Ghana - Agricultural Sector Adjustment

 Agricultural Sector Adjustment Report No: ; Type: Report/Evaluation Memorandum ; Country: Ghana; Region: Africa; Sector: Agriculture Adjustment; Major Sector: Agriculture; ProjectID: P000914 The Ghana Agricultural Sector Adjustment Credit, supported by Credit 2345-GH for SDR 57 million (US$80 million equivalent), was approved in FY92. Cofinancing equivalent to US$33.1 million was provided by the Governments of the Netherlands and Germany. The Credit was closed on December 31, 1995, following a delay of one year. The Implementation Completion Report (ICR) was prepared by the FAO/World Bank Cooperative Program and finalized by the Africa Regional Office. Comment on the ICR was invited: no reply was received from the borrowers and the cofinanciers indicated that they had no comments. The Credit was intended to support the liberalization of agricultural pricing, marketing and input supply, and the strengthening of agricultural sector coordination and management. The Credit helped finance a program of actions, comprising principally: (i) rationalization of state intervention in the cocoa and basic food subsectors; (ii) divestiture of the state-owned cotton company; (iii) elimination of producer price regulation for all crops except cocoa; (iv) phasing out of state intervention in the supply of inputs and farmer services; (v) removal of restrictions on the export of crops; (vi) tightening of environmental standards for agrochemicals and (vii) measures to strengthen program and budget formulation for the agriculture sector. This adjustment operation was generally well planned and implemented, benefiting from the high quality of collaboration with the Government of Ghana. Bank staff formed a strong partnership with a core group of Ghanaian officials who had worked on the Economic Reform Program since its inception in 1983. The continuity and competence of this core group has played a key role in sustaining the Program, of which this operation forms an integral part. The liberalization objective was largely achieved, although less progress was made in the cocoa subsector (the primary earner) compared to other subsectors. The state-owned cotton company and farmer service companies were divested, government intervention in the distribution of basic foods was substantially cut back, export restrictions were removed from all crops, and (with the exception of cocoa) government withdrew from price determination and price support operations. The state monopsony for cocoa purchases was eliminated and about 25 percent of the annual crop is now handled by private buyers; this falls short of the 40 percent target set at appraisal, mainly because inflation eroded the margin between the government-determined producer price and the export price, deterring the entry of new buyers. Also, the private marketing of inputs has been slower to develop than was envisaged at appraisal. The government’s budget process was substantially overhauled, with significant reductions in the level of subsidy applied to state-owned enterprises and increased funding for development activities. Appropriate steps were taken to strengthen the legal and institutional framework governing the use of agrochemicals. Implementation proceeded according to schedule until the third tranche release which was delayed by temporary setbacks in the divestiture program. The Operations Evaluation Department (OED) agrees with the ICR in rating the outcome of this adjustment operation as satisfactory, sustainability as likely and institutional development as substantial. Although the operation achieved all the objectives listed in the President’s Report the liberalization of domestic cocoa marketing and farm input marketing fall somewhat short of expectations. Both the ICR and OED rate the Bank’s performance as satisfactory. The main lesson of this adjustment operation is that intensive collaboration between the borrower and the Bank in formulating a medium-term sectoral development strategy is likely to greatly facilitate the subsequent implementation of an adjustment program.  The satisfactoriness of this operation was much enhanced by the soundness of the economic and sector work on which the Economic Reform Program was initially based. However, the shortfall in the operation’s outcome probably reflects the complacency that had set in a decade after the Program was launched: this led to a loss of momentum in addressing the unfinished agenda of adjustment; and it resulted in a failure to carry out the supplementary analytical work needed to identify ways and means to increase private investment in agriculture. The ICR is satisfactory, offering a comprehensive and systematic discussion of the operation’s objectives and the implementation record. The ICR would have been stronger if it had included a fuller discussion of the obstacles to development of a more competitive marketing system. No audit is planned.