Ghana - Public Financial Management Technical Assistance Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-6977-GH MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT OF SDR 14.4 MILLION TO THE REPUBLIC OF GHANA FOR A PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT OCTOBER 10, 1996 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS US$1 = 1680 Cedis (September, 1996) FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ASYCUDA Automated System for Customs Database BPEMS Budget and Public Expenditure Management System CAGD Controller and Accountant-General's Department CAS Country Assistance Strategy CEPS Customs, Excise, and Preventive Services CIDA Canadian International Development Agency CPAR Country Procurement Assessment Report CS-DRMS Commonwealth Secretariat's Debt Recording and Management System EMS Economic Management Support Project ERP Economic Recovery Program ESAF Enhanced Structural Adjustment Facility EU European Union FIMTAP Public Financial Management Technical Assistance Project GDP Gross Domestic Product GoG Government of Ghana ICB International Competitive Bidding IMF International Monetary Fund IPPD Integrated Personnel and Payroll Database IRS Internal Revenue Service LIB Limited International Bidding MDA Ministries, Departments, and Agencies NCB National Competitive Bidding ODA Overseas Development Administration PSAC Private Sector Adjustment Credit PUFMARP Public Financial Management Reform Program SAIS Structural Adjustment Institutional Support Project SPER Support for Public Expenditure Reform VAT Value-Added Tax FOR OFFICIAL USE ONLY REPUBLIC OF GHANA PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT Credit And Project Summary Borrower : Republic of Ghana Beneficiary : The Government of Ghana Implementing Agency Ministry of Finance, line ministries, and participating central government agencies Poverty Category: Not Applicable Amount SDR 14.4 million (US$20.9 million equivalent) Terms Standard IDA terms with a maturity of 40 years Financing Plan Government USS 3.1 million UK ODA US$ 4.1 million EU US$ 2.7 million IDA US$ 20.9 million TOTAL US$ 30.8 million Economic Rate of Return Not Applicable Staff Appraisal Report None Technical Annex T-6977-GH Map No. : IBRD 23606 Project I.D. : GH-PA-45588 Vice-President Jean-Louis Sarbib Country Director Serge Michailof Technical Manager Charles P. Humphreys Task Team Leader Asad Alam This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO THE REPUBLIC OF GHANA FOR A PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT 1 The following memorandum and recommendation on a proposed development credit to the Republic of Ghana for the equivalent of US$20.9 million is submitted for your approval. The proposed credit would be on standard IDA terms with 40 years maturity and would help enhance the efficiency, transparency, and accountability of the financial management functions of Government. The Project is expected to be cofinanced by the Overseas Development Administration (ODA) of the UK for US$4.1 million and by the European Union (EU) for US$2.7 million. 2. Country Background. Following a number of years of strong economic performance, Ghana's fiscal performance received a setback during the run-up to the 1992 general elections when large wage awards were granted to the Civil Service and other public sector employees, and delays in passing increases in imported oil costs to consumers gave rise to large revenue losses. This led to a budget deficit equivalent to 4.8 percent of GDP in 1992, a rapid growth in money supply, and the re-emergence of inflationary pressures. Although the budget reverted to a surplus position in 1994, aided by divestiture receipts, inflation grew on account of a 46 percent growth in money supply. Ghana's external position, after deteriorating in 1992-93, improved substantially in 1994 aided by foreign receipts from the divestiture of public holdings, and its foreign exchange reserves position improved to over four months of imports by the end of the year, compared with only three months at the end of 1993. 3. In 1995, macroeconomic performance was mixed. The external current account balance improved more than expected and GDP growth was close to the program target. Despite some payment arrears in road sector expenditures, a fiscal surplus of 0.9 percent of GDP was achieved, close to the target level of 1.2 percent of GDP. Monetary growth of 37 percent was higher than the target of 14 percent largely due to larger than expected external surplus in the last quarter arising from favorable cocoa prices. Inflation rose sharply in 1995 due to the lagged effect of the large monetary expansion in the last quarter of 1994 and the first quarter of 1995, to reach 71 percent by the end of the year. However, policy measures introduced by the Government have helped to reduce inflation to 39 percent by the end of August, 1996. The continuation of tight fiscal and monetary policies is expected to lower inflation further by the end of the year. 4. Ghana agreed to a three-year Policy Framework Paper with the IMF and the World Bank in May 1995. This formed the basis for the Government to enter into a three-year Enhanced Structural Adjustment Facility (ESAF) with the IMF in June 1995. The first year of the ESAF was completed in June 1996. There was a delay in completing the policy discussion for the midterm review due to pending action to correct for the slippages that had occurred during program implementation. This has, in turn, delayed the start of the second year of the ESAF arrangement which is now likely to commence in early 1997 upon detailed discussions with the Government. 5. Public Financial Management Background. The Government of Ghana (GoG) is now strongly committed to the implementation of an integrated financial management system in the country. Under the Economic Recovery Program (ERP), the GoG had implemented various 2 measures to strengthen financial management (see Technical Annex, para. A. 1). While these have been useful in the light of the disarray in public finances at the start of the ERP, they have been of a piece-meal nature and the overall ability of the Government to manage its financial accounts remains weak, particularly in the area of expenditures. The Public Expenditure Review (PER) for 1993, done by the GoG for the first time, highlighted several problems including weak budget preparation, the lack of a uniform and adequate accounting system, weak expenditure monitoring and control mechanisms, and the general lack of ownership and accountability by the Ministries, Departments, and Agencies (MDAs). It had been recognized by the Bank and donors that the lack of timely, accurate, and current information on budget commitments and actual expenditures was seriously undermining the Government's capacity for fiscal management, leading to an inefficient allocation of public resources, and obscuring public accountability. 6. In other areas of public financial management, too, weaknesses remain. In public sector auditing, capacity for both internal and external audit needs to be strengthened. In revenue management, whereas improvements in revenue collection from both direct and indirect taxes have been a significant aspect of the ERP, inefficiencies remain largely as a result of inadequate technological capacity for faster processing. In cash management, complete and timely information on the cash assets of the Government is not available which imposes higher borrowing costs for the Government. Aid and debt management is neither integrated nor provide complete information constraining the Government's timely management of its borrowings. In procurement, a national code does not exist and a variety of practices have evolved which are used by different agencies. 7. Recognizing these deficiencies in its overall public financial management and the critical need for greater efficiency, transparency, and accountability, the GoG with inputs from the Canadian International Development Agency (CIDA), the Overseas Development Administration (ODA), and the World Bank, developed a medium-term strategy for reforming the public financial management system, called the Public Financial Management Reform Program (PUFMARP). This strategy seeks to develop an integrated financial management system in government. This has since been adopted by the Cabinet and forms the basis for planned measures (tranche conditions) supported by CIDA's Support for Public Expenditure Reform (SPER) and the World Bank's Private Sector Adjustment Credit (PSAC). The implementation of this strategy will be supported by technical assistance from ODA, CIDA, and EU. This project is the Bank's contribution to supporting this effort. 8. Rationale for the Project. There are three important rationales for the Project. First, the Project supports fundamentally a key objective of the Country Assistance Strategy (CAS) - restoring and sustaining macroeconomic stability. Given limited scope for increasing government revenues, which are already close to 20 percent of GDP (excluding divestiture receipts), measures to improve and sustain macroeconomic stability must focus on greater efficiency in revenue collection and public expenditures, which are the principal components of this project. Second, with better management of public expenditures and greater efficiency in their use, the inter- and intra-sectoral allocation of resources-particularly towards rural infrastructure, primary education, and basic health-essential for poverty reduction, can be better addressed and poverty reduction more seriously targeted. Third, effective financial management will induce greater private sector growth, not only indirectly through the obvious salutary effect of greater macroeconomic stability, but also directly through more timely payments to private contractors and greater transparency and accountability of the financial management functions within Government. 3 9. Project Objective. The fundamental objective of the project is to enhance the efficiency, accountability, and transparency of the financial management functions of the Government. To that end, the project will support the implementation of the GoG's Public Financial Management Reform Program. 10. Project Description. The Project will support the development of eight critical components or sub-systems-(i) the budget preparation sub-system: this supports the preparation of the budget according to the considered priorities of the Government and ensures the production of an effective and viable financial plan for the Government; (ii) the budget implementation sub-system: this provides for the effective control and monitoring of Government expenditures; (iii) the accounting sub-system: this permits the classification, recording, and analyses of all financial transactions in a timely, reliable, and standard manner across Government; (iv) the cash management sub-system: this covers the management of the cash assets of the Government through projections and monitoring of cash flows, both receipts and expenditures, and provides the basis for the public sector borrowing requirements during the year; (v) the aid and debt management sub-system: this allows for the management of the acquisition, servicing, and retirement of public debt, both internal and external, (vi) the revenue sub-system: this aims to achieve increased efficiency in the collection, reporting, and forecasting of all revenues: (vii) the procurement sub-system: this enables the procurement and delivery of goods and services in a transparent and timely manner, with appropriate regard to price competition, quality control, and administrative expense; and (viii) the auditing sub-system: this ensures the safeguarding and control of all government resources through fair, objective, transparent, and reliable internal and external reviews of Government performance. 11. Some elements of an integrated financial management system already exist in Ghana or are being implemented-such as the UNCTAD's Automated System for Customs Database (ASYCUDA), the Commonwealth Secretariat's Debt Recording and Management System (CS- DRMS), and the Integrated Personnel and Payroll Database (IPPD)-but may still need to be reinforced or enhanced under this Project.' The Project recognizes that even though various components of the Project can proceed apace, it is essential that the design of each element of the system be compatible to, and coherent with, the overall integrated financial management strategy. The Government's emphasis in the reform program is on the design of the flows of information and the nature of the controls that need to be instituted; it is only then that the system requirements- hardware and software-to support the informational requirements will be developed. Even with respect to the latter, the emphasis will be on simple design, due regard to local capabilities, a predominant emphasis on training, and ensuring project sustainability. 12. The attached Technical Annex provides a detailed project description on the individual project components as well as detailed information on project implementation arrangements. Project objectives and activities for each component, and their implementation targets, particularly for the first two years, have been developed. A schedule of key activities is also presented in the Technical Annex. 13. Linkage with Other IDA Operations. While this Project builds on the work accomplished under previous IDA operations (see Technical Annex para. 1), it draws synergy from These were supported by the ongoing Economic Management Support Project which is finishing in December, 1996. 4 complementarity with several ongoing IDA operations. In particular, (i) improvements in cash management, revenue collections, and treasury payments which are envisaged under this Project will take advantage of the reforms in commercial payments system which are being introduced under IDA's Non-Bank Financial Institutions Project. (ii) The reforms in public financial management are critical to the Government's National Institutional Renewal Program which seeks to improve the efficiency and productivity of the public service. This initiative is being financially supported by IDA through a Project Preparation Facility under the proposed Private Sector Adjustment Credit III. (iii) The modernization of customs data management which is provided for under this Project will benefit from the rationalization of customs policies and procedures, and the consequent reduction in transactions costs, which is being addressed under the proposed Trade and Investment Gateway Project. And (iv) this Project has targeted the three sectors where IDA sector investment credits have been recently prepared or are being prepared for pilot implementation of the Budget and Public Expenditure Management System (see para. 15 below). 14. Upfront Activities. The GoG has already undertaken a series of initiatives demonstrating its commitment to the reform program. PUFMARP was officially launched by the Minister of Finance in July 1995 and the GoG's commitment to the reform program was reiterated by the Minister in his budget speech in February 1996 (see also the attached Letter of Development Policy). Political will has been demonstrated to improve the accountability and transparency of the financial management decisions of Government. 15. Reflecting its commitment to the reforms, the GoG has started implementing some of the project activities. Towards the end of 1995, a short-list of consulting firms were invited to submit proposals for the design and implementation of a Budget and Public Expenditure Management System (BPEMS) which covers most of the first three function-based sub-systems referred to in paragraph 10 above-budget preparation, budget implementation, and accounting . Price Waterhouse Associates has been selected for this work. The design work began on July 8, 1996. Financing for this upfront activity will be provided through the ongoing Economic Management Support Project (EMS) for US$500,000 and a Project Preparation Facility (PPF) for US$750,000. 16. BPEMS will be implemented in three phases. In Phase 1, the existing functional processes for financial management will be studied, new functional processes will be developed along with the design of the information systems to support the functional processes. In Phase II, BPEMS will be implemented on a pilot basis in seven priority ministries: Finance, Roads and Highways, Works and Housing, Education, Health, Information, and Local Government and Rural Development. In Phase III, BPEMS will be replicated across remaining ministries in Accra and the regional capitals. The design work is expected to be completed by December 31, 1996, pilot implementation by December 31, 1997, and further replication by June 30, 1998. It is expected that the systems will be fully operational, and staff properly trained, in time for the budget cycle of 1999 which will begin in the third quarter of 1998. 17. In addition, work is in progress in several other areas. The Government introduced policy- based hearings in 1995 as part of its regular budgetary process. A decision was made earlier this year to extend this further by instituting a Medium-Term Expenditure Framework, the preparatory work for which has already been started. The Government has been doing its own Public Expenditure Reviews for the last three years. Expenditure monitoring and control has been strengthened, particularly in the Ministry of Roads and Highways where significant expenditure over-runs have occurred in recent years. The annual public accounts of the Government have been produced since 1993, and monthly reporting on the public accounts, as also required by GoG 5 financial regulations, has been improved and streamlined. Work is also in progress on the reconciliation of external debt data between the Ministry of Finance and the Bank of Ghana, and on forecasting cash inflows and outflows as a first step towards cash management. 18. Project Cost and Financing. Total project costs have been estimated at US$30.8 million over the five-year project life (see Schedule A). Total IDA financing of US$20.9 million would cover two-thirds of the total costs while other donors would contribute close to a quarter of the costs. The Government would finance the remainder. Project costs would cover consultancies, training, purchase of equipment, some civil works, and contingencies. The Government would provide counterpart funds for recurrent expenditures. Consultancies (US$6.7 million, 22 percent of project costs) would be provided by a well-coordinated team of international experts in the various sub-systems and national consultants for information technology support, legal and procurement issues, and for the development of human resources. IDA's share of total consultancy costs is about 66 percent. Training (US$4.4 million, 14 percent of project costs) will be provided largely domestically. Such training would cover training specific to the systems being introduced under the Project, general information technology and financial training, and training specific to the professional advancement of staff. Training would be targeted to policymakers, senior and middle management staff, as well as to the technical staff involved in recording and reporting on financial transactions. About 50 percent of total training costs will be covered by IDA. Goods (US$12.7 million, 41 percent of project costs) involve primarily the installation of computer hardware and software. IDA's share of these costs is about 85 percent. Civil works (US$1.5 million, 5 percent of project costs), recurrent expenditures (US$2.7 million, 9 percent of project costs), and unallocated funds to cover contingencies (US$2.8 million, 9 percent of project costs) account for the remaining categories of expenditures. 19. Project Implementation. The overall implementation of PUFMARP, including those components supported by this Project, will be managed by a PUFMARP Implementation Team. This Team will be composed of three groups of people: three contractual full-time staff with special skills required for PUFMARP implementation-the PUFMARP Manager, the Finance Manager, and the Information Technology Manager; Government staff from the Ministry of Finance and relevant Ministries and Agencies; and consultants who will be designing and implementing the various components. This Team will be supervised by a multi-sectoral Steering Committee led by a Deputy Minister of Finance. 20. For successful implementation, the Bank will provide intensive supervision, with close monitoring of identifiable performance indicators. A full set of Performance Indicators which have been agreed with the Government are presented in Schedule A of the Technical Annex. 21. Project Sustainability. The sustainability of the Project will depend on the incentives that will exist within the various levels of Government and its staff to properly use and adopt the redesigned systems. These incentives would, in turn, depend on (i) the domestic demand for accurate and timely information on public finances, (ii) the level of financial remuneration of staff implementing the system and the ability of Ministries to recruit and retain skilled staff, and (iii) the capacity of staff to implement and maintain the new systems. The first comes primarily from scrutiny by policymakers and groups within civil society, and will be reinforced through a series of workshops targeted towards them. The strengthening of the Office of the Auditor-General will also complement the demand for accurate and timely financial information. In addition, the development of donor-supported sector investment programs in three key ministries which are also targeted for the pilot implementation of BPEMS-Roads and Highways, Health, and Education- 6 also creates additional demands, both domestically and from the donors, for accurate information on the use of the financial resources. The second set of incentives will be addressed through the public service reforms envisaged under the National Institutional Renewal Program led by the President's office and supported by the Bank and other donors. The third set of incentives would be addressed through extensive training under the Project. 22. Lessons Learned from Past Technical Assistance Operations in Ghana. There are several lessons of experience from technical assistance operations in Ghana, primarily from the completed Structural Adjustment Institutional Support Project and the ongoing Economic Management Support Project. These emphasize the need for: (i) strong borrower ownership; (ii) close and high level Bank supervision; (iii) having a long-term strategic approach and not allowing short-term agendas drive the project; (iv) coordinating multidonor aid; and (v) having measurable performance indicators. These lessons are being internalized in the preparation of this Project. In particular, the PUFMARP is fully owned by the Government and is the outcome of the Government's own PERs. The Bank Task Team combines members with requisite country- specific knowledge and proven expertise in public financial management and information technology. Donor coordination has been ensured through collaborative missions and joint preparation of the Project. 23. Lessons Learned from Similar Operations in Other Countries. The lessons of experience in supporting public financial management reforms in other countries emphasize (i) sponsorship, ownership, and understanding of the project at the highest levels of Government; (ii) awareness of the large scope of the program at various levels of Government; (iii) good project management; (iv) interagency coordination, particularly the support of sector ministries; (v) training and support; and (vi) appropriate management of the changes brought about by the reforms. Some of these lessons are already being followed in the course of the preparation of the project, others will be followed at the appropriate time. The PUFMARP was discussed and approved by Cabinet, and was subsequently launched by the Minister of Finance at a two-day Workshop for senior civil servants in July, 1995. The Controller and Accountant-General also discussed the program with his staff from across the country at his annual staff conference in September, 1995. More Inception Workshops are planned at the regional and more decentralized levels to develop further awareness of the program at lower levels of Government and to elicit inputs into the process. An external search was conducted for the three key staff of the PUFMARP Implementation Team and local Ghanaians at local market salaries have been recruited for the positions. Interagency coordination will be facilitated through the intersectoral Steering Committee and the involvement of key sector ministries in the context of the development of their sector investment programs. Training will receive significant attention under the Project as will the management of change. The latter will be particularly necessary since the implementation of the reforms will span at least two budget cycles. 24. Rationale for IDA Involvement. The critical importance of the public financial management reform program to effective fiscal management requires the support of IDA. This Project was explicitly stated in the CAS as a lending operation critical to the CAS objective of assisting the GoG in restoring and maintaining macroeconomic stability. The CAS was presented to the Board on May 9, 1995, and the CAS Progress Report on May 14, 1996. Successful implementation of the Project would also help ensure the effectiveness of Bank-financed development programs and projects. 7 25. Project Objective Category. The Project will promote efficient fiscal management. This will be achieved through better monitoring and control of public expenditures, improved allocation of resources consistent with national priorities, and enhanced transparency, and accountability in the use of public resources. The Project does not have any adverse environmental impact and is in Environmental Category C. 26. Benefits and Risks. The benefits from the Project would (i) provide greater accountability in the use of public resources; (ii) provide effective expenditure management and control; (iii) improve the efficiency in the use of public resources- (iv) improve the inter- and intra-sectoral allocation of public resources; (v) permit the mobilization and management of domestic and foreign resources; and (vi) enable decentralization of fiscal operations while maintaining adequate controls. 27. The primary risks arise from (i) lack of incentives or technological resources to change or to sustain the re-designed system; (ii) lack of incentives for full financial disclosure; (iii) problems of implementation arising from the large scope of the reforms envisaged, and from any change in political leadership; and (iv) the failure of donor coordination, even though the Project is being jointly prepared by the donors. Some of these risks apply differently to the different components. For instance, the better financial incentives and the technical skills of staff in the revenue agencies may make them less prone to the lack of incentives to sustain the re-designed system. As for the incentives for full financial disclosure and reporting, they would reflect GoG's own commitment to greater transparency and accountability, requirements which are being emphasized by critical business and civil society groups. The upfront activities undertaken by the Government (as mentioned in paras. 13-16) are an attempt at coping with the risks involved in the large scope of the Project. The Government's Letter of Development Policy (Annex 1) also provides a statement of the Government's resolve to manage these risks effectively. 28. Issues and Actions. There are no outstanding issues to be resolved with the Government. However, action will be sought from the Government on (i) expanding awareness of the benefits of the program through the Inception Workshops to those who use public financial information and to those who will benefit from better financial management in Government; (ii) ensuring, during project implementation, that the new procedures and systems are adequately used and that the users have the requisite incentives and skills to do so; and (iii) providing adequate access to public financial information to all end-users. In addition, credit effectiveness will be conditional on the Government developing a Project Implementation Plan, and appointing independent project auditors, both of which have to be satisfactory to IDA. 29. Recommendation. I am satisfied that the proposed credit would comply with the Articles of Agreement of the Association and recommend that the Executive Directors approve it. James D. Wolfensohn President by Gautam Kaji Washington, D.C. October 10, 1996 Attachments  8 Schedule A Page 1 of 1 GHANA PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT Estimated Costs and Financing Plan by Expenditure Category (in US$ 000's)* Expenditure Category Project Cost Financing Plan Foreign Local TOTAL IDA Other GoG TOTAL Donors 1. CONSULTANTS 3,880.0 2,848.0 6,728.0 4,608.7 2,119.3 -- 6,728.0 1.1 International Consultants 3,880.0 -- 3,880.0 2,500.0 1,380.0 -- 3,880.0 1.2 National Consultants -- 2,848.0 2,848.0 2,108.7 739.3 -- 2,848.0 2. TRAINING 1,381.1 3,033.2 4,414.3 2,200.0 2,214.3 -- 4,414.3 3. GOODS 12,267.1 457.3 12,724.4 10,996.6 1,682.1 45.7 12,724.4 3.1 Hardware and standard software 7,425.6 239.9 7,665.5 6,703.9 937.6 24.0 7,665.5 3.2 Application software 4,841.5 217.4 5,058.9 4,292.6 744.5 21.7 5,058.9 4. CIVIL WORKS -- 1,487.9 1,487.9 1,239.3 111.0 137.7 1,487.9 5. RECURRENT COSTS -- 2,654.7 2,654.7 -- - 2,654.7 2,654.7 6. CONTINGENCIES 1,752.8 1,048.1 2,800.9 1,904.5 612.7 283.8 2,800.9 TOTAL 19,280.9 11,529.3 30,810.2120,949.0* 6,739.3 3,122.0 30,810.2 * includes the advance from Project Preparation Facility of US$750,000.  9 Schedule B Page 1 of 2 GHANA PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT Procurement Methods and Disbursement Arrangements (in USS 000's)* Procurement Methods Project Element International National Other Non-Bank Total Competitive Competitive Financing Bidding Bidding Consultant Services -- -- 5.069.6 2,331.2 7,400.8 (5,069.6) (0.0) (5.069.6) Goods 11,643.5 303.3 200.0 1,850.3 13,997.1 (11,643.5) (273.0) (180.0) (0.0) (12,096.3) Training -- -- 2,420.0 2,435.7 4,855.7 (2,420.0) (0.0) (2,420 0) Civil Works -- 1,314.7 200.0 122.2 1,636.7 (1,183.2) (180.0) (0.0) (1,363.2) Recurrent Expenditures -- -- -- 2,920.2 2,920.2 (0.0) (0.1 TOTAL 11,643.5 1,617.6 7,889.6 9,659.5 30,810.2 (11,643.5) (1,455.8) (7,849.6) (0.0) (20,949.0) * Figures in parantheses are the respective amounts to be financed by the IDA credit. All numbers include contingencies and the advance from the Project Preparation Facility. 10 Schedule B Page 2 of 2 GHANA PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT Procurement Methods and Disbursement Arrangements (in US$ 000's) Disbursement Arrangements Category Amount Percent of expenditures to be financed Consultant Services 4,108.7 100% of expenditures Training 2,200.0 100% of expenditures Goods 10,746.6 100% of foreign expenditures; 100% of local expenditures (ex-factory cost); and 90% of local expenditures for other items procured locally. Civil Works 1,239.3 100% of foreign expenditures; 90% of local expenditures Unallocated 1,904.5 Refunding of Project 750,0 Preparation Advance TOTAL 20,949.0 Estimated Disbursements IDA Fiscal Year 1997 1998 1999 2000 2001 Annual 4,332.4 5,886.6 4,740.3 2,735.6 3,254.0 Cumulative 4,332.4 10,219.1 14,959.4 17,695.0 20,949.0 11 Schedule C GHANA PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT Timetable for Key Processing Steps (a) Time Taken to Prepare 16 months (b) Prepared by Government, with IDA, ODA, EU, CIDA Assistance (c) First IDA mission July, 1995 (d) Appraisal Mission June 25, 1996 (c) Negotiations September 25, 1996 (f) Board Presentation November 7. 1996 (g) Planned Date of Effectiveness March, 1997 (h) List of Relevant Documents None This report is based on the findings of the preparation, pre-appraisal, and appraisal missions conducted in 1995 and 1996. Participants in the missions and contributors to the report included Asad Alam (AFTM4, Task Team Leader), Jose Sokol, Kazi M. Matin (AFTM4), Mauricio Mathov (ITSIE)' Ali Hashim (EMTPM); Lynnette Asselin, John Davison (Consultants); Bertrand de Chazal, and Francesco Sarno (AFTS3). The Peer Reviewers were Ladipo Adamolckun (HRGLL) and Michael Stevens (PSP). The report also benefited from inputs from Arigapudi Premchandj (IMF). Ofclia Miranda (AFTM4) provided secretarial and administrative assistance.  Schedule D 12 Page 1 of2 Data uof 91&96 Status of Bank Group Operations in Ghana IBRD Loans and IDA Credits in the Operations Portfolio Diffrence Onginal amount in USS aIlin. bnswoen ,oond Pr-ject Loan or FIcal and armal ID Credi No Yar Borrower Purpos- IBRD IDA Canllaousnt Uodisbursed disbursems' N-mbr of Cloed LoantCredut: 73 Acotn Loans GH-PA-419 C19210 19S GOVT OF GHANA MININGSECTORREHAB 40Wo 489 427 GH-PA.900 C19760 1989 GOVT OFGHANA FORESTRY 39 40 196 .170 GH-PA-905 019960 1939 GOVT OF GHANA SME/FrNANCE 30 O 1 13 .033 GH-PA-901 C0390 1989 GOVT OF GHANA WATER SECTOR REHAB 25 00 3 40 523 GH-PA-908 C206 10 1990 GOVTOFGHANA POWER SECTOR(ECG r F 4000 494 I 7 GH-PA-925 C1090 1990 GOVTOFGHANA VRA/SIXTH POWER 2000 1590 131 GH-PA-910 C21570 1990 GOVTOFGHANA URBAN II(SEC CITIES) 700o 1193 I327 OH-PA-91i C21800 1991 GOVTOFGHANA AGRICDIVERS(TREEC 16.30 11.71 6J7 GH-PA-93 C21920 1991 GOVTOFGHANA TRANSP REHAB It 9600 1646 1216 GH-PA-497 01930 1991 GOVTOFGHANA HEALTH & POPII 27 00 7 35 640 GH-PA-940 C2240 1991 GOVTOF GHANA ECON MOT SUPPORT 300 2.35 2.0s GH-PA-91 022470 1991 GOVTOFGHANA kGRIC RESEARCH 22.00 1462 11.17 GH-PA-9Il C0130 1992 GOVTOFGHANA FINSAC 10000 3563 29.75 GH-PA-914 C3190 1992 GOVTOFGHANA FEEDER ROADS 55 00 14 t11 1782 OH-PA-931 C23460 1992 GOVTOFGHANA AGRIC EXTENSION 300 ol 53 15 94 CH-PA-917 03490 1992 GOVT OFGHANA ADULT LITERACY 1740 459 393 OH-PA-942 04260 1993 GOVT OF GHANA ENVIRONMENT 1510 9 54 423 OH-PA-933 C24230 1993 GOVTOFGHANA TERTIARYEDJCATION '500 1796 407 GH-PA-930 C24410 1993 GOVT OF GHANA LIVESTOCK ". 45 967 662 GH-PA.953 04670 1993 GOVTOFGHANA NATL ELECTRIFICATIO 100n 63 97 1379 GH-?4-956 C4930 1993 GOVTOFGHANA URBANTRANSPORT 7620 b5 74 3332 QH-PA-Q20 C12020 1993 GOVTOFGHANA ENTERPRISE DEVT 410o0 332: 2 97 GH-PA-964 05080 3993 GOVTOFGHANA PRIMARY SCHOOL DEVEL 65 10 34 S1 !2.25 GH-PA-961 05530 994 GOVTOFGHANA AGRIC SECTOR rNVEST 21 50 1732 195 GH-PA-936 2560 1994 GOVTOFGHANA LOCAL GOVT DEV 350 3834 6 54 GH-PA-924 C2600 1994 GOVTOFGHANA COMMUNITYWATER&SA 2196 1977 374 GH-PA-960 06650 1995 GOVT OF GHANA PRIV SECTOR DEV 1300 12.33 239 GH-PA-926 C6S20 1995 GOVT OF GHANA THERMAL (P-VII) 175 6091957 1469 GH-PA-914t 06950 1995 GOVT OF GHANA EDUCVOC TRNG 940 3 56 1 64 GH-PA-962 C7130 3995 GOVTOFGHANA FISHERIES 0(0o 179 433 OH-PA-967 07100 1995 GOVTOFGHANA PRIV SCTR ADJ 70o 3909 2.68 GH-PA-966 C1430 1995 GOVT OF GHANA MINING SEC.DEV & ENV 12.30 131 135 GH-PA-943 C27920 1996 GOVTOFGHANA NON-8ANKININSAST 390 234 036 GH-PA-973 C23360 1996 GOVT OF GHANA URBAN ENV SANITATION ?1 0 69 712 49 GH-PA-937 C23580 1996 GOVT OF GHANA HWY SECT INV PROG 10016 9339 GH-PA-15 16 C5770 1996 GOVTOF GHANA PUBLIC ENTERPRISEPR 26 45 26 54 GH-PA-.975 CS850 1996 GOVTOFGHANA BASIC EDUCATION 5000 5061 TOTAL n 00 163436 000 1021.73 93 44 Act,e Loas Closed Lans Total TouLi disomrued (IBRD and IDA) 67413 135901 253314 of hch mrwped 100 19366 19366 Toal An d b IBLD Wad IDA 163436 3151 69 3216 05 Amont sold 0 00 033 133 Ofwhchm reasd t 10 (138 '139 ToWa nAdior-ed 1021 13 2141 1043 21 a IloAded disbursements to darwsines acin a dittrwumontmas data s projected at appmimal. Folloes he FY94 Annul Rev. of Pomoia Prfartmcac ARPP,a loe-bosed uneo. mooducad (HS*hishv satofactory, Suaaory, U*nuttry. HU-haghiv uasasfactorr.: se Pronpoe la.pve-msnar up Prw;mcr wst Pornfolro Prreevmtre Arang ArhotaliSnchies94-901),. Augas 23, 1994 Dibrnmert data nsupdaed at dhe end ofr6 tbs0hatwee of ltinmem. Schedule D 13 Page 2 of 2 Ghana - Statement of IFC Investments Committed and Disbursed Portfolio As of 7/31/96 (In US Dollar Millions) Committed Disbursed IFC IFC II II FY Approval Comoami Loan Equin Quasi Panic Loan Equiry Quasi Panic 1988/8911/93 Bogosu 8.50 0.81 6.27 17.62 3.50 0.81 6.27 17.62 1989/91/93 Cont Acceptances 2.78 0.88 0.00 0.00 2.78 0.88 0.00 0.00 1989/92 Wahome Steel 1.17 0.44 000 0.00 1.17 044 0.00 0.00 1990 AEF Alugan 0.15 0.00 0.00 0.00 0.15 0.00 0.00 0.00 1990/91/96 Iduaprien 7.36 3.00 7.41 740 3.36 2.55 7.41 7.40 1991 AEF Appiah.Menka 0.63 0.00 0.00 0.00 0.63 0.00 0.00 0.00 1991 AEF Packrite 0.33 0.00 0.00 0.00 0.33 000 0.00 0.00 1991 GHANAL 0.00 0.44 0.00 0.00 000 0.44 0.00 0.00 1991/92 Hotel lnv. Ghana 2.80 0.00 0.00 0.00 2.80 0.00 0.00 0.00 1991 SDC 0.00 0.23 0.00 0.00 000 0.23 0.00 0.00 1992 AEF BMK 1.13 0.00 0.00 0.00 1.13 0.00 0.00 0.00 1992 AEF CFL 0.30 0.00 0.00 0.00 0.30 0.00 0.00 0.00 1992 AEF Polytex 0.22 0.00 0.00 0.00 0.22 0.00 0.00 0.00 1992/93 Ghana Leasing 4.09 0.75 0.00 0.00 4.09 0.75 0.00 000 1993 AEF Afariwaa 0.34 0.00 0.00 0.00 0.34 0.00 0.00 0.00 1993 AEF GHUMCO 0.40 000 0.00 000 0.40 0.00 0.00 0.00 1993 ECOBANK 1.10 0.00 0.00 0.00 1.10 0.00 0.00 0.00 1994 AEF Palm Royale 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 1994 .\EF Shangri-la 0.30 0.00 0.00 0.00 0.30 0.00 0.00 0.00 1994 GRACEM 2.31 0.00 0.00 0.00 2.31 0.00 0.00 0.00 1995 AEF Dupaui Wood 1.00 0.00 0.00 0.00 1.00 0.00 0.00 0.00 Total Portfolio: 36.91 6.55 13.68 25.02 32.41 6.10 13 68 25.02 Approvals Pending Commtonent Loan Equav Quas Panic 1994 AEF-ALUGAN II 0 10 0.00 0.00 0.00 1995 AEF ANTELOPE CO. 040 0.00 0.00 0.00 1995 AEF GHANA PACK 0.36 0.00 0.00 0.00 1995 AEF-DARKO FARMS 0.50 0.00 0.00 0.00 1996 AEF PAKO BAY 0.20 005 0.00 0.00 1996 AEF TACKS FARMS 0.37 0.00 0.00 0.00 1996 ECOBANK (1l) 5.00 0.00 0.00 2.00 Total Pending Commitnent 6.93 0.05 0.00 2.00 Schedule E 14 Page 1 of 2 REPUBLIC OF GHANA PUBLIC FINANCIAL MANAGEMENT TECHNICAL ASSISTANCE PROJECT GHANA - IMPLEMENTATION ISSUES In FY 96, the Ghana Portfolio consisted of 42 projects of which 5 have since closed and 4 are likely to close in FY97. The ARPP underlines an overall improvement in portfolio performance through FY96 (disbursements for investment projects increased by 36 percent) despite several slow moving projects. There are currently 3 problem projects: two are unsatisfactory in terms of Development Objectives, one in terms of Implementation Progress. In addition, there are a few projects potentially at risk, which will be very closely monitored by the country team during FY97. Problem projects and projects potentially at risk are listed below. Prior to the ARPP exercise, 18 projects showed unsatisfactory disbursement lags, of which 9 were over 50 percent (Ag. Diversification; Community Water and Sanitation; VRA/Sixth Power; Ag. Research; Ag. Extension; Education/Vocational Training; National Electrification; Urban Transport; Local Government Development). However, disbursement forecasts were revised in conformity with the ARPP guidelines and only 6 projects now show high disbursement lags, of which 3 are over 50 percent and 3 remain under 30 percent (Urban II, FINSAC and Transport Rehab). In addition, two projects are "old" namely Mining Sector Rehabilitation (> 8 years) and FINSAC (adjustment project > 4 years). A mini-CPPR is to be held in the third week of October 1996 during which all the projects listed below will be thoroughly examined, discussed with the government and action plans agreed. Problem Projects: Water Sector Rehabilitation (FY89; $25 million credit) DO: U. The project was rated unsatisfactory for FY93, FY94, FY95 and FY96. Although works implementation is progressing, the institutional and financial management of the water supply sector requires reform, particularly in terms of private sector participation and of sustainable tariff levels. An advisory group has been established in the Ministry of Works and Housing which, with the help of consultants, will review various options for private sector participation in the sector and submit its recommendations to the Minister of Works and Housing for Government's consideration. During the last supervision mission in September 1996, an action plan towards private sector participation was agreed to by all parties. Tertiary Education (FY92; $45 million credit) DO:U. The project was rated unsatisfactory in late FY96, due to lack of progress on policy matters. In June 1996, a 15 point time-bound Policy Action Plan for the Ministry of Education/National Council for Tertiary Education was agreed to. If these actions are largely carried out as agreed, the development objectives rating is expected to improve. Schedule E 15 Page 2 of 2 Enterprise Development (FY94; $41 million credit) IP:U. The implementation progress of the project was rated unsatisfactory in FY96. Slow disbursement was mainly due to adverse economic conditions (60 percent inflation and 360 percent devaluation of currency), resulting in reduced activity in the refinance component (which represents 80 percent of the credit), and to delays in the approval of bidding documents and contracts by the Ministry of Finance. The Government has been informed that a partial cancellation of the line of credit portion of the credit would be sought if no substantial increase in the use of credit proceeds is noted. Projects Showing Disbursement La2s of over 50 percent: Private Sector Development (FY95; $13 million credit). Disbursement lag: 73.4 percent. Signed in January 1995, this credit became effective in July of the same year. Implementation has been satisfactory in all aspects save procurement progress, which has held up disbursement. At the instance of Government, the credit is being managed exclusively through the Ministry of Finance. The procurement phase is progressing satisfactorily, however, and staff expects disbursement to improve substantially once the bottleneck of procurement has been overcome. Local Government Development (FY94; 538.5 million credit). Disbursement lag: 78 percent Highly participatory tender evaluation involving district, regional and central tender boards has resulted in an initial disbursement lag for this project. However, contracts for a total value of $10 million have been committed during the last quarter and the closure of the disbursement gap should become apparent as soon as this new information is reflected in the system. Enterprise Development (see under Problem Projects). In addition to projects with high disbursement lags, the following projects could be at risk and will be monitored very closely during the year: Feeder Roads (FY92; $55 million credit). The procurement progress for this project has been slow. The project involves a large number of relatively small civil works contracts, the design and procurement processing of which took longer than expected. However, out of the $28.4 million which are shown as undisbursed, $13 million have been committed. It is expected that this project will be extended to June 1998, by which time it is expected that its balance will be disbursed. Power Sector (ECG) (FY89; $40 million credit). This project has an unsatisfactory financial situation because tariff rates have not been increased as required under the IDA covenant. This project will be discussed at the mini-CPPR. Schedule F 16 Page 1 of 2 Ghana at a glance Sub- POVERTY and SOCIAL Saharan Low- Ghana Africa income Development diamond* Population mid-1995 (millions) 17 1 590 3,188 Life expectancy GNP per capita 1995 (US$) 390 500 480 GNP 1995 (billions US$) Ia 67 295 1,466 Average annual growth, 1990-95 Population (%) 2 8 2 8 1 8 Labor force (%} 30 28 1 9 GNP Gross per primary Most recent estimate (latest year available since 1989) capita enrollment Poverty headcount index (% of populaion) 32 Urban population (% of total population) 36 31 28 Life expectancy at birth (years) 58 52 63 Infant mortality (per 1,000 live births) 78 92 68 Child malnutrition (% of children under 5) 27 . 38 Access to safe water Access to safe water (% of population) 56 66 Illiteracy (% of population age 15+) 40 44 35 Gross primary enrollment (% of school-age population) 76 71 105 - Ghana Male 83 77 112 Low-income group Female 70 64 98 KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1985 1994 1995 Economic ratlos* GDP (billions USS) 2.8 6.3 54 63 Gross domestic investment/GDP 12.7 9.6 159 186 Openness of economy Exports of goods and non-factor services/GDP 194 107 25.5 250 Gross domestic savings/GDP 13.7 66 4.5 10 1 Gross national savings/GDP 129 53 75 12 2 Current account balance/GDP -0.1 -58 -8.4 -6.4 Savings , Investment Interest payments/GDP 0.7 0 7 2.0 2.0 Total debt/GDP 25.6 498 99.4 88.5 Total debt service/exports 6.4 23 6 27.0 35.4/b Present value of debt/GDP .. . 64.0 55.2 Present value of debt/exports . .. 249.0 218.5 Indebtedness 1975-84 1985-95 1994 1995 1996-04 (average annual growth) - Ghana GDP -0.3 44 38 4.5 59 GNP per capita -2.6 1.1 0.5 1.4 2.8 Low-income group Exports of goods and nfs -10.0 8.0 04 34 5.9 STRUCTURE of the ECONOMY (% of GDP) 1975 1985 1994 1995 Growth rates of output and investment (%) Agriculture 47.7 44.9 464 463 3o Industry 21.0 16.7 160 15.8 1s Manufacturing 13.9 11.5 8.5 8.3 , Services 31.3 38.4 377 37.9 73 4 Pnvate consumption 73.3 84.0 83.8 77 5 so General government consumption 13.0 9.4 11 6 12.4 Imports of goods and non-factor services 18.4 13.6 36.9 335 -GD1 --GDP (average annual growth) 1975-84 1985-95 1994 1995 Growth rates of exports and Imports (%) Agriculture 1.2 1.9 2.6 42 20 Industry -8.2 5.4 4.3 33 Manufacturing -9.3 3.6 40 1 8 Services 2.8 7.5 4.5 5.0 m Private consumption -03 37 4.2 1.0 0.- .-. . General government consumption 3 2 6.6 -6.4 11.6 go 9i 92 93 94 9s Gross domestic investment -7 3 5.6 -2.6 27.8 -1o Imports of goods and non-factor services -103 6.5 -8.2 1.3 Gross national product -0.3 42 3.5 4.4 -Exports -impors Note. 1995 data are preliminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. al Uses atlas conversion factor b/ This jump in debt service arises from pre-payment of Govemment-guaranteed external debt (around $160 million) by Ashanti Goldfield Corp Ltd. 17 Schedule F Page 2 of 2 Ghana PRICES and GOVERNMENT FINANCE 1975 1985 1994 1995 Inflation (%) Domestic prices (% change) a Consumer prices 29.8 10.4 24.9 595 40 Implicit GDP deflator 30.8 20.6 266 39.8 Government finance 20 (% of GDP) Current revenue .. 11.3 237 223 90 91 92 93 94 95 Current budget balance .. 0.1 4 8 4.9 Overall surplus/deficit .. -4.1 -6.8 -8.3 -GDP def CPI TRADE (millions USS) 1975 1985 1994 1995 Export and import levels (mill. US$) Total exports (fob) .. 633 1,236 1,431 2.000 - Cocoa . 412 320 390 Gold 28 549 647 1,soo Manufactures .. Total imports (cif) . 729 1,724 1,842 1.0oo Food .. 40 45 56 Fuel and energy . 199 175 197 50 Capital goods . 187 348 398 Export price index (1987=100) .. 93 90 100 a Import price index (1987=100) .. 103 121 127 Terms of trade (1987=100) . 90 74 79 Exports ]gImports BALANCE of PAYMENTS (mlin S)1975 1985 1994 1995 Current account balanceto GDPrtio (%) (millions UISS) Exports of goods and non-factor services 891 672 1,384 1,582 - - - T_ I -- - --T Imports of goods and non-factor services 882 857 2.000 2.118 Resource balance 9 -185 -616 -536 Net factor income -36 -111 -111 -130 Net current transfers 24 33 271 263 Current account balance, before official transfers -3 -263 -458 -402 .10 Financing items (net) 0 148 620 686 Changes in net reserves 3 116 -163 -284 memo: Reserves including gold (mill. US$) 147 552 593 780 Conversion rate (locallUS$) 1.9 54.4 956.7 1,199.8 EXTERNAL DEBT and RESOURCE FLOWS 1975 1985 1994 1995 Composition of total debt, 1994 (mIll. US) (millions US$) Total debt outstanding and disbursed 721 2,243 5,389 5,588 A IBRD 40 118 70 59 5 2 70 IDA 44 259 2,094 2,375 Total debt service 57 169 379 587/b 381 IBR 5 18 20 21 I IDA 1 3 21 25 2094 Composition of net resource flows Official grants 8 75 201 260 E Official creditors 13 93 230 271 G Private creditors -17 35 48 -38 Foreign direct investment 71 6 30 35 Portfolio equity 0 0 203 72 70 508 World Bank program .700~ Commitments 89 191 88 299 A-IBR El-oBlatwral Disbursements 10 70 178 242 B -IDA D -Othter multilteral F -Private Principal repayments 2 10 20 23 C - IME G - Shot-term Net flows 8 60 158 219 Interest payments 3 11 21 23 Net transfers 5 49 138 196 International Economics Department 9712696 FAX 233 21 663854 CHIEF DIR MOF Annex I 18 Page I of 5 to: :wt of MINISTRY OF FINANCE nember and daeto ofAMi .1 aAIeP.O. BOX M 40 Awe Al 'V ACCA year Rel. No.......... . Tel. N R..U. .C OF G.L..NA. COUNTRY DIRECTOR FOR GHANA WEST CENTRAL AFRICA DEPARTMENT THE WORLD BANK WASHINGTON. USA LETTER OF SECTOR DEVELOPMENT POLICY ER.I WORLD BANK'S PUBLIC FINANCIAL MAN&GZMEN] TECHNICAL ASSISTANCE PROJECT T'ie Governncrit of Ghana has embarkcd upon a comprehlensive relonn ol its financial Munagem1ent systenis. I he objcctive of these reforms is to enhance the etticiency. accountantlity, and Iran.parcticy of the financial management functhons tf Government and thereby strengthen the basis for cfte&ive economic management. The purpose of this letler Is to outline the (iovernnen's strategy iind approach to the reforms envisaged ind to re-iteratc (itvcrnrncnt's requcst for the support ol the International Lcvclopmcnt Associalion and the internaional donor community to support the programme. Background 2. The origins of the envisaged financial nanagcienti rulurms imdnaid frm the conlusion that were reached in t1i Frst-ever Public Expenditure Keview that the (iovernmern conducted. The 1993 review highlighted several proiblems relating to budget formilation and implemenration. the general lack of ownership by the scror Ministries of their budgets, and the lack of quality and timcly datu and deficiencies in accounting and auditing as well as the obsolescenc of. and weak compliance with. financial policies and procedures. In particular, the review highlighted the fact that the budget was not being used as an effective tool for national policy intervention. 3. It Was imnediately recognitcd by the Government that addressing these problems was critically important not only to loster bottcr fiscal management but also to respond to a changcd economic environment wher inancial resources availale to the Government were becoming 1ighter. 4. This self-reai.atioin kd to a Governmiwnt delcgation travelling to Washington in July 1994 to discuss with the World Bank and CIDA Ixfssiblic asistance towards a programme for imljecting sound financial managenrnt in (ovemment machinery. Suhequcntly, with inpuls from these agencie.; and the Overscas Developmeni Administration of the UK, the Government devclopcd a medium-tenn strittegy for reforming (1he puhlic financial management systens. called the Public 'inanmial Managernt Rctbnor Programn (PUFMARP). This strategy was adopted by Cabinet in early 199. and was officially launched by the Minister of Finance in July of that year. Actions under the FAX 233 21 663854 CHIEF DIR MOF Annex 1 19 Page 2 of 5 progranle alircady form iic haiS for planned tranche releaws tider IDA P rvat Sccioi Adjustment (redit (NAU) and CIlA's Supporl for Public E.xpenditure Reform (SPER). 9 The Internaliona Development Association (IDA). th (lu ' idh nicm 0nan Iona I-velopflcnt Agency (CII)A). the Overseas Development Administration IUDA) of the United Kingdom . the Furopean Union (FU). and the Danish international cvelopment Agency (DANIDA). arc also ;)cparling technical )1sistance projects to support the development and-implWmentation 4f variouN components of this reforn programme. 6. PU.FMARP seek% to develop an intcgraECd financial imanagement systeli in governent I he programme Cs expected to pXOdUce a reltalic. computer-based system which will provIe accurate. linely. and up-o-date intormation on budgetary allocatons, expendiliirr V011m1mi n TM ndi reveniu' itillows. and produce financial reports. The prograrlmC has many functional components including budget preparation anid inpleimntatiOn. accounting and cash ianagement systems as well is aid aid dcht managmnict, ituditing. and procurement. It seeks a comprehensivu solution not only to the hudgeraty and expenditure inanagetrent prohilms but also the weaknesses in revenue management. and in the auditing. and financial managcment functions of Govemment in general. Recent Developmnts 7. Hudget Preparation. The Governnent itroduccd policy-hased hudgel lv.ring- for the firsi li rr in I O) Ministrics were grouped into four along sectoral lines (agricultural. indw tIrial. social andI servic: sectors) and asked lo present their budget propo-als in the context of tile Scc -itl growth targets developed i the iGoverninentCs strategy document for accclerating tho pace oF economic growth. dbhed "Vision 2020"-. . e Government has now decided io carry thi., approach frward tandlo insuillonah/c a Mlditim- I erm Fxpendiure Framework as part of the overall reforms envisaged under F11 TMARP. This would involve improved methods for mnacrocconomic forecasting. the preparation of torward estimites, improvemenis in hudget gtudclincs and rolling three-ycar recurrent budgets. much like the three-year Public Investment Programme that guides the annual developmniit budget. ELvei though the MT[F' will only be implemented in a phased manner with the budgei of 1998, sone early preparation and training will start from this year. To that end. the Government will this year embark on the preparation of Tanu4als on rolling expenditure planning. In addition, the Governmcnl will continue with (he pIOLutiont01Ii of its annual Public Expenditure Reviews and link the results of these reviews to the provision ol detailed budget guidance lo the line ministries for the preparation of budgct estimates. (Jovernint will also formulate the organizational and functional links betwccn the Five Year Development Plan. the first of which is being produced by the National Dcvclopinent Planning Comrmission. and the Annual Budgetc. In the budget process. we will continue to give emphasis to the intensive %crutiny of programmes in selected areas such us poveily reduction, gender, and road scctor devcopment. 10. Budget Implementation. At i heart of the proposed refons uidei I't 1MARP would hw a Budget and Public Expenditure Managemcnt system (BPEMS). Progress on this has been imoie advanced than on the other coinix>ncnts of the reformi programme. Price Waterhouse Associates have been selected ais consuitants to design and implement the systo:m. The assignment commenced on Mth July. 1996 and is expected to be completed by the end of 1996. Pilot iplementarnon in the Ministry of Finance and six sector ninistrics would he completed by the end of 1997 and replication across other remaining Ministncs by mid 1998. FAI 233 21 663854 CHIEF DIR MOF Annexl 20 Page 3 of 5 i 1. In addition. fihe G;ovelntlcfli will ConinuC (ihe monjionng o expenhh aI Roais and ifghways - which is critical to our economic growth pros Nets - fnd nM-wage expenditures on bIsi elducation. prmary health. and niral intra.siruture - which are criticil iti our- poverty reduction strategy. I 2. As ndictiei in Ilie 1995 Puhlic Fxpenditure Review. te Mins,yiv el Vmance lia, ifilminted i system ol Project ]Tiplimentaiioin Monioring with the aun ol undcrtaiiung itie Jllowiimi e f ) crify physical presence ol projects: () certily thai a projeu is a the stage tor which paymneni is req1ueited: iii) deveop i hsory of cach prole: by reivng ihe saeS of implementn over IirI and cost: (iv) ensure thiat proj i fons are blring used tor the statcd puirpose: (N) inomftor the flow of projecr expendiures and enure that they are within hudget; (vi) huil a -ahase of rrjeccl inlrnuiin to aid policy fornition i1 . The systcin would he hased on quteulrly progress Icpoillng. phymk-al ms1pe1on. 1nd a revsew of tijdgei relCasCs agaist provisions. Vhis is heing done in a phatsed mtalnner. slurting with projlets in the hudgets of the Ministries of Rotds and !iighways. Works and Ilousing. lealth. Ldticatinl. and Agricuture. These Ministries' projecis constitute over 75 per cent of the Icvcloprment budget. A unit in the Policy Analysis Division of the Ministry of Finance has been cnrrused with this task in collahoration with the Policy. Planning. Monitoring. and Evaltiaion iits of the sector Minisires 14. A %igniknt developnient mi recert years has been the productionl o( thle Iiliaciaiil repores of overnriment. Alcr a hiatus of several years the mnnithly and annul stalClitemnts el the pubi accounts If Ghaia are since 1993 heing produced. These efforts wilt he ftirfher sti-ruined tunder FI IMAR P. 15. Cush Management. Iinprovernents in (ash manageiem is a major 1'0 11, el ili- ( i<vciment's reform prograine and current imactrconmririic reaulities have given i atdditional urgency. 1o that end, the (joverimlent has set up'a group comprisg otticials trom the vministry el Financc, the Conroller and Accuntanl-(enerul's Lepartneni. änd the Bank l Uhina änd elarged it to forecast the cash needs (iGovernit aLt the hginning of cach inancial yeur. This s cii he used for the issing of Financial Encutmbrances and the formulation of the domesc horrowing programme of the Giovernnrnr. These efftrts would he linked lo the monthly information heing pro, ideld by the Conroller and Accountant-Gerieral's Depatment. As an integral pai of this, efforts will continue to be made to ninimii.e the lags ereated by the comnercial banks in depositing revenuc vollection into the Consolilated Fund. 10. Perwonnel and Paynill Management. An Intcgrated Personnel and lyl',l )ålulase < IPPD) was operatioilali7r<d in 1995. Thi% links personnel infonnation with payrtll and is a villuable tool tor le nianagerenl of wage and wagc-related expenditurms. 17. Inception Workshops. (ii order to reinlrce the ec>ncep l o .1o111 owinrslhip and responsihfjty for financial inanagement in govcrnnitr. and to ensure the tfulest acceptance. participation. and cooperution of all key players in public financial imanagement. the (.iovernment hus lainched a series of inception Workshops, two of whieh have been conecuded. Vhese workshops are nant to address the basis and mechanisms of the reform programme. and ichi the inputs frory the participants into the design of the reforms. FAI 233 21 663854 CHIEF DIR MOF Annex 1 21 Page 4 of 5 4 T.heVAX Forward 1 9. Our shired vision for ihcsc reforms is comprehensive and anbiIi4tis. I-it il i a ncee%sarv viNion that needs ro he tra;nslrcd inro realiry for the oinlisanun or fle thellowing objectives ftio the country: the attainrnenl of sisl;ine(d nacroeconomic slahility and ensurm that publi epcnditres rctlcI tfe national priority of poverty reduction. It is also necessary ihat financial information is provided on d timely hasis to iud the review of the programme. especially the achievement of the quirerly largets cstabihshcd in tl economic programiiii. 11 i almy necessary to establi an Cequlitabie and fair basis for revenue generation, rhc strengthening of the tools for conomic pertormance and progrimmiej evaluation, as weil a facilitating isicatl decentruli/.alon, and for tijecting lie iequiremncnts of financial traiisparency and aiccountability. essential for a demnocratic system. I ). Wc recgniic tilt he pmeeof re[irming financial managemnen will Ike 1i1e and1 has t he done carelully. bor that reason, wc have invcstcd a lot of time and elforr in preparing the grotndwtrk for the programme. Wc have held several discussions with Sector Ministries to celt their inputs into the ireform programme and to create a beter understanding of the progti amie anJ the gains expected from it. We have received strong encouragement from them in moving forward. A host of workshops i.s plannedo. a.s mentioned above, to conlinue the p)r>cess of building ownership with the various other iers of Gvernmenr. 20. Well in advancc of the launch ol the proposed Project. wc liavt sel up a SedLtaruit which hoises thr PU FIAR1 limiplementinin Tean. Key mehers ol this Icai with spectah.d skills suiiablei trhe task havc bcen recruitcd through an Inteinational scarch and are already at post. Additional counterparts from the Covemment will be assigned to the Proeer Team as and when needed. A highly qualified team will be mrtinltaned at all times to prepare and implement the Projeci. A core und will continur. even after the Project. zs an integral part of the MiniVtry of Finarncc. Thesc stliff will forni the nucleus tor str-atCgi7in1g and ctveloping new initiatives in publi, financial maragement. ?1. The Government recogni/.es fully weil that any efflu towards a inore ratinnal utse ol publik- resources should also jocus on the s17C and qiality of the public service. i his important cormpletenottry issue is the subject offfhe Nauional instiutional Renewal Programrmrit: iNIRP and lhe CiviJ Service Perfimance Irpremenrjt Prograilmc (CSPIP) which are prceeding apace. and from which the overnmerls financial imanagenent reforms will derive benefit. 1 must be neted that the commitment to pitblic setvice reform has been made it the liighest leveki. 22. We recognizc, the need to inprove human capacity within Givernmei t > mplenent aindi lise the above systeis. Tlhcrefore. strong emphasis will be plaed on training staffon a coitinuous basis. Training providect will he hoth speific to the new systems bein iniruduced as weil as inore general in the field of financial rnanagement. Detailed training plans will be developed for each conpocneil on the reform programnme based on scientific training nceds assessments, where needed. 23. The (;veimtinnt shall make inancial inforniation available t, Ihe public and It all IseIs. All levels of society will have access to the inormiation. Vinancial reports will be publiely available on a timely basis. The sharing of financial information is eritical io the Government'% efförs in promoting a stpportive environment for private sector developiment Ind in creating greater transparency and ac;ounability in the use of public resources. FAI 233 21 683854 CHIEF DIR MOF Annexi 1 22 Page 5 of 5 24. Tlhc Governnent has develojped Ilie pro*jct design joitly wih 1 IDA. Tihe de%igni and impicmcntation plan is detatled iii the cechnica,l Annex of the Memorandum ol lhe President of the IDA. The details reflect our comnri vis;ion for what is envisaged under Ilie reform programme and will be the guiding principles for inplementing the Project. 25. Filially. il is ricesarv to s[ute thal the GovernIMCIl is fully cOIunitiCd to imlmlnitll ing ti linancial manageient reforms. Tlhe comii menr ro rhe prograime is evidencet hy [he leiadleNip of the Giovemiient in developing rhe programme and by puhlie commmitienis al ile highest levels to ensure the efficiency, iransparency. and accountubility of the finuncial manageienL funirns of Governnient. K.. AMISSAII-ARTHUR DEPUTY MINISTER OF FINANCE GOVERNMENT OF GHANA  IBRD 23606 31 BURKINA FASO P ""ua- - - . P m k UPPER G0mbGH<N WES T Luo1 r) Yale -eo * ad Bulenga gu Karega 0 - Gushego l .- - PRIMARY POADS ) - wSECONDAR ROADS Sepegu TERTlARY ROADS Dabrya'R- -RAILWAYS ZozugC REGION HEADQuARTE WS h ee-,Ieba e chombu gu . NATiONA CArTAL 0 Y-.rp REGION BOUNDARIES Mam R,&a, 9 INTERNATIONAL BOUNDARIES The boundaes. colors, CTE denaomm"at'ons and any \tuer mírrocrton shownr Kov\ un thj map du eot D'IVOIRE s.a,' .mpIy, on the par to Nr.mb 0 The World Bank Group, Yel c ndir atny dgreNt an the legal status o ony terrtory, Bmbo ur any endorsemrent K-b.p Damba ur acceptance of such Pý Pragb- - BRONG-AHAf0 cremer -' -L_____ 0 ech-mn, 0Mømpong ASHANT! G.re TOGO owkowHO 6 re KOFORIDUA? Dunk ,, Ode s &who 0~~Asenkragwa ~ E TR L Encho eH1aw Erynabr- sao ÅAsraon ElesteENjL - A CAPE COAST SENrEGAA \E C Es-w EAECOS THE GAMB A L : ·- Tslot 0991 EA .- SEKONDI GER EQUA 3 2 9 FEBRJARY 1995   I MAGI N G Report No: P- 8977 GH Type: MOP