Identifier
Created
Classification
Origin
06ACCRA1236
2006-05-31 13:19:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Accra
Cable title:  

GHANA ECONOMIC HIGHLIGHTS MAY 2006

Tags:  ECON EINV EAID ETRD EAIR EMIN GH 
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VZCZCXRO3067
RR RUEHMA RUEHPA
DE RUEHAR #1236/01 1511319
ZNR UUUUU ZZH
R 311319Z MAY 06
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 1424
INFO RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/USDOC WASHDC 0587
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP
UNCLAS SECTION 01 OF 02 ACCRA 001236 

SIPDIS

SENSITIVE
SIPDIS

COMMERCE FOR MARIA RIVERO
TREASURY FOR LUKAS KOEHLER
DEPARTMENT FOR BIRGGITA MATTINGLEY

E.O. 12958: N/A
TAGS: ECON EINV EAID ETRD EAIR EMIN GH
SUBJECT: GHANA ECONOMIC HIGHLIGHTS MAY 2006


ACCRA 00001236 001.2 OF 002

UNCLAS SECTION 01 OF 02 ACCRA 001236

SIPDIS

SENSITIVE
SIPDIS

COMMERCE FOR MARIA RIVERO
TREASURY FOR LUKAS KOEHLER
DEPARTMENT FOR BIRGGITA MATTINGLEY

E.O. 12958: N/A
TAGS: ECON EINV EAID ETRD EAIR EMIN GH
SUBJECT: GHANA ECONOMIC HIGHLIGHTS MAY 2006


ACCRA 00001236 001.2 OF 002


1.(U) This report covers noteworthy economic events and
activities in Ghana for April and May 2006. The issues
covered are:

-- MCA Negotiations on Track for late July Signing
-- ALCOA Enters Key Phase of Negotiations
-- Fuel Price Increase to Reverse Downward Trend of Inflation
-- Ghana International Airlines
-- North-American Air offers direct flights to NY from Ghana
-- Visit of OPIC Executive Vice President
-- Visit of Mayor Anthony Williams

MCA Negotiations on Track for late July Signing
--------------
2.(SBU) During a May 19 outbrief, Millennium Challenge
Corporation (MCC) officials informed Ambassador Bridgewater
that the MCC and Ghana MCA negotiating teams made significant
progress over the previous two weeks ) both in Washington
and in Accra -- and the two sides were on track for a late
July signing in Washington, D.C., subject to MCC Board
approval. The two sides resolved or are close to resolving
the outstanding issues related to the agriculture,
infrastructure, and financial services components, and the
Ghana government created (with Parliamentary approval) the
Millennium Development Authority (MiDA) to implement the
Ghana-MCA agreement.

3.(SBU) The MCC officials briefed the Ambassador on the Ghana
MCA Program Logic, with Program Goal of &Reduction of
poverty through economic growth led by agricultural
transformation.8 The Program Objectives are: 1) &Enhance
the competitiveness of high value cash and food crops in
local and international markets8; and 2) &Increase
production and productivity of high value cash and food crops
in three selected areas of Ghana.8 The targeted Program
Outcomes are: 1) Commercialization of Agriculture (including
increased farmer training, land tenure facilitation,
increased irrigation, and improved post-harvest handling and
access to credit); 2) Improved Transport Infrastructure
(including improved access to air and sea ports); and 3)

Delivery of Basic Community Services (including energy, water
and sanitation, and educational services).

ALCOA Enters Key Phase of Negotiations
--------------
4.(SBU) Charge and EconOff met with ALCOA executives May 3
and May 9 to discuss the current state of negotiations with
the GoG. ALCOA has been negotiating a plan with the GoG for
the creation of an integrated (mine-refine-smelt) aluminum
industry in Ghana for the past twelve months. Total
investment is expected to be in excess of $2 billion. ALCOA
Commercial Director for Ghana Russell Grant told EconOff May
23 that both parties made good progress over the last few
weeks, with both sides pledging their best effort to come up
with a deal that will give the project an internal rate of
return sufficient for ALCOA board approval.

Fuel Price Increase to Reverse Downward Trend of Inflation
-------------- --------------
5.(U) Year on year inflation dipped 0.4% in April to 9.5%,
continuing the downward trend that began in October 2005.
This was the first time Ghana had seen single digit inflation
since May 1999. Bank of Ghana officials, however, expect
May's numbers to go back above 10% because of the 10% fuel
price increase announced May 3. The National Petroleum
Authority has increased fuel prices a total of 20% since
January 1 in a series of small adjustments, thus easing
inflationary pressure on overall prices.

6.(U) The general public appears to have accepted fuel price
increases to date despite some demonstrations from a group
called the Committee for Joint Action (CJA). The CJA, which
is made up of representatives of several of Ghana's
opposition parties, has called for the reduction of fuel
taxes, which make up 30% of the total price. The NPA's May
price increase introduced a new mode of pricing, which allows
oil marketing companies to set their own prices within a
margin of 650 cedis ($0.60),below the NPA's maximum price.

7.(SBU) The Bank of Ghana is forecasting inflation just
above 10% by year's end, saying it expects monetary
aggregates to provide an anchor for low inflationary
environment, but that rising crude oil price may jeopardize
the objective of attaining single-digit inflation in 2006.
Post has also heard that the public utilities regulatory

ACCRA 00001236 002.2 OF 002


commission is planning to increase electricity prices by
15-20% and water prices by 10-15%, starting August 01. This
will also complicate the GOG's objectives of achieving single
digit inflation.

Ghana International Airlines(GIA) Dispute
--------------
8.(U) GIA-USA, which represents the private investors
controlling 30% of Ghana International Airlines, filed suit
in the Ghanaian court April 17 against the GoG, claiming that
the GoG controlled board of directors had acted outside its
authority when it dismissed CEO Bryan Presbury on April 7.
The case was suspended May 14 after both parties agreed to
enter mediation. The GoG, which owns 70% of the airline, is
actively seeking a new private sector partner.

North American Airlines (NAA) Adds New Flights to Accra
-------------- --------------
9.(U) On May 05,2006, the Ghana Civil Aviation Authority
(GCAA) granted permission for North American Airlines to add
two additional weekly flights between Accra and the U.S. May

5. With these new flights North American will have two
weekly non-stop flights from Accra to New York and one weekly
flight to Baltimore via Banjul. NAA expects to begin service
on the new routes June 5.

Visit of OPIC Executive Vice President
--------------
10.(U) OPIC Executive VP John Simon visited Ghana May 9 - 12
for a series of meetings with GoG officials and the private
sector, as well as visits to some of OPIC's projects in
Ghana. Mr. Simon, accompanied by OPIC VP for Investment
Policy Dr. Christine Emery and EconOff, met with the Minister
of Trade, the Minister of Works and Housing, the Deputy
Finance Minister, the CEO of the Volta River Authority,
USAID, AmCham members, and CAL Bank CEO Frank Adu. OPIC is
currently negotiating a $30-million investment project to
provide mortgages for private homes in Ghana. Mr. Simon
stated his intention to work closely with USAID, Millennium
Challenge Corporation, and other USG development agencies to
increase the impact of USG assistance programs.

Visit of Mayor Anthony Williams
--------------
11.(U) Washington DC Mayor Anthony Williams visited Accra May
7 - 11 with a 30-person delegation including, among other
notables, the Mayor's wife, the wife of former DC Mayor
Marion Barry, former AF Assistant Secretary Constance Berry
Newman, and AGOA legislation author Charles Williams. The
Embassy helped kick off the visit with a country team
briefing that received high praise from the Mayor and several
other delegates. Accra Mayor Blankson and Mayor Williams
also initiated an Accra-Washington D.C. sister city program.
Local press gave the visit extensive and positive coverage.
BRIDGEWATER