restrictions on the media were lifted in the early 1990s, there has been a proliferation of newspapers in Ghana. The state-owned Graphic Corporation publishes several newspapers, including its flagship, Daily Graphic. Most non- government newspapers are openly affiliated with opposition parties or wealthy individuals, and many are tabloids of dubious quality. Public Agenda is a weekly paper run by left-wing former members of the ruling party, and has played an important role in exposing government corruption. There are a few business-related weekly publications, notably the Business and Financial Times. Ghana has several independent radio stations, some of which are available worldwide over the Internet. As at 2005, 84 radio stations out of the licensed 137 were operational across the country. There are four terrestrial television stations: GTV is state-owned; Metro-TV is jointly owned by a private individual and the Ghana Broadcasting Corporation; and TV3 and TV Africa are both privately owned. In addition, several pay-per-view TV stations are operational in the major cities, namely Accra, Kumasi and Sekondi/Takoradi. Notable among them is South Africa’s DSTV, which is available nationwide through a satellite service.

Energy provision

The weather dictates Hydroelectricity is the main source of domestically generated power,

hydroelectricity output representing about 70% of the total domestic energy produced. Lake Volta and its dam supply the main 912-mw hydroelectric power station at Akosombo and another smaller lake feeds the Kpong plant 40 km downstream. Reliance on water levels at these stations makes power supplies vulnerable to rainfall. In late-1997 the water level of Lake Volta fell drastically, plunging the country into a full-scale electricity crisis in 1998. This forced many industries to reduce their output and temporarily halted Ghana’s export of electricity. The Volta River Authority (VRA) began a power-shedding programme as a result of low levels of water in Lake Volta. There has been low rainfall in the northern sectors of the country where the Volta’s main tributaries spring from resulting in low water inflow in the Lake. The current energy crisis is also attributed to surging consumer demand resulting from rapid urbanisation. Electricity demand is estimated at an annual growth rate of 7% per year.

Power generation (GWh) 2004 2005 Takoradi thermal (combined cycle) 535.5 831.4 TICO (simple cycle) 222.6 327.7 Akosombo hydro station 4,404.4 4,718.1 Kpong hydro station 876.5 910.6 Total domestic production 6,039.0 6,786.8

Source: Ministry of Energy.

Other power sources are The two players in the power system in Ghana are the Volta River Authority

being added and the Electricity Company of Ghana (ECG). VRA generates and transmits electricity to the ECG for onward distribution across the southern parts of the country. The northern parts are served directly by the VRA under the Northern Electricity Department (NED). In 2005 the Ministry of Energy embarked on a power-sector reform programme to improve infrastructure and increase access to power. As part of this, proposals are under way to construct a 300-mw thermal plant at Tema by 2008 using either private capital or as a joint venture. The IFC is also funding the expansion of the Takoradi power station (TICO). This will be used to construct a 110-mw steam turbine to add to the existing capacity of 220 mw. On completion, this will reduce power generation costs from the TICO plant by 30%. In addition, another US company, KMR Power, is building a 220-mw, gas-fired combined-cycle plant at Tema, primarily to serve the country’s main gold mines. However, the reform of the sector was too late to prevent the onset of the energy crisis in 2006. As water levels fell at the Akosombo dam and the VRA was forced to shut down four out of the six turbines, reducing production from the dam to only 30% of usual production. As a result, high energy intensity companies, such as the aluminium industry, were forced to end production and other mining sectors were prevailed on to cut production levels by 25% until the crisis was over. Subsequently, four mining companies!Newmont, Anglogold

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Ashanti, Golden Star Resources and Goldfields Ghana!formed a consortium to construct a thermal power plant in collaboration with the VRA. The plant, which is expected to add about 80 mw to the national grid, will be completed by end-2007. It will supply uninterrupted power for the mining companies to offset the effect of current and possible future power-rationing exercises. However, fuelling the plant to generate power is expected to cost about US$630,000 a day and may be higher as oil prices rise on the international markets. Other plans to increase future production include the building of thermal plants, and the building of a another dam at Bui.

Petroleum industry is Imported oil is processed at the country’s sole oil refinery, the Tema Oil deregulated Refinery (TOR). For many years fuel prices were fixed at below cost levels by the government, causing TOR to build up large debts. As international oil prices began rising, the government provided large subsidies to TOR to keep fuel prices down, but it became clear that the financial burden this created could not be sustained. Fuel prices were eventually raised to cost-recovery level in February 2005, and a pricing mechanism was put in place shortly afterwards to ensure that prices are regularly adjusted to remain at cost-recovery level. The pricing mechanism is linked to international oil prices, but also includes any applicable taxes, levies, adequate distributor margins and a debt recovery levy aimed at paring back previous TOR debts. The supply of petroleum products has also been deregulated, so that private-sector oil-marketing companies are now free to participate in competitive tenders for petroleum products. The responsibility for overseeing the deregulation of the domestic petroleum industry lies with the newly-created National Petroleum Authority (NPA), which includes representatives from the government, the private sector and non-governmental organisations. Although deregulation has eased the financial burden on TOR, clearance of the huge backlog of debt remains an issue. In 2006 the government issued special TOR bonds to cover debt incurred in 2005 following a revision of the terms of credit for importing oil from Nigeria.

West African Gas Pipeline After having been on the drawing board for nearly a decade, the regional West African Gas Pipeline (WAGP) is going ahead. The WAGP is a US$500m project, which aims to move Nigerian gas to Ghana via a 680-km sub-sea pipeline with spurs running off to Togo and Benin. The project gathered momentum following the World Bank’s approval of US$125m in finance, and the major construction work is now expected to be completed by December 2006, with operations scheduled to begin in the mid-2008. The government has issued a roadmap towards establishing a secondary gas market in Ghana once the pipeline has been completed. A draft policy paper to this effect, containing provisos on performance and rules of practice, health and safety measures for gas transportation, and tariff methodologies has been submitted to cabinet.

The economy

Economic structure

Main economic indicators, 2006 (Actual unless otherwise indicated) Real GDP growth (%) 6.0a Consumer price inflation (av; %) 10.9 Current-account balance (US$ m) -627.9a Exchange rate (year-end: US$) 9,235.3 Population (m) 22.6 External debt (year-end; US$ m) 3,318.8a a Economist Intelligence Unit estimate. Sources: Economist Intelligence Unit; IMF, International Financial Statistics.

Agriculture is the mainstay of Agriculture has long been an important sector of the economy, employing the economy about 50% of the labour force and contributing around 36% of GDP in 2006. Cocoa is the major export crop, followed by timber and non-traditional products such as horticulture, fish/sea foods and pineapple. Cocoa, timber and other tree crops are grown in the southern forest belt of the Ashanti, Brong- Ahafo, Eastern and Western regions. Most of the cocoa crop is exported as beans, although there are some cocoa-processing plants and more are under construction. The agricultural sector is vulnerable to shocks caused by fluctuations in weather patterns, world commodity prices and disease. Attempts to diversify the sector have yielded minimal results, although the potential to do so exists!the government is currently targeting the production of cassava for domestic processing into starch. Services are an increasingly important sector of the economy, accounting for around 30% of GDP in 2006. The manufacturing sub-sector is the largest contributor to industrial output representing 9.1% of GDP in 2006, followed closely by the construction sector (8.6% of GDP) and then mining and quarrying sector (5% of GDP).

Comparative economic indicators, 2006 GhanaA Côte d'Ivoirea Nigeria a South Africab GDP (US$ bn) 11.9 16.8 116.4 255.4 GDP per head (US$) 528 914 809 5,388a GDP per head (US$ at PPP) 2,818 1,832 1,227 12,574a Consumer price inflation (av; %) 10.9b 2.4b 8.2 b 4.6 Current-account balance (US$ bn) -0.6 0.9 15.4 -16.3 Current-account balance (% of GDP) -5.3 5.4 13.2 -6.4 Exports of goods fob (US$ bn) 3.8 8.1 58.2 63.8 Imports of goods fob (US$ bn) -6.6 -4.8 -27.0 -69.9 External debt (US$ bn) 3.3 10.8 6.7 31.8a Debt-service ratio, paid (%) 2.7 4.2 1.9 6.1a a Economist Intelligence Unit estimates. b Actual. Source: Economist Intelligence Unit, CountryData.

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Economic policy

Broad commitment to IMF- Since Ghana’s return to multiparty democracy in 1992 the government has

backed reforms generally continued with economic reform programmes agreed with the IMF, albeit more slowly than donors and local business would have liked. Much progress has been undone in election years when the pressure to spend freely has proved too tempting. These fiscal lapses during election years have caused the government problems that have proved difficult to resolve in subsequent years. Nonetheless, IMF programmes have remained in place for most of the past decade. The last agreement with the IMF, a poverty reduction and growth facility (PRGF), was approved in May 2003, under which SDR184.5m (US$258m) was to lent over a period of three years. Performance under the PRGF was good according to IMF assessments. In particular, policy implementation was noted as creditworthy with fuel price liberalisation and banking reform notable achievements that were enacted despite popular objections. However, the government decided not to renew the PRGF when it expired in 2006. Instead government signed a Policy Support Instrument (PSI) arrangement with the IMF in October 2006. Details of the PSI programme are yet to be made public, although under the PSI option the IMF will only provide technical support in design, implementation and monitoring of economic programmes in order to provide signals on the country’s performance and prospects to development partners. Opting for the PSI therefore gives Ghana the credibility of an IMF programme and policy approval without the borrowing facility of the PRGF.

Government looks to increase Increasingly in recent years the government"s focus has moved from stabilising

developmental spending the economy to achieving visible development gains and in this regard the government has stated its aim to increase development spending significantly. The poverty reduction strategy paper agreed in July 2006 entails high levels of public spending in order to promote a structural transformation and lift the country out of poverty. The spending increase is to be funded through previously unbudgeted increases in revenue, largely from donor-related sources. Funding will also come from continued concessional borrowing and, subject to approval from parliament, the government intends to raise about US$750m in sovereign bonds from international capital markets. This is expected to support infrastructure projects particularly in the energy sector and is scheduled to be issued by the end of 2007.

Fiscal imbalances remain However, with the government emphasising increased spending plans, fiscal policy has come under scrutiny in light of historical slippages. After Ghana’s return to multiparty democracy in 1992, its overall fiscal performance deteriorated significantly. From 1992 to 1995 the average budget balance deteriorated from a surplus in the 1980s to an average deficit of 0.6% of GDP. The budget deficit therefore increased to an average of 6.4% of GDP in 1996- 2000. In 2000 the budget deficit (January-December) rose still further to 8.5% of GDP caused mainly by rapid increases in government spending (particularly ahead of the election in 2000) on wages and interest on the national debt, against a backdrop of stagnating revenue.

After coming to power, the New Patriotic Party (NPP) government identified the huge fiscal deficit, public-sector debt, falling economic growth rates, rising inflation and high unemployment as the main problems facing the economy. After staying high at 9% of GDP in 2001, greater control over fiscal expenditure, coupled with improved revenue collection and administration, helped to reduce the fiscal deficit to 6.8% of GDP in 2002 and 4.4% in 2003. By 2005 the fiscal deficit had fallen to just 2.1% of GDP. However, with the renewed emphasis on infrastructural spending, coupled with expensive public-sector wage settlements, fiscal discipline weakened in 2006 and the government posted a deficit of 7.3% (against a projected target of 4.5%).

Central bank pursues A further target of the NPP when they came into power was lowering inflation

lower inflation to single digits. Previously the financing of fiscal deficits had made reducing inflation difficult and the average inflation rate was at 33% in 2001 as a result. However, since then, the reduced deficit has allowed the central bank to slow down monetary growth through the intensification of open-market operations, complemented with deposit auctions and the introduction of new instruments, such as repurchase agreements and swaps. As a result, the inflation rate fell to an average of 14.8% in 2002. In response to the inflationary impact of the near-doubling of petrol prices in January 2003, the Bank of Ghana (BoG, the central bank) increased the prime rate by 300 basis points over the following two months, to 27.5%. However, the rate was cut again in July 2003, to 26%, on the basis of improved fiscal performance, a slowdown in money supply growth and an easing of underlying inflationary pressure. The central bank continued to reduce the prime rate regularly, until it reached 16.5%!the lowest in decades!in response to the continued decline in inflationary pressures and the central bank’s optimism that this would continue. However, the cuts in inflation stalled in mid-2005, as the bank began taking a more cautionary stance given that inflationary pressures remained high, not least because of the 50% fuel price increase that was instituted in February 2005. However, much of the inflationary effect of the petroleum price adjustments had eased by June 2005. The BoG therefore lowered the prime rate by a further 100 basis points, to 15.5%, in the third quarter of 2005, where it remained until the end of the year. The prime rate was then lowered by another 100 basis points to 14.5% in January 2006. Having remained stable throughout the year, the BOG announced a further reduction by 200 basis points, to 12.5% in December 2006. The cuts in the interest rate have been introduced at a time when the government deficit has been falling. However, recent increases in the deficit may threaten the low interest rate environment, as the government looks to securitise its debt on the domestic market.

Monetary policy also aims to The central bank was also aware that high interest rates are hurting the private increase private-sector lending sector and therefore has a bias towards easing monetary policy in the hope that commercial banks will lower their lending rates, which will encourage private- sector borrowing and therefore investment. Although lending rates have come down, so have deposit rates, and there has been little impact on the spread between the two. According to the BoG, in December 2004 the spread between

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the lending and savings rates was 19.25%, while in June 2006 the same spread had risen to 19.62%. However, the government has also taken other steps in order to promote the issuing of credit to the private sector. In July 2005 and August 2006 the central bank lowered reserve requirements (banks must still hold 9% of their eligible deposits as primary reserves at the central bank but the requirement to hold 35% of their eligible deposits as secondary reserves!in the form of Treasury bills and medium-term government securities!has been abolished). It is hoped that this will free up bank assets so they can be lent to the private sector. However, although measures such as this, combined with further cuts in the prime rate and continued fiscal discipline will allow a narrowing of this differential, an improved repayment culture would have a greater impact, as commercial banks still see lending to the private sector as risky. In this regard, the government introduced a Credit Reporting Act in 2007. The Act will establish credit reference bureaus that provide valid credit risk assessments of borrowers. Implementation is therefore expected to lower risks associated with lending to the private sector and make credit more readily available.

Privatisation has slowed in During the 1990s, Ghana undertook a reasonably extensive privatisation pro-

recent years gramme, in which it divested of 200 state-owned enterprises (SOEs). However, privatisation efforts have slowed down since then, with 35 enterprises still wholly government-owned and an additional 200 in which the government still owns a majority share. Many of the SOEs are functioning poorly, requiring financial support from the government. Little mention was made of privatisation in the 2006 budget, and the issue seems to have been temporarily sidelined as other reforms, such as the deregulation of the petroleum industry, take centre stage. Limited asset sales, planned for later in 2006, were announced in the 2006 supplementary budget, but the companies involved are not major players. These include the State Insurance Company and Ghana Oil Company. Privatisation of the main firms that donors would like to see completed remain stalled. These are: • Ghana Water Company, which serves the Greater Accra region; • Volta River Authority, the main electricity producer and transmitter; • Tema Oil Refinery, which produces all refined petroleum products consumed domestically; • Electricity Company of Ghana, the principal distributor of electricity; and • Ghana Commercial Bank (GCB), the largest commercial bank in terms of assets and deposits. Attempts to sell GCB have proved highly controversial and the government postponed its planned divestiture in mid-2003 in response to intense public pressure. To downplay the public pressure associated with divesting GCB, the government has recommended disposal of its shares in GCB via a rights issue on the Ghana Stock Exchange instead of direct sales to a strategic investor in 2007. Other privatisations likely to take place in 2007 are the sale of the government stake in the Agricultural Development Bank and in Westel

Communications, the telecommunications company that remains in the hands of the government after previous attempts to privatise it.

Economic performance

Solid real GDP growth Since 1983 the Ghanaian economy has undergone several changes in economic management in response to the introduction of various policies and programmes designed to reverse the economic decline that has affected the country since the 1970s. The result is that GDP has grown reasonably strongly since 1983!reflected in an average real GDP growth rate of 4.4% per year between 1995 and 1999!and has become increasingly broad-based. Between 2000 and 2003 real GDP growth continued to average 4.4% a year, despite the low growth rate in 2000, because of the macroeconomic instability created by the collapse in the cedi. However, as macroeconomic stability returned during this period, real GDP growth accelerated, reaching 5.2% in 2003 and 5.8% in 2004. This growth trend was strongly reflected in the agricultural sector, where a downturn in 2000 was followed by agricultural expansion, boosted by a number of factors. These included increased spraying of crops against disease, good rains and the advent of large-scale smuggling of cocoa from Côte d’Ivoire. In 2004 the agricultural sector grew by 7.5%, largely because of the strong performance of the cocoa sector. Cocoa production rose by 30%, the second consecutive year of high growth.

Government GDP estimates, selected sectors, 2006 (% change) 2005 2006 2006 2006 Original Supplementary Estimated Budget budget budget outturn Agriculture 6.5 6.5 4.1 5.7 Agriculture & livestock 6.0 6.0 3.3 6.0 Fishing 3.6 3.6 -1.2 3.7 Industry 5.8 5.6 7.7 7.3 Mining & quarrying 4.9 3.0 6.3 3.0 Electricity & water 4.5 6.6 12.4 23.0 Services 5.4 5.4 6.9 6.5 Transport, storage & communications 6.0 6.0 7.9 7.2 Wholesale & retail trade, restaurants & hotels 6.1 6.1 10.0 7.5 Finance, insurance, real estate & business 5.6 5.6 7.6 7.6 GDP 5.8 5.8 5.9 6.2

Source: Government budget speeches.

Record growth of 6.2% in 2006 The latest official figures released in the 2007 Budget Statement in February 2007 show that real GDP is estimated to have grown by 6.2% in 2006. This is the highest growth rate achieved in 20 years and is in excess of the 2001-05 real GDP growth average of 5.1%. However, the traditional role of the agricultural sector as the driver of growth, as seen over the last five years, was diminished as poor weather resulted in agricultural growth of 5.7%. Instead, the industrial and services sectors were the main drivers, growing at 7.3% and 6.5%, respectively. Higher demand and expansions in the electricity and water

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subsector were the main drivers of growth in the industrial sector; posting 23% growth compared with a targeted 4% for 2006. The high electricity subsector growth rate is attributed to the rapid rise in demand from the Volta Aluminium Company (Valco), at least for the first half of 2006. The mining subsector showed weak performance, recording just 3% growth, far below the targeted 6.3% growth for the sector. At 6.5%, growth in the services sector was also significant. Transport, storage and communications gained strongly, buoyed by the crisis in Cote d’Ivoire, which has led to diversion of transit trade through Ghana’s ports. The wholesale and retail trade, restaurants and hotels subsector also gained, as did finance, insurance, real estate and business services. The number of tourist arrivals has also increased steadily in recent years. According to the Ghana Tourism Board, visitors to the country increased from 373,000 in 1999 to over 420,000 in 2006.

Regional trends

Ghana has a Ghana is informally divided into north and south. The north consists of three

north/south divide states!Northern, Upper East and Upper West!and the south seven!Ashanti, Brong-Ahafo, Central, Eastern, Greater Accra, Volta and Western. Since the pre- colonial period there has been an unequal distribution of development programmes and projects in favour of the south. The development gap can be explained by the concentration of natural resources in the south, particularly minerals and forest resources. In addition, agricultural activities, particularly tree crops, are concentrated in the south because of high rainfall relative to the north. The north is also reliant on agriculture, but most of the crops are grains because of scant and irregular rainfall. This division is slowly narrowing, as recent governments have expanded capital investment projects in the north. The investment undertaken so far includes extending the national electricity grid, rehabilitating north-south roads and increased expenditure on education. The NPP government is expected to continue courting the northern vote with development projects, but the disparity between north and south is wide and bridging the gap will be difficult. The divide has always encouraged migration from the north to the south, causing higher population densities in the southern part of the country relative to the north. The northern part of the country has been prone to ethnic tensions among some tribes, the most recent of which is the Dagbon chieftaincy conflict. However, regional tensions have been minimal.

Economic sectors

Agriculture

Recent improvements in Agriculture accounts for 30-40% of GDP and employs around 50% of the

agriculture workforce. Growth has historically lagged behind other sectors of the economy and been highly unpredictable owing to its dependence on weather conditions (only 0.02% of total cultivated land is irrigated). In recent years, however, agricultural growth has improved, averaging 4.6% per year in 2000-06, owing to strong expansion in the cocoa and forestry sub-sectors. Although most of the

year-to-year trends are attributable to weather, the longer-term improvement in performance can be ascribed to changes in public policy. As part of its broader economic reforms, the government has removed food price controls, raised cocoa prices paid to producers and boosted extension services. According to estimates in the World Bank’s African Development Indicators 2005, the area under permanent crops has increased steadily from an estimated 3m ha in 1995 to 4.2m ha in 2002. However, yields of food crops have been disappointing; only cassava yields have improved much in the past decade. This seems to be a result of low investment, poor technology and the poorer quality of some of the land that has recently been planted. The removal of subsidies on fertilisers and other agricultural inputs has also had an effect on several crops. As a result, estimates by the Ministry of Food and Agriculture reveal self-sufficiency only in starchy staples such as cassava, yam and plantain while production in the cereals sector, especially rice and maize, falls far below demand. The World Food Programme intends to establish a regional food depot in Ghana for its emergency supplies in the sub-region. The programme will lower post-harvest losses of some crops arising from glut and lack of storage facilities. Increased research and development activities into production of high-yielding breeder seeds of selected crops, agricultural mechanisation, irrigation and good agronomic practices are also in the pipeline. The government has targeted a doubling in production levels of maize, rice and cassava by the end of 2009. Additional reforms envisaged for the agricultural sector include diversification of the export base from solely cocoa to include other crops like cashew, mango and cotton.

Production of main food crops ('000 tonnes) 2000 2001 2002 2003 2004 2005 Cereals 1,710 1,648 2,014 1,932 1,831 1,898 Maize 1,013 938 1,257 1,289 1,158 1,171 Rice 249 296 243 239 242 237 Mille 169 134 176 176 144 185 Guinea corn 279 280 338 228 287 305 Starchy staples 15,027 16,279 18,242 18,246 17,728 17,968 Cassava 8,107 8,970 10,255 10,239 9,739 9,567 Cocoyam 1,625 1,688 1,826 1,805 1,716 1,686 Yam 3,363 3,547 3,832 3,813 3,892 3,923 Plantain 1,932 2,074 2,329 2,389 2,381 2,792

Source: Ministry of Food and Agriculture.

Cocoa production hits all-time Around 1.6m farmers produce most of the country’s cocoa on plots of fewer high in 2003/04 than 3 ha in the forest areas of Ashanti, Brong-Ahafo, Central, Eastern, Western and Volta regions. In the early 1960s Ghana was the world’s largest producer of cocoa, with an average annual output of 450,000 tonnes, but output fell to an all-time low of 159,000 tonnes in the 1983/84 crop year (October-September). Production has since recovered significantly, particularly owing to the increase in producer prices, which have risen by an average of over 50% each year since 1990. Cocoa production rose significantly from 339,000 tonnes in 2001/02 to 479,000 tonnes in 2002/03 and 737,000 tonnes in 2003/04!an all-time high that

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exceeds the previous record (in 1964/65) by 154,000 tonnes and enabled Ghana to reclaim the position of the world’s second-largest cocoa producer from Indonesia (neighbouring Côte d’Ivoire is the largest producer). Higher production levels have also been attributed to good weather combined with high-tech agronomic practices developed by the Cocoa Research Institute of Ghana (CRIG). Also, a cocoa reform strategy was implemented by the New Patriotic Party (NPP) government when it took power in 2000. This entailed: • an increase in the price paid to producers to 72.8% of the free on board (fob) price by 2005/06, up from 67% when it took office; • the introduction of an annual programme of mass spraying with pesticides; • the rehabilitation of older cocoa farms and the encouragement of the use of high-yielding varieties; • a revolving credit fund for farmers organised in part by the government; and • the upgrading of feeder roads to marginal areas.

Exogenous factors support One exogenous factor that has affected the cocoa sub-sector is the conflict in strong cocoa production Côte d’Ivoire, which has changed the relationship between the two producers. An estimated 60,000 tonnes of cocoa per year were smuggled to Côte d’Ivoire after the liberalisation of that country’s cocoa sector in 1999, as farmers there sell direct to exporters, whereas in Ghana the majority of the crop is sold to the Ghana Cocoa Board (Cocobod), a parastatal. Rising global cocoa prices meant that exporters were paying a higher price in Côte d’Ivoire than the producer price set by Cocobod. The outbreak of civil conflict in Côte d’Ivoire caused several Ivorian farmers to smuggle their crops over the border to avoid problems in transporting them to the ports. A stronger stimulus is the higher prices available in Ghana, where the hikes in producer prices have lifted them above those available to farmers in Côte d’Ivoire. It is estimated that up to 100,000 tonnes of Ivorian cocoa is being smuggled into Ghana per year. Success in increasing cocoa production continued into the most recent 2005/06 season (October-September), when production was estimated to have increased to 740,458 metric tonnes from 601,922 metric tonnes in 2004/05. These improved cocoa production volumes were again driven by the government’s continued support for the sector through mass sprayings and higher producer prices for farmers. The cocoa farmer’s producer price has increased more than 150% from C3.5m (US$488) in 2001 to C9m in 2006. The government also agreed to pay additional bonuses to farmers during the main crop season as incentives for higher production. As a result the government estimates that cocoa production for 2006/07 will be in excess of 800,000 tonnes.

Long-term changes in the Private cocoa buyers have been allowed to operate in the domestic market since

cocoa sector 1992, but Cocobod has a monopoly on external marketing and still dominates domestic purchasing through its Produce Buying Company (PBC). However, there have been some complaints that private buying has led to quality control problems in post-harvest production. The government and Cocobod officials have argued that the reform process should be slowed down until such

problems have been solved. In late 1999 the PBC was partly privatised through the offer of shares to the public. However, the uptake was poor, primarily because of weak investor interest at a time of low international prices for cocoa. The Cocoa Processing Company (CPC), a subsidiary of Cocobod, processes cocoa beans into finished and semi-finished products in its three factories, currently the only ones in Ghana. The government sold 25% of its interest in the CPC through the Ghana Stock Exchange in October 2002. There are plans to divest additional government shares in both PBC and CPC through the secondary market on the stock exchange. In 2005 CPC completed its initial expansion phase of a processing plant at Tema. It is expected that the expansion will increase the processing capacity of CPC from 25,000 tonnes/year (t/y) to 30,000 t/y. The second phase of the project will further increase the processing capacity of the plant, to 35,000 tonnes, by 2007. Despite expansion of the processing plant, CPC cocoa factory processed a total of 19.6 tonnes of raw cocoa beans in 2005-06 higher than 16.3 tonnes processed in 2004-05, but far below the commissioned factory capacity of 30 tonnes. Low production levels were attributed to frequent power outages and poor quality of power supply to run the newly installed machines. Six more cocoa- processing factories are in the process of being set up by other companies. Notable among them is US-based company, Cargill, which already has processing plants in Cote d’Ivoire, Brazil and the US. When fully operational in the 2006/07 season, they are projected to lift total processing capacity to around 250,000 tonnes, from the 70,000-tonne capacity of the three factories currently in operation.

Forestry More than one-third of the total land area of Ghana is covered by forest, not all of which is suitable for commercial exploitation. Commercial forestry, concentrated in the Western region, has been the third-largest foreign-exchange earner in recent years, generating US$232m in 2005. Exports of timber and timber products fell to US$204.5m in 2006. Donor support has encouraged the government’s forestry strategy to focus on forestry management, research and investment equipment for logging, saw-milling and manufacture. The Timber Export Development Board is responsible for marketing and pricing, while the Forest Products’ Inspection Bureau monitors contracts and maintains quality standards.

Forestry production ('000 cu metres) 2000 2001 2002 2003 2004 Logs 1,309 1,212 1,104 1,500 1,400 Sawn timber 616 480 461 511 506 Veneer 120 259 264 300 339 Plywood 68 114 104 105 127

Source: Ghana Statistical Service.

Depletion of forest reserves has become a problem. Total forest coverage declined by 1.7% per year between 1990 and 2000, according to World Bank data. The government has had to make difficult choices between preservation and the need for hard currency and has banned exports of a number of species

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of timber, although plans to phase out log and lumber exports altogether have been shelved. A National Forest Plantation Development Programme was launched in 2001 to halt and restore the depleted forest cover. By 2005 a total area of 6,475 ha had been replanted. At the same time, the private sector, including the banking sector, is being encouraged by the Ministry of Lands, Forestry and Mines to undertake large- scale commercial plantation developments as well as enter a competitive bidding process for the allocation of timber resources. The government"s commitment to encouraging the exportation of processed wood products was further revealed by the abolition of export duty on lumber, veneer and plywood in 2005. The tax introduced in 2002 ranged from 2% to 7% and was a major constraint on the timber industry, especially on value added exportable products.

Fishing There are two main sources of fish in Ghana: marine and inland fishing, marine fishing being the most important. Ghana possesses a total coastline of 539 km with a continental shelf of 200 nautical miles, an exclusive economic zone of 200 nautical miles and a territorial sea of 12 nautical miles. Although the fish catch has been rising!from an average of 373,000 tonnes between 1990 and 1994 to an average of 426,000 tonnes between 2000 and 2003!it is insufficient to satisfy national demand, which is estimated at 720,000 t/y. Annual fish supply is currently about 430,000 tonnes, creating a deficit of 290,000 tonnes. Nonetheless, some species, such as tuna and shrimp, are exported. Total exports of fish and seafood were US$27m in 2003.

Fish production ('000 tonnes) 1999 2000 2001 2002 2003 2004 Marine 333 380 366 290 331 352 Inland 89 88 88 88 75 79 Total 422 468 454 378 406 431

Source: Fisheries Department, Ministry of Agriculture.

Mining and semi-processing

Gold mining Gold and other minerals were the largest sources of export earnings in 2004, making up around 50% of the total, with gold comprising around 90% of this. Ghana’s gold reserves lie in the Ashanti region, which has large deposits that are mined, and in Western and Central regions, where the mining is largely alluvial. Preliminary figures show that the mining sector recorded a 42.6% annual increase in revenue in 2006, with 93% of the revenue again attributed to gold exports. Performance of gold was favoured by a higher world market price of US$604.5 per oz in 2006 compared with US$445 per oz for 2005. The increased level in gold production was mainly the result of fresh output from Newmont’s Ahafo mine and a full year’s operation from the Chirano Goldmine (which began operation in last quarter of 2005). The Goldfields Group, comprising Goldfields Tarkwa and Abosso Goldfields, continues to be the largest gold producer. However, its share dropped from 50% in 2005 to about 32% of total production in 2006.

With the exception of Newmont and Chirano, all other mines recorded lower production levels in 2006. Production from Anglogold Ashanti Group dipped by 12.4%, following sharp decline of 65% in its Bibiani mining unit. Production in the other two AngloGold’s mining units, Obuasi and Iduapriem also went down by 0.05% and 6.02% respectively. Production was hampered by both operational and technical problems. This marks a worrying turnaround for the group. Prior to its merger with Anglogold in 2004, Ashanti had long been the country’s largest producer; a series of expansion programmes increased output at its Ghanaian operations from 300,000 oz in 1985 to nearly 1.3m oz by 2000. Ashanti accounted for 90% of Ghanaian production in the 1990s, a figure that has declined to about 28% in 2006 owing to a decline in its production and growth in output from mines owned by other producers in recent years. The Ashanti Goldfields-AngloGold merger

After a bidding war during the second half of 2003, AngloGold of South Africa beat Randgold of the UK to take over the operations of Ashanti Goldfields. AngloGold’s final offer valued the company at US$1.5bn. Although this was some US$2oom below Randgold’s offer, the sale price was not the clinching factor in the deal. A South African mining company, Lonmin, which held a 27.6% stake in Ashanti, favoured AngloGold’s bid and insisted on cash for its proportion of the company, a condition that Randgold could not meet. Furthermore, the rationale for Ashanti to merge with another company was that it would allow access to the necessary funding and expertise to develop the Obuasi deep mine. A rich seam of gold is known to exist in the mine, but this will require mining at up to 1.8 km below the surface and investment of up to US$1bn. Owing to its experience in deep-level mining, coupled with a strong balance sheet, which means that it could more easily raise funds for the required investment, AngloGold was considered to be in a better position to do this by the Ghanaian government. The key terms of the merger, which will create a new company, called Ashanti AngloGold in Ghana and AngloGold Ashanti elsewhere, include the following. • The government extends AngloGold Ashanti’s lease of the Obuasi mine until 2054 (it was due to run out in 2004). • Royalty payments to the government are fixed at 3% of revenue for the next 15 years for all of AngloGold Ashanti’s operations in Ghana. (Current royalty rates vary from 3-12%; under proposed mining legislation this will change to 4-6%.) • Corporation tax will be paid at a rate of 30% for the next 15 years (private companies normally face a corporate tax rate of 32.5%). • The government undertakes not to perform any actions that would impose additional obligations on AngloGold Ashanti for 15 years. This includes doing nothing to change AngloGold’s legal position with respect to exchange controls, dividend remittance, transfer of capital, and adjustment of customs, duties, taxes and fees. • The government has indicated that it is prepared to give clarification that the government’s golden share only applies to the assets and operations of AngloGold Ashanti in Ghana.

Full production at Obuasi will New developments are set to increase Ghanaian production further in coming take at least five years years. Following the AngloGold Ashanti merger it was found that the Obuasi mine was operating below capacity owing to underinvestment in capital equipment. Thanks to investment by the newly merged company, by mid-2005 production levels had increased, while costs were significantly lower. However, the company undertook to make further investment of around US$44m over a five-year period in order to improve production from the mine. AngloGold Ashanti is also looking at developing the mine’s deep-level operations, which would extend the life of the mine. Early projections by AngloGold Ashanti are that US$570m will be invested in the mine over its lifetime.

Newmont mines will lift gold The sector will also receive a significant boost from the entry into Ghanaian production in 2006-08 gold mining of a US firm, Newmont Mining. In 2004 Newmont won government approval to proceed with the development of the Ahafo and Akyem gold deposits. The development of the Ahafo mine is estimated to have cost US$350m. Production started in the second half of 2006, adding around 500,000 oz/year (oz/y) to Ghanaian production. Meanwhile, Newmont has estimated that development of the mine at Akyem will cost it a total of US$500m; production is expected to start in the second half of 2008, at a projected rate of 400,000 oz/y. Akyem is partly located in a “productive forest area” and its development was only made feasible by the opening up of these areas to mining in early 2003. These are the first new mines to be commissioned since 1996.

Diamonds—a history of Ghana’s diamond reserves lie mainly in the Birim basin in central Ghana. The

corruption and smuggling sector has had an unfortunate history, characterised not only by corruption and smuggling but also by poor management at the state-owned Ghana Consolidated Diamonds (GCD) and the Ghana Diamond Marketing Board (GDMB). GCD was set up to exploit larger diamond deposits, while the GDMB was set up as an avenue for government to harness the potential of smaller- scale miners. However, the GDMB and GCD oversaw a decline in the diamond mining sector. GCD figures suggest that output in 1978 was 1.4m carats, but that this had declined steadily to 259,358 carats in 1988. Therefore, in 1989 the GDMB was reorganised and in 2000 a limited liability company was formed from the GDMB called the Precious Minerals Marketing Corporation (PMMC) with the government as the single shareholder. The reformed PMMC has had some success in stimulating small-scale mining production. These miners account for about 70% of total diamond production in the country, but extensive illegal mining and a thriving parallel market make it difficult to measure small-scale output with accuracy. Nonetheless, according to government figures, there was a turnaround in diamond production from 1995, driven by artisanal production. In 2002, artisan output for diamonds was 693,493 carats whilst the GCD accounted for 297,778 carats. The government has been trying to privatise GCD for many years. An American company, Sapper & Associates, won a tender to acquire GCD in early 2004, but missed two deadlines to make a 10% down payment of US$3.4m to the government, and the deal fell through. It is expected that GCD will be put out to tender again, but

progress on this has been slow. Between 2004 and 2005 diamond purchases by the PMMC increased further from 911,809 to 1,062,930 carats. The increase in production led to allegations in a UN report that diamonds were being imported by rebel groups from Cote d"Ivoire and then sold within Ghana. The assertion was rejected by the PMMC, which claimed that increases in Ghana’s diamond production were not from war-torn countries, but rather from increased licenses to diamond mining companies and the willingness of small-scale miners to sell their output to PMMC. However, Ghana began looking to implement the Kimberley Process Certification Scheme!a UN scheme aimed at combating the illegal sale of diamonds. Ghana was fully compliant with the scheme by mid-2007, however, perhaps as a result of the increase regulation, in 2006 diamond purchases from small-scale mines contracted by 8.7% to 970,751 carats.

Ghana is a major producer of Ghana is one of the world’s largest exporters of manganese. Production has manganese increased since the state-owned Ghana National Manganese Corporation was privatised in 1995. The new owners, the Ghana Manganese Company, undertook a substantial restructuring and investment programme, which caused output to increase from 193,096 tonnes in 1995 to 1.7m tonnes in 2005. Manganese exports in 2006 fell slightly by 2.7% to 1.65m tonnes, however. The company is currently involved in major exploration work, investing US$3m in the mine. However, Ghana Railway Company is used in order to transport the product and its current state of disrepair is a major constraint on the production process. In 2005 part of the manganese production had to be transported to the port by road in order to meet shipping deadlines.

Bauxite has potential Only a small proportion of Ghana’s substantial bauxite reserves!estimated by the Minerals Commission at 120m tonnes!are currently mined. Alcan Incorporated owns about 80% of shares in Ghana Bauxite Company (GBC), the sole producer of bauxite in the country. The company recovered strongly from a slump in 1999 to register significant growth in production in 2000, to 678,000 tonnes, which increased further to 683,000 tonnes in 2001. Since then, GBC is reported to have struggled with railway tariff increases in 2002 and 2003, which reduced production levels to 495,000 tonnes and 498,000 tonnes respectively. Production recovered to reach 726,600 tonnes in 2005 and further up to 885,770 tonnes in 2006, representing a 22% growth on the 2005 output. However, the unavailability of reliable railway services to handle bigger shipments is a major constraint on bauxite mining, compelling the company to transport bauxite to the ports by road. It is believed that the GBC has the potential to produce 1m tonnes/year. There are also plans to develop Ghana’s bauxite reserves, as part of a larger project to develop the country’s aluminium industry.

Aluminium industry to A US mining company, Alcoa, has signed a Memorandum of Understanding be developed (MoU) with the Ghanaian government to develop the country’s integrated aluminium industry. Alcoa already owns 10% of the Volta Aluminium Company (Valco), and the government owns the remaining 90% share, which it bought from Kaiser International in October 2004. The government had been looking for a strategic partner to help run the Valco smelter, and also to exploit

the country’s bauxite deposits, which could then be refined to produce alumina for the Valco smelter. Alcoa therefore restarted three of Valco’s five potlines in 2006. Additionally, Alcoa is working with the government on a feasibility study for building a 1.5m-t/y alumina refinery and undertaking railroad and other infrastructure upgrades. No indication has yet been given about how much Alcoa intends to invest in these projects. Alcoa hopes further to consolidate its investment prospects in Ghana’s aluminium and bauxite sectors if it receives the green light to mine bauxite in the Atewa Forest Reserve!one of Ghana’s richest bauxite bases. This is in line with the government"s objective of establishing an integrated aluminium industry (bauxite mining and aluminium refinery and production) in the country.

Manufacturing

Ghana has a broad and diverse For a Sub-Saharan African country of its size, Ghana has a relatively broad and industrial base diverse industrial base, covering aluminium smelting, timber and agricultural processing, brewing, cement manufacture, oil refining, textiles, electronics, pharmaceuticals, mining and many others. The impetus for this came from the Convention People’s Party government, which, in the years following independence, sought to create a self-sufficient, diversified industrial base. However, owing to poor planning and inappropriate policies, many viable industries were starved of foreign exchange for spare parts, while unviable plants were kept afloat by subsidies and protective policies. By 1982 only 21% of industrial capacity in Ghana’s medium and large factories was in use.

Manufacturing growth The economic recovery programme introduced in 1983 had a mixed effect on picks up in the 1980s the manufacturing sector. Falling subsidies and exposure to competition forced businesses to rationalise and improve performance, but many closed down. Sectors showing the most improvement were textiles, garments, metals, plastics and non-ferrous metal manufactures. The manufacturing base has not changed significantly since then and is geared towards light manufacturing!textiles, food and beverages, cement and wood chemicals. Lack of access to credit facilities, high borrowing rates, obsolete machinery and fierce competition from imported substitutes hamper the sector.

Composition of the manufacturing sector, 2003 (%) Food products 16.0 Beverages 7.5 Tobacco & tobacco products 8.5 Textiles, clothes & leather goods 15.0 Sawmill & wood products 6.0 Petroleum products 19.0 Chemical products (other than petroleum) 6.0 Non-ferrous metals 9.0 Others 13.0

Source: Ghana Statistical Service.

Manufacturing production contracted in 1998 after being hit by energy shortages (see Energy provision) that forced most factories to run below capacity.

Steel and aluminium producers, who rely heavily on power supplies, were hit particularly hard. There was a significant rebound in 1999 and 2000, when manufacturing production grew by 21.1% and 18.8% respectively, but the severe depreciation of the cedi in 2000 raised the cost of imported raw materials, causing growth in manufacturing production to slow to 4.9% in 2001. Manufac- turing growth has remained at around this level in subsequent years.

NPP attempts to stimulate The NPP government set up three Presidential Special Initiatives (PSIs) in 2002 manufacturing and 2003, for garments, cassava and palm oil. The PSI for garments is intended to improve the capacity of Ghanaian textile and garment manufacturers, through training and technical assistance, to enable them to produce and export garment and textile products. However, this has had little impact and the industry is struggling to survive against cheap imports, particularly from Asia, with many domestic producers going out of business. The initiative for cassava is being used as a vehicle for promoting village enterprises (COVE). Under COVE, small-scale farmers are encouraged to own shares in community enterprises that manufacture industrial starch for export. The raw material! cassava!will be produced by local farmers and sold to the processing plant. Despite these attempts, several obstacles to the development of the manufacturing sector remain. These include: the limited size of the market (a function of low disposable incomes); the high cost of utilities and raw materials; the use of obsolete machinery; the relative high cost of labour; and the real appreciation of the currency. Most recently power shortages caused by low water levels at the Akosombo dam have resulted in further problems for the manufacturing sector. Local manufacturers also complain that they are having to compete with goods smuggled through the country’s land borders, as well as importers that under-declare the full value of their goods at customs to avoid paying higher duties. In the case of textiles, this has led the government to impose higher duties, as well as to introduce a new regulation that textiles may only be imported via the Takoradi sea port.

Construction

Road construction is a priority Construction is the second-largest sub-sector in the industrial sector and contributes about 30% of industrial output and 8% of GDP. It comprises roads, highways and bridges, coastal works and housing. Road construction is important; many of Ghana’s roads are being rehabilitated and a number of new feeder roads are being built. Both foreign and local companies are engaged in construction; foreign firms who have the requisite machinery and expertise undertake most of the large construction works, such as highways and coastal works. Local construction companies play an important role in the construction of access and feeder roads. Growth in the construction sector has historically been dependent on the availability of donor project funding and the government’s speed in awarding contracts. However, there is increasing private- sector demand for housing, which is causing a boom in the construction sector.

Financial services

Banks are risk-averse Financial services have seen a tremendous improvement since reforms in 1989 led to the establishment of a stockmarket and several other financial services that were hitherto not available. Additionally, a 1989 Banking Law prescribed minimum capital requirements and capital adequacy ratios and improved the regulatory and supervisory framework. A banking law was introduced in October 2004 to align capital adequacy requirements with the international standards prescribed under the Basel II framework. Bank of Ghana (the central bank) regulates the banking and non-banking financial sub-sectors. The Securities and Exchange Commission (SEC) and the Ghana Stock Exchange (GSE) regulate the securities market. There are 23 registered banks in Ghana. Despite the relatively high number of banks, the sector is concentrated; of the 326 bank branches in operation in 2005, 131 belonged to the partly state-owned Ghana Commercial Bank (GCB) and a further 106 to the three next biggest institutions. As a result, the banking sector is centred around Accra and only an estimated 5% of the population currently have access to banking facilities. At only 15% of GDP, the level of lending to the private sector is also limited; credit extended to the private sector is mostly lent to the less-risky blue chip companies.

High interest rates The government feels that in recent years banks have not pushed the lending

for borrowers rate down sufficiently, as a result of the central bank gradually lowering the discount rate from 27% in 2001 to 12.5% in the December 2006. It also argues that the low level of credit being extended to the private sector reflects the excessive interest-rate spread between lending and borrowing rates, which makes borrowing unattractive. It is therefore set to keep up pressure on the banks to lower interest rates and boost lending. However, the lending rate is only part of the problem. The high interest rate spread reflects the need for banks to recoup overhead costs which are in excess of regional averages. A central bank survey put overhead costs in Ghana at 7% of total asset value, in excess of the Sub-Saharan African average of 5.7%. In addition, there are also structural impediments to the growth of private-sector credit, not least the traditionally high levels of government borrowing and a significant demand for credit from the public enterprise sector. Additionally, the risks involved with lending to the private sector have resulted in a high level of non-performing loans (NPLs). In 2005 NPLs made up 13.9% of gross loans, with the GCB carrying a particularly high level. Other criticisms of the banking sector centre on the perceived concentration on higher-income customers and large businesses. Specifically, banks have been criticised for requiring excessive minimum balances that many public-sector workers cannot meet; charging high transaction costs; the non-payment of interest on deposits below C10m (US$1,150); and the closure of branches outside Accra, particularly in other regional capitals. Partly as a result of these issues, a universal banking licence was introduced in February 2003 for banks with paid-up capital of C70bn at the end of 2006. The universal licence abolishes the segmentation of banks into commercial, merchant or

development. It is hoped that the ability of banks to offer multiple services should encourage competition within the sector for private customers, resulting in an improving and extended service. Other recent reforms included a Financial Sector Strategic Plan, which was instituted in 2005 in order to strengthen the legal and regulatory frameworks guiding the sector.

A fledgling stockmarket The GSE was established in 1989 and began trading in corporate equities, bonds and government securities in 1990. The Securities Industries Law, which governs the GSE, called for a Securities Regulatory Commission to oversee and regulate the bourse, which was finally established in 1998 and named the Securities and Exchange Commission (SEC). The GSE had 29 listed companies and a market capitalisation of US$1.4bn at the end of 2005. The capitalisation figure is misleading because of the dominance of AngloGold Ashanti, which accounts for over 80% of market capitalisation, although its shares are mostly traded on other exchanges. (The AngloGold Ashanti merger caused a substantial increase in market capitalisation). Liquidity has remained extremely low, the volumes traded averaging only around 3% of total market capitalisation. The number of listed companies increased to 33 (including Anglogold Ashanti’s Depository and Standard Chartered Banks’ Preference shares) by end 2006. New companies (mostly from government divestitures) are expected in 2007. Most retail investors are passive and public awareness of the GSE is relatively low.

Downturn in stockmarket Since the end of 2001 the stockmarket has boomed; market capitalisation increased from C3.9trn (US$528m) at end-2001 to C112.5trn at end-2006 and the GSE all-share index increased from 955.9 to 5,005.9. This remarkable performance owed partly to the floating of AngloGold Ashanti shares on the stockmarket, but also to the improved macroeconomic situation!increased foreign-exchange reserves, a stable currency and lower inflationary pressures! combined with falling yields on government debt. The reduced yield available on T-bills has encouraged some investors to switch their holdings to equities. The improved economic environment has allowed most listed companies to post impressive results, further buoying the all-share index. However, the size and speed of the gains raised concerns that the boom was unsustainable, and the index shed 30% of its value in 2005, even though macroeconomic conditions remained stable. The size of the loss was due to the fact that because few of the companies issue dividends of note, investors rely on capital gains for their returns. When the market showed signs of peaking, the majority of investors therefore looked to get out of the market rapidly. In 2006 the government also listed two-, three- and five-year bonds on the stockmarket. The government intends to list an additional five-year bond in 2007. It is hoped that these listings will deepen secondary market activities in bonds and develop a benchmark yield curve for the country.

Other services

Tourism draws investment Like many developing countries, Ghana produces few exportable services, although recent efforts to revive tourism have paid off to a certain extent.

Ghana’s hotel sector declined dramatically during the 1970s and 1980s, but has been rejuvenated by large-scale private investment. Tourist attractions such as old slave forts and small wildlife parks have also received substantial investment. In particular, Ghana has targeted the African-American tourist market, promoting special heritage tours (Pan-African Festivals and Emancipation-day annual celebrations) and other historical events aimed at the African diaspora. Official figures point to rapid growth in international tourist arrivals, from 257,000 in 1993 to a high of 584,000 in 2004 (according to estimates from the Ghana Tourist Board). Tourist arrivals then dipped slightly in 2005, to 408,000 (with the peak period between July and August) and recovered in 2006 to 428,533 However, much of the tourism is concentrated in a few areas, and even then the industry battles to survive the low season. There is also concern that many of those counted as tourists are really aid workers and volunteers. As a result, the Ministry of Tourism has streamlined the procedures for information collection on visitors to the country. Ranking the data collected in 2006, 31% of visitors were identified as attending businesses and conferences, 26% as visiting friends and family, and 19% were on holiday. According to the Ministry, the future of the tourism industry in Ghana hinges heavily on Ghana’s status within the sub-region as a destination for businesses and conferences. Tourism is the fourth-largest foreign-exchange earner in Ghana after gold, cocoa and inward remittances!the central bank estimated receipts in 2006 at US$840.8m!and it is government policy to develop Ghana into an internationally competitive tourist destination through a five-year Strategic Tourism Development Plan, which aims to attract 1m tourists each year from 2007. The plan seeks to alert the private sector and the government agencies involved in the development of infrastructure for tourism to the importance of the sector, improve skills in the hospitality industry, and identify opportunities and programme developments necessary for the sector. The Ghana Tourist Board is at the forefront of work in this area and carries out promotional activities such as monitoring and evaluating selected tourism plans, and organising festivals and celebrations. The main origins of tourist arrivals are from the UK, the US, Germany and France, with Ghanaians based overseas (largely in the UK and US) accounting for 34% of tourist arrivals in 2003. Ghana received significant tourist arrivals from African countries, at 44% of total arrivals in 2006, followed by 31.7% from Europe. Hotel beds in Ghana more than doubled between 1992 and 2004 (from 10,902 to 23,538), reflecting an increase in one-, two- and three-star accommodation. There are still only a few hotels with a four-star rating or above. Occupancy rates are greater for the better quality hotels, at around 70%, compared with below 60% for three-star hotels and below.

Tourist arrivals and receipts 2000 2001 2002 2003 2004 2005 2006a Arrivals 399,000 438,833 482,643 530,827 583,821 408,167 428,533 Receipts (US$ m) 386 477.8 519.6 602.8 649.4 796 840.8 a Estimates Source: Ghana Tourist Board.

The external sector

Trade in goods

A large trade deficit Ghana’s trade profile is that of a typical African country. It usually has a large trade deficit and is dependent on a few primary products!gold and cocoa. This dependence is reflected in swings in export earnings according to the output of the key commodities and international price fluctuations.

Foreign trade, 2006 (US$ m; fob) Exports 3,727 Gold 1,277 Cocoa beans & cocoa products 1,187 Timber 207 Others 1,055 Imports -6,754 Trade balance -3,027

Source: Economist Intelligence Unit estimates.

Strong export growth in The annual rate of growth in dollar export earnings has averaged 12% over the recent years ten years to 2004. This masks some sharp annual fluctuations, ranging from a rise of 40.3% in 1998, resulting from a jump in cocoa and gold production, to a fall of 5.1% in 1997, when cocoa production was hit by poor weather. Owing to strong growth in international prices of cocoa and gold and higher domestic production (particularly of the former), export growth averaged nearly 20% between 2002 and 2004 before falling to an estimated 5% in 2005. In 2004 cocoa exports overtook gold to become the largest source of export revenue, a position that it last held in 1991, as a record crop lifted cocoa exports by 46% compared with the same period in 2003, despite lower prices. In contrast, although higher prices offset the impact of lower production by AngloGold Ashanti, gold exports were up by only 17%. However, this situation was reversed in 2005 and remained that way in 2006. Export earnings from cocoa dropped by 15% on account of lower production levels and prices on the world market, while gold production increased by 13% (owing mainly to improved performance at Goldfields Ghana) and the market price increased by 8.6% over the year as global demand rose. Growth in export earnings rebounded in 2006 by 33% compared with 5% in 2005. This was attributed to greater gold and cocoa earnings on account of higher world commodity prices.

Exchange rate and reserves Although domestic demand primarily determines import levels, and inter- influence imports national price trends for manufactured items play a key role in determining import values, exchange-rate policy also has a big influence on imports. For example, expectations that the government would defend the cedi for much of early 1993 led to a rapid build-up in stocks and imports, and the relative stability of the currency in 1997 and 1998 allowed a more gradual increase in demand. Imports contracted sharply in 2000, owing to the collapse of the cedi. Import spending has picked up strongly since 2002, as the government has encouraged a stable exchange rate that has been rising in real terms. Rapid

import growth has resulted in the trade deficit widening to its highest level yet, of US$2.8bn, in 2006. The bulk of Ghana’s trade remains with OECD countries. Ghana’s main export market is the Netherlands, where much of Ghana’s cocoa is processed, followed by the UK and the US. However, these trade flows are declining as a proportion of Ghana"s overall trade compared with newer trading partners. For example, the UK supplied only 4.6% of Ghana"s imports and received only 4.5% of its exports in 2006 compared with 8.5% and 11.8%, respectively, in 2001. The main cause of this is increasing trade with non-OECD partners. Ghana’s main, non-OECD trading partners are Nigeria and China, which supplied a combined total of 29.1% of imports in 2006. Nigeria supplied the majority of Ghana"s oil, while China provided textile imports as well as capital goods used in areas of construction and infrastructure development.

Invisibles and the current account

Transfers surplus outweighs Ghana’s services and income accounts are persistently in deficit. The income services and income deficits deficit is the result of substantial debt-service payments and is likely to widen in the coming years owing to profit repatriation by the foreign mining companies that are increasing their presence in Ghana. The deficit on the services account has grown owing to increased travel of Ghanaians abroad, and also owing to higher freight and merchandise insurance stemming from growing import levels. A substantial inflow of transfers!comprising expatriate remittances and donor aid!usually more than compensates for the services and income deficits. Inflows of current transfers have surged from US$638m in 1999 to US$2.1bn in 2005. According to the minister of finance, Kwadwo Baah-Wiredu, private inward transfers have continued to rise in 2006; in the first quarter of the year inward transfers totalled US$1.44bn, a 53.2% rise over the corresponding period in 2005. These inflows are likely to continue to rise, as the large Ghanaian diaspora continues to grow and becomes increasingly confident about the investment opportunities available in Ghana. The trend has been assisted by the growing ease of sending remittances in recent years. The increase in remittances is also likely to have occurred because the strength of the global economy has meant that expatriates are likely to have more money to send home. The improved economic performance under the New Patriotic Party (NPP) will also have stimulated the flow of remittances, which are often used to finance small businesses and construction projects. In addition, the government’s reasonable adherence to donor-driven policies and the strategic role that the president, John Agyekum Kufuor, has carved out for Ghana in regional dispute resolution have caused donor transfers to pick up. The current-account balance improved markedly from a deficit of US$964m (12.5% of GDP) in 1999 to a surplus of US$255m (3.3% of GDP) in 2003!the first surplus since 1980. This was attributable to a substantial rise in gold and cocoa exports, as well as current transfers, which together more than outweighed rising import levels. However, since then the current account has moved increasingly into deficit as import growth has outpaced the growth in exports

as well as the increase in current transfers. This trend has also been driven by the services deficit, which has also widened substantially, partly because of the rising cost of imports but also because of the use of contractors by mining companies for exploration. In 2006 the deficit on the current account reached US$628m, or 5.3% of GDP.

Capital flows and foreign debt

Aid flows are usually high During the early 1980s Ghana was one of the first Sub-Saharan African countries to carry through a structural adjustment programme. Donors saw Ghana as a test case and wanted to prove that their policy prescriptions worked. Anxious for a success story to set an example for the rest of Africa, donors granted Ghana large amounts of aid. Since Ghana’s political transition to democracy in 1992, relations with donors have been mixed. Large amounts of aid have been forthcoming when the economic reform programme is perceived as being on track, but donors have shown a readiness to suspend disbursements when the government has relaxed fiscal policy or fallen behind schedule on prescribed reforms. Encouraged by the performance of the NPP government, donors have allowed Ghana to pioneer the Multi-Donor Budget Support Programme (MDBSP) approach to donor financing. The MDBSP is a pool of funds into which donors deposit money. Under the programme, the policies and procedures of donors are harmonised and common benchmarks against which to measure progress are agreed upon. This means that the government can concentrate on project implementation knowing that adequate budgetary support is available, rather than relying on donors to deliver specific funds for specific projects. The MDBSP approach also gives the government greater freedom as to how it spends the donor money, provided the projects coincide with the goals of the agreed framework. There is some donor oversight of how the government spends the funds in the MDBSP, but this is not as vigorous as that accom- panying normal bilateral lending programmes. In return for this, it is assumed that the government, not wanting to lose the benefits of the pooled fund system, will try to persuade more donors to contribute!for example, the US Agency for International Development (USAID) maintains a bilateral approach. Official development assistance has picked up from its recent low of US$600.4m in 2000, when some funding was suspended because of donor concern over policy slippage during the election year. Official development assistance increased to US$643.6m in 2001, as donors increased support for the country after the smooth transfer of power to the new NPP government. Most donors increased support in 2002, but the data are distorted by a fall in assistance from the Netherlands, after a one-off boost in 2001, and the overall level of assistance therefore rose only marginally to US$649.8m. In 2003 the continued support of donors resulted in an increase to US$954.2m, which rose again, to US$1,357.6m, in 2004 although falling fractionally to US$1,106 in 2005. The proportion of donor support that is in the form of grants, rather than loans, has increased substantially; virtually all bilateral assistance is now in grant form.

Ghana also qualified as a recipient from the Millennium Challenge Account (MCA) in 2006, an initiative by the US to make available financial resources for developing countries that rule justly, invest in people and exhibit economic freedom. The MCC is expected to deliver approximately US$547m over a five- year period and the money is to be used to promote developments in agriculture, transport and rural services.

Large external debt prompts Ghana’s external debt more than quadrupled, from US$1.4bn in 1980 to US$7bn Ghana to join HIPC in 2000, according to the World Bank’s Global Development Finance, owing mainly to a rapid accumulation of loans from multilateral lenders (mainly at concessional rates), in particular the World Bank. Faced with this large debt, in 2001 the NPP government decided to avail itself of debt-relief facilities under the IMF-World Bank’s heavily indebted poor countries (HIPC) initiative, hoping to reduce debt to sustainable levels. Ghana reached HIPC decision point in February 2002, entitling it to savings in debt service, but data from the World Bank showed that the country’s debt stock rose from US$7.0bn at the end of 2002 to US$7.6bn by the end of 2003, largely owing to the effect of cross- currency revaluations caused by the weakness of the US dollar on global currency markets.

Ghana reaches HIPC Data in the latest edition Global Development Finance show that Ghana’s completion point in 2004 external debt stock declined from US$7.6bn in 2003 to US$6.7bn in 2005. The main cause of the fall was that the country reached completion point under the heavily indebted poor countries (HIPC) initiative, entitling it to a reduction in its debt stock of US$3.5bn (US$2.2bn in net present value terms) over the following 20 years. However, because of the way that debt write-offs were structured under the HIPC deal, the actual up-front write-off of multilateral debt was extremely limited. In fact, as the 2004 data show, the write-off was more than offset by an increase in disbursements, which meant that multilateral debt increased to US$5.1bn, from US$4.7bn in 2003. Far more important was the Paris Club write-off of official bilateral debt of US$821.5m that followed HIPC completion. It was because of the impact of this deal that bilateral debt fell significantly, from US$1.4bn (18.4% of the total outstanding stock of debt) in 2003 to US$435m (7.4% of the debt stock) in 2004. As 72.6% of Ghana’s outstanding external debt stock was owed to multilateral institutions in 2004, the country would benefit substantially from debt relief only if this stock was significantly reduced. It was for such reasons that the Multilateral Debt Relief Initiative (MDRI) was announced at the meeting of the Group of Eight (G8) industrialised countries in Scotland in July 2005. The first stage of implementing the MDRI was announced in December 2005, when the IMF announced that it would write off its outstanding debt to the countries eligible for relief. In Ghana’s case, this amounted to US$392m. This was followed in June 2006 by a total debt write-off by the African Development Bank, totalling US$461m for Ghana. However, with the largest proportion of Ghana’s debt owed to the World Bank, it was only in July, when the World Bank at last announced its component of the debt-relief package, that the full impact became clear. The World Bank has agreed to an additional US$2.98bn write-off, to be combined with the HIPC relief and to be granted as a one-off

up-front debt cancellation. As a result, the Economist Intelligence Unit expects Ghana’s total stock of outstanding external debt to fall from US$6.7bn in 2005 to an estimated US$3.3bn in 2006.

Direct and portfolio After more than a decade of low and static flows, inward foreign direct investment investment (FDI) began to pick up in 1993. That year’s inflow, of US$125m, was more than five times the annual level of previous years. The following year FDI almost doubled to US$233m, and after peaking at US$244m in 1999 it fell to just US$59m in 2002, but rose to US$137m in 2003. The fluctuations in the level of FDI reflect erratic levels of investment, particularly in mining projects, and inflows linked to privatisation. However, FDI levels are also low compared to similar African countries, probably because of fears concerning the government"s fiscal slippages prior to 2000. In 2004, FDI therefore remained at US$137m before rising fractionally to US$148m in 2005. Data on portfolio flows are limited. The IMF’s International Financial Statistics does not show any portfolio investment since the stock exchange opened.

Foreign reserves and the exchange rate

The cedi has depreciated Having been kept artificially high for many years, the cedi was devalued and since 1992 floated in stages after 1984. In 1987 the government introduced an auction system, and then in 1990 allowed foreign-exchange bureaux to be established. Since then foreign currency has been easy to acquire for relatively small transactions, but the imbalance between supply and demand caused the cedi to depreciate significantly after 1992. In 1995 the government began to use the exchange rate as a nominal anchor against inflation. This strategy involved considerable intervention in the foreign-exchange market and slowed the nominal depreciation. In 1998 the cedi was stable in nominal terms, falling by just 4% against the dollar. However, combined with average annual inflation of 20%, this translated into a sharp appreciation of the real exchange rate. In mid-1999 the cedi began a steep slide, falling from C2,453:US$1 in May 1999 to C6,293:US$1 in August 2000. Although the cedi’s fall against the US dollar slowed in the final quarter of the year (when it depreciated by only 3.7%), during the year as a whole the cedi depreciated by 52% against the dollar, falling from an annual average of C2,647:US$1 in 1999 to C5,322:US$1 in 2000. The cedi depreciated by less than 5% in 2001, owing to tighter monetary and fiscal policies, lower inflationary expectations and a reduction in external debt-service payments.

Recent cedi stability Due in no small part to the currency instability experienced in the past, the incoming NPP government placed considerable emphasis on maintaining a stable currency. This involved improving fiscal stability, and was aided by rising commodity prices and increased remittances and transfers from donors. As a result, the real effective exchange rate has remained stable since 2001, rising by just 1.6% between 2001 and 2004, while foreign-exchange reserves rose from one month import cover to 3.9 months in 2005. Since 2002 the cedi has not depreciated by more than 2% per year and in 2006, the cedi depreciated by 1.1% compared with 0.9% in 2005.

Import cover is low despite Strong inflows of gold and cocoa revenue and expatriate remittances caused fo reign-exchange i nfl ows foreign-exchange reserves to surge from US$287m in June 2002 to US$1.6bn at the end of 2004, an all-time high. However, even at this level, import cover was still under four months, reflecting the strong demand for imports. Foreign- exchange levels fell steadily for much of 2005, before the start of the cocoa season at the end of the year caused reserves to increase and reach US$1.75bn at the end of 2005. In 2006 the increase in foreign-exchange earnings from cocoa and gold exports helped to boost reserves to US$2.3bn!fractionally more than four months-worth of import cover.

Regional overview

Membership of organisations

African Union The African Union (AU) is the successor to the Organisation of African Unity (OAU). The AU is modelled on the EU and has ambitious plans for a parliament, a central bank, a single currency, a court of justice and an investment bank. The most advanced of these is for the Pan-African Parliament, which was inaugurated in March 2004 and has since held a number of sessions, although it is unlikely to play a legislative role for some years. The AU also aims to have common defence, foreign and communications policies, based loosely on those of the EU. Even if these goals are not fulfilled, the organisation fills the need for a forum for discussing the continent"s problems, and the idea of pan-African unity exerts a strong hold over member countries. The day-to-day affairs of the AU are managed by the AU commission, which is modelled on the EU commission. The commission is headed by the former Malian president, Alpha Konaré. One of the main problems facing the AU is the cost of many of the proposed new institutions and policy co-ordination mechanisms. To help to counter this, at the July 2004 Annual Summit Mr Konaré presented a 2004-07 Strategic Framework for the AU. Under this, member states are supposed to pledge 0.5% of GDP to fund the AU, which would allow it to double the staff at its headquarters and to push ahead with the implementation of the New Partnership for Africa"s Development (Nepad). However, few states have kept to their funding commitments, and the involvement in Nepad remains a bone of contention with the South African government, which is keen for Nepad to remain in its South African headquarters. As such, the AU remains heavily dependent on donor support and the expansion plans remain unimplemented. The main criticism levelled at the OAU in the last decade was that little real action resulted from its policy announcements. There are concerns that the AU, like its predecessor, will be undermined by a lack of real commitment to its initiatives among the 53 member states, many of which suffer from weak governance. This problem is further compounded by the fact that many member states are unlikely to give up the sovereignty required to make several of the proposed initiatives!such as a single currency or a court of justice! operate effectively. However, on a more positive note, the AU has shown a much greater willingness to overcome opposition to the principle of non- interference. However, its intervention has had a mixed success rate, particularly in Côte d"Ivoire, where little progress has been made, while it has avoided any wider involvement in more contentious political crises, such as that in Zimbabwe. In 2003 the AU established a Peace and Security Council (PSC) modelled on the UN Security Council. It is envisaged that the PSC will sanction military intervention in member states in cases of genocide, unconstitutional changes of government and gross human rights abuse. The proposed military intervention

by the AU is to be through a standing armed force. This is projected to comprise five battalions by 2010 and will be part of a wider peacekeeping initiative proposed by the group of the world"s eight leading industrialised nations (G8) in 2004, which seeks a commitment to train and, where appropriate, equip some 75,000 troops by 2010 to take part in peace support operations worldwide "with a sustained focus on Africa". The first real test of the PSC to intervene in a conflict arose in 2004. As a result of this, 7,000 troops are now in Sudan, trying to keep the peace in the Darfur region. However, they are chronically under-equipped and are overwhelmed by the sheer size of the mission. Until such issues are fully resolved, quite apart from the political constraints to intervention, it is unlikely that the AU will be able to send an effective peacekeeping force to intervene in such crises.

Economic Community of The Economic Community of West African States (ECOWAS) was established West African States in May 1975 by 15 West African countries: Benin, Burkina Faso, Côte d"Ivoire,

(ECOWAS) The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Nigeria, Senegal, Sierra Leone and Togo. Cape Verde joined ECOWAS in 1977, and Mauritania withdrew in early 2000. The community"s principal objective is to establish a customs union and a common market to promote the free movement of goods and people within West Africa. ECOWAS has an executive secretariat headed by a Ghanaian former minister, Mohamed Ibn Chambas, a 120-member parliament and a court of justice, all based in the Nigerian capital, Abuja. Decision-making powers are vested in a council of ministers and a chairman (who is elected annually and is currently Mamadou Tandja of Niger); supreme authority rests with the annual conference of heads of state and government. The ECOWAS Bank for Investment and Development (EDIB), which was set up in 2001, carries out development projects in member states. In 1994 eight members of ECOWAS!mainly francophone countries!set up the Union économique et monétaire ouest-africaine (UEMOA) to work towards a customs union and other aspects of economic convergence. The UEMOA members!Benin, Burkina Faso, Côte d"Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo!already share the same currency, the CFA franc, and similar legal codes. In December 2000 six other ECOWAS members!The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone!signed an agreement to create a second regional monetary union, the West African Monetary Zone (WAMZ). This led to the creation of the West African Monetary Institute, an interim organisation that was to pave the way for the creation of a West African central bank and the introduction of a common currency, the Eco, in January 2003, followed by the merger of the two monetary zones in 2004. However, the failure of member countries to meet most of the WAMZ convergence criteria led to the creation of the Eco being postponed until December 2009, although this deadline is also unlikely to be met. Progress towards economic integration in ECOWAS has been limited by several factors, including antagonism towards the core member, Nigeria; mistrust between anglophone and francophone members; lack of financial resources; and regional political instability. Inadequate infrastructure and the

lack of diversification of the ECOWAS economies have also undermined economic co-operation. Although ECOWAS was created for economic reasons, it has been most active on regional security issues. The ECOWAS Ceasefire Monitoring Group (Ecomog), which is dominated by Nigerian forces, has been used for peace-enforcement operations in Liberia (1990-97 and 2003), Sierra Leone (1997-99), Guinea-Bissau (1999), the Guinea-Liberia border (2001) and Côte d"Ivoire (2002). ECOWAS plans to turn its peacekeeping force into a permanent stand-by force for deployment in the sub-region. An observation and monitoring centre at the secretariat in Abuja is the hub of a system that has four observation and monitoring zones to prevent and control civil tension and upheaval in West Africa.

Appendices

Sources of information

National statistical sources The availability of Ghanaian data has improved significantly in recent years. In particular, the Bank of Ghana produces a monthly Statistical Bulletin, quarterly Economic Bulletin and an Annual Report which are available on its website (though often with some delay). Detailed data and forecasts that are presented at each bimonthly meeting of the Bank’s Monetary Policy Committee are also on the Bank’s website. The Central Statistical Office also provides reasonably up-to-date information about inflation However, the output of the Ghana Statistical Service, the main source for all important national data, is of uneven quality. The Ghana Stock Exchange reviews its operations in its annual Fact Book, and daily prices and statistics are available from the exchange and on the Internet. An independent, Accra-based think-tank, the Centre for Economic Policy Analysis (CEPA), provides a comprehensive analysis of recent macroeconomic trends in its annual Macroeconomic Review and Outlook; data are drawn from local sources and from CEPA’s own estimates. The Institute of Statistical, Social and Economic Research also produces an annual publication entitled The State of the Ghanaian Economy, which contains detailed data on all the leading economic sectors. Further data are contained in the budget speeches published by the Ministry of Finance and in documents prepared for the IMF by the Ministry relating to negotiations over assistance packages.

International statistical sources Apart from these sources, statistics are also derived from the World Bank and the IMF, which, in turn, rely on the government to furnish the data. This applies to both International Financial Statistics and the World Bank’s Global Development Finance. There are generally few inconsistencies between data in these sources and in national sources. Regular detailed reviews of the government’s performance under its poverty reduction and growth facility and its poverty reduction strategy paper are published on the IMF’s website. For information on international aid, see the OECD’s Geographical Direction of Financial Flows to Aid Recipients. Information on the military comes from the International Institute for Strategic Studies" publication, The Military Balance.

Select bibliography and Ernest Aryeetey, Jane Harrigan & Machiko Nissanke, Economic Reform in Ghana: websites The Miracle and the Mirage, Oxford, 1999. Kwabena Dinkor, Structural Adjustment and Mass Poverty in Ghana, Aldershot, Ashgate, 1997 Jeffrey Herbst, The Politics of Reform in Ghana, 1982-91, California University Press, 1993 Eboe Hutchful, Ghana’s Adjustment Experience: The Paradox of Reform, Oxford, 2002.

Richard Jeffries, Class, Power and Ideology in Ghana, Cambridge University Press, 1978 Paul Nugent, Big Men, Small Boys and Politics in Ghana, Pinter Press, 1994 Douglas Rimmer, Staying Poor: Ghana’s Political Economy, 1950-90, Oxford, 1993 Kevin Shillington, Ghana and the Rawlings factor, Macmillan Press, 1992 www.finance.gov.gh!Ministry of Finance, contains downloadable versions of all the country’s main economic policy documents (not kept up to date as of October 2004). www.gse.com.gh!Ghana Stock Exchange website, contains information on the performance of the exchange and trading information www.bog.gov.gh!Bank of Ghana website, features copies of the bank’s statistical publications (usually with some delay after their production in hard copy) www.ashantigold.com!AngloGold Ashanti homepage, features up-to-date and detailed information on Ghana’s largest gold producer (also viewable through www.anglogold.com)

www.databankgroup.com!Databank investment banking group, provides regular reports on the stockmarket and economy

Reference tables

Population 2001 2002 2003 2004 2005 Population (m; mid-year) 21.07 21.56 22.06 22.54 23.01 Population growth (%) 2.2 2.3 2.3 2.2 2.1

Source: IMF.

Nominal gross domestic product by expenditure (C m at current prices where series are indicated; otherwise % of total) 2001 2002 2003 2004 2005 Private consumption 32,370 39,492 51,237 60,666 73,189 85.0 80.8 77.4 76.0 76.0 Government consumption 3,020 5,594 7,630 12,780 15,654 7.9 11.4 11.5 16.0 16.3 Gross fixed investment 10,102 9,653 15,150 22,279 28,160 26.5 19.8 22.9 27.9 29.2 Stockbuilding 260 100 0.0 0.0 0.0 0.1 0.0 0.0 0.0 0.0 Exports of goods & services 17,202 20,727 26,684 27,584 33,596 45.2 42.4 40.3 34.5 34.9 Imports of goods & services 24,648 26,614 34,543 43,445 54,313 64.7 54.5 52.2 54.4 56.4 GDP 38,071 48,862 66,158 79,864 96,285

Source: World Bank.

Gross domestic product by sector (C bn; at constant 1993 prices) 2000 2001 2002 2003 2004 2005 Agriculture 1,849 1,923 2,007 2,129 2,289 2,312 Food crops & livestock 1,252 1,314 1,383 1,456 1,533 1,569 Cocoa production & marketing 178 176 175 204 265 300 Forestry & logging 182 191 200 213 225 234 Fishing 237 242 249 256 265 269 Industry 1,295 1,333 1,396 1,467 1,542 1,655 Mining & quarrying 286 281 294 308 322 337 Manufacturing 472 489 513 536 561 589 Electricity & water 132 138 144 150 155 174 Construction 405 425 446 473 505 555 Services 1,525 1,603 1,678 1,757 1,840 1,971 Transport, storage & communications 245 258 273 289 305 328 Wholesale & retail trades, restaurants & hotels 352 369 390 410 430 478 Finance, insurance, real estate & business services 220 230 243 255 267 288 Government services 565 593 614 639 667 701 Community, social & personal services 97 104 108 113 117 122 Producers of private non-profit services 47 48 50 51 53 55 Net indirect taxes 472 498 519 542 566 591 GDP at factor cost 5,142 5,357 5,601 5,895 6,236 6,589

Source: Ghana Statistical Service.

Government finances (C m) 2001 2002 2003 2004 2005 Revenue 9,532 10,334 16,861 24,073 28,256 Tax 6,557 8,543 13,345 17,799 21,302 Non-tax 348 258 397 1,194 1,854 Grants 2,627 1,533 3,119 5,080 5,100 Total expenditure 12,451 12,753 19,035 26,584 30,223 Overall balance -3,433 -3,313 -2,884 -2,837 -1,967

Source: Ministry of Finance and Economic Planning.

Interest rates (%; period averages unless otherwise indicated) 2002 2003 2004 2005 2006 Lending interest rate (%) 27.6 29.8 19.6 18.4 16.0 Deposit interest rate (%) 16.2 14.3 13.6 10.2 8.9 Money-market interest rate (%) 25.1 27.3 16.6 14.9 10.0

Source: IMF, International Financial Statistics.

Money supply (C bn unless otherwise indicated; end-period) 2001 2002 2003 2004 2005 2006 Money (M1) incl others 5,035.0 8,048.6 10,723.4 13,745.3 14,707.0 20,045.5 % change, year on year 46.3 59.9 33.2 28.2 7.0 36.3 Quasi-money 5,036.4 6,942.7 9,399.6 11,899.4 13,334.0 20,004.0 Money (M2) 10,071.4 14,991.3 20,123.0 25,644.7 28,041.0 40,049.2 % change, year on year 31.7 48.9 34.2 27.4 9.3 42.8

Source: IMF, International Financial Statistics.

Prices and earnings (% change, year on year) 2002 2003 2004 2005 2006 Consumer prices (av) 14.8 26.7 12.6 15.1 10.9

Source: IMF, International Financial Statistics.

Mineral production (‘000 tonnes unless otherwise indicated) 2001 2002 2003 2004 2005 2006 Gold ('000 kg) 69.6 70.8 63.1 50.8 57.5 69.8 Bauxite 683.7 494.7 498.1 498.1 726.6 885.8 Manganese 1,135.8 1,518.4 1,597.1 1593.8 1,712.5 1,658.7 Diamonds ('000 carats) 963.5 904.1 905.3 911.8 1,062.90 970.8

Source: Ghana Statistical Service.

Main trading partners (% of total) 2001 2002 2003 2004 2005 Exports fob to: Netherlands 14.5 15.0 11.3 12.2 12.5 UK 11.8 9.9 10.7 9.9 8.3 US 12.6 7.1 4.3 6.4 6.7 Spain 2.6 3.7 3.8 2.9 2.5 Imports cif from: Nigeria 11.1 13.9 13.0 12.7 15.2 China 6.0 6.7 9.2 11.5 12.5 UK 8.5 7.7 7.1 6.7 5.2 Belgium 1.9 2.2 2.4 2.3 2.3

Source: IMF, Direction of Trade Statistics.

Balance of payments, IMF series (US$ m) 2001 2002 2003 2004 2005 Goods: exports fob 1,867.1 2,015.2 2,562.4 2,704.5 2,802.2 Goods: imports fob -2,968.5 -2,707.0 -3,232.8 -4,297.3 -5,345.4 Trade balance -1,101.4 -691.8 -670.4 -1,592.8 -2,543.2 Services: credit 531.7 554.9 630.0 702.3 1,066.4 Services: debit -606.1 -620.9 -899.8 -1,058.5 -1,264.4 Income: credit 16.3 14.7 21.4 44.5 43.3 Income: debit -124.1 -189.0 -178.1 -242.4 -230.4 Current transfers: credit 978.4 912.4 1,408.4 1,831.0 2,125.4 Current transfers: debit -19.4 -12.2 -9.2 0.0 -8.7 Current-account balance -324.6 -31.9 302.3 -315.9 -811.6 Direct investment in Ghana 89.3 58.9 136.8 139.3 145.0 Direct investment abroad 0.0 0.0 0.0 0.0 0.0 Other investment assets 65.0 94.7 68.0 -88.3 106.6 Other investment liabilities 237.9 -192.3 135.6 150.6 582.9 Financial balance 392.2 -38.7 340.4 201.6 834.5 Capital account nie credit 0.0 0.0 0.0 0.0 0.0 Capital account nie debit 0.0 0.0 0.0 0.0 0.0 Capital account nie balance 0.0 0.0 0.0 0.0 0.0 Net errors & omissions -189.1 57.0 -139.1 37.3 25.6 Overall balance -121.5 -13.6 503.6 -77.0 10.0 Financing (– indicates inflow) Movement of reserves -65.7 -259.1 -832.7 -280.4 -148.1 Use of IMF credit & loans 67.0 68.1 73.8 39.1 39.0

Source: IMF, International Financial Statistics.

Net official development assistancea (US$ m) 2000 2001 2002 2003 2004 2005 Bilateral 376.0 386.7 406.2 478.8 896.9 602.7 Netherlands 27.6 114.2 59.6 65.8 152.6 70.5 US 63.3 53.5 68.9 83.9 80.4 66.8 Denmark 37.2 39.7 51.5 56.7 59.7 56.7 UK 79.9 97.8 123.7 131.3 263.5 117.4 Multilateral 205.8 253.9 238.3 462 451.5 503.4 IDA 178.9 158.9 76.8 243.6 288.0 318.0 EU 16.4 18.1 42.4 71.2 63.5 77.4 IMF -1.8 1.9 53.9 52.6 -4.8 -14.6 African Development Bank 1.6 51.6 39.1 63.7 47.7 -14.7 Total incl others 600.4 643.6 649.8 954.2 1,357.6 1,106.1 Grants 352.7 422.6 522.9 644.5 2,008.0 1,117.6 a Disbursements minus repayments. Official development assistance is defined as grants and loans with a grant element of at least 25%, provided by OECD and OPEC countries with the aim of promoting development and welfare in the recipient country. Source: OECD Development Assistance Committee, Geographical Distribution of Financial Flows.

External debt, World Bank series (US$ m unless otherwise indicated; debt stocks as at year-end) 2001 2002 2003 2004 2005 Public medium- & long-term 5,253.5 5,755.7 6,422.5 5,892.6 5,734.4 Private medium- & long-term 255.0 253.0 1.0 0.0 0.0 Total medium- & long-term debt 5,508.5 6,008.7 6,423.5 5,965.5 5,827.8 Official creditors 4,869.7 5,382.2 6,069.0 5,569.0 5,419.7 Bilateral 1,145.1 1,297.2 1,411.9 438.0 369.0 Multilateral 3,724.6 4,085.0 4,657.1 5,131.0 5,050.7 Private creditors 638.8 626.5 354.5 396.5 408.1 Short-term debt 550.6 589.6 696.3 706.0 587.3 Interest arrears 13.7 18.3 21.2 19.0 9.3 Use of IMF credit 283.6 363.4 453.1 468.5 417.0 Total external debt 6,342.7 6,961.7 7,572.9 7,067.1 6,738.7 Principal repayments 189.9 87.9 365.7 157.2 210.9 Interest payments 89.8 90.2 88.5 85.7 95.7 Short-term debt 27.0 17.2 20.3 25.3 21.3 Total debt service 279.6 178.1 454.2 242.8 284.6 Ratios (%) Total external debt/GDP 119.5 113.0 99.3 79.7 63.5 Debt-service ratio, paida 9.2 5.4 11.3 5.1 5.3 Note. Long-term debt is defined as having original maturity of more than one year. a Debt service as a percentage of earnings from exports of goods and services. Source: World Bank.

Exchange rates (C per unit of currency unless otherwise indicated; annual averages) 2002 2003 2004 2005 2006 US$ 7,933 8,677 9,005 9,073 9,174 £ 11,889 14,168 16,487 16,496 16,881 € 7,496 9,813 11,195 11,302 11,520 Source: IMF, International Financial Statistics.

Foreign reserves (US$ m; end-period) 2002 2003 2004 2005 2006 Total reserves incl gold 636.2 1,468.9 1,749.3 1,897.4 2,268.2 Total international reserves excl gold 539.7 1,352.8 1,626.7 1,752.9 2,090.3 Gold, national valuation 96.5 116.1 122.6 144.5 177.9

Source: IMF, International Financial Statistics.

Editors: Ewan Wheeler (editor); Christopher Eads (consulting editor) Editorial closing date: August 15th 2007 All queries: Tel: (44.20) 7576 8000 E-mail: [email protected]