Statement by Joaquim Carvalho at the Board meeting of September 4, 1997

International Bank for Reconstruction and Development International Development Association 86557 . .r International Finance Corportation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS97-345 September 3, 1997 Board Meeting of September 4, 1997 Statement by Joaquim Carvalho Ghana: Country Assistance Strategy We welcome the opportunity to discuss the Country Assistance Strategy (CAS) for Ghana, whose relationship with the Bank has matured to the point where, under the Bank's new decentralization posture, a country program director will be posted to the field. This is a positive development as it not only indicates the level of importance the Bank attaches to the relationship but also gives strong encouragement to Ghana's other development partners to pursue their collaboration efforts with the Bank and each other in support of the country's development agenda. We wish to extend our full support to the CAS which, because of the assessed performance results of the Ghanaian economy during the last two years, will enable the Bank to extend appropriate and necessary assistance, financial or otherwise, in order for the Ghanaian authorities to press ahead with their programs aimed at realizing the objectives that they have set for themselves in their efforts to reduce poverty. These include a reduction in the rate of inflation to 6 percent and GDP growth of 5.5 percent by the year 2000. We also welcome the CAS's candid assessment of the Bank's own performance in Ghana, as noted in para 38. To us, the admission in that paragraph that the "Bank had not adapted quickly its style of dialogue and support to reflect the new realities on the ground in Ghana" is a reminder that the way of doing business in most countries of Sub-Saharan Africa has changed. The process of consultation required to reach decisions in a democratic setting is necessarily longer than in the past. The Bank can, however, assist government in setting up appropriate structures and mechanisms for consultation with different segments of society. The EDI, which has participated in similar exercises in the past, would probably be the best suited to develop such mechanisms. We have specific comments on a few issues we think could have been discussed in greater detail in the CAS. 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.  2 First, the initiative on capacity building in Africa which was launched by the African Governors during the 1996 World Bank/IMF Annual Meetings clearly identifies capacity as the missing link in Africa's development agenda. While we welcome the Bank's intention to support capacity building in Ghana, the CAS gives the impression in para 46 that such effort will be limited to the public sector. It is worth reminding ourselves that major efforts in this area are called for throughout the economy, including the private sector, if progress is to be made in this area and if countries are to realize their development goals. More broadly, we welcome the intention to increase investments in education and health, as well as the emphasis on gender issues. Second, in Ghana, and indeed in most Sub-Saharan African countries, agriculture contributes substantially to GDP growth. Additionally, because of the fact that a high proportion of the population resides in the rural areas, robust performance in the sector contributes to the reduction in poverty. While we welcome the CAS's intention to promote agricultural growth and rural development (para 4a), through private investment in agricultural production, as well as to implement direct poverty- alleviation measures (para 50), we would have been interested in a discussion on how the Bank would assist the Ghanaian authorities in promoting and increasing productivity in small-holder agriculture. This, in our view, is crucial if the objectives in this sector are to be realized. Third, recent borrowing on non-concessional terms is likely to aggravate Ghana's debt burden in the medium-term, especially since no debt relief is envisaged. We hope, therefore, that the Bank, together with Fund, will assist the Ghanaian authorities in strengthening their capacity for external debt management. Fourth, we note that among the mechanisms for promoting higher private investment is the deepening of financial sector reform, including the promotion of micro-finance institutions. We welcome this position and hope that the CGAP will be actively involved in this process. Fifth, on the size and composition of the Bank Group program, we welcome the increase in the range of the base case lending program as it permits a greater flexibility in responding to developments in the economy. We also think that the triggers for the lending program are reasonable. Sixth, we wish to commend the high level of collaboration between the Bank and other organizations including NGOs. In the case of the NGOs, we see in Ghana a good example of how constructive some NGOs can be in complementing the Government's efforts, as well as those of other partners, in furthering the country's development objectives.  3 Finally, Ghana's relationship is a long-standing which has improved tremendously over time. This success can be attributed to the level of flexibility and realism that has been exercised by both the country and Bank staff. Accordingly, we wish to commend the staff for assisting the Ghanaian authorities in developing what is clearly one of the most successful programs in Sub-Saharan Africa.