REPORT TO THE CONGRESS United States Programs In Ghana 8-179421 BY THE COMPTROLLER GENERAL OF THE UNITED STATES COMPTROLLER GENERAL OF THE UNITED S-I-AI-ES WASHINGTON. D.C. 20542 B-179421 To the President of the Senate and the 31 Speaker of the House of Representatives This is our report on U.S. programs in Ghana. We made our review pursuant,to the Budget and Account- ing Act, 1921 (31 U.S.C. 53), and the Accounting and Audit- ing Act of 1950 (31 U.S.C. 67). We are sending copies of this report to the Director, Office of Management and Budget; the Secretary of State; the Secretary of Commerce; and the Administrator, Agency for International Development. Comptroller General of the Unite-d States Contents Page DIGEST 1 CHAPTER 1 GHANAIANPOLITICAL AND ECONOMICDEVELOPMENTS 5 Political developments 5 Economic developments 6 2 GHANA'S EXTERNALDEBT BURDENAND THE U.S. ROLE. 10 Origins of the problem 11 Debt relief 12 Debt repudiation 15 Long-term lending 16 Conclusions 20 Matter for consideration by the Congress 21 3 U.S. ROLE IN MULTIDONORASSISTANCE 22 Leadership role of International Mone- tary Fund and World Bank 22 U.S. coordination with other donors 25 Conclusions 26 4 U.S. ASSISTANCE PROGRAMS 27 Studies loan 30 AID and Peace Corps coordination 31 Conclusions 33 Family planning program 34 Ejura Farms t Cooley loan 36 5 ASSISTANCEVERSUS TRADE PRIORITIES 41 U.S. trade relations and investments in Ghana 41 AID-funded textile loan 42 Third-country interests 47 Use of AID commodity loan to expand Ghana Textile production 47 Ghana Textile exports to the United States 48 Agency comments and GAO analysis 50 Recommendation 52 Public Law 480 program and Ghanaian ex- port expansion 52 CMPTER Page 6 SCOPE OF REVIEW 55 APPENDIX I Letter dated June 26, 1973, from the De- partment of State 57 II Letter dated May 24, 1973, from the Agency for International Development 62 III Letter dated July 26, 1973, from the De- partment of Commerce 69 IV Principal officials responsible for the ad- ministration of activities discussed in this report 74 ABBREVIATIONS AA/AFR Assistant Administrator, Bureau for Africa AID Agency for International Development AG Auditor General CCP Country Commercial Program EC European Economic Community GAO General Accounting Office GOG Government of Ghana IBRD International Bank for Reconstruction and Develop- ment IDA International Development Association LDCs less developed countries OPIC Overseas Private Investment Corporation USAID U.S. AID ?.!ission in Ghana USG U.S. Government i - CormWce objected to AID's providing --developing and expanding Ghanaian financial assistance to the textile markets for U.S. agricultural com- manufacturer. modities and ,& The Department of State, which has --encouraging economic development a central role in the determination in Ghana. (See pp. 32 to 54.) of U.S. interests in foreign coun- tries, said that determining rela- RECOMMENDATION tive priorities in conflict situa- tions, such as in the case GAO is GAO recommends that the Secretary of 19 reporting on, was difficult. 1 State, in cooperation with the De- ;i- & 'P partment of Commerce and AID, con- '"j i'7 GAO discussed with a Department of >sider developing more definitive State official whether criteria criteria to help resolve conflicting should be developed to specifi- U.S. interests such as those identi- cally identify issues involving U.S. fied in providing assistance to a interests for consideration in the Ghanaian textile firm. approval process. This official said that such criteria would be Criteria for determining eligibility difficult to develop and that he for a loan should specify such mat- doubted the practicality of develop- ters as the permissible percentage ing criteria for all aspects of the of the production that could be ex- developmental and U.S. interests is- ported to the United States; how sues involved. much displacement of U.S. trade should be permitted; and the bene- GAO believes that definitive cri- fits, if any, that could flow to teria can be developed covering is- third-country interests. sues involving U.S. interests, such as AGENCYACTIONS AND UNRESOLVEDISSUES --the percentage of production that The Department of State's comments could be exported to the United recognized the importance of con- States, sidering net-aid flows to countries, such as Ghana, that have significant --how much U.S. trade would be dis- debt problems. The Department re- placed, iterated its efforts to persuade creditor-donors to reschedule debts --the benefits, if any, that could on terms which would reduce the flow to third-country interests. drain on the resources available to Ghana from the United States and the GAO believes that this approach by other major sources of net foreign the concerned agencies would result assistance; i.e., the World Bank, in more consistent and uniform rec- West Germany, and Canada. ognition of U.S. interests. Both the Department of State and AID There are problems involving the expressed concern that GAO's report priorities of such Public Law 480 on this matter inferred that the program objectives as United States had shouldered a I&x Sheet 3 disproportionate burden in assist- MATTERFOR CONSIDERATIONBY TBE '= * ing Ghana. The amount of assist- CONGRESS ance given to any developing country apparently relates to U.S. interests in that country and to its Because of the seriousness of potential for economic development. Ghana's debt problem, the Congress Policy considerations involved in may wish to review with the Depart- determining the amount of such as- ment of State and AID the role that sistance for a particular country foreign, donors, including the United should be resolved by the agencies States, play in providing a net-aid with the Congress through the appro- flow to support Ghana's economic priation process. development. 4 CHAPTER 1 GHANAIAN POLITICAL AND ECONOMIC DEVELOPMENTS POLITICAL DEVELOPMENTS The Republic of Ghana, formerly the Gold Coast, became an independent nation within the British Commonwealth in 1957. Ghana was the first nation in tropical Africa to obtain in- dependence from European colonial rule. Almost all of Ghana's 9.3 million people are Sudanese Negroes, including a variety of ethnic groups speaking different West African languages. English is the official national language. From 1957 to 1966 Ghana was dominated by one man, Kwame Nkrumah. As the head of Ghana's Government and founder and leader of its only legal political party, Nkrumah sought to make Ghana the standard bearer for his concept of pan- Africanism and a model based on his ideals of African social- ism. In February 1966, while Nkrumah was in Asia on a visit, the Ghanaian army and police services deposed him in a brief, but successful, coup d'etat. Nkrumah took refuge for several years in Guinea; he died in Romania in April 1972. The leaders of the revolt quickly established the National Libera- tion Council and governed the country by decree. From 1966 to 1968 Ghana, with International Monetary Fund guidance and support, pursued a stabilization policy which reduced the disproportionately high levels and poor quality of Ghanaian investment, enforced economies on imports, and lessened inflationary pressures. The stabilization measures, however, brought no improvement in export performance and allowed a rapid growth in both private and public consump- tion. In 1968 a constituent assembly was established in Ghana, and in 1969 the assembly approved and promulgated a hew con- stitution. In elections held in August 1969, the leader of the Progress Party, K.A. Busia, became Prime Minister, bring- ing to an end more than 3 years of military rule. From late 1969 through 1971, the Busia government tried to move the Ghanaian economy from stabilization to development while promoting necessary structural changes. Although the policies of the Government were considered generally appro- priate, the tightness of the balance-of-payments situation had left little flexibility for their adoption and implemen- tation, Although the gross domestic product grew about 4 percent annually, as planned, export receipts declined, imports grew rapidly, and foreign exchange reserves remained very low. Short- term debt and Government expenditures also grew rapidly, and the burden of debt service on medium- and long- term debts rose. In January 1972, while Prime Minister Busia was in England, army officers seized power in Ghana, citing economic problems, Government mismanagement, and Government-imposed austerity measures as the reasons for their action. The Na- tional Redemption Council, composed almost exclusively of military officers, was established. The Ghanaian Parliament and all political parties were dissolved, the Constitution was suspended, and the Council ruled by decree. ECONOMIC DEVELOPMENTS Most of the economic wealth and population of Ghana, which occupies an area about the size of Oregon on the coast of West Africa, are concentrated in the south where the staple food crops are produced and where the major urban centers are located. This southern area also has a rain forest which produces valuable timber and minerals and which is the source of Ghana’s main cash crop, cocoa. The northern two-thirds of the country is hot, dry, and economically poor; its chief occupations are subsistence farming and cattle raising. Ghana has been a traditional importer of foodstuffs, and between 1960 and 1971 the per capita agricultural produc- tion index actually declined. The principal current problems are: (1) achieving a better balance in external trade and payments, (2) obtaining substantial progress in import substitution and export pro- motion policies to insure a better longrun trade balance, (3) continuing emphasis on agricultural development strategy, particularly cocoa rehabilitation, and (4) for industrial development, reducing the high level of dependency on im- ported raw materials and revising the overemphasis on domestic consumption goods.