Statement by Godfrey Gaoseb at the meeting of March 30, 2000

86574 International Bank for Reconstruction and Development International Development Association International Finance Corporation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS2000-53 March 29, 2000 05:16:24 PM Statement by Godfrey Gaoseb Date of Meeting: March 30, 2000 Ghana: Country Assistance Strategy We welcome discussion of the Country Assistance Strategy for Ghana as it follows discussion by CODE of OED's country assistance evaluation, and by the Committee of the Whole, via a very enlightening videoconference with the Ghanaian authorities on the country's own Development Strategy for Poverty Reduction. We would encourage Management to make such presentations whenever feasible since it allows for a balanced view of the issues involved, and enables Board Members to have a lively interaction with clients. As we noted during the discussion of the Development Strategy for Poverty Reduction, we wish to commend the Ghanaian authorities for their determination to push ahead with their reform programs. There have been policy slippages during the past decade, triggered, among other things, by external shocks. However, there is little doubt that the authorities have drawn useful lessons from past experience and have incorporated them into the design of their current development and reform programs. At the same time, we believe Bank staff also deserve to be commended for the depth of dialogue with the authorities and coordination with other development partners, in the context of the CDF. Additionally, the Bank's decentralization to the Ghana office has gone a long way in facilitating the dialogue and ensuring that decisions and agreed actions are taken quickly. We also commend management for bringing to the Board a CAS that reflects the Bank Group's approach to development assistance, one which has substantial input from IFC and MIGA. We think this approach should be replicated wherever possible. Having said this, we have a few comments to make. The CAS makes an assessment of achievements, or lack thereof, during the last CAS period. In our view, although we realize that in some cases the authorities have not met all the objectives they set for themselves in the FY98 CAS, including the 8 percent annual growth rate, the present CAS gives the authorities much less credit than they deserve. To cite two examples: First, the process of divestiture and the reform of the financial sector are much deeper than we are given to understand in the CAS. One of the yardsticks regarding the level of liberalization in the financial sector is the number of new entrants. Our understanding is that there are presently about ten new banks that have been established. On divestiture, the government has divested its holdings in most banks and currently holds interest in only two banks, the Agriculture Development Bank and the Ghana Commercial Bank, from both of which the government intends to disengage itself in the new future. Furthermore, those banks that did not meet stated requirements, notably the Cooperative Bank and the Bank for Housing and Construction have been closed. Secondly, the CAS notes that the government is perhaps overcautious in the speed at which it wishes to move in decentralization. But then the CAS quickly adds that it is weak capacity that is the Government's greatest fear for decentralization. In our view, the Government's fear is not unfounded, and unless programs are set up to accelerate capacity building, particularly in financial management, there is the need to move at a deliberate speed. We believe the CAS appropriately supports the Governments overriding goal of eliminating hard core poverty. In this regard, we think the Bank's intention to support Ghana in such sectors as agriculture, infrastructure (especially roads and urban water) and education is critical to assisting the poor and reducing poverty levels. We also note the efforts to promote a strong and efficient financial system to underpin higher growth, including rural finance. On one issue, however, we believe that more decisive action is needed. The adult HIV prevalence in Ghana is currently estimated at about 4.6 percent. According to the CAS as well as the paper to be discussed by the Development Committee, “Intensifying Action Against HIV/AIDS" Responding to a Development Crisis", this level is a threshold following which the disease develops into an epidemic. This stage, in our view, is one at which intensive action is required to avert an impending development catastrophe. While commending the CAS for recognizing the importance of containing the HIV/AIDS epidemic by assisting the country through the second Health Sector Project, especially in providing resources to community-based and civil society groups to undertake programs related to HIV/AIDS, we would have expected a more comprehensive program dealing with this potentially devastating impediment to development. In a democratic setting, it is critical that all segments of society play their role for the common good. We are pleased that a LIL for Promoting Partnerships with Traditional Authorities would serve to deepen the Bank's relationships with traditional leaders and local government authorities in such areas as education, and HIV/AIDS prevention. We wish to caution, however, that the Bank should not be seen to be undermining the authority of Government in such matters and should play a supportive role to the Governments efforts. We note that the CAS, like the government, attaches great importance to the problem of the high domestic debt, which has negative implications for private sector development and private sector-led growth. This is an issue that needs to be addressed in a forthright manner. One critical solution to the problem is better management of the budget, which will be supported under the second Public Financial Management Project, as well as program assistance. We would be interested in finding out when the project would be presented for Board consideration.  On the size and composition of the Bank Group program, we have no problem with the proposals in the CAS. However, given that opportunities for IFC investment will open up in several sectors, including agribusiness and infrastructure, we hope the Corporation will continue with its imaginative ways in developing a pipeline of projects, so that it indeed doubles or triples its current portfolio. Finally, we welcome the level of collaboration among development partners and endorse the position taken by IDA that it will reduce direct lending in those areas where others could participate, such as IFC in infrastructure and the African Development Bank in agribusiness. In closing, we note the various wishes that have been identified in various parts of the CAS, particularly in paras 54 and 55. We could not agree more with the statement at the end of para 55, that at this juncture, when the country is facing a political transition and a difficult external environment, "it is important that the Bank continue its close involvement in Ghana and its support in order to encourage the Government to take the necessary actions to accelerate growth and poverty reduction".