Country Profile 2005

Ghana

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Comparative economic indicators, 2004

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

Nigeria C te d’Ivoire

C te d’Ivoire Senegal

Ghana Benin

Senegal Nigeria

Burkina Faso Mauritania

Mali Guinea

Guinea Ghana

Benin Togo

Niger Burkina Faso

Togo Mali

Mauritania Gambia

Gambia Niger

Guinea-Bissau Guinea-Bissau

0 1020304050607080 0 200 400 600 800 1,000 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)

Gambia Guinea

Mauritania Nigeria

Nigeria Gambia

Senegal Ghana

Ghana Mauritania

Burkina Faso Guinea-Bissau

Guinea-Bissau C te d’Ivoire

Benin Benin

Guinea Senegal

Mali Togo

Togo Niger

Niger Burkina Faso

C te d’Ivoire Mali

-1012345678 -5 0 5 10 15 20 25 Sources: Economist Intelligence Unit estimates; national sources. Sources: Economist Intelligence Unit estimates; national sources.

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Contents

Ghana

3 Basic data

4 Politics 4 Political background 5 Recent political developments 9 Constitution, institutions and administration 10 Political forces 12 International relations and defence

13 Resources and infrastructure 13 Population 15 Education 16 Health 18 Natural resources and the environment 18 Transport, communications and the Internet 22 Energy provision

24 The economy 24 Economic structure 25 Economic policy 29 Economic performance 31 Regional trends

31 Economic sectors 31 Agriculture 35 Mining and semi-processing 38 Manufacturing 39 Construction 40 Financial services 43 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 49 Foreign reserves and the exchange rate

51 Regional overview 51 Membership of organisations

55 Appendices 55 Sources of information 56 Reference tables 56 Population and labour force 57 Electricity generation and consumption 57 Gross domestic product by sector 57 Nominal gross domestic product by expenditure

58 Gross domestic product 58 Government finances 58 Interest rates 58 Money supply 59 Mineral production 59 Manufacturing production 59 Ghana Stock Exchange 60 Main trading partners 60 Balance of payments, IMF series 61 Net official development assistancea 61 External debt, World Bank series 62 Exchange rates 62 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 2004: C9,005:US$1. Exchange rate on June 3oth 2005: C9,074: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, this 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 Lawyers and other educated elites who were excluded from politics by the colonial state dominated the early political movements. After World War Two 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 to 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

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formed the National Liberation Council (NLC). They handed over power to the laisser-faire Progress Party (PP) after elections in 1969. The PP, led 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 (NRC), 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 NRC 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, Flight-Lieutenant 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

Multiparty 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 still left the NDC with a workable majority, but was an important base on which to build their 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 presidential candidate Mr Kufuor managed to capitalise Kufuor and the NPP 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 their 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 them 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

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transition followed. Ghana’s growing democratic tradition contributed to perceptions that the country is a role model within the West African region.

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 retain power Mr Kufuor and the NPP went on to win the presidential and parliamentary elections again in December 2004, with the NDC again being its closest rival. 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, and the fallout from this, in terms of the future relationship between the NDC and Mr Rawlings, has not yet become clear. In the meantime, the report recommended that compensation be given to the victims, paid for by the government, which Mr Kufuor has agreed to—although it is not clear how the funding for this will be raised. Mr Kufuor also agreed with the report’s finding that the security forces need to be made more professional, and ordered the councils administering these forces to begin implementing the report’s recommendations.

Extension of the vote to the Since coming to power, the NPP has been courting the Ghanaian diaspora, with 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 have been against extending the vote, citing numerous technical difficulties and their fear that staff at diplomatic missions abroad are largely from the ruling party, which might encourage electoral fraud in favour of the NPP. However, as the NPP carry a majority in parliament, a vote on the matter is likely to find in favour of them, although concerns over a possible legal challenge to this may force it into a compromise.

African Peer Review Forum On June 19th the third Summit of the African Peer Review Forum was held in reports on Ghana Abuja, Nigeria, at which peer review reports were presented on Ghana and Rwanda. The African Peer Review Mechanism (APRM) seeks to establish a self- monitoring process by African states, which will drive domestic political and economic reforms in participating countries. The key findings were: • strengths include the holding of three post-transition democratic elections and participation in regional peacekeeping operations; • however, there is a potential for conflict to arise from disputes over land, chieftancy and election results; • there are difficulties for businesses in accessing finance; • commercial dispute resolution is lengthy and costly; • the economy is highly vulnerable to external shocks and regional instability—diversification and further development of infrastructure is needed; • there is a high dependence on external assistance to fund development expenditure and for policy advice; and • there is concern over the extent of corruption in public administration.

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The APRM’s report was received with much lively debate in Ghana. There has been a fair amount of cynicism in the press over whether the findings actually presented anything new—the problem of corruption, for instance, is already well-known. The press also highlighted previous promises to address certain issues that were included in the report—which have not been carried through— and raise the question of why the government should be more likely to tackle such problems now that it is participating in the APRM than previously. 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. September 2002 The National Reconciliation Commission (NRC) begins hearing cases of human rights abuses during the periods of military rule. January 2003 The president, John Agyekum Kufuor, is selected to be the New Patriotic Party’s (NPP) candidate at the 2004 presidential election. John Atta Mills was chosen to be the National Democratic Congress (NDC) candidate the previous month, meaning that the poll will be a rerun of the 2000 election. March 2003 A wide-ranging cabinet reshuffle takes place, resulting in some ministries being merged, new ones being created and a reallocation of some ministerial positions. The reshuffle is designed to strengthen ministerial performance: those ministers considered to be performing poorly are either removed or moved to less important positions. February 2004 The former president, Jerry Rawlings, testifies before the NRC. His appearance only lasts 25 minutes and entails very limited questioning. December 2004 Mr Kufour and the NPP win the elections, in a closely run contest. April 2005 The NRC’s report is published, which claims that most of the human rights abuses committed in the past were during Mr Rawlings’ military regimes. 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 present 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. The Supreme Court declared these unconstitutional in February 2002 after a leading member of the NDC challenged whether the court had the authority to try him, although it subsequently overturned its decision. 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 returns Historically, there have been two political traditions in Ghana: Nkrumahist and to power Busia-Danquah. The NPP traces its ideological roots to Abrefa Busia and J B Dankwa, 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. While the electorate appears to have given the NPP government credit for stabilising the economy in its first term of office, there are high expectations that tangible benefits be delivered to the population in its second term.

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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, despite being from one of the sub-groups of the Dagomba tribe who clashed violently in March 2002. After two full terms as vice- president, he will be one of the favourites 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. His close relations with Mr Rawlings may been responsible for the electoral defeats, despite his attempts to play down these links in the campaigns. 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. Yaw Osafo-Maafo Minister of finance. A former banker, he was the trade and industry spokesman for the New Patriotic Party (NPP) in the last parliament. John Henry Mensah Senior Minister. He was previously the minister for parliamentary affairs and the majority leader in parliament. He is influential within the NPP. Kwesi Botchwey A former finance minister who is popular for having stood up to Mr Rawlings; he resigned as finance minister in 1995 after disagreeing with the president on key policies. Was resoundingly beaten in the contest to become the NDC’s candidate at the presidential election. May be a leading figure in any breakaway party that is formed—a possibility that has increased following the NDC’s defeat in the 2004 elections. The opposition After dominating the political scene since 1992, the NDC became an opposition party after losing the 2000 elections. The party was born out of 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. The NDC has struggled to adjust to life as an opposition party after such a long period in power and there have been a number of defections of lower-ranking members to the NPP. 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. The party has also split between those who want to remain loyal to Mr Rawlings and those who favour steering a more independent course. For the moment the former appear to have control of the party, but there is still a real prospect that the divisions may deepen sufficiently for a formal split to take place. The other four opposition parties, the Convention People’s Party, the People’s National Convention, the National Reform Party and the Great Consolidated People’s Party, all of which claim an ideological link with Ghana’s first president, Kwame Nkrumah, have run into trouble. After a dismal showing in the 2000 elections, the parties hardly featured in the 2004 polls, as voters pre- ferred to back the main parties. This also reflects the fact that the membership of the Nkrumahist parties is ageing and the groupings have little appeal to younger voters who do not fully understand what Mr Nkrumah stood for. However, the parties could play an important role if future contests between the NPP and NDC are closely tied, leaving the smaller parties to determine the balance of power in parliament.

The Asantehene The king of the Ashanti, also known as the Asantehene, who has been a ceremonial figure focusing on local and traditional affairs, is acquiring a new role in domestic politics as an envoy who will try and attract foreign investment into Ghana. He has undertaken several foreign trips to talk to businessmen about investment opportunities in the country, particularly in the Ashanti lands. He ascended to the Ashanti throne in April 1999 as King Otumfuo Osei Tutu II after the death of his uncle, King Opoku Ware II.

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. Mr Kufuor has invested considerable time in enhancing Ghana’s international status, facilitating conflict resolution within the region and pursuing pan-African issues at the global level. (The opposition complains that he spends too much time abroad, rather than dealing with domestic issues.) Since becoming president, Mr Kufuor has focused on mediating in the conflicts that blight the sub-region and on building friendly relations with neighbouring countries. He demonstrated this by paying visits to all of Ghana’s neighbours at an early stage in his presidency. Mr Kufuor was appointed to the rotating chairmanship of the Economic Community of West African States (ECOWAS) in January 2003, since when he has been very active in the region. Ghanaian troops are currently in Côte d’Ivoire as part of an ECOWAS peacekeeping force.

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However, Mr Kufuor has left the mediation of the crisis to the South African president, Thabo Mbeki, and leadership of the regional response to other political crises in West Africa tends to be headed by the Nigerian president, Olusegun Obasanjo. Mr Kufuor is also a leading proponent of the New Partnership for Africa’s Development (NEPAD) and of adherence to its underlying principles, including good governance and peer review. Ghana was one of the first countries to undergo a peer review examination in April 2005. The peer review committee’s provisional conclusions from this seem to be broadly positive, with the claim that Ghana’s co-operation was an important part in helping to jumpstart the peer review process.

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, and the president has ordered that the council of the military, as well as other security forces, study the NRC report and propose new reform measures. 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, while a small number are also in Lebanon along with a number of observers in several other crisis areas.

Military statistics, 2004 Army 5,000 Navy 1,000 Air force 1,000 Total 7,000

Sources: International Institute for Strategic Studies, The Military Balance 2005.

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, population growth declined from 2.8% between 1985 and 1994 to 2.2% between 1995 and 2002. 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.

Population by region, 2000 Population Annual growth Total Rural Urban density a rate b 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 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, 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 41.3% from 45% in 1984, while the number of elderly people (those older than 64) has increased from 4% in 1984 to 5.3%. This change 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%. Data from the statistical service show that poverty declined during the 1990s. Using an income of C900,000 (US$110) per year as a poverty line, the percentage of the Ghanaian population defined as poor declined from almost 52% in 1991-92 to just below 40% in 1998-99. However, the decline was not evenly distributed geographically; the reduction in poverty was concentrated in Accra and the forest zones. Rural income per head is 90% 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.

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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. According to the World Bank, the reduction in illiteracy rates has continued, to 18% of males and 34% of females in 2002.

Education indicators (%) Males Females All Primary school gross enrolment ratio (1999-02)a 81 77 79 Secondary school gross enrolment ratio (1999-02)a 43 36 37 a Number of pupils enrolled as a proportion of the population in the relevant age group. Source: World Bank, African Development Indicators. Educational reforms Educational reforms have included changing the structure of the education system to six years of primary, three years of junior secondary, three years of senior secondary and four years of tertiary schooling. The curriculum has been reformed at both primary and secondary levels and made more relevant, and most senior secondary schools now offer vocational options in agriculture and technical subjects in addition to general arts and sciences. However, the change in the curriculum was not supported by a corresponding increase in resources to allow schools to run some of the new courses, particularly those in vocational and technical studies. The gross primary education enrolment rate reached 79% in 2002, although this masks significant discrepancies, as it was only 67.7% in Northern region. In an attempt to address this regional disparity, 61% of the 685 classrooms constructed in 2003 were in the north. Northern parts of the country also have the lowest female enrolment, owing to the predominance of Muslims and lower family incomes. In 2004 the government began providing scholarship and other incentive schemes to encourage the retention of females in full-time education. The number of teachers is increasing, but is still insufficient, as many of the better-qualified ones are taking higher paid jobs in Europe. Tertiary education in Ghana

There are five public universities: the University of Ghana, Kwame Nkrumah University of Science & Technology, the University of Cape Coast, University College of Winneba and the University of Development Studies. 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.

The main private universities are Central University College, Methodist University College, Valley View University, Islamic University and the Ashesi University College. These institutions are creating avenues for higher education and are easing some of the pressure on the public tertiary institutions, but the cost—private schools charge US$500-US$2,500 per semester depending on the facilities offered—serves as a deterrent to most potential students. The curricula of the private universities are geared more towards business and information technology courses, whereas the public institutions offer more courses in the arts.

There has 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. Health

A mixed record As in other developing countries, the health services in Ghana are severely under-resourced. According to the UN, healthcare expenditure was just US$60 per head (in purchasing power parity terms) in 2001. There are just nine physicians per 100,000 people and skilled healthcare personnel attended only 44% of births. 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 69% in 2003.

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

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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. National Health Insurance Scheme

The 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 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 mainly funded by a 2.5% increase in value-added tax (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 3.1% 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, among a number of other countries, although the results of these trials have not been concluded.

HIV/AIDS in Sub-Saharan Africa, 2003 (‘000 unless otherwise indicated) Ghana Côte d’Ivoire Nigeria South Africa People with HIV/AIDS 350 570 3,600 5,300 Children (aged 0-14) 24 40 290 230 Adults (aged 15-49) 320 530 3,300 5,100 Women 180 300 1,900 2,900 Adult infection rate (%) 3.1 7.0 5.4 21.5 AIDS deaths in 2003 30 47 310 370 No. of living orphans 170 310 1,800 1,100

Source: UNAIDS, 2004.

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. Offshore hydrocarbon deposits in the Tano Basin have proven crude oil reserves of 14.3m barrels, and natural gas reserves estimated at 193bn cu ft. 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 often reaches 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.

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.

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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 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 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 296 in December 2003. Private-sector operators are also increasing provision, boosted by the removal of the import duty on buses that seat more than 30 passengers in 2003. The outbreak of conflict in neighbouring Côte d’Ivoire 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. 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, with emphasis placed on improving the existing network.

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. The other reason for the low patronage of the railway may be the unattractiveness of the coaches used. The railways have traditionally transported manganese, bauxite, and some cocoa and timber, and the coaches have not been adapted to carry passengers in comfort. Passenger numbers have, however, risen significantly since 2001, owing to the government’s procurement of new carriages. 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.

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

Source: Ministry of Ports, Harbours and Railways.

The ports are handling more Throughput has been rising fairly steadily at Ghana’s two ports, Tema to the traffic east and Sekondi-Takoradi to the west, following rehabilitation work since the late 1980s. 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. The government plans to exploit the situation in order to establish the ports as regional trade hubs. One of the quays at Tema is currently being dredged to allow it to be developed into a container terminal. This is projected to take two years to complete. Plans are also under way to develop warehousing facilities, export promotion zones, packaging facilities and haulage zones at Tema and Takoradi. Inland water transport on Lake Volta is less efficient, mainly because of inadequate port and navigation facilities. There are also 1,293 km of waterways on the Volta, Ankobra and Tano rivers.

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, with the process of liquidating the company beginning in June 2005. 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, 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. 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. The expansion of Kotoka International Airport in Accra 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 expected to lose trade as a result of the deepening civil conflict in Côte d’Ivoire. The expansion programme, which cost more than US$100m, included the extension of the runway, 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 fixed-line The telecommunications system in Ghana is unreliable and gives poor service, subscribers reflecting a lack of investment. This impacts negatively on business and Internet connectivity. The number of people with access to telephones is low. In 2003 there were 292,098 main lines in use, all of which were connected to digital exchanges. 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

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terminate their management contract with the firm, and to reduce Telekom Malaysia’s presence on Ghana Telecom’s board), which has delayed Telenor’s plans for expanding domestic services. Telenor intends to provide an additional 450,000 fixed lines, which will include extending coverage to towns that are not connected to the telecoms network at present—regional distribution of fixed- line services is heavily skewed, with two-thirds of subscribers in Greater Accra. Mobile-phone users now far outnumber fixed-line services and the subscriber base is growing rapidly, from 12,766 in 1996 to 130,045 in 2000 and 822,873 in 2003. There are four licensed service providers: Scancom, Ghana Telecom, Millicom and Kasapa. The Spacefon service, run by a Danish company, Scancom, is the largest network, with 535,000 subscribers in 2003. Under Telenor, Ghana Telecom is expected to provide an additional 750,000 mobile-phone subscribers, but, again, the legal challenge by Malaysia Telekom has delayed this.

Telephone subscribers, 2003 Service (providing company) Fixed line Payphone Mobile Total Mobitel (Ghana Telecom) 288,520 4,829 100,000 393,349 Spacefon (Scancom) 0 0 535,000 535,000 Onetouch (Millicom) 0 0 150,000 150,000 Kasapa (Kasapa) 0 0 37,873 37,873 Westel 2,578 166 0 2,744 Capital 100 0 0 100 Total 292,098 4,995 822,873 1,119,966

Source: National Communication Authority

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. This will give Ghanaians direct communication services to most African states, as well as high-quality links to international destinations. However, poor domestic services will prevent Ghanaians from taking full advantage of this, including the cable’s broadband capability.

Telecommunications indicators 1999 2000 2001 2002 2003 Main lines in operation 158,555 237,178 242,122 274,341 302,300 Public payphones 3,044 3,180 4,295 n/a n/a Cellular phone subscribers 70,026 130,045 193,773 449,435 799,900 TV receivers ('000) 990 1,100 1,100 1,100 n/a No. of PCs 50,000 60,000 70,000 82,000 n/a Internet users 20,000 30,000 40,000 170,000 n/a

Source: International Telecommunication Union.

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. The government aims to provide access to telephones in all secondary schools to allow them connection to the Internet. The proliferation of Internet cafes has improved access to Internet services and reduced the cost of usage. Several government ministries and

agencies have websites that are kept reasonably up to date (for a selection see Selected bibliography and websites).

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 High Street Journal. Ghana has several independent radio stations, some of which are available worldwide over the Internet. There are three terrestrial television stations; GTV is state-owned, Metro-TV is jointly owned by a private individual and the Ghana Broadcasting Corporation, and TV3 is privately owned. A satellite service is also available through South Africa’s DSTV.

Energy provision

The weather dictates Hydroelectricity is the main source of domestically generated power. Lake Volta hydroelectricity output 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.

Other power sources are The electricity crisis in 1998 and growing demand from Ghana’s expanding being added mining industry have hastened government and private-sector initiatives to develop alternative power sources. Capacity has been increased at Ghana’s oil- and gas-fired power plant; a new substation at Aboadze increased output to 440 mw. This expansion, plus the installation of two more turbines, lifted total power generation at the plant to 660 mw by the end of 2001. A US contractor, CMS Energy, carried out the work in co-operation with the plant’s operator, the state-owned Volta River Authority (VRA). 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. The electricity crisis has also encouraged the Ghana National Petroleum Corporation (GNPC) to construct barge-mounted power plants that will use gas from the Tano basin, but these have not yet been installed. Electricity supply has therefore remained unstable.

Petroleum industry 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 the 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 continued. Fuel prices were eventually raised to cost-recovery level in February 2005, and a pricing mechanism was put in place shortly

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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 and adequate distributor margins. The supply of petroleum products has also already 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.

West African Gas Pipeline After being on the drawing board for nearly a decade, the regional West African Gas Pipeline (WAGP) appears to be 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 has gathered momentum following the World Bank’s approval of US$125m in finance, after it conducted a study into the economic sustainability and financial viability of the project. It is expected that Ghana will consume 90% of the WAGP’s throughput, estimated at 4m cu metres/day. The date for the first gas to start flowing was last put at late 2006, but this may have been put back given the delays on the project.

The economy

Economic structure

Main economic indicators, 2004 (Actual unless otherwise indicated) Real GDP growth (%) 5.8a Consumer price inflation (av; %) 12.6 Current-account balance (US$ m) -235.7 Exchange rate (av; C:US$) 9,004.63 Population (m) 21.7a External debt (year-end; US$ m) 6,981.3a a Economist Intelligence Unit estimates. Source: Economist Intelligence Unit, CountryData.

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 35% of GDP. 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 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.

Comparative economic indicators, 2004 Ghanaa Côte d'Ivoire a Nigeriaa South Africab UKb GDP (US$ bn) 8.7 14.7 75.6 213.2 2,132.0 GDP per head (US$) 400 871 554 4,990a 35,659a GDP per head (US$ at PPP) 2,443 1,743 1,143 11,565a 31,515a Consumer price inflation (av; %) 12.6b 1.4b 15.0b 4.3 1.3 Current-account balance (US$ bn) -0.2b -0.2 2.7 -7.0 -46.9 Current-account balance (% of GDP) -2.7 -1.5 3.5 -3.3 -2.2 Exports of goods fob (US$ bn) 2.8b 6.5 34.6 48.4 349.3 Imports of goods fob (US$ bn) -4.3b -4.8 -18.1 -48.5 -455.4 External debt (US$ bn) 7.0 12.5 37.5 28.7a – Debt-service ratio, paid (%) 8.4 6.9 3.4 9.4a – a Economist Intelligence Unit estimates. b Actual. Source: Economist Intelligence Unit, CountryData.

Services has become an important sector of the economy, accounting for around 40% of GDP in 2004. Government services is the biggest sub-sector, followed by construction. Industry contributed about 25% to GDP in 2004. The manufacturing sub-sector is the largest contributor to industrial output, followed by mining and quarrying. The mining sub-sector, of which gold mining is the most important component in terms of quantity and foreign earnings, contributes 5-6% of GDP. Gold deposits are found in Ashanti and Western regions, and in some parts of Central and Northern regions. Other

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minerals mined in Ghana are diamonds, bauxite and manganese. Gold and cocoa exports make up around 50-65% of total exports, depending on international price trends—in 2004, with prices for both commodities high, they accounted for 65% of exports.

Economic policy

Broad commitment to IMF- In 1983 the government launched a comprehensive economic recovery backed reforms programme assisted by the IMF and the World Bank, with the objective of reducing macroeconomic imbalances and carrying out structural reform of the Ghanaian economy. The policies and programmes introduced established fiscal and monetary discipline, and exchange-rate liberalisation. The financial sector was also liberalised, ending the government’s shareholding in banks and the clearing of bad loans from banks’ balance sheets. The result was increased competition in banking, which resulted in innovation in the sector. Since Ghana’s return to multiparty democracy in 1992 the government has generally continued with its economic reforms, 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 latest agreement with the IMF, a poverty reduction and growth facility (PRGF), was approved in May 2003. Under this a maximum of SDR184.5m (US$258m) is to be lent over a period of three years. SDR26.35m of this was made available immediately. To gain access to the funding the government is required to tighten its control of public expenditure and keep energy prices at full cost-recovery levels. The Fund also wants to see reforms in the financial sector to enable it to play a greater part in private-sector development.

Recent lending agreements with the IMF Approved Drawn Approval Expiry (SDR m) (SDR m) ESAF Nov 1988 Mar 1992 388.55 388.55 ESAF Jun 1995 May 1999 164.40 137.00 ESAF/PRGF May 1999 Nov 2002 228.80 176.22 PRGF May 2003 Oct 2006 184.50 79.05a a As at June 30th 2005. Source: IMF.

In its most recent assessment of the current PRGF (May 2003-October 2006), the IMF was relatively positive about the government’s performance. In particular, the IMF highlighted the government’s commitment to policy implementation, which contributed to the country’s reasonably strong economic performance in 2004. However, slippages in fiscal policy were noted, particularly as higher- than-expected expenditure on the petroleum subsidy and government wages meant the budget deficit missed its targeted level—although a narrowing of the fiscal deficit was still recorded. Progress with reforms on a number of fronts

was also highlighted, particularly the introduction of reforms to petroleum product pricing, which effectively removes the need for petroleum subsidies.

Fiscal imbalances remain This emphasis on fiscal policy is not surprising. After Ghana’s return to multiparty democracy in 1992, its overall fiscal performance deteriorated compared with the late 1980s—although a steady improvement has taken place in recent years. After running large fiscal deficits averaging 4.2% of GDP in 1981- 83, the government ran average annual surpluses of 0.8% of GDP between 1986 and 1991. From 1992 to 1995 the budget balance deteriorated to an average deficit of 0.6% of GDP. This 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. The widening deficits were 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) placed considerable emphasis on improving macroeconomic stability and creating an environment conducive to sustainable economic growth. The 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. However, in their first year the fiscal deficit rose higher still, to 9% of GDP in 2001, the largest deficit since 1979. This likely reflects many arrears inherited from the previous government. However, greater control over fiscal expenditure, coupled with improved revenue collection and administration, helped reduce the fiscal deficit to 6.8% of GDP in 2002—just within the original budget projection of 6.9% of GDP. This did include, however, a substantial overrun in public-sector pay resulting from an unbudgeted pay rise to healthcare staff, to prevent an exodus to better-paid positions abroad, and because wage bills at some ministries and government agencies exceeded the budget target. In 2003 and 2004 the fiscal deficit fell further, to 4.4% of GDP and 3.6% of GDP, respectively, due to a strong performance by the revenue-collection agencies, although this exceeded the government's deficit targets of 3.1% of GDP for both years. The 2005 budget

As outlined in the budget speech, the key priorities for the government in 2005 include: • the maintenance of a tight monetary policy in order to help reduce inflation and support the building of foreign-exchange reserves; • the strengthening of the fiscal position by consolidating public expenditure, improving the administration of tax collection, and implementing public-sector reforms; • the reduction of the public debt stock in order to help “crowd-in” private-sector investment—the domestic debt stock is to be reduced to 13.5% of GDP by the end of 2005—and • the deregulation of the petroleum sector, by opening it up to private-sector participation and establishing a market-based pricing regime.

The priorities laid out in the budget reflect the need to continue with the economic reform agenda begun during the New Patriotic Party’s first term, boost the growth

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rate and make inroads into poverty reduction in Ghana. The fiscal deficit is projected to fall to 1% of GDP. Wages and salaries remain the largest item of expenditure, followed by debt-service payments and investment, which is most likely to focus on infrastructure, as the government strives to show that it is making progress in achieving the ambitious commitments on infrastructure development that it gave in the previous two elections. Domestic revenue is targeted to continue to rise rapidly, by 25%, owing to increasing efficiency in the tax collection systems and the widening of the tax base. Central bank pursues lower During the latter part of the 1990s, the monetary policy followed by the Bank inflation of Ghana (the central bank) was aimed at sustaining the declining trend in inflation, which began in 1996. The bank therefore permitted only moderate growth in the money supply, which brought year-end inflation down from 15.7% in 1998 to 13.8% in 1999. The central bank was also able to slow down monetary growth through the intensification of open-market operations, and complemented this with deposit auctions and the introduction of new instruments, such as repurchase agreements and swaps. However, financing the rapidly growing fiscal deficit eroded all the gains achieved from earlier policies during the fourth quarter of 2000—when an election was held—and only when fiscal discipline was restored under a new government could monetary policy become effective again in slowing down inflation. In response to the inflationary impact of the near doubling of petrol prices in January 2003 the 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 Bank continued to reduce the prime rate, until it reached its current level of 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 bank began taking a more cautionary stance in mid-2005, given that inflationary pressures remained high, not least because of the 50% fuel price increase that was instituted in February 2005.

Monetary policy also aims to The central bank is 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. While lending rates have come down, so have deposit rates, and there has been little impact on the spread between the two, which in August 2005 was around 21 percentage points, compared with 23.5 percentage points at the start of 2003. This level is still far too high for effective financial intermediation. As of July 2005, the central bank has also 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 reduced to 15%). However, while 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 very risky.

Greater use of indirect market In July 2005 the central bank announced reforms that include greater use of instruments announced indirect, or market instruments, to control monetary policy, rather than direct instruments. The main aim of these is to develop a more liquid interbank market for reserve requirements, rather than allowing them to rely on the central bank to meet reserve requirements. This includes increasing the existing interest rate corridor for Bank of Ghana money market operations from 1% to 3%, with reverse repos now offered at two percentage points below the prime rate, to ensure that the reverse repo rate is below the interbank market rate. In addition, fine-tuning repos will be available at one percentage point above the central bank prime rate on the final day of the maintenance period for meeting reserve requirements.

Reforms have increased Bank Since late 2001 several steps have been put in place to increase the of Ghana’s independence independence of the central bank. Principal among these was the introduction of a Bank of Ghana Act, the main features of which are: • a clause limiting government borrowing from the central bank to 10% of total government revenue in any fiscal year; • the abolition of the central bank’s ability to provide external loan guarantees to private organisations; and • a reduction of the number of areas on which the central bank has to consult with the government before it can make a decision. A Monetary Policy Committee, mandated under the Bank of Ghana Act to advise the government on monetary policy, was inaugurated in September 2002. It meets every two months and its minutes are published on the Bank’s website. In addition, as of July 2005, the central bank will hold periodic auctions of its bills as part of its open market operations, rather than using the proceeds of auctions to meet the public-sector borrowing requirement of the government, which will help to make monetary policy more effective.

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 there are 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 2005 budget, and the issue seems to have been temporarily sidelined as other reforms, such as the deregulation of the petroleum industry, take centre stage. Nevertheless, the main sales that donors are looking to be completed 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

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• 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.

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, but there was a marked slowdown 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. This was strongly reflected in the agricultural sector, where a downturn in 2000 was followed by strong growth, which was heightened by a number of other factors, including increased spraying of crops against disease, good rains and the advent of large-scale smuggling of cocoa from Côte d’Ivoire.

Record growth of 5.8% in 2004 Real GDP is estimated to have grown by 5.8% in 2004, the highest growth rate achieved since 1984. The largest contribution to growth came from the agricultural sector, which 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. The government attributed this to the mass spraying exercise and better husbandry practices implemented in 2004. Good weather, an increase in producer prices, and smuggling from Côte d’Ivoire (as farmers can obtain higher prices for their crop in Ghana at present) also played a major role. Healthy growth was also experienced in other agricultural industries, such as forestry and logging production, and crops and livestock production.

Gross domestic product (% real change) Annual average 2003 2004 2001-04 Agriculture 6.1 7.5 5.4 Industry 5.1 5.1 6.5 Services 4.5 4.7 4.5 GDP 5.2 5.8 4.9

Sources: World Bank; Economist Intelligence Unit estimates.

The industrial sector is estimated to have grown by 5.1% in 2004, with the strongest performance shown by the construction industry, largely as a result of acceleration in roads development. Growth in mining and quarrying was also high, reflecting ongoing investment in the gold sector. Meanwhile, services grew by 4.7%, with the best performance coming from the transport, storage

and communications sector, as the diversion of goods from Côte d’Ivoire continued. Many other services sub-sectors showed good growth, such as government services, which is not surprising given that 2004 was an election year.

Single-digit inflation proves Ghana has long battled with high inflation rates, with single-digit inflation elusive remaining elusive. The early part of the 1990s was characterised by rising inflation; the year-end inflation rate peaked at 59.5% in 1995. The government’s aim of halting the rising trend in inflation, both to restore macroeconomic stability and stay within the limits agreed with the IMF, compelled the central bank to tighten monetary policy. This helped inflation to fall to an annual average of 12.4% in 1999. However, between 2000 and 2003 the average inflation rate soared to 25%, following the collapse of the cedi in 2000 and rising international oil prices. Although tighter fiscal and monetary policies did help to prevent inflation from moving higher over this period, the impact of higher fuel and other import prices proved difficult to control. In 2004 government subsidies helped to keep domestic fuel prices low, which ensured considerably lower inflation, but rising food prices and increased government spending ahead of the elections meant that single-digit inflation remained elusive, and the inflation rate averaged 12.6% for the year.

Inflation remains in double- The 50% fuel price increase in February 2005 prevented inflation from moving digits in 2005 into single digits in the first half of the year, although it appeared that year-on- year inflation peaked at 16.7% in March, falling to 15.7% in June. The impact of the fuel price increase was somewhat curtailed by exchange-rate stability and the harvesting of crops during that time. However, a number of inflationary pressures will keep inflation high in the second half of the year, including strong international oil prices; a possible weakening of Ghana’s exchange rate over the second half of the year; expected tariff increases for utilities; food shortages caused by drought; and the 21% increase in the minimum wage and 20% hike in government salaries that were announced in the 2005 budget.

Inflation (% change) Annual average 2003 2004 2001-04 Consumer prices 26.7 12.6 21.8

Source: Bank of Ghana.

Recent inflation data likely to be under recorded

The IMF has expressed concerns over the accuracy of the consumer price index (CPI). According to the Fund, a procedural change in the calculation of the CPI in 1999 has resulted in a significant under-recording of the inflation rate, as observations for which there were no data were entered as no change, implying that there was no inflation in the price of these goods. IMF calculations suggest that end- 2000 inflation was about 65% rather than the reported 40.6%. In 2005 there continues to be concern over the accuracy of the inflation rate, particularly as drought-related food price increases in many parts of the country have not been reflected in official calculations of food price inflation in the first half of the year.

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Regional trends

A decentralised administration Ghana is divided into ten regions, each with a regional capital and adminis- tered by the regional minister and his team. Ghana operates a decentralised form of administration and within each region district assemblies that are funded by central government are responsible for day-to-day administration. In all, there are 110 districts in Ghana, each with a district chief executive. The district assemblies are supervised by the regional administration, which reports to the central government. The Ministry of Local Government and Rural Development is responsible for the decentralised system. More generally, the country is informally divided into north and south. The north has three regions—Northern, Upper East and Upper West—and the south has seven regions—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 greater 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 between 30-40% of GDP and employs around 50% of agriculture the 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% per year, 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, 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 and rice 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. The government relies on donor funding to support the majority of its initiatives for moder- nising agriculture so as to improve food security and reduce imports.

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

Source: Ministry of Food and Agriculture.

Cocoa production hits all-time Cocoa has overtaken gold as a source of export revenue, but production levels high in 2003/04 remain vulnerable to weather conditions. Around 1.6m peasant farmers produce most of the country’s cocoa on plots of less 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 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 been attributed to good weather combined with a cocoa reform strategy implemented by the New Patriotic Party (NPP) government when it took power. This entailed: • an increase in the price paid to producers to 70% of the free on board (fob) price by 2004/05, 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;

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• a partly government organised revolving credit fund for farmers; and • the upgrading of feeder roads to marginal areas.

Cocoa production levels fall in Coca production for 2004/05 is estimated at 600,000 tonnes—a large drop from 2004/05 the 2003/04 levels. This has been attributed to the erratic nature of rainfall during the season, which affected the cocoa crop at a critical stage of development, thus inhibiting the fruition process of the cocoa trees. However, cocoa production is still relatively high by historical standards, and the pressure to maintain high production levels has brought new concerns about sustaining the quality of the country’s cocoa crop, which has long been an advantage in Ghana’s favour. Major problems identified include: • older cocoa trees are reported to have been rejuvenated alongside younger high-yielding varieties; • farmers have not been properly equipped to deal with the fermentation and drying to get the desired quality; and • not enough time is being allowed to dry the cocoa beans.

Exogenous factors support Two exogenous factors have supported the historically high levels of cocoa strong cocoa production production. First, international prices nearly doubled in 2002, owing to concerns over the impact on production of the civil conflict in Côte d’Ivoire, and have remained strong since then. As farmers are getting a greater proportion of this higher price it has had a positive effect on fertiliser use and general farm maintenance. Second, the conflict in Côte d’Ivoire 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. In 2003/04 up to 100,000 tonnes of Ivorian cocoa are estimated to have been smuggled into Ghana, with a similar amount estimated for 2004/05.

Long-term changes in the Private cocoa buyers have been allowed to operate in the domestic market cocoa sector since 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 this context, the reform of the cocoa sector in neighbouring Côte d’Ivoire in 1999 is being watched closely, although that country’s civil conflict and the recent high world cocoa prices limit the scope for drawing real conclusions. Nevertheless, 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 government sold 25% of its interest in the Cocoa Processing Company (CPC) through the Ghana Stock Exchange in October 2002. CPC, a subsidiary of Cocobod, processes cocoa beans into finished and semi-finished products in its three factories, currently the only ones in Ghana. Six more cocoa-processing factories are in the process of being set up by other companies. 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.

Cocoa production ('000 tonnes) 1999/2000 2000/01 2001/02 2002/03 2003/04 Main crop 400 350 321 444 669 Mid crop 30 45 18 35 68 Total 430 395 339 479 737

Source: Ghana Cocoa Board.

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$175m in 2003. 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 of timber, although plans to phase out log and lumber exports altogether have been shelved. The current strategy is a package of incentives and penalties to encourage exporters to increase value added. Although there are signs that this has happened recently, a lack of funds, managerial skills, technical expertise and marketing facilities are still significant constraints.

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

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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. While the fish catch has been rising—from an average of 373 tonnes between 1990 and 1994, to an average of 426 tonnes between 2000 and 2003—it is insufficient to satisfy national demand. Nonetheless, some species, particulate, tuna and shrimp, are exported. Total exports of fish and seafood were US$27m in 2003.

Fish production (tonnes) 1999 2000 2001 2002 2003 Marine 269 355 371 290 331 Inland 76 88 88 88 83 Total 345 443 459 388 414

Source: Fisheries Department, Ministry of Agriculture.

Mining and semi-processing

Gold dominates the mining sector and is usually Ghana’s most important source of foreign exchange. Gold and other minerals were the largest sources of export earnings in 2003, making up 32% of the total, with gold accounting for around 95% of this. Ghana’s gold reserves lie in Ashanti region, which has large resources, and in Western and Central regions, where much alluvial mining takes place. The country’s largest producer is AngloGold Ashanti, formed in 2004 after the merger between South Africa’s AngloGold and Ashanti Goldfields. Prior to the merger, Ashanti had long been the country’s largest producer; a series of expansion programmes more than quadrupled output at its Ghanaian operations from 300,000 oz in 1985 to nearly 1.3m oz in 1999. Ashanti used to account for 90% of Ghanaian production, but this has been reduced to about 50% 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 very 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 At the time of the merger, AngloGold Ashanti committed to developing the take at least five years Obuasi mine, which contains both surface operations and Ghana’s only under- ground mine. The mine was found to be operating below capacity owing to under-investment in capital equipment. By mid-2005 investments in improving production had resulted in an increase in production levels, with cost levels significantly lower. AngloGold Ashanti are also looking at making a large investment to develop the mine’s deep-level operations, which would extend the life of the mine to beyond 2040. Around US$44m is to be spent over a five- year period on exploration and feasibility studies, after which several years would be dedicated to developing the deep-level operations. Early projections by AngloGold Ashanti are that US$570m will be invested in the mine over its lifetime.

Gold production (oz) 2001 2002 Ashanti Group 1,002,636 964,752 Gold Fields (Ghana) 527,011 523,489 Abosso Goldfields 302,563 306,597 Billiton Bogosu 87,122 124,393 Resolute (Ghana) 108,827 102,455 Bonte Gold Mines 65,293 46,054 Satellite Goldfields 69,809 4,181 Prestea Sankofa Gold 8,257 2,263

Source: Minerals Commission.

Newmont mines will lift gold Prior to Obuasi coming on stream, the sector will receive a significant boost production in 2006-08 from the start of mining by 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, estimated to cost US$350m, was under way in mid-2005, with production of around 500,000 oz/year scheduled to begin in the second half of 2006. Following feasibility studies that were completed in February 2005, the development of the mine at Akyem was estimated to cost US$500m; production is expected to start in the

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second half of 2008, at a projected rate of 400,000 oz/year. 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. The sector has had an corruption and smuggling unfortunate history, characterised not only by corruption and smuggling but also by poor management at the former state-owned Ghana Consolidated Diamonds (GCD). GCD figures suggest that output in 1978 was 1.4m carats, declining steadily to 259,358 carats in 1988. Since 1995 there has been a significant turnaround in diamond production, which peaked at 1.09m carats in 2001. This overall improvement was helped by the reorganisation of GCD, which was privatised in the early 1990s. However, the continued problems at GCD contributed to a fall in production thereafter, to 905,000 carrats in 2003, and production remains at a quarter of full capacity. 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. Small-scale mines are thought to produce a sizeable amount each year, possibly more than the large-scale mines, but extensive illegal mining and a thriving parallel market at Akwatia’s Diamond Junction make it difficult to measure small-scale output with accuracy.

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 1.6m tonnes in 2003.

Bauxite has potential Only a small proportion of Ghana’s substantial bauxite reserves—estimated by the Minerals Commission at 120m tonnes—are currently mined, at Bui. The sole producer of bauxite in the country, Ghana Bauxite, 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, Ghana Bauxite 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. However, there are plans to develop Ghana’s bauxite reserves, as part of a larger project to develop the country’s aluminium industry

Aluminium industry to be Alcoa has signed a Memorandum of Understanding (MoU) with the Ghanaian developed government to develop the country’s integrated aluminium industry. Alcoa already owns 10% of 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. According to the MoU, Alcoa will initially restart three of Valco’s five potlines, which should result in the production of 120,000 tonnes/year (t/y) of aluminium. Alcoa will be working

with the government on a feasibility study for building a 1.5m-t/y alumina refinery and undertaking railroad and other infrastructure upgrades. The study is expected to be completed by 2006 and to lead to a more detailed MoU. No indication was given of how much Alcoa intends to invest in these projects. Importantly, when a more detailed MoU is agreed, majority ownership of the total integrated aluminium industry project is expected to pass to Alcoa. This is a critical aspect of recent developments, as the IMF had originally put pressure on the government not to buy the 90% share in Valco, owing to concerns about the company’s profitability. Production at Valco under Kaiser had been inter- mittent, and power shortages were a frequent problem. Under the recently signed MoU, interim power supply measures have been planned with the Volta River Authority, which it is hoped will improve the reliability of power supply; reference was also made to the possible use of natural gas from the West Africa Gas Pipeline (WAGP) once it becomes operational.

Oil exploration intensifies Following an increasing number of oil finds off the coast of West Africa, the area has begun to attract the attention of a number of foreign oil companies. After considerable activity in Côte d’Ivoire, investment in Ghana, which shares many of its neighbour’s geological structures, has picked up in the last few years. Four small oil companies—UK-based Alderney Resources, Tano Energy Ghana (whose parent company is First Oil of the UK), Vanco Energy of the US and a consortium of Devon Energy of the US and Canada’s EnCana—are currently carrying out exploration activities. India’s state-run Oil and Natural Gas Corporation also signed an exploration deal with the Ghana National Petroleum Corporation in October 2004.

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.

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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.

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.

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. 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 very

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 is partially dependent on the availability of donor project funding and the government’s speed in awarding contracts.

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. The 1989 Banking Law prescribed minimum capital requirements and capital adequacy ratios and improved the regulatory and supervisory framework. A new banking law was introduced in October 2004 to align capital adequacy requirements with the international standards prescribed under the Basel II framework. The 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 18 banks—ten commercial banks, five merchant banks and three development banks. There are five foreign banks: Société Générale, which bought a 50.72% stake in SSB Bank in early 2003; Barclays Bank Ghana; International Commercial Bank (of Taiwan); Stanbic Bank; and Standard Chartered Bank Ghana. Since 1992 privatisation and the formation of a number of new commercial banks have brought increased dynamism to the sector. Barclays is the most technologically advanced bank in Ghana, Standard Chartered Bank is the leader in commercial banking services and Ghana Commercial Bank has the largest branch network. These three banks held just over 55% of the total assets of the banking sector in June 2005. The foreign banks play a leading role in the sector and are slowly stimulating competition, mainly by offering more and better services—commercial banks have introduced many new products, including ATMs and credit cards, and have improved the turnaround time for cheque clearing and cashing. Universal banking licences for banks with paid-up capital of C70bn (US$7.6m) were introduced in February 2003, and this has also increased competition. The main commercial banks have, however, recently attracted much criticism for their perceived concentration on higher-income customers and large businesses. Specifically they 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. These criticisms are a reflection of the risk-averse nature of the banks operating in Ghana. Banks have a limited appetite for lending to small and medium-sized local businesses, which has caused some local resentment. The spread between

borrowing and lending rates remains high, at over 20 percentage points. High lending rates have resulted from high levels of bad debts and, until recently, a high secondary reserve requirement—on top of a 9% primary reserve requirement, commercial banks previously had to meet a minimum 35% secondary reserve requirement—although this has been reduced to 15% to encourage more lending to the private sector. The low deposit rates appear to be the result of the volatile nature of savings deposits, which tend to impose high operating costs on the banks. This interest rate structure means that those who can afford to hold Treasury bills rather than use the commercial banks, reducing financial intermediation and the amount of funds available for private-sector capital formation. Commercial banks also prefer to hold government paper, which is in effect risk free, and are cautious towards lending, further hampering the development of the private sector. In contrast, tough competition has driven merchant banks’ margins down to around 4%. The leading merchant banks are CAL Merchant Bank, Ecobank Ghana, First Atlantic Bank and Merchant Bank Ghana. The merchant banks provide trade finance as well as commercial and other banking services. The three development banks are National Investment Bank, which is responsible for investment banking, the Agricultural Development Bank for agricultural finance, and Prudential Bank. Both of these are now being run along the lines of commercial banks and the government plans to privatise them.

Medium-term financial sector The government’s medium-term plans to make the financial sector more reform plans efficient at mobilising and allocating funds and to fully integrate it into the international financial system were announced in the 2004 budget. The government is aware that saving and investment need to be increased to achieve the higher rates of real GDP growth and employment that will make a real impact on poverty. These goals are encompassed in the government’s new financial sector strategic plan, the main priorities of which are as follows. • A revamping of the government’s borrowing programme to extend and secure a better balance of debt maturities; clearly distinguish borrowing from open market operations; introduce openness into the process; build confidence among investors; and reduce crowding out of the private sector. • The removal of obstacles to the development of an efficient secondary market in government securities and equities, and the improvement of the quality and timeliness of the information flow available to market participants. • The reinforcement of the legal framework for business transactions and investment so that it surpasses that of other countries in the region. • A strengthening of regulatory agencies and financial institutions to meet global standards of financial capacity, expertise, transparency and consumer protection.

Non-banking financial sector is The non-banking financial sector is growing and diversifying, although it relatively undeveloped remains relatively small. In the area of securities and capital markets, Ghana has three discount houses: CDH Investment, which was established in 1987; the Securities Discount Company, which was established in 1991; and Fidelity

Discount House, which was established in 1998. (An affiliate of CDH Investment, CDH Asset Management, was closed in 2004, after being found to be insolvent.) Since the opening of the Ghana Stock Exchange (GSE), several stockbrokers have become established, and legislation introduced in 1999 has opened the way for unit trusts and more varied financial instruments. Databank Ghana operates as an investment bank, providing financial advisory and stockbrokering services. There are now 19 insurance companies, compared with fewer than ten in 1993, although the industry is still dominated by two state-owned firms. The government is preparing one of them, State Insurance Company, for privatisation. Ghana also has mortgage companies, including the Home Finance Company, building societies, at least one venture-capital company and three leasing firms.

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$1.3bn in mid-2005. However, 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 2% of total market capitalisation. Most retail investors are passive and public awareness of the GSE is relatively low.

Volatile returns The GSE was very small until 1994, when the government divested around 30% of its equity in Ashanti and sizeable stakes in six other companies. The well- publicised divestment of Ashanti stimulated foreign and local interest in other Ghanaian equities. Despite more (albeit smaller) privatisations in 1995 and 1996, poor economic fundamentals undermined the attractions of the GSE. Dynamism returned in 1997, when falling inflation and the government’s post- election efforts to restore fiscal stability tempted some investors back to the GSE. Enthusiasm was maintained during 1998 and the domestic share index rose by 70%, or 63% in US dollar terms, making it the best performing market in Africa that year. In 1999 the macroeconomic environment deteriorated and the market soured, falling by 15% in local-currency terms or 42% in US dollar terms— the GSE’s worst year ever. Although the market recovered in 2000, its return of 16.6% in local-currency terms was well below the inflation rate of 40.5% and the Treasury-bill rate of 38%. The GSE recovered somewhat in 2001, owing to the relative stability of the cedi and improved macroeconomic stability.

Doubts over sustainability of Since the end of 2001 the GSE all-share index has boomed; it is up by over boom since 2002 550% in cedi terms (around 400% in US dollar terms). This remarkable performance is partly owing 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. To absorb some of the surge of funds directed towards the exchange, the GSE is encouraging new firms to list, although only a few have done so. Amid concern that the stockmarket boom was unsustainable, it began to slow down at the end of 2004, and in the first half of 2005 the index shed 14% of its value.

GSE adopting a regional role Trust Bank of The Gambia became the first ever crossborder listing on the GSE in November 2002. According to the bank, its rationale for listing on the GSE was to provide liquidity for shareholders and an avenue for raising additional capital in the absence of a stock exchange in The Gambia. However, the listing also ties in with the objectives of the West African Monetary Zone. One reason why Trust Bank may have chosen to list on the GSE—despite the fact that the Nigerian stockmarket is the largest exchange in the region—is that one of its leading shareholders is Databank, which also sponsored the listing. Ghana is in talks with Nigeria on the possible integration of the Ghanaian and Nigerian stock exchanges, with a view to creating a wider market.

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 and other historical events aimed at the African diaspora. Official figures point to rapid growth in international tourist arrivals, increasing from 257,000 in 1993 to 650,000 in 2004 (according to estimates from the Ghana Tourist Board). 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. Tourism is the third-largest foreign-exchange earner in Ghana after gold and cocoa—estimated at US$800m in 2004—and it is government policy to develop Ghana into an internationally competitive tourist destination through a five- year Strategic Tourism Development Plan, which aims at attracting 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 Ministry of Tourism also facilitates the development of the sector.

The main sources of tourism are the UK, the US, Germany and France. Ghanaians based overseas, mainly in the UK and US, accounted for 28% of total arrivals in 2002. Hotel beds in Ghana more than doubled between 1992 and 2003 (from 10,902 to 22,909), 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.

Tourism arrivals and receipts 1998 1999 2000 2001 2002 Arrivals 347,952 372,653 399,000 438,833 482,643 Receipts (US$ m) 284.0 304.1 386.0 477.8 519.6

Source: Ghana Tourist Board.

Retail Although retail facilities in Ghana remain limited, a range of outlets serve urban areas. There are a growing number of large foreign outlets in Accra, particularly South African retailers. More new investments are expected in coming years, although the development of large shopping complexes is con- strained by land shortages. Rural areas typically rely mainly on informal markets or modest general stores.

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, cocoa and timber. This dependence is reflected in swings in export earnings according to the output of the key commodities and international price fluctuations.

Foreign trade, 2004 (US$ m; fob) Exports 2,785 Gold 840.2 Cocoa beans & cocoa products 1,071.0 Timber 211.7 Others 662 Imports -4,297 Trade balance -1,513

Source: IMF.

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, due to 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. 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% in comparison. While good weather has been one of the leading factors in the doubling of cocoa exports since 2001, higher exports of gold and non-traditional exports have made Ghana less vulnerable to the market and weather conditions that affect cocoa. The main growth sectors in non-traditional exports include agriculture and agro-processing industries, particularly fish products and pineapple, and processed timber and aluminium products.

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 and foreign-exchange reserves also have 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. However, import spending has picked up strongly since 2002, following an increase in export revenue and foreign-exchange reserves, to reach a record high of US$4.3bn. The diversion of goods from Côte d’Ivoire, due to the political instability, to be transported through Ghana is likely to have contributed to increased import levels. Rapid import growth has resulted in the trade deficit widening to its highest level yet, of US$1.5bn.

Ghana’s main trade partners The bulk of Ghana’s trade is with OECD countries. Ghana’s main, non-OECD are OECD countries trading partner is Nigeria, from which Ghana imports most of its oil, and neighbouring Côte d’Ivoire. Ghana’s main export market is the Netherlands, where much of Ghana’s cocoa is processed, followed by the UK and the US.

Main trading partners, 2003a Exports to: % of total Imports from: % of total Netherlands 11.3 Nigeria 12.8 UK 10.7 China 9.1 France 7.6 UK 7.1 Germany 6.2 US 5.9 US 4.3 Germany 4.7 a Derived from partners’ trade data and subject to a margin of error. Source: IMF, Direction of Trade Statistics.

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 due 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 remit-

tances 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$1.8bn in 2004. The rise in current transfers may actually be slightly misleading as this is in part due to improvements in the measurement of expatriate remittances. All the major banks have linked up with the Western Union money transfer agency in recent years, so most remittances go into the formal banking sector and are therefore more accurately captured by the official data. Nonetheless, an increase in remittances is likely to have occurred, as the strength of the global economy means 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. 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 has improved markedly in recent years, 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 is attributable to a substantial rise in gold and cocoa exports, as well as current transfers, that together more than outweighed rising import levels. However, in 2004 a deficit, of US$236m, was recorded again, as import growth outpaced exports, causing the trade deficit to more than double. At the same time, the services deficit also widened substantially, mirroring import growth. Although growth in current transfers continued to be substantial, this was not sufficient to prevent a current-account deficit being recorded.

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 continued support of donors resulted in an increase to US$906.7m in financial support, but this level is likely to have slipped in 2004, again due to donor concerns over policy slippages in an election year. 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.

Large external debt prompts Ghana’s external debt more than quadrupled, from US$1.4bn in 1980 to Ghana to join HIPC US$7bn 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 the latest data from the World Bank show that the country’s debt stock rose from US$7.3bn at the end of 2002 to US$8bn 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 Ghana hit completion point in July 2004. Achieving completion point entitles completion point in 2004 Ghana to debt relief of US$3.5bn (US$2.2bn in net present value terms, after discounting according to the degree of concessionality of the debt stock). The relief is to be phased over a period of around 20 years. The International Development Association, the World Bank’s soft lending arm, will forgive US$1.4bn in debt-service payments, which is equivalent to a two-thirds reduction in debt-service payments between 2002 and 2022. The IMF will forgive US$112m in net present value terms between 2002 and 2009, while the remainder of the relief will come from bilateral and other multilateral creditors. Savings on debt servicing will be spent in accordance with the pro-poor objectives of Ghana’s poverty reduction strategy. As much of this relief will be phased, any immediate reduction in Ghana’s debt stock will be limited to those bilateral donors that rapidly approve the debt

write-off. Even though the Paris Club of sovereign creditors approved the cancellation of US$821.5m of Ghanaian debt shortly after the completion point announcement was made, this process can take some time and is subject to delay in national parliaments. A further factor that will limit the usefulness of the HIPC debt reduction is that Ghana is expected to continue to borrow externally (at concessional rates) to fund spending on poverty reduction, health, education and infrastructure development. Coupled with the immediate reduction in the debt stock made by bilateral creditors, it is estimated that the debt stock fell to US$7bn at the end of 2004.

Ghana could get further At the G8 annual summit held in July 2005 in Gleneagles (Scotland) major external debt write-offs agreements were made to boost aid and to provide further debt relief for Sub- Saharan Africa, of which Ghana is likely to be a major beneficiary. In terms of the G8’s agreement on debt, after months of negotiations it was finally announced that a total of 32 Sub-Saharan African countries could eventually benefit from more substantial debt relief than is currently being provided under the HIPC initiative, with Ghana included as one of the 14 African countries that would qualify immediately. However, despite the substantial publicity around the deal, the exact scale of the debt write-offs for each country will only become clearer in time as the final details of the scheme are worked out. Nevertheless, the key aspect of the deal for Ghana is likely to be the commitment to provide 100% multilateral debt stock cancellation, by relieving those governments that have already reached HIPC competition point, and are on track with their IMF reform programmes, of their debt-service obligations to the World Bank, IMF and African Development Bank (ADB). Multilateral debt stock cancellation crucial is also crucial because in recent years it has become apparent that although countries such as Ghana have benefited from debt write-offs by bilateral donors, their overall external debt stocks have not fallen because of the large outstanding stock of debt owed to multilateral lenders and the fact that that have continued to borrow from them to fund various priority sector projects.

The write-offs are likely to Meanwhile, given that there are a number of important unresolved issues have conditions attached around the proposed write-offs, a quick write-off seems unlikely. First, it is not clear what the cut-off date will be for the external debt that is being written off, notably whether the G8 will include, or exclude, the large amount of recent borrowing taken on by many HIPC states—much of which is from the World Bank. Second, it is not obvious whether the write-offs alone will actually boost resources flowing into the various states. G8 governments have committed to providing additional money to finance debt write-offs, although World Bank research has apparently challenged this, claiming that the current pledges made by the G8 are inadequate. According to this research, the proposal may only work if the governments provide legal guarantees of future funding commitments or the relief is spread over a greater time period than currently envisaged. Nevertheless, it was also stated in the final communiqué at Gleneagles that donor governments would “adjust their gross assistance flows by the amount forgiven”.

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, and remained at that level in 2004. The fluctuations reflect erratic levels of investment, particularly in mining projects, and inflows linked to privatisation. The data on portfolio flows are conflicting. The IMF’s International Financial Statistics does not show any portfolio investment since the stock exchange opened. The World Bank’s Global Development Finance shows no portfolio investment before 1993, but then records a massive US$557m in 1994 when the government sold shares in Ashanti Goldfields, followed by a steady decline to just US$17m in 2000 (these data were dropped from the 2003 edition of Global Development Finance).

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 has caused the cedi to depreciate significantly since 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. Higher imports by construction and utility companies after the government settled its arrears with them, and a lack of intervention by the Bank of Ghana (the central bank), caused the cedi to depreciate by 15% against the US dollar during 2002.

Recent cedi stability The cedi has been relatively stable against the US dollar since the end of 2002. It stood at C9,074:US$1 in June 2005, down only 7.5% on its end-2002 level. Strong receipts from both cocoa and gold exports, increasing expatriate remittances and a weak US dollar have supported the currency. Additionally, there was some official support from the central bank to defend the exchange rate as a nominal anchor, both in terms of monetary policy and foreign- exchange inflows. Although the cedi has depreciated faster against the currencies of other major trading partners, owing to the weakness of the US dollar, the large inflation differential between Ghana and the US and EU means

that in real terms Ghanaian exporters are losing competitiveness. Some economists have raised concerns that such relative exchange-rate stability may lead to another sharp depreciation, but, according to the IMF, the real effective exchange rate is little changed since end-2000 and is one-third below the level reached ahead of the currency collapse in 1999. Despite this relative stability, the cedi remains vulnerable to any sudden deterioration in the terms of trade (such as a sharp fall in gold or cocoa prices).

Import cover is low despite Strong inflows of gold and cocoa revenue and expatriate remittances have fo reign-exchange i nflows caused foreign-exchange reserves to surge from US$287m in June 2002 to US$1.6bn at the end of 2004, an all-time high. Even at this level, import cover was still under four months, reflecting the strong demand for imports. Foreign- exchange levels have fallen steadily in 2005, to US$1.3bn by June—foreign- exchange reserves usually jump in the final quarter of the year, which coincides with the start of the cocoa export season, before gradually easing through the first three-quarters of the following year.

Regional overview

Membership of organisations

African Union (AU) The African Union (AU) is the successor to the Organisation of African Unity (OAU) and is based in the Ethiopian capital, Addis Ababa. The AU was formally launched in July 2002 at a meeting of African heads of state in the South African city of Durban. This came two years after the AU’s formation was first agreed in Togo in July 2000 and followed a one-year transitional period that began after the ratification of the constitutive act of the AU by two-thirds of the member states in May 2001. 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 a Pan-African Parliament, which held its first session in South Africa in October 2004, although it will not play a legislative role for five years. The president is currently Gertrude Mongella from Tanzania. 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. In practical terms, the most high-profile AU event is the annual conference of heads of state, which is hosted by the member state that is due to hold the chairmanship of the organisation for the following year. The day-to-day affairs of the AU are managed by the AU commission, which is modelled on the EU commission and was endorsed by the AU heads of state summit in July 2003. The commission is headed by the former Malian president, Alpha Konaré, aided by a deputy, Patrick Mazimhaka of Rwanda, both of whom were elected at the summit. There are also seven appointed AU commissioners. One of the main problems facing the AU is that many of the proposed new institutions and policy co-ordination mechanisms are costly and cannot be funded within the AU’s current resource allocations. To help to counter this, at the July 2004 Annual Summit Mr Konaré presented a 2004-07 Strategic Framework aimed at launching Africa into the 21st century. Under this, member states are supposed to pledge 0.5% of GDP to fund the AU, which will 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). This is a potential bone of contention with the South African government, which is keen for Nepad to remain in its South African headquarters. However, to date, many members still fail to pay their membership dues so further commitments, other than from external donors, are unlikely. In December 2003 donors and external lenders expressed their full support for the AU’s initiatives and the creation of new institutions. 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 very 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. The AU will also battle to overcome opposition to the principle of non- interference, which has been a major hindrance to the resolution of conflicts on the continent and is a contentious issue among member governments. Although non-interference was enshrined in the old OAU, this is not the case with the AU, which has set up a Peace and Security Council (PSC; to replace the OAU’s Mechanism for Conflict Prevention, Management and Resolution) 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, which is projected to comprise five battalions by 2010 and has already received some funding from both the EU and the US. Even without the establishment of the PSC, since May 2003 the AU has had an observer mission in Burundi, led by South Africa and including troops from Mozambique and Ethiopia, to help enforce a peace agreement in Burundi’s civil war. An AU observer mission was also sent to the Darfur region of Sudan in July 2004, and a protection force is being deployed. If this is increased, to become a real peacekeeping force, it could prove to be the first real test of the AU’s commitment to intervening in member countries’ domestic affairs.

Economic Community of West The Economic Community of West African States (ECOWAS) was established African States (ECOWAS) in 1975 by 15 West African countries: Benin, Burkina Faso, Côte d’Ivoire, 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 John Agyekum Kufuor of Ghana); supreme authority rests with the annual conference of heads of state and government. 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. Six other ECOWAS members—The Gambia, Ghana, Guinea, Liberia, Nigeria and Sierra Leone—signed an agreement in December 2000 to create a second monetary union in the region and defined a set of convergence criteria: a budget deficit of less than 4% of GDP; central bank financing of budget deficits limited to 10% of the previous year’s tax revenue; an inflation rate of no more

than 5%; and foreign reserves equivalent to at least six months of imports. A first step towards monetary integration was 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 monetary unit in January 2003. The West African Monetary Zone (WAMZ) Stabilisation and Co-operation Fund was created in 2001 with planned capital of US$100m to assist member countries with temporary balance-of-payments problems. The two monetary zones were expected to merge in 2004. However, progress has been slow and the WAMZ countries agreed in November 2002 to postpone the creation of their new currency until July 2005, since none of the countries had met most of the convergence criteria. (This date is also unlikely to be met.) Moreover, the IMF has expressed its opposition to such a monetary union, since it would be dominated by Nigeria, whose economic imbalances could lead to monetary instability in the whole region. 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) was established to enforce an agreement for ending the civil war in Liberia in 1990. Dominated largely by Nigeria, Ecomog intervened to restore peace in Sierra Leone in 1997 and in Guinea-Bissau in 1998. Its forces were deployed in Côte d’Ivoire at end-2002 under the leadership of Senegal to help to secure a ceasefire. In August 2003 Liberia’s interim government and rebel groups signed a peace deal in Accra, Ghana, permitting the establishment of an ECOWAS “interposition” force, the ECOWAS Mission in Liberia (ECOMIL), which maintained the ceasefire until October 2003, when the UN Mission in Liberia took over, mandated by the UN Security Council. ECOWAS plans to turn its peacekeeping force into a permanent stand-by force for deployment in the subregion. Four observation centres—in Benin, Burkina Faso, The Gambia and Liberia—to prevent and control civil tension and upheaval in the region are planned.

Cotonou Convention A new, 20-year, convention was signed in June 2000 in Cotonou, Benin, offering a group of 77 African, Caribbean and Pacific (ACP) countries preferential trade and aid links with the EU. The Cotonou Convention replaced Lomé IV, a convention that was signed in 1989 and replaced previous agreements signed in 1975, 1979 and 1984. Although similar to the Lomé conventions, the new convention has a stronger political dimension. Respect for human rights, democratic principles and the rule of law were essential components of Lomé IV. Under the Cotonou agreement, the ACP countries have also agreed to promote good governance, combat corruption and try to prevent illegal immigration into the EU. A revision of the Cotonou Convention is made possible every five years by a special clause. Negotiations between the

ACP countries and the EU for the review and adaptation of the accord should start in autumn 2004 and be completed in February 2005. Under previous conventions, ACP products, whether agricultural or industrial, entered the EU duty-free, although four agricultural products—beef, sugar, bananas and rum—were subject to a more restrictive system of tariff quotas. Because the type of trade agreement established by the Cotonou Convention does not comply with the rules of the World Trade Organisation (WTO), the new agreement offers a negotiating framework for tailor-made regional free- trade agreements known as Economic Partnership Agreements (EPAs), under which ACP countries, preferably within existing economic groupings, will gradually open their domestic markets to European products. Given the adjustment costs involved, a preparatory period of eight years (2000-2008) has been agreed, during which the old system of preferences will continue to apply. However, under existing global trading rules, the 33 African countries classified as least developed countries will still have the option of entering the EU’s generalised system of preferences (GSP). Unlike the Lomé Convention, the GSP, which benefits all developing countries, complies with the rules of the WTO because it is based on the twin principles of non-reciprocity and non- discrimination. In September 2003 the ACP countries and the WTO signed an agreement at the Cancun trade round, whereby the WTO will provide training and technical assistance to ACP countries as a form of mutual co-operation. The European Development Fund (EDF) will remain the main source of multilateral European aid to the ACP countries. Under the new convention, EDF instruments have been regrouped and rationalised into two programmes: one to provide grants for long-term development schemes being carried out either at the national or the regional level, with additional support available in the event of a fall in export earnings, and the other to finance risk capital and loans to the private sector. The ninth EDF will total €13.5bn (US$12.9bn). In addition, about €10bn left undisbursed from previous programmes will remain available until 2007, and the European Investment Bank will provide €1.7bn. The financial protocols are concluded for a period of five years, with the ninth EDF running from 2000 to 2005. The Cotonou Convention finally entered into force in April 2003 with all 15 EU members and 76 ACP nations (not Somalia) ratifying the treaty. A month later the ACP representatives signed the Brussels Declaration, which calls for the timely and effective implementation of EDF funds. This represents a commitment towards the efficient disbursement of EDF resources for the benefit of ACP countries. In June 2004, at the 4th Summit of ACP Heads of State, the ACP Council of Ministers was mandated to ensure the effective co-ordination and coherence of EPA negotiations within the ACP and between various ACP regions, as well as with the WTO negotiations, so as to ensure unity.

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 stock market and economy

Reference tables

Population and labour force 1999 2000 2001 2002 2003 Population (m; mid-year) 19.4 19.9 20.3 20.8 21.2 Population growth (%) 2.2 2.3 2.2 2.2 2.2 Labour force (m) 9.4 9.6 9.9 10.1 10.3

Source: World Bank.

Electricity generation and consumption (bn kwh) 1999 2000 2001 2002 2003 Electricity generation 5,925 8,086 8,321 8,441 6,841 Akosombo 4,289 5,557 5,523 4,177 3,210 Kpong 880 1,052 1,084 858 675 Imports n/a 863 461 1,145 940 Electricity consumption 6,804 7,835 8,030 8,028 6,462 Electricity Corporation of Ghana (ECG) 3,493 3,918 4,175 4,326 4,505 Volta Aluminium Company (Valco) 1,928 2,505 2,565 2,062 250 Mines 696 630 569 562 572 Exports 326 392 302 611 602

Source: Volta River Authority.

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

Source: Ghana Statistical Service.

Nominal gross domestic product by expenditure (C bn at current prices; % of total in brackets) 1999 2000 2001 2002 2003 Private consumption 18,121.8 23,551.1 32,369.7 39,529.3 51,045.3 (88.1) (86.7) (85.0) (80.9) (77.2) Government consumption 1,646.0 2,123.0 3,020.1 5,593.6 7,623.0 (8.0) (7.8) (7.9) (11.4) (11.5) Gross fixed investment 4,211.7 6,271.7 10,325.9 9,173.8 14,488.3 (20.5) (23.1) (27.1) (18.8) (21.9) Stockbuilding 212.0 237.8 -198.6 452.0 860.4 (1.0) (0.9) (-0.5) (0.9) (1.3) Exports of goods & services 6,641.7 13,310.9 17,201.8 20,726.9 26,684.1 (32.3) (49.0) (45.2) (42.4) (40.3) Imports of goods & services 10,253.6 18,341.5 24,647.9 26,613.6 34,543.1 (49.8) (67.5) (64.7) (54.5) (52.2) GDP 20,579.7 27,153.0 38,071.0 48,862.0 66,158.0

Source: World Bank.

Gross domestic product (market prices) 1999 2000 2001 2002 2003 Total (US$ m) At current prices 7,709.8 4,977.6 5,309.2 6,159.6 7,624.2 Total (C bn) At current prices 20,579.7 27,153.0 38,071.0 48,862.0 66,158.0 At constant (1975) prices 10,070.0 10,442.6 10,881.2 11,370.8 11,962.1 % change, year on year 4.4 3.7 4.2 4.5 5.2 Per head (C) At current prices 1,059 1,367 1,874 2,354 3,119 At constant (1975) prices 518 526 536 548 564 % change, year on year 2.1 1.4 1.9 2.2 3.0

Source: World Bank.

Government finances (C m) 2000 2001 2002 2003 2004 Revenue 5,385 9,532 10,334 16,861 24,073 Tax 4,415 6,557 8,543 13,345 17,799 Non-tax 396 348 258 397 1,194 Grants 574 2,627 1,533 3,119 5,080 Total expenditurea 7,525 12,451 12,753 19,035 26,584 Current 5,034 7,578 9,763 13,122 16,697 Capital 2,491 4,873 2,990 5,912 9,888 Overall balance -2,624 -3,433 -3,313 -2,884 -2,837 Financing 2,975 2,554 2,757 2,602 2,656 External -56 2,087 460 2,203 2,612 a Does not include arrears payments and tax refunds. Source: Ministry of Finance and Economic Planning

Interest rates (%; period averages unless otherwise indicated) 2000 2001 2002 2003 2004 Lending interest rate (%) 38.8 43.5 27.6 29.8 19.2 Deposit interest rate (%) 28.6 30.9 16.2 14.3 13.6 Money-market interest rate (%) 27.0 27.0 24.5 21.5 18.5

Source: IMF, International Financial Statistics.

Money supply (C bn unless otherwise indicated; end-period) 2000 2001 2002 2003 2004 Money (M1) incl others 3,441.5 5,035.0 8,048.6 10,723.4 13,745.3 % change, year on year 38.2 46.3 59.9 33.2 28.2 Quasi-money 4,206.3 5,036.4 6,942.7 9,399.6 11,899.4 Money (M2) 7,647.8 10,071.4 14,991.3 20,123.0 25,644.7 % change, year on year 54.2 31.7 48.9 34.2 27.4

Source: IMF, International Financial Statistics.

Mineral production (‘000 tonnes unless otherwise indicated) 1999 2000 2001 2002 2003 Gold ('000 kg) n/a 74.10 69.60 70.80 63.10 Bauxite 353.1 678.4 683.7 494.7 498.1 Manganese 541.4 1,076.7 1,135.8 1,518.4 1,597.1 Diamonds ('000 carats) 648.0 1,090.1 963.5 904.1 905.3

Sources: Ghana Statistical Service.

Manufacturing production (volume indices unless otherwise indicated; 1977=100) % weighting 1998 1999 2000 2001 2002 Food manufacturing 15.0 130.3 196.6 235.4 269.9 280 Beverages 8.1 124.0 164.3 190.8 199.8 258.1 Tobacco & tobacco products 7.8 53.6 37.1 37.1 46.6 65.4 Textiles & clothing 13.7 55.9 50.0 54.7 57.8 60 Timber 7.2 125.0 123.3 134.7 140.1 131 Paper & printing 1.9 54.3 54.5 55 56.3 93.8 Petroleum refining 19.0 56.6 58.6 68 72.1 87.1 Chemicals 6.6 159.8 159.1 159.2 170 170 Cement 3.0 293.1 324.2 293.1 261 248 Iron & steel 3.3 413.4 561.4 863.3 819.5 633 Non-ferrous metal 9.6 37.3 77.6 104 108.7 n/a Cutlery & metal products 0.5 116.8 143.1 154.3 142 111.9 Electrical goods & appliances 1.3 29.9 25.2 25.7 25.3 25.3 Overall index incl others 100.0 99.5 120.5 143.2 150.2 153.4

Source: IMF, Statistical Appendix.

Ghana Stock Exchange (end-period unless otherwise indicated) 2000 2001 2002 2003 2004 No. of listed companies 22 22 24 25 29 Market capitalisation C bn 3,655 3,904 6,183.8 12,616.8 23,792.4 US$ m 502 528 740 1,426 2,644 Turnover ratio (%) 1.5 2.6 1.8 4.1 3.2 Value of trading (period total) C bn 50.6 96.9 89.6 387.1 589.9 US$ m 10.1 13.3 11.3 45.5 66.0 Local indexa 858 955.9 1,395.3 3,553.4 6,798.5 % change 16.5 11.4 46 154.7 91.3 Price/earnings ratio (av) 8.1 -7.9 3.6 7.2 15.8 a GSE all-share index. Source: Standard & Poor’s, Emerging Stock Markets Fact Book 2005.

Main trading partners (% of total) 1999 2000 2001 2002 2003 Exports fob to: Netherlands 11.3 16.8 14.4 14.8 11.3 UK 12.9 9.3 11.8 9.8 10.7 France 4.6 4.4 4.7 5.8 7.6 US 10.4 13.7 12.5 7.0 4.3 Imports cif from: Nigeria 14.9 10.1 11.1 14.0 12.8 China 3.7 4.1 6.0 6.7 9.1 UK 9.6 9.8 8.5 7.8 7.1 US 8.1 7.2 8.2 7.1 5.9

Source: IMF, Direction of Trade Statistics.

Balance of payments, IMF series (US$ m) 2000 2001 2002 2003 2004 Goods: exports fob 1,936.3 1,867.1 2,015.2 2,562.4 2,784.6 Goods: imports fob -2,766.6 -2,968.5 -2,707.0 -3,276.1 -4,297.3 Trade balance -830.3 -1,101.4 -691.8 -713.7 -1,512.7 Services: credit 504.2 531.7 554.9 630.0 702.3 Services: debit -583.7 -606.1 -620.9 -903.7 -1,058.5 Income: credit 15.6 16.3 14.7 21.4 44.5 Income: debit -123.2 -124.1 -188.9 -178.0 -242.3 Current transfers: credit 649.3 978.4 912.2 1,408.4 1,831.0 Current transfers: debit -18.4 -19.4 -12.2 -9.2 0.0 Current-account balance -386.5 -324.6 -32.0 255.2 -235.7 Direct investment in Ghana 165.9 89.3 58.9 136.7 139.3 Direct investment abroad 0.0 0.0 0.0 0.0 0.0 Other investment assets 70.0 65.0 94.7 68.0 -175.0 Other investment liabilities 133.4 237.9 -192.3 142.6 237.3 Financial balance 369.3 392.2 -38.7 347.3 201.6 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 -352.1 -189.1 57.1 -98.8 20.9 Overall balance -369.3 -121.5 -13.6 503.6 -13.2 Financing (– indicates inflow) Movement of reserves 221.3 -65.7 -259.1 -832.7 -280.4 Use of IMF credit & loans 35.4 67.0 68.1 73.8 39.1

Source: IMF, International Financial Statistics.

Net official development assistancea (US$ m) 1999 2000 2001 2002 2003 Bilateral 355.6 376.0 386.7 406.2 478.7 Netherlands 11.8 27.6 114.2 59.6 65.8 US 40.9 63.3 53.5 68.9 83.9 Denmark 38.0 37.2 39.7 51.5 56.7 UK 91.8 79.9 97.8 123.7 131.3 Multilateral 249.9 222.1 253.9 238.3 415.1 IDA 198.6 178.9 158.9 76.8 196.6 EU 25.6 16.4 18.1 42.4 71.2 IMF -15.2 -1.8 1.9 53.9 52.6 African Development Bank 15.6 1.6 51.6 39.1 63.7 Total incl others 609.4 600.4 643.6 649.8 906.7 Grants 369.0 352.7 422.6 522.9 597.6 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) 1999 2000 2001 2002 2003 Public medium- & long-term 5,690.0 5,490.0 5,640.0 6,130.0 6,800.0 Private medium- & long-term 260.0 257.0 255.0 253.0 1.0 Total medium- & long-term debt 5,950.0 5,747.0 5,895.0 6,383.0 6,801.0 Official creditors 5,110.0 4,990.0 5,080.0 5,590.0 6,290.0 Bilateral 1,430.0 1,330.0 1,360.0 1,510.0 1,630.0 Multilateral 3,680.0 3,660.0 3,720.0 4,080.0 4,660.0 Private creditors 840.0 757.0 815.0 793.0 511.0 Short-term debt 718.0 588.0 555.0 593.0 700.0 Interest arrears 20.4 26.2 17.9 21.4 24.5 Use of IMF credit 310.0 293.0 284.0 363.0 453.0 Total external debt 6,978.0 6,628.0 6,734.0 7,339.0 7,954.0 Principal repayments 343.7 309.1 216.5 99.8 386.2 Interest payments 175.4 155.3 98.1 92.5 86.3 Short-term debt 37.8 37.8 27.0 17.2 21.1 Total debt service 519.1 464.3 313.9 192.6 482.2 Ratios (%) Total external debt/GDP 90.5 133.2 126.8 119.1 104.3 Debt-service ratio, paida 17.5 15.7 10.0 5.9 11.4 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) 2000 2001 2002 2003 2004 US$ 5,455 7,171 7,933 8,677 9,005 £ 8,254 10,323 11,889 14,168 16,487 N 53.6 64.5 65.8 67.2 67.8 CFAfr 7.7 9.8 11.4 14.9 17.0 € 5,041 6,422 7,496 9,825 11,200 ¥ 50.6 59.0 63.3 74.8 83.2

Source: IMF, International Financial Statistics.

Foreign reserves (US$ m; end-period) 2000 2001 2002 2003 2004 Total reserves incl gold 311.4 377.1 636.2 1,468.9 1,749.3 Total international reserves excl gold 232.1 298.2 539.7 1,352.8 1,626.7 Gold, national valuation 79.3 78.9 96.5 116.1 122.6

Source: IMF, International Financial Statistics.

Editors: Nicola Prins (editor); David Cowan (consulting editor) Editorial closing date: August 31st 2005 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected]