COUNTRY REPORT Ghana At a glance: 2001-02 OVERVIEW The new administration will spend the outlook period consolidating its position in power and laying the foundations for a return to robust economic growth. The key to promoting growth in the long term will be the need to reduce the fiscal deficit and diversify the economy. But whereas the latter is a long-term goal, the deficit can be addressed more quickly. At present the EIU forecasts that the deficit will fall, though this will be due to increased aid inflows rather than to an increase in revenue or greater control of expenditure. In the meantime, the economy will expand (GDP will grow by 3.5% in 2001), against a background of falling inflation and a more stable cedi. The former ruling party, the National Democratic Council, is attempting to reform itself in preparation for the 2004 elections. Key changes from last month Political outlook • The new administration has begun to reform the security services, and now faces a much reduced threat of a military coup. Economic policy outlook • The government’s economic policy over the outlook period will be led by the 2001 budget, which seeks to tighten fiscal policy through a number of measures, such as the government’s decision to freeze expenditure for the next six months. However, it will be revised as the government gets a clearer picture of the state of the economy. • No changes to the IMF poverty reduction and growth facility are envisaged. But, in sharp contradiction of its previous statements, the government has now applied for debt relief under the heavily indebted poor countries (HIPC) initiative. Economic forecast • The budget deficit is forecast at 5.9% of GDP in 2001 and 3.9% of GDP in 2002. • The current-account deficit is forecast at 4.3% of GDP in 2001 and 3.6% of GDP in 2002. April 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. 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ISSN 1350-7052 Symbols in tables “n/a” means not available; “–” means not applicable Printed and distributed by Redhouse Press Ltd, Unit 151, Dartford Trade Park, Dartford, Kent DA1 1QB, UK Ghana 1 Contents 3 Summary 4 Political structure 5 Economic structure 5 Annual indicators 6 Quarterly indicators 7 Outlook for 2001-02 7 Political outlook 8 Economic policy outlook 9 Economic forecast 12 The political scene 15 Economic policy 20 The domestic economy 20 Economic trends 22 Agriculture 24 Industry and mining 25 Infrastructure and other services 26 Financial services and other services 27 Foreign trade and payments List of tables 10 International assumptions summary 11 Forecast summary 16 Selected economic indicators 17 Medium-term expenditure framework 23 Agricultural growth 28 Exports 28 Current account List of figures 12 Gross domestic product 12 Real exchange rates 21 Inflation, 2000 22 Exchange rate 25 Ghana’s electricity deficit, 2001 © The Economist Intelligence Unit Limited 2001 EIU Country Report April 2001 Ghana 3 Summary April 2001 Outlook for 2001-02 The New Patriotic Party (NPP) government has begun to restructure the security services, and the possibility of the military intervening in politics following the election is now diminishing. The new administration has published its first budget, which seeks to lay the foundations for macroeconomic stability and robust economic growth. The statement also commits the government to seek entry into the World Bank-IMF’s heavily indebted poor countries (HIPC) debt relief initiative. Growth is forecast at 3.5% in 2001 and 3.7% in 2002, led by the agricultural sector and the resumption of donor inflows, which will provide the foreign exchange required by the import-reliant services and industrial sectors. Higher inflows will also reduce government reliance on domestic debt, allowing a loosening of monetary policy and relieving the crowding out of the private sector. The improved outlook and greater inflows should also help to slow the depreciation of the cedi over the outlook period. The political scene While the NPP consolidates its position in power, the National Democratic Council, Ghana’s governing party from 1982 to 2000, is attempting to reform itself in time for the elections in 2004. An 18-member National Reorganisation Committee is holding consultative meetings in all areas of the country to ascertain the reasons for the party’s defeat and to draw up a programme of reform for the party. Economy policy The new administration has published its first budget statement. The main macroeconomic targets for 2001 include real GDP growth of 4%, an year-end inflation rate of 25% and an overall budget deficit equivalent to 5.2% of GDP. In addition, the government has applied to enter the heavily indebted poor countries (HIPC) initiative. We expect it to qualify for debt relief by the beginning of 2002. The domestic economy Ghana has applied for debt relief under the heavily indebted poor countries (HIPC) initiative. The government has decided to pay to cocoa farmers a total of C80.38bn (US$1.1m) as compensation for the loss in revenue due to the fall in world cocoa prices during the past two years. Foreign trade and payments The Ministry of Finance estimates that the current-account deficit will be US$265m in 2001. Its projections show that the value of exports will increase marginally by US$41.2m or 2.1%, whereas imports will decline by US$52.8m or 1.8%. Editors: John Arthur (editor); David Cowan (consulting editor) Editorial closing date: April 17th 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule © The Economist Intelligence Unit Limited 2001 EIU Country Report April 2001 4 Ghana Political structure Official name Republic of Ghana Form of state Unitary republic Legal system A new constitution, based on the US model, was approved by referendum in April 1992 National legislature Parliament; 200 members elected by universal suffrage every four years National elections December 2000 (presidential and parliamentary); next elections due December 2004 Head of state President, elected by universal suffrage for a maximum of two four-year terms; John Agyekum Kufuor was sworn in on January 7th 2001 for his first four-year term. National government Cabinet, appointed by the president in January 2001. Main political parties New Patriotic Party (NPP), the ruling party; National Democratic Congress (NDC), the main opposition party; other parties include the People’s National Convention (PNC), the Convention People’s Party (CPP), United Ghana Movement (UGM) and National Reform Party President John Agyekum Kufuor Vice-president Alhaji Aliu Mahama Key ministers Attorney-general & justice Nana Akufo Addo Communications K. Owusu-Agyapong Defence Kwame Addo Kufuor Economic planning and regional integration Kwesi Nduom Education Christopher Ameyaw Akumfi Energy Albert Kan Dapaah Environment, science & technology Dominic Fobih Finance Yaw Osafo-Maafo Food & agriculture Courage Quarshigah Foreign affairs Hackman Owusu Agyeman Health Richard W. Anane Interior Alhaji Malik Yakubu Alhassan Lands, forestry & mines Kweku Afriyie Local government Kwadwo Baah-Wiredu Manpower development and employment Cecilia Bannerman Parliamentary affairs J H Mensah Roads & transport K. Adjei-Darko Tourism Hawa Yakubu Trade & industries Kofi Konadu Apraku Works & housing Kwamena Bartels Youth & sports Alhaji Aliu Mahama (acting) Central bank governor Kwabena Duffour EIU Country Report April 2001 © The Economist Intelligence Unit Limited 2001 Ghana 5 Economic structure