GHANA ECONOMIC HIGHLIGHTS, OCTOBER-NOVEMBER 2005

UNCLAS SECTION 01 OF 02 ACCRA 002401

SIPDIS

E.O. 12958: N/A
TAGS: EFIN EAGR PREL SENV EMIN GH
SUBJECT: GHANA ECONOMIC HIGHLIGHTS, OCTOBER-NOVEMBER 2005



1. This report covers noteworthy economic events and
activities in Ghana for October-November 2005. The issues
covered are:

-- Government Submits Annual Budget to Parliament
-- World Bank Review of Consultative Group Meeting
-- World Bank Seminar on Fighting Corruption
-- Treasury Advisors Host HR Management Workshop
-- Fitch Rating Agency Reviews Ghana Rating
-- Ghana Increases Cocoa Grinding Capacity
-- Diamond Development Initiative Meeting
-- Ghana Makes Strides in Air Quality Management

Government Submits Annual Budget to Parliament
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2. President Kufuor submitted the draft annual budget to
Parliament on November 10, fulfilling the GoG's ambitious
promise to complete the 2006 budget prior to year-end 2005.
Parliament has agreed to debate the budget during December,
so that it will be ready for implementation at the beginning
of the financial year, a first for Ghana. In his letter to
Parliament, Kufuor claimed the budget would usher Ghana "onto
a new economic plateau which facilitates the process of
attaining the status of a middle income country in the next
decade within the framework of good governance, private
sector development, rule of law, respect for human and
property rights and prudent fiscal and economic management."


3. The local press has questioned some of the data presented
in the budget, especially for 2005 where the government
predicts it will meet every target -- including 5.8 real GDP
growth, despite high oil prices and lower cocoa revenues.
Nevertheless, the IMF has certified that the budget meets the
commitments of the Poverty Reduction and Growth Facility
program, and it also increases the accountability of HIPC
funds (a concern in the past). The GoG commits to using 20%
of HIPC funds to pay down domestic debt and 80% for poverty
reduction.

World Bank Review of Consultative Group Meeting
-------------- --

4. World Bank Country Director Mats Karlsson hosted a Donors'
Heads of Mission meeting November 18 to review the results of
the November 7 Consultative Group (CG) meeting between Donors
and the GoG. The CG resulted in three useful documents that
together provide the development/assistance roadmap: 1) the
Results Matrix, showing the Growth and Poverty Reduction
Strategy's (GPRS) goals, expected outcomes, government
actions, and donor contributions; 2) the Aid Harmonization
and Effectiveness Matrix, which coordinates donor and GoG
spending; and 3) the Development Partner Support Overview,
showing projections of donor assistance levels. The next
GoG/Donors meeting is scheduled for June 2006. Donors agreed
to meet about every two months to coordinate, with the first
meeting set for late February 2006. The GoG hopes to
finalize the GPRS by March 2006, and DPs will update the
Support Matrix at that time. Donors agreed to consider
changing the name of the June 2006 meeting from "CG" to
"Ghana Partnership Strategy."

World Bank Seminar on Fighting Corruption
--------------

5. The World Bank organized a November 15 seminar on
"Achieving Middle Income Status: The Need to Fight
Corruption by Implementing the Procurement, Financial
Administration and Internal Audit Acts." Local radio station
Joy FM broadcast the first three hours of the seminar.
Presenters expressed concern about evidence of both
increasing corruption in Ghana and increasing tolerance for
corruption among Ghanaians. The consensus was that Ghana
must address this issue now, to prevent it from becoming the
major obstacle to achieving middle-income status by 2015.
Joe Abbey, the Executive Director of the Center for Economic
Policy Analysis, and one of the most respected Ghanaian
economists, emphasized that the GoG should act because
corruption raises risks to doing business, therefore
deterring investment or making it less productive.


6. Participants agreed that the GoG had not yet fully
implemented nor enforced the Procurement, Financial
Administration and Internal Audit Acts, which combined should
reduce government corruption, given that in 2004 public
procurement totaled $750 million, or over 70% of the
operational budget. The seminar occurred around the same
time that Transparency International published its 2005
Corruption Perceptions report, with Ghana falling slightly in
the rankings.

Treasury Advisors Host HR Management Workshop
--------------

7. U.S. Treasury advisors working on tax reform in Ghana
cosponsored a November 16-18 workshop for Ghana revenue
agencies with the German Technical Cooperation (GTZ) Agency
and the Ghana Revenue Agencies Governing Board (RAGB). The
workshop focused on three human resource topics: job
descriptions, performance appraisals, and career management.
The revenue agencies ) IRS, VAT, Customs, and Large Taxpayer
Unit -- plan to merge into one organization, and a unified HR
system is critical. Treasury and GTZ experts presented world
best practices to the 35 participants. Sixty five government
officials and private sector representatives attending the
opening session, which received widespread and positive media
coverage.
Fitch Rating Agency Reviews Ghana Rating
--------------

8. EconChief met November 17 with Fitch Rating Agency
officials to review recent economic events. Fitch raised
Ghana's Sovereign Credit Rating to "B plus" from "B with
Positive Outlook" in March 2005, and is now conducting a
regularly scheduled review. The Fitch Reps heard a uniformly
positive message about Ghana's economic and political
policies from the IMF, World Bank, and Ghanaian private
sector. However, they said Ghana would need to accelerate
the pace of structural reforms for Fitch to raise the rating
beyond "B plus," and commented that Standard and Poor's would
likely agree.

Ghana Increases Cocoa Grinding Capacity
--------------

9. On November 7, the Ghana Cocoa Processing Company (CPC)
inaugurated newly installed machinery that doubles the CPC's
capacity to grind raw cocoa beans. The expansion is part of
the GoG's policy of adding value to cocoa exports, instead of
only exporting raw cocoa beans. With the expansion, Ghana's
grinding capacity is approximately 45% of total production,
which totaled about 600,000 million tons in the 2004/2005
season. Local private banks financed the 22 million Euros
expansion, with most of the equipment imported from the U.S.
and Switzerland. CPC plans is also rehabilitating a factory
to increase processing of cocoa liquor, butter, cake, and
powder. (Note: The GoG partially privatized CPC in
September 2002 by floating 40% of its shares on the Ghana
Stock Exchange. CPC's board is, however, still dominated by
GoG appointees. The CPC exports over 90% of its products.
End Note)

Diamond Development Initiative Meeting
--------------

10. The Diamond Development Initiative (DDI) took place
October 28-30 in Accra, with the goal of improving the plight
of Africa's diamond miners and to direct more of the diamond
trade into formal channels subject to regulation and
taxation. DDI aims to build on the regulatory structure of
the Kimberly Process (which focuses on exports and
international trade). The conference focused on five
themes: money, banking and parallel economies; policy and
regulatory frameworks; social issues; technical issues; and
security issues. (Note: readout provided by AmEmb Monrovia
EconOff, who attended the conference. End Note)

Ghana Makes Strides in Air Quality Management
--------------

11. U.S. EPA organized an Outreach Workshop in Ghana November
8-9 as a wrap-up to the initial phase of the EPA/USAID-funded
Air Quality Monitoring Capacity-Building Project. The
purpose of the workshop was to provide information to
stakeholders (government, public, media, donors) about the
accomplishments in establishing an air monitoring system in
Ghana, and also present on air quality management and hold
technical consultations with government on air quality
monitoring. The project has three goals: promote local
capacity to conduct air quality monitoring, analyze air
quality data on key pollutants, and provide policymakers with
information on air quality and its impact on public health.
Preliminary results from the project, announced during the
workshop, reveal that the phase-out of leaded gas starting
2004 has resulted in a marked decrease of the toxic material
in Accra's air.


12. The project is unique in that it is the first to build
local capacity to sustain a long-term monitoring program.
Next steps include continued monitoring and health analyses,
refining health-based air quality standards, public
education, and advice on pollution mitigation options and
behavioral change strategies. U.S. EPA and the Research
Triangle Institute are providing technical assistance under
the project, with USAID funding. UNEP is funding in-country
costs, and Ghana's EPA coordinates the implementation
committee consisting of government, NGOs, and academia.
BRIDGEWATER