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Ghana Public Expenditure Review, 1989-91

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Ghana Public Expenditure Review, 1989-91 RepowtNo. 7673.GH Ghana Public ExpenditureReview, 1989-91 Public Disclosure Authorized Cobr 30, 1989 WesternAfrica Region FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Documentof theWorld Bank Thisdocument has a restricteddistribution and may be usedby recipients only in the performanceof their officialduties. Public Disclosure Authorized Itscontents may not otherwise be disclosedwithout World Bankauthorization. CURRENCYEQUIVALENTS Currency Unit 1985 1988 1/ 1987 j/1 1988 USl1 064.37 oleo 0162 0202.36 Cedi (0) 1 USSW.919s USSg.0094 USS. 62 USSIe6e FISCAL YEAR JANUARY 1 - DEEMBER 31 ABBREVIATIONS AESC - Architectural and Engineering Services MIST - Ministryof Industries, Science and Corporation Technology AFDB - African Development Bank MOA - Ministry of Agriculturo AHP - Animal Health and Production MOEC - Ministrr of Education and Culture APPP - Agriculture Productivity Promoting MOH - Ministry of Health Project MRH - Ministry of Roads and Highways OCR - Benefit Cost Ratio MSD - .9.nagementServices Division BHC - Bank for Housing and Construction MTAC Medium Term Agricultural Development CAG - Controller and Accountant General Program CIDA - Canadian International Development MTC - Ministry of Transport and Communication Agency M'H - Ministry of Works and Housing CIDU - Crops Inputs Development Unit NORRIP - Northern Region Rural Integrated Program CSD - Crops Services Division ODA - Overseas Development Assistance DFR - Department of Feeder Roads OHCS - Office of the Head of the Civil Ssrvice DUR - Department of Urban Roads PAMSCAD- Programl of Action to Mitigate the Social EdSAC - Education Sector Adjustment Credit Costs of Adjustment EEC - European Economic Community PER - Public Expenditure Review EIB - European Investment Bank PIP - Public Investment Program Economic Recovery Program PIPTF - Public Investment Program Task Force ERR - Economic Rate of Return PHC - Primary Health Care FASCOM - Farmers' Service Company PNDC - Provisional National Defense Council GA - Ghana Airways PWD - Public Works Department CCAA - Ghana Civil Aviation Authority SAC II - Second Structural Adjustment Credit GES - Ghana Education Service SCC - State Construction Corporation GFDC - Ghana Food Distribution Corporation SEC - State Enterprises Commission GHA - Ghana Highway Authority SGMC - State Gold Mining Corporation GIDA - Ghana Irrigation Development Authority SHC - State Housing Corporation GIHOC - Ghana Industrial Holding Company SIC - State Insurance Corporation GOG - Government of Ghana SME - Small and Medium Scale Enterprises GOPDC - Ghana Oil Palm Development Corporation SOE - State Owned Enterprise GPHA - Ghana Ports and Harbors Author'ty SSNIT - Social Security and National Insurance GPT - Ghana Ports and Telecommunications Trust GRC - Ghana Railway Corporation TDC - Tems Development Corporation GWSC - Ghana Water and Sow-isag-Corporation TOR - Te-ms of Reference IDA - InternationalDevelopment Association TRP - TransportRehabilitation Project IFAD - International Fund for Agricultural TSC - Technical Services Center Development UNDP - United Nations Development Program ILO - International Labor Organization URADEP - Upper Region Agricultural Development JSS - Junior Secondary School Project MFEP - Ministry of Finance and Fconomic USAID - United States Agency for International Planning Development WSRP - Water Sect r Rehabilitation Project 1/ A dual exchange rate system was established on September 19, 1986 when a foreign exchange auction was instituted for specified transactions. The t90 rate applied to the first window (cocoa and residual oil exports, petroleum and essentia! drugs imports, and central government debt service contracted before January 1, 1988); the rate on the second window was established at the weekly auction. The two rates were unified with effect from February 20, 1987; all transactions are now valued at the rate merging in the weekly auction. In the week ending November 3, 1989 the marginal rate at the auction was 0289=US31. FOROFFMCIAL USE ONLY GHANA: PUBLIC EXPENDITURE REVIEW 1989-91 Table of Contents Page No. SUMMARY OF MAIN RECOMMENDATIONS . I. INTRODUCTION . 1 II. MACROECONOMIC FRAMEWORK ... 2 A. Overview ... 2 B. Resource Availability ... 2 C. Expenditure Trends . 5 III. ALLOCATION ISSUES . ... 6 A. Civil Service Wages . 6 B. Recurrent Expenditure on Goods and Services . 9 C. Subventions . 11 D. Capital Investment Levels and Allocation . 14 IV. IMPLEMENTATION ISSUES . 21 A. Norms and Recurrent Expenditure Allocations . 21 B. Discrepancies Betwef Program and Actual PIP Expenditure . 22 C. Supercore . I . 25 D. New Projects . 26 V. SECTORAL REVIEWS . 28 A. Overview . 28 B. Agriculture . 28 C. Manufacturing . I I . 50 D. Mining . 60 E. Water Supply . 68 F. Transport . 78 G. Posts and Telecommunications . 88 H. Highways . 94 I. Works and Housing . I . 102 J. Education . 1111 K. Health . 125 This report is based on the findings of a core mission that visited Ghana in November 1988 and a follow-up mission in February 1989. The core mission consisted of Stephen Mink (Task Mautager), Isabelle Tsakok (Agriculture), Benson Ateng (Manufacturing), Erol Haker (Cons. - Infrastructure), Rogati Kayani (Telecommunications), Thampil Pankaj (Roads and Highways, Transport), Nicholas Bennett (Education), David Berk (Health) and Long Ton (Macroeconomic framework). Jim Moose (Mining) contributed from Headquarters. Cristina Perez and Tania Hollestelle provided secretarial support. Thisdocument has a restricted distribution and may be used by recipients only in the performance of theirofficial duties Its contents may not otherwise be disclosed without World Bank authorization. INDEX OF TABLES Table Page No. II. Macroeconomic Framework Table 2.1 Actual and Projected Revenue Performance, 1984-1991 . 4 Table 2.2 Allccation of Government Expenditure, 1985-1991 . 6 III. Allocation Issues Table 3.1 Civil Service Wage Bill - 1989 Policy Scenario ... 8 Table 3.2 Relation of Recurrent to Development Expenditure, 1985-1989 . 11 Table 3.3 Budget Allocations, Recurrent Items 2-5 for Selected Ministries, 1987-89 . 12 Table 3.4 Recurrent Budget Subventions, Economic Classification, for 1988 . 13 Table 3.5 Recurrent Budget Subventions, Economic Classification, for 1988 . 14 Table 3.6 Public Investment Programme, 1989-1991 . 15 Table 3.7 Comparison of PIP and Macromodel Development Expenditure, by Funding Source 1989-91 . 16 Table 3.8 Investirentand Savings, by Public and Private Sectorq . - . la Table 3.9 Capital Expenditure by Sector, 1987-89 . 19 IV. Implementation Issues Table 4.1 Public Investment Program, Program Actual Expenditure, 1987-88 . 23 V. Sectoral Reviews B. Agriculture Table 5.B.1 MOA Recurrent Budget, Disaggregated by Expenditure Items Approved and Provisional Estimates, 1987-89 . 32 Table 5.B.2A Forestry Department . 35 Table 5.B.2B Forestry Department . 35 Table 5.B.3 Proposal for Short-Term Rehabilitation Needs for the Departments of Extension, Animal Health and production, and Fisheries . 38 Table 5.B.4 Fertilizer: Retail Prices, Scale of Imports and Budgetary Requirements for Local Handling for 1989 Crop Year . 39 Table 5.B.5 Public Investment Programme 1989-1991 . 41 Page No. C. ManufacturinA Table 5.C.1 1987 End of Year PIP Financial Disbursement Report (Industry).54 Table 5.C.2 1988 PIP Mid Year Financial Disbursements.55 Table 5.C.3 Public Investment Program=e 1989-1991.56 D. Minina Table 5.D.1 Public Investment Programme 1989-91 .63 E. Water Supply Table 5.E.1 Project Costs, Funding Gap, Execution and Cost Inflation in the 1989 Multi-Year PIP .71 J. Education Table 5.J.1 Public Investment Programme 1989-91 .113 Table 5.J.2 Budget Hearing for 1989 Estimates Agreed Levels of Recurrent Expenditure .119 K. Health Table 5.K.1 Public Investment Program in Health .126 Tabl^ 5.K.2 MOH Recurrent Budget 1989 .130 INDEX OF ANNEXES Page No. IV. Implementation Issues Annex IV.1 Supercore Projects for 1989 . 27 V.E. Water Supply Annex 5.E.1 Public Investment Programme 1989-91 . 77 V.F. Transport Annex F.1 Public Investment Program 1989-91 . 85 V.G. Post and Telecommunications Corporation Annex 5.G.1 Public Investment Program 1989-91 . 93 V.H. Highway Annex 5.H.1 Public Investment Programme 1989-91 . 100 V.I. Works and Housing Annex i.I.' Public Investment Prograrme 1989-91 . 110 V.K. Health Annex 5.K.1 Public Investment Programme 1989-1991 . 132 Map of Ghana Summary of Main Recommendations 1. This Public ExpenditureReview was undertaken to assist the Government in its annual budget preparation. A number of recommendations made at earlier stages of the review have already been addressed by Governmentprior to the writing of this summary 1/. The focus in this summary is thus on issues that are still outstandingor which, because of their complexity,will need consistentand concertedattention over a number of years to be dealt with effectively. 2. This report builds upon the base of annual Bank reviews undertaken since 1985. The core work for the present report was undertaken during November 1988 in close collaborationwith the Ministry of Finance and Economic Planning (MFEP) and the sector ministries and agencies. A smaller, follow-upmission took place in February 1989 once the Bu,get had been finalized. The report contains recommendationson expenditure allocation issues, implementationconstraints, and detailed sectoral issues. Allocation Issues 3. Civil Service Compensation. The Government is pursuing two objectives in civil service compe-sationpolicy, to at least maintain real wages and to target
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