Ghana - Policies and program for adjustment

A WORLD BANK COUNTRY STUDY PU B-4702 GHANA Policies and Program for Adjustment o 7 7 - 7- 1 - -' H91-001   A WORLD BANK COUNTRY STUDY GHANA Policies and Program for Adjustment The World Bank Washington, D.C., U.S.A.  Copyright c 1984 The International Bank for Reconstruction and Development/The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. First printing April 1984 All rights reserved Manufactured in the United States of America World Bank Country Studies are reports originally prepared for internal use as part of the continuing analysis by the Bank of the economic and related conditions of its developing member countries and of its dialogues with the governments. Some of the reports are published informally with the least possible delay for the use of governments and the academic, business and financial, and development commu- nities. Thus, the typescript has not been prepared in accordance with the proce- dures appropriate to formal printed texts, and the World Bank accepts no responsi- bility for errors. The publication is supplied at a token charge to defray part of the cost of manufacture and distribution. Any maps used have been prepared solely for the convenience of the readers; the denominations used and the boundaries shown do not imply, on the part of the World Bank and its affiliates, any judgment on the legal status of any territory or any endorsement or acceptance of such boundaries. The full range of World Bank publications is described in the Catalog of World Bank Publications; the continuing research program of the Bank is outlined in World Bank Research Program: Abstracts of Current Studies. Both booklets are updated annu- ally; the most recent edition of each is available without charge from World Bank Publications in either Washington or Paris (see the back cover for addresses). Library of Congress Cataloging in Publication Data Main entry under title: Ghana, policies and program for adjustment. (A World Bank country study) 1. Ghana--Economic conditions--1957-1979. 2. Ghana-- Economic conditions--1979- . 3. Ghana--Economic policy. I. World Bank. II. Series. HC1060.G47 1984 338.9667 84-5275 ISBN 0-8213-0358-9  - iii - FOREWORD (i) This report, Ghana - Policies and Program for Adjustment reviews macroeconomic trends since 1970, identifies policies and program for adjustment and assesses prospects for the economy in the medium term. (ii) The Statistical Appendix of this report attempts to present, for the first time, a time series of key economic data of Ghana since 1970. As the appendix mainly draws on the officially published data sources it is quite possible that some of the text tables may differ from the Statistical Appendix tables. The text tables are drawn from diverse sources and also include staff estimates wherever the official data is either inconsistent or incomplete. (iii) This report is based on the findings of a mission consisting of Messrs. Ishrat Husain (Leader), W. Schelzig (General Economist), W.S. Kee (Fiscal Economist), T. Akiyama (Cocoa Sector Economist), B. Walstedt (Consultant) and Ms. Maria-Christina Germany who visited Ghana from November 14 to December 4, 1982. Mr. Husain visited Ghana in June 1983 to update the report following the announcement of the Government's economic recovery program.  - iv - AVANT-PROPOS i) Ce rapport examine les tendances macroeconomiques observees au Ghana depuis 1970, identifie les mesures a prendre par le Gouvernement et un programme d'ajustement et evalue les perspectives a moyen terme de 1'e_conomie ghaneenne. ii) L'Appendice statistique donne la toute premiere serie chronologique des principales donnees economiques sur le Ghana, recueillies depuis 1970. Comme il s'agit essentiellement de donnees officielles, il se peut que certains des tableaux contenus dans le rapport, qui pro- viennent de sources diverses, ne concordent pas avec ceux qui figurent dans I'Appendice statistique. Des estimations de la Banque ont ete utilisees la ou les donnees officielles sont contradictoires ou incompletes. Une version plus detaillee de cet appendice peut etre obtenue sur demande. iii) Le rapport se fonde sur les conclusions d'une mission composee de MM. Ishrat Husain (Chef de mission), W. Schelzig (Economiste general), W. S. Kee (Economiste fiscal), T. Akiyama (Economiste, specialiste du secteur du cacao), B. Walstedt (Consultant) et de Mme Maria-Christina Germany. Cette mission a s6journe au Ghana du 14 novembre au 4 decembre 1982. M. Husain est retourne au Ghana en juin 1983 pour mettre a jour le rapport de la mission, le Gouvernement ayant annonce un programme de redressement economique.  PROLOGO i) En este informe, titulado Ghana - Politicas y programa de ajuste, se examinan las tendencias macroecon6micas de ese pais a partir de 1970, se identifican las politicas y el programa de ajuste y se evaluan las perspectivas de su economia a plazo mediano. ii) En el Volumen II de este informe, Apendice Estadistico, se intenta presentar, por primera vez, una serie cronol6gica de los datos econ6micos fundamentales de Ghana desde 1970. Dado que en el apendice se recurre principalmente a las fuentes de datos publicados oficialmente, es muy posible que algunos de sus cua- dros difieran de los del texto del Volumen I. Estos ultimos se han obtenido de diversas fuentes e incluyen ademas estimaciones del personal en los casos en que los datos oficiales eran incoherentes o incompletos. iii) Este informe se basa en las conclusiones de una misi6n compuesta por los Sres. Ishrat Husain (Jefe), W. Schelzig (economista general), W.S. Kee (economista fiscal), T. Akiyama (economista del sector del cacao), y B. Walstedt (consultor) y la Sra. Maria Christina Germany que visit6 Ghana del 14 de noviembre al 4 de diciembre de 1982. El Sr. Husain visit6 Ghana de nuevo en junio de 1983 para actualizar el informe despues que se anunciara el programa de recuperacion economica del Gobiernoa.  - vi - ABBREVIATIONS AGF - Ashanti Goldfields BOG - Bank of Ghana CBS - Central Bureau of Statistics ECG - Electricity Corporation of Ghana GCMB - Ghana Cocoa Marketing Board GIHOC - Ghana Industrial Holding Company GOG - Government of Ghana GOIL - Ghana Oil Limited GTMB - Ghana Timber Marketing Board GWSC - Ghana Water and Sewer Corporation MFEP - Ministry of Finance and Economic Planning MISSA - Middle Income Sub-Saharan Africa NFPB - National Family Planning Board PDC - Peoples' Defence Committee PIB - Prices and Incomes Board PNDC - Provisional National Defence Council PPAG - Planned Parenthood Association of Ghana SGMC - State Gold Mining Company TYIP - Three Year Investment Program VALCO - Volta Aluminium Company VRA - Volta River Authority WDC - Workers' Defence Committee CURRENCY EQUIVALENTS February 1973 - June 18, 1978 US$1 = 01.15 01 = US$0.869 August 26, 1978 US$1 = 02.75 01 = US$0.363 October 10, 1983 US$1 = 030 01 = US$0.033 FISCAL YEAR Prior to 1983 - July 1 to June 30 After 1983 - January 1 to December 31  - vii - GHANA: POLICIES AND PROGRAM FOR ADJUSTMENT Table of Contents Page No. ECONOMIC INDICATORS ix SOCIAL INDICATORS xi SUMMARY AND CONCLUSIONS xv PART I THE ECONOMY SINCE 1970 Chapter 1. Growth and Efficiency ........................ 1 Chapter 2. External Sector ............................. 6 Chapter 3. Domestic Resources ............. .............. 19 Chapter 4. Human Resources and Social Development ....... 26 PART II POLICIES AND PROGRAM FOR ADJUSTMENT Chapter 5. The Problem and the Nature of Response ....... 34 Chapter 6. The Government's Response to Economic Crisis; Short-term Stabilization Phase ....... 38 Chapter 7. Economic Rehabilitation Phase - Macro Aspects ................................ 46 Chapter 8. Economic Rehabilitation Phase - Sectoral Aspects ............................. 58 Chapter 9. Liberalization and Growth Phase ............. . 68 STATISTICAL APPENDIX .......... ...................................... 74 MAP  - viii - LIST OF TEXT TABLES Table Page No. 1. Indicators of Growth, Efficiency and Distortions ............... . 3 2. Summary of Balance of Payments 1970-82 .. 7 3. Foreign Trade Indicators 1970-81 ..8 4. Annual Average Growth of Exports 1960-70 and 1970-80 . 10 5. Appreciation of Real Effective Exchange Rate 1973-81. 11 6. Cocoa Sector Domestic Terms of Trade 1970-81 . .12 7. Selected External Debt Indicators 1970-82. 18 8. Investment and Saving 1970-82. 19 9. Public Finance Indicators 1970/71-82. 21 10. Estimated Tax Buoyancies and Elasticities ..... .................. 23 11. Basic Needs Indicators 1960 and 1980 ..... ....................... 28 12. Exchange Rate System 1983 ................... .................... 39 13. Agriculture Producer Prices 1983 ............. .. ................. 40 14. Summary of Government Budget 1983 ............................... 42 15. Three Year Investment Program 1984-86 ............. .............. 50 16. Macroeconomic Projections 1983-90 ...... ......................... 51 17. External Capital Requirements 1983-90 ..... ...................... 55 18. Indicators of Aid and Total Resource Flow 1979 ................. . 57 LIST OF CHARTS 1. Relative Cost of Imports ......... .................... 16  - ix - ECONOMIC INDICATORS GNP PMR CAPITA IN 1982: US$360 Y GRDSS NATIONAL PR(I)UCr IN 1982 ANNUAL RATE OF GROWTH (o, Cnstant Prices) Gedis Mil. % 1977-82 GNP at Market Prices 85,700 100.00 -0.86 Gross Domestic Investment 1,148 1.30 -16.40 Gross National Savirg 1,259 1.50 -16.45 Current Account Balance -46 -0.05 - Export of Goods, NFS 2,009 2.34 -9.44 Inport of Goods, NFS 1,959 2.29 -20.22 OUTPUr AND LAB)R FORCE Output in 1982 Labor Force, 1982 Cedis Mil. % 141. % Agriculture 44,031 51.28 2.509 57.2 Iniustry 6,440 7.50 0.671 15.3 Services 35,395 41.22 1.206 27.5 Total 85,866 100.00 4.386 100.0 GOVElR FINANE Central Government Cedis Mil. % of GP in 1981 Cedis Mil. % of GDP in 1982 Total Reverue and Grants 4,855.3 6.33 5,253.2 6.12 Total Expenditure and Net Lending 9,702.9 12.66 9,220.1 10.74 Overall Deficit (-) -4,847.6 -6.32 -3,966.9 -4.62 tV , CREDIT AND PRICES 1976 1977 1978 1979 1980 1981 1982 Money and Quasi-mwney 1,903 3,044 5,131 5,942 7,949 12,029 15,072 Bark Credit to Public Sector 1,966 3,203 5,636 6,537 8,481 14,043 1,714 Bank Credit to Private Sector 385 560 739 796 940 1,342 1,558 (Percentages of Index Numbers) Mbney and Quasi-mnmey as % of GDP 29.2 27.3 24.4 21.1 19.4 15.7 17.6 General Price Index (1977=100) 46.2 100.0 173.1 267.3 401.2 868.6 1062.4 1/ Staff estimate September 1983  BALANCE OF PAYMETS NERHANDISE EXPORTS (AVERE 1978-1982) 1980 1981 19824! US$ Mil. % (US$ million) Cocoa Beans & Products 654.5 72.9 Trade Balance 184.3 22.3 98.2 Timber Logs & Products 38.2 4.3 Exports 1208.9 766.3 627.2 Gold 135.1 15.0 Tnports -1024.6 -788.7 -529.0 Diands 10.3 1.1 Mananese 9.6 1.1 Invisibles (Net) -168.0 -140.4 -114.8 All Other Goods 50.1 5.6 Services -247.7 -223.3 -197.2 Transfers 79.7 82.9 82.4 Total 897.8 100.0 Current Balance 16.3 -162.7 -16.6 E :TRA DEBT, DEC2R 1982 Capital Accounts Us$ MI-i. Official Capital (Net) 187.9 57.3 149.7 Private Capital (Net) 19.8 26.3 31.7 Total Outstanding and Arrears Payments 78.9 141.4 35.2 Disbl:rsed M&LT 1163.6 Total Outstandirg and Overall Balance 81.5 -262.5 56.4 Disbursed incl. Short-term 1648.6 Gross International Reserves (End of Period) 197.6 189.8 223.9 DEN SEIICE RATIO FOR 1981 % Total Outstandirg and February 1973 - June 18, 1978 Disbursed MILT 10.7 llS$ =