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COUNTRY REPORT

Ghana

2nd quarter 1997

The Economist Intelligence Unit15 Regent Street, London SW1Y 4LRUnited Kingdom

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Contents

3 Summary

4 Political structure

5 Economic structure

6 Outlook for 1997-98

8 Review8 The political scene

11 The economy14 Business and finance16 Cocoa and agriculture17 Industry and mining18 Energy and infrastructure21 Foreign trade and payments

24 Quarterly indicators and trade data

List of tables8 Forecast summary

15 Ghana Stock Exchange: share price performance18 Mineral production, 199619 Port statistics21 Balance of payments 23 External debt23 Net resource flows24 Quarterly indicators of economic activity25 Foreign trade25 Direction of trade

List of figures8 Gross domestic product8 Cedi real exchange rate

16 Cocoa production

Ghana 1

EIU Country Report 2nd quarter 1997 © The Economist Intelligence Unit Limited 1997

May 29, 1997 Summary

2nd quarter 1997

Outlook for 1997-98: The NDC has lost some steam since its election victoryin December. The cabinet choice implies continuity in policy, although thepresident, Jerry Rawlings, will miss some old faces. The opposition will be slowto let go of legal wrangling. The ESAF looks set to resume this year and growthprospects are good, although perhaps less strong than the budget predicts.Inflation will elude the government’s target. The external outlook is mixed.

The political scene: Opposition politicians have impeded parliamentaryproceedings with legal wrangling. Mr Rawlings has finally appointed most ofhis cabinet, although changes are still possible. The number of ministerial postshas been scaled back. Mr Peprah retains the finance portfolio, and reshuffleselsewhere could bring new impetus to priority ministries. Mr Asamoah hasdropped foreign affairs to focus on legal matters.

The economy: The CG meeting has been set for November. Donors haveplayed down talk of a rift with the government on overspending. The 1997budget has aimed to put public finances back on track, and has forecast realGDP growth of 5.5% this year and a drop in inflation. The government haspledged to close tax loopholes, keep privatisation receipts unchanged and raisefees for some state services. VAT is to be reintroduced in 1998. The 1996 budgetoutturn was well off target. The budget will fund more health centres andschools. Trading on the GSE has been subdued. HFC has planned anothercorporate dollar bond.

Cocoa and agriculture: The main season cocoa crop has been disappoint-ing, but prices look set to improve. Donors have been assessing coffee poten-tial. The government has outlined plans to accelerate agricultural growth.

Industry and mining: The EPA has given the Tarkwa open-cast gold-miningproject the green light. The pace of exploration has accelerated. An inde-pendent check has been ordered on some gold samples produced by Canadiancompanies.

Energy and infrastructure: The ports authority has announced upgradingplans, including privatisation, and port throughput has improved. The Tanooffshore oil project has progressed and more exploration is under way.

Foreign trade and payments: The budget has forecast a widening current-account deficit in 1997, and external accounts for 1996 are worse than ex-pected. Ghana’s debt profile has altered but net resource flows have dropped.

Editors:All queries:

Gill Tudor; Kristina QuattekTel: (44.171) 830 1007 Fax: (44.171) 830 1023

Ghana 3


Political structure

Official name Republic of Ghana

Form of state Unitary republic

Legal system A new constitution, based on the US model, was approved by referendum in April 1992

National legislature Parliament; 200 members elected by universal suffrage every four years

National elections December 7, 1996 (presidential and legislative); next elections due in 2000

Head of state President, elected by universal suffrage for a maximum of two terms; currently JerryRawlings

National government Cabinet, partially appointed by the president in February-May 1997

Main political parties Progressive Alliance (PA), the ruling coalition, consisting of the National DemocraticCongress (NDC—the majority party) and the Every Ghanaian Living Everywhere(EGLE) party. Opposition parties include: the New Patriotic Party (NPP); the People’sNational Convention (PNC); the National Convention Party (NCP); the People’sConvention Party (PCP)

Vice-president John Atta Mills

Ministers confirmed as ofmid-May

Attorney-general & justice Obed AsamoahCommunications Ekwow Spio-GarbrahDefence Alhaji Mahama IddrisuEducation Christine Amoako-NuamahEmployment & social welfare Alhaji Mohammed MumuniFinance, economic planning, mines & energy Richard Kwame PeprahFood & agriculture Kwabena AdjeiForeign affairs Kwamena Ahwoi (acting)Health Eunice Brookman-AmissahInterior Nii Okaidja AdamafioLands & forestry Isaac Adjei-MensahParliamentary affairs Joseph Owusu-AcheampongRoads & transport Edward SaliaTourism Vida Amaadi YeboahTrade & industries John Frank AbuWorks & housing Cletus Avoka

Central bank chairman Godfried K Agama

4 Ghana


Economic structure

Latest available figures

Economic indicators 1992 1993 1994 1995a 1996a

GDP at market prices C bn 3,009 3,949 5,108a 9,133 12,713

Real GDP growth % 3.6 4.8 3.6 4.5b 5.2b

Consumer price inflation % 10.9 25.0 24.9 74.3c 34.0c

Population m 15.96 16.45 17.11 17.69 18.30

Exports fobd $ m 986 1,064 1,236 1,431c 1,510c

Imports fobd $ m 1,457 1,728 1,580 1,678c 1,823c

Current account $ m –375 –558 –264 –143c –253c

Reserves excl gold $ m 319.9 409.7 661.0 697.5c 828.7c

Total external debt $ m 4,499 4,882 5,463 5,874c 5,137e

External debt-service ratio, paid % 28.6 25.2 26.2 23.1c n/a

Cocoa productionf ’000 tons 305 255 290 404b 340g

Gold production m fine oz 1.1 1.4 1.5 1.6 1.6

Exchange rate (av) C:$ 437.1 649.1 956.7 1,200.4c 1,637.2c

May 23, 1997 C2,000:$1

Origins of gross domestic product 1993 % of total Components of gross domestic product 1993 % of total

Agriculture, forestry & fishing 47.6 Private consumption 89.7

Mining & industry 16.0 Government consumption 11.7

Manufacturing 8.5 Gross domestic investment 14.8

Services 36.4 Change in stocks 0.1

GDP at factor cost 100.0 Exports of goods & services 19.6

Imports of goods & services –35.8

GDP at market prices 100.0

Principal exports 1994a $ m Principal imports 1990 $ m

Gold 549 Capital goods 544

Cocoa beans & products 305 Intermediate goods 356

Timber 165 Fuel & energy 210

Consumer goods 124

Main destinations of exports 1995h % of total Main origins of imports 1995h % of total

UK 14 UK 17

Germany 11 Nigeria 16

USA 11 Germany 8

Togo 9 USA 7

a EIU estimates. b Provisional actual. c Actual. d Balance-of-payments basis. e Bank of Ghana figure, September. f Crop years beginning in Octoberof calendar year. g EIU forecast. h Based on partners’ trade returns; subject to a wide margin of error.

Ghana 5


Outlook for 1997-98

The NDC has lost somesteam

After their impressive election victory last December, the president, JerryRawlings, and his National Democratic Congress (NDC) party, have lost steamin the first few months of this year. Mr Rawlings made heavy weather ofchoosing a new cabinet, naming ministers piecemeal in February, March andApril and then compounding the uncertainty by changing the portfolios ofseveral appointees.

The cabinet choice impliescontinuity—

So far the president’s main post-election achievement has been to cut the num-ber of Ghana’s ministries (a factor which complicated the selection process). Hehas appointed familiar faces to most of the key posts which, while providinglittle cause for excitement, implies broad continuity of the government’s earlierdirection towards gradual and selective liberalisation. The reappointed financeminister, Richard Kwame Peprah, has secured parliamentary approval for hisnew corrective budget. This, together with Mr Peprah’s earnest attempts to re-sume Ghana’s interrupted Enhanced Structural Adjustment Facility (ESAF) pro-gramme with the IMF, suggests that the new government will muddle throughthe next few months without either much incident or accelerated policy imple-mentation. The government could be waiting for finalisation of the newCountry Assistance Strategy (CAS) it is now drawing up with the World Bank.The document, slated for completion later this year, will reorder the Bank’slending programmes into a more coherent framework that takes greater accountof Ghana’s social as well as economic requirements. The CAS and the expectedreturn to the IMF programme in August or September could provide the neces-sary impetus for more dynamic government.

—but some old faces willbe missed

Yet the president will find it difficult to govern decisively without the counselof his former key advisers, the one-time security chief, Kojo Tsikata, and theformer de facto prime minister, Paul Victor Obeng, who both retired frompolitics in December. Some argue that, with their help, the president wouldhave had less trouble balancing competing factions and regional interestswhile selecting the cabinet and junior ministers.

The opposition is clingingto legal issues

The new opposition MPs have also put in a disappointing performance, havingso far failed to live up to their leaders’ noble defeat speeches promising a“constructive” opposition. Judging by local press reports, the opposition hasyet to present alternative policy options or to initiate debates on issues of widerconcern to Ghana’s citizens. Rather, as predicted last quarter, the New PatrioticParty (NPP) has continued to focus on using its extensive contingent of lawyersto challenge the government on legal technicalities and ambiguities in theconstitution, including the latter’s lack of provision for vetting reappointedministers.

Fiscal accounts have goneoff track—

As anticipated, last year’s fiscal outturn was way off track from the 1996 budgetwith the government recording a deficit of C142bn ($87m) instead of a pro-jected C158bn surplus. Yet the outturn and its implications are not as bad asthey were after the previous election in 1992. This time, public-sector payincreases were kept well in line with inflation, and the government maintained

6 Ghana


more control over spending. Thus this year’s mopping up should prove a littleless daunting than it did in 1993.

—but the ESAF looks set toresume this year—

Moreover, the government’s quest to resume the interrupted ESAF programme,and its need to impress foreign donors before the next biennial meeting of theConsultative Group (CG) of official donors, now scheduled for November, hasalready concentrated its resolve to implement the fairly tough correctivebudget read in February. Washington sources report that the IMF is alreadysatisfied with the government’s fiscal and monetary performance in the firstquarter of 1997 and say that, if the April indicators are acceptable, Ghana islikely to resume the ESAF in late summer. This would provide a necessaryendorsement ahead of the CG meeting.

—and growth prospectsare good

The budget aims to raise revenue by 28%, restrain expenditure growth to 14%and rustle up a surplus of C191bn. It also anticipates GDP growth of 5.5%,based on a sustained expansion of 6.3% in services, 4.3% in agriculture and4.9% in industry. Mr Peprah’s growth forecast may prove to be a little optim-istic, particularly in view of expectations of a substantially reduced cocoa cropin the 1996/97 (October-September) season, which will in turn squeeze ruralincomes and hence private expenditure. Nevertheless, healthy real GDPgrowth of 5% seems attainable in 1997 and 1998.

Inflation will elude thegovernment’s target

For all that, the new budget’s additional taxes, petrol price increases and plansto triple electricity prices make it highly unlikely that its ambitious target of 15%for year-on-year inflation will be met. Rather, we anticipate that the year-on-year rate, which has inched down from 32% in December to 29.2% in March, islikely to gather pace in April, May and June, reaching around 35-37%. If theannual harvest provides adequate food supplies, then the year-on-year ratecould move back to 30% by December. Nevertheless, with official figures show-ing average inflation of 34% in 1996, we have lowered our 1997 forecast slightlyto an average of 32%, easing further to 25% in 1998.

The external outlook ismixed

A smaller cocoa crop and falling gold prices continue to overshadow the trad-itional export sectors. The crop is expected to yield only 330,000-340,000 tonsin 1996/97. Assuming the Ghana Cocoa Board (Cocobod) managed to avoidthe worst 1996 price troughs when it sold much of the current crop forward, wewould estimate earnings in the region of $500m for 1997. This estimate, whichis 10% higher than the budget’s pessimistic forecast for cocoa earnings, is basedon average 1996 prices of $1,452/ton, while taking some account of the pricerecovery in early 1997. London gold prices fell to around $342/oz in mid-May,and assuming anticipated production of 1.6m oz, current price trends wouldyield around $550m, well below the budget forecast of $621m. Partly offsettingthis gloomy news, non-traditional sectors such as agro-industries and manufac-tures are improving, and there is little evidence yet to suggest that last year’searnings of $400m in this sector cannot be repeated. Assuming that the govern-ment sticks to its import target of $1.9bn and that there is little change on theservices account, we are adjusting our forecast for the current-account deficit toaround $375m this year.

Ghana 7


Forecast summary($ m unless otherwise indicated)

1995a 1996a 1997b 1998b

Real GDP growth (%) 4.5c 5.2c 5.0 5.0

Consumer price inflation (average %) 74 34 32 25

Merchandise exports fobd 1,431 1,510 1,529 1,750 of which: cocoa 390 509 500 650 gold 647 612 550 570

Merchandise imports fobd 1,678 1,823 1,903 2,000

Current-account balance –143 –252 –375 –210

Average exchange rate (C:$) 1,200 1,637 2,150 2,450

a Actual. b EIU forecasts. c Provisional actual. d Balance-of-payments basis.

Review

The political scene

Opposition MPs cut theirteeth—

As expected, the election of more than 60 opposition MPs has made parliamenta livelier and more heterogeneous forum. However, as also predicted, thestrong contingent of lawyers in the opposition New Patriotic Party (NPP) isfocusing more of its energies on legal and constitutional matters than on policydebates. In early February the minority leader (head of the parliamentaryopposition), Joseph H Mensah, filed a suit in the Supreme Court arguing that,under the constitution, “old” ministers could not continue in office withoutbeing vetted and approved by the parliamentary appointments committee.Had it succeeded, this manoeuvre—which prevented the finance minister,Richard Kwame Peprah, from reading the budget in early February—mighthave enabled opposition MPs to use vetting sessions to draw public attentionto potential conflicts of interest between ministers’ public responsibilities andtheir private business activities.

0

1

2

3

4

5

6

1994 95 96(a) 97(b) 98(b)

Ghana

Africa

Gross domestic product % real change, year on year

(a) Provisional actual. (b) EIU forecasts. (c) Nominal exchange ratesadjusted for changes in relative consumer prices.(d) Côte d'Ivoire.Sources: EIU; IMF, International Financial Statistics; World EconomicOutlook.

60

70

80

90

100

110

120

130

1990 91 92 93 94 95 96(a) 97(b) 98(b)

Real exchange rates (c)1990=100

CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$Cedi:$

Naira:$Naira:$Naira:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$Cedi:$

Naira:$Naira:$Naira:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

CFAfr:$ (d)

Cedi:$

Naira:$

8 Ghana


—and bog parliamentdown in constitutional

issues

After a minor furore, the members of the ruling National Democratic Congress(NDC) who form a majority on the appointments committee, argued that thefloor of parliament should be the forum for developing customs and conven-tions to fill gaps left uncatered for in constitutional practice. “To resort to thecourts would encourage the judiciary’s intrusion into matters of parliamentarydomain,” the committee concluded. On February 14 the NDC tabled a motionin parliament that ministers and deputy ministers approved by the last parlia-ment need not appear before the appointments committee if they were nomi-nated for the same portfolio. The resolution was carried by 119 votes to zero,but the opposition abstained, arguing that because Mr Mensah’s legal suit waspending, it could not be party to any action that pre-empted the SupremeCourt’s jurisdiction. The NDC vote prompted a rash of allegations in the pressthat the ruling party had staged a “coup” against the Supreme Court, arguingthat the court held exclusive power to interpret the constitution on all buthuman rights issues. Despite such trends, other developments suggest that thegovernment and opposition can work together. For example, the governmentaccepted an opposition motion to have minority deputy chairmen appointedto 15 select committees.

Most of the cabinet isnominated

By late April the president, Jerry Rawlings, had nominated and secured provi-sional legal approval for most of his new cabinet and ministers of state. Thecabinet list—which diplomats warn could still change—suggests the presidenthas tried to strike a balance between accommodating regional, personal andother factions in the NDC, while maintaining trusted allies in key posts.Predictably, the opposition press has claimed that the cabinet is dominated byEwes and northerners, implying that the president, who is half Ewe and halfScottish, is favouring his own people in Volta Region and those from theNDC’s other solid support bases in the north. In reality, however, while Voltaand the north are slightly overrepresented in cabinet, the full government list,which includes twice as many ministers of state as cabinet members, wasdescribed by the London-based fortnightly newsletter Africa Confidential as a“carefully balanced team”.

Ministerial posts havebeen scaled back—

Full details on the president’s restructuring of the ministries were not availableat the time of writing, but he has reportedly cut more than 25% of the posts heldunder the outgoing government, appointing only 72 ministers and deputiescompared with 99 under the last government. The transport and communi-cations, information, and roads and highways ministries will undergo the mostrestructuring, with the creation of a “superministry” for information and com-munications, and a new roads and transport department. Ghana’s constitutionallows the president to appoint non-MPs to cabinet positions, and Mr Rawlingshas taken advantage of this to save several former ministers who lost their seatsin the elections of December 1996, including the former deputy foreign min-ister, Mohamed Ibn Chambas, the former chief whip, Albert Busomtwi Sam, andthe former environment minister, Christine Amoako-Nuamah.

—with familiar faces inkey positions

The president’s most trusted ally, Mr Peprah, remains at finance, which he hasoccupied since 1995. International finance officials speak well of Mr Peprah,whose political base in the cabinet allows more clout than that available to his

Ghana 9


more isolated predecessor, the internationally respected Kwesi Botchwey.Others, citing last year’s budget deficit, say his closeness to the president under-mines his capacity to assert the economy’s interests over political expediency.It would be premature to judge, given that last year—his first full one inoffice—was an election year.

Mr Peprah has hishands full

The coming year will provide a fairer test of Mr Peprah’s mettle. In addition tonegotiating the resumption of the Enhanced Structural Adjustment Facility(ESAF) with the IMF, and getting ready for the Consultative Group (CG) meetingof donors, he and his reconfirmed minister of state, Victor Selorney, will have tocope with thorny financial matters, including the continuing investigation intothe collapse of Securities Discount House, which has left investors some C20bn($10m) out of pocket, and misdemeanours at the A Life Company, which bor-rowed more than C100bn from Ghana Commercial Bank (GCB), the Cooper-ative Bank and the Bank for Housing and Construction (BHC). Strong criticismof Ghana’s public health service, from which reports continue to emanate ofdoctors and nurses demanding money to give treatment, has not deterred thepresident from reappointing as minister Eunice Brookman-Amissah, who hasbeen faced with some very daunting challenges posed by the country’s under-funded health service infrastructure. Others retaining posts at broadly the sameministries include Alhaji Mahama Iddrisu at defence, Edward Salia at the newlyamalgamated roads and transport ministry, and Joseph Owusu-Acheampong atparliamentary affairs. New faces in government include Alhaji Mohamed Mu-muni, who will head employment and social welfare, and Cletus Avoka at worksand housing.

Reshuffles could bringnew impetus to priority

ministries

Given plans for a new push to boost agriculture, it will be interesting to seewhether Kwabena Adjei will make a better job of the portfolio than his prede-cessor, Steve Obimpeh, who, with the support of the World Bank, made littleprogress towards the longstanding goal of accelerating the sector’s growth.Mr Adjei’s previous stint at the lands and forestry ministry gives him someappropriate experience for the post. Mr Rawling’s decision to moveMs Amoako-Nuamah to education could also indicate a determination to en-courage improvements in that sector, the NDC has pledged to provide freecompulsory basic schooling early next century.

Mr Asamoah will focus onlegal matters—

Obed Asamoah, the government’s longest-serving minister, has been spreadinghimself thinly between the foreign affairs and justice ministries for the pastyear or so. Now, given opposition MPs’ focus on legal and constitutional issues,the government needs to concentrate more fully on the post of attorney-general. Mr Asamoah, who commands a personal faction in the NDC, handsover foreign affairs to another faction leader, Kwamena Ahwoi.

—while Mr Spio-Garbrahheads communications—

In view of the government’s still poor relations with the opposition press, someare lauding the decision to put a new man in charge of the beefed up com-munications ministry. Ekwow Spio-Garbrah, who takes over a new communi-cations superministry has plenty of experience of dealing with the press,having worked in the external relations department at the Washington-basedInternational Finance Corporation (IFC, the World Bank’s private-sector lend-

10 Ghana


ing arm) and the press office of the Abidjan-based African Development Bank(ADB). Competent as he was in those technocratic posts, some doubt his abilityto apply these skills in a political context. As the most recent Ghanaian ambas-sador in Washington, Mr Spio-Garbrah impressed Mr Rawlings by arranginggood press turnouts for his US roadshows, and presided over some successfulconferences. But his critics question whether he has sufficient sensitivity andforesight to tackle the tricky task of engaging Ghana’s largely antagonistic freepress more constructively.

—and the controversialMr Mensah returns

In a controversial move, Mr Rawlings has reappointed Enoch Teye Mensah tothe non-cabinet post of minister of youth and sports. Mr Mensah’s record wasstained in May 1995, when several observers linked him with an attack ondemonstrators against the value-added tax (VAT). The US State Department’slatest report on human rights in Ghana claims that there is what it calls “credibleevidence” that Mr Mensah organised and armed counter-demonstrators respon-sible for the killing of four people in Accra. Most NDC-watchers attributeMr Mensah’s retention to his closeness to another faction leader, the first lady,Nana Konadu Rawlings, who wields significant power in the party.

New African withdrawsallegations against the

former security chief

In late April the London-based monthly magazine New African retracted alleg-ations against Mr Rawlings’ former longstanding security adviser, Kojo Tsikata,and paid substantial but undisclosed damages at a London court. Lawyers forthe magazine, which in April 1996 accused Mr Tsikata of being implicated indrug trading and arms dealing, said the allegations were “utterly false, andshould never have been made”. This is the second time that Mr Tsikata hastaken action against foreign journalists. He has also challenged a London dailynewspaper, The Independent, for implicating him in the deaths of threeGhanaian judges in the early 1980s.

The economy

The CG meeting is set forNovember—

Ghana’s biennial CG meeting of official donors has been scheduled for earlyNovember 1997. The meeting, the most important in Ghana’s aid calendarbecause it sets levels for donors’ financial support two years in advance, hastraditionally taken place in June. This year it was delayed for two reasons. First,Ghana has yet to conclude talks with the IMF on resuming the second year ofits interrupted ESAF programme. Second, organisational changes at the WorldBank have delayed completion of Ghana’s Country Assistance Strategy (CAS)for 1998-2000, a key document which sets out the Bank’s investment prioritiesfor the country. Both the CAS and the IMF green light are essential prereq-uisites for the CG meeting, because other donors generally coordinate theirsupport around Bank and Fund programmes.

—as donors play downtalk of a rift

Financial sources in Washington DC have dismissed suspicions that thegovernment’s election-inspired overspend provoked a rift with donors inFebruary and March this year and delayed some disbursements scheduled for1997. Suspicions were fuelled by Ghanaian and Washington officials’ reluc-tance to comment on negotiations on the ESAF and World Bank lending, evenoff the record, until unspecified “issues” were addressed. Aid officials admit to

Ghana 11


initial concern about the government’s numbers for the 1996 fiscal outturn(see below), but report that after some adjustments to the accounts, the bottomline was not much different from that in the government’s budget presentationin February. The financial commentators, who tend to put a positive spin onambiguous situations, played down the budgetary issues and attributed muchof the uncertainty to local political difficulties in getting the budget read andapproved in parliament. They also emphasised the enthusiasm of the financeminister for resuming the ESAF programme, and reported that the IMF hasgiven its full blessing to the 1997 budget; they added that the Fund was quitepleased with the outturn for the first quarter of 1997, for which data is not yetpublicly available. If the Fund is satisfied with the data for April, it will schedulea resumption of the current ESAF programme for the third quarter of 1997. TheESAF programme was approved in 1995, and should have run for three con-secutive years. However, the government, which did not want its hands tied inan election year, requested a 12-month interruption until 1997.

The new budget aims toput public finances back

on track—

Full details of the 1997 budget (1st quarter 1997, page 24) indicate thatMr Peprah has prescribed fairly tough measures to put public finances back ontrack after last year’s election-driven deficit (see The economy). The budgetaims to create a C191bn surplus by increasing revenue by 28% and allowingexpenditure to grow by around 14% to C2.75trn.

—with GDP growthprojected at 5.5%—

The budget projects real GDP growth of 5.5% in 1997, a fraction higher thanlast year’s provisional outturn of 5.2%, and anticipates slight increases in keysector growth rates compared with last year. It forecasts that agricultural outputwill expand by 4.3% and industrial production by 4.9%. The booming servicessector is expected to maintain last year’s growth rate of 6.3%.

—and ambitious targetsfor inflation

The budget’s targets for inflation are fairly ambitious. The government aims tolower the year-on-year rate to 15% in 1997 from the 32.6% registered at the endof December 1996, thus maintaining the decline from the rate of 70% recordedat the outset of 1996. (Consumer price index figures published by the IMF in itsInternational Financial Statistics show that Ghana’s average inflation rate morethan halved from 74.3% in 1995 to 34% in 1996.) The government has also setmore realistic forecasts for the money supply, planning a ceiling of 15% realgrowth. This appears sensible given that the money supply grew last year bymore than 30%, over six times the original target of 5%.

The government is to closetax loopholes—

The government plans to boost tax revenue by 26% this year, to C2.18trn, bywidening the eligibility net and minimising tax evasion. The first measuresinclude assigning new tax identification numbers to all businesses, including alarge number of individual proprietorships that have hitherto avoided tax-ation. The government calculates that these should help boost income taxrevenue by 40% to C635bn. Taxes on domestic goods, comprising exciseduties, local sales taxes and levies on petroleum products, are projected to yieldjust under C784bn. In the area of international taxes, the government plans areview of exemptions on import duties and import sales taxes, to avoid someunspecified abuses said to have occurred last year. However, government calcu-lations recognise that, even with crackdowns, the projected 8% growth in such

12 Ghana


revenue will lag far behind the increase of 36% recorded in 1996. The govern-ment anticipates that this year’s smaller cocoa crop will yield only C240bn inrevenue, a 13% decline on last year.

—and keep privatisationreceipts unchanged, but

raise government fees

Mr Peprah projects no real change in privatisation receipts, currently likely to beC175bn, but anticipates a recovery in grants to around C111.2bn, comparedwith last year’s disappointing C77.5bn. To boost other revenue, he has imposedlarge and sweeping increases on fees for public services. In measures that wouldappear to run counter to the government’s stated goal of boosting small busi-nesses, the budget has raised fees for business registrations and other services bybetween 100% and 1,000%. It has also doubled road, bridge and ferry tolls, andimposed sweeping hikes on services for passports, other travel documents andmarriage licences. These measures are aimed at raising an additional C195bnover 1996 receipts, delivering a total of C477bn.

VAT will be reintroducednext year—

More controversially, the minister also announced plans to present a new VATbill in parliament this year, to widen the tax net and reduce the government’sreliance on single-product taxes such as those on cocoa and petroleum. How-ever, in contrast to the last effort to introduce VAT in 1995, which wasthwarted by major public protests, Mr Peprah is preparing the ground carefully.He plans to allow plenty of time for debate on the bill, which is scheduled forthe statute books in January 1998, and has pledged to implement the new taxwith “greater efficiency and equity”. The last introduction of VAT caused socialunrest partly because many retailers used it as a cover for overcharging, whilethe public was not sufficiently informed to challenge sellers. No doubt mindfulthat the 1995 protests were the final cause of the resignation of his predecessor,Kwesi Botchwey, Mr Peprah acknowledged potential political problems. Hereminded MPs that throughout the debate over the last VAT bill, no oneseriously attacked the basic principles of the VAT system.

—and so spending is to bekept below inflation

Mr Peprah’s projected 14.2% growth rate for government expenditure isaround half the year-on-year rate of inflation at the end of 1996, and wellwithin the 15% inflation forecast for 1997. He assumes that recurrent expend-iture will grow by 15%, to C2.1trn, although personal wages, the largest recurrentitem, are projected to grow by 20%, to C720bn. The next biggest recurrentitem, domestic interest payments, is set to grow by 5.2%, with outlays forecastat C460bn. The budget projects a 10% increase in capital expenditure, toC669bn, while development spending has been set at C662bn.

The 1996 outturn was welloff target—

As anticipated for an election year, the 1996 outturn was C300bn wide of thebudget target. Instead of the C158bn surplus projected at the outset of the yearthe government reported a deficit of C142bn. In relation to national income,however, the deficit, which amounted to 1.4% of GDP, was not as bad as thatregistered by many other economies, including those of some OECD members.Total receipts, at C2.27trn, were C60bn under the 1996 budget target ofC2.32trn. While tax revenue was C86bn ahead of target, thanks to higher thanexpected yields on local sales and cocoa export taxes, revenue from othersources fell well short of budgeted levels. Income and fees were C101bn behindprojections, and the shortfall on grants was C46bn.

Ghana 13


—with spending boostedby interest payments

Total spending raced ahead of the targeted C2.17trn to C2.41trn. In accountingfor the divergences Mr Peprah chose to focus on two factors: a higher thanprogrammed wage bill owing to newly negotiated salary levels, and the non-disbursement of programmed foreign aid inflows worth C60bn. However, thecontribution of wages to the overspend appears less important than some othercategories. The C39.2bn overspend on personal emoluments was dwarfed byexcess spending of C123.1bn and C78bn on interest payments and capitalexpenditure respectively. Later in the budget text Mr Peprah attributed theinterest payment levels to the government’s “vigorous policy of open-marketoperations (OMOs) to mop up excess liquidity and to help reduce inflation”.He omitted to mention that the budget deficit was a more significant contrib-utor, because borrowing to finance the deficit pushed up government debt andtherefore interest payments.

The budget will fundmore new health centres—

The government anticipates spending C201bn on health this year. It has ear-marked C38.3bn from the budget, apparently as counterpart funds for foreignaid projected at around C162bn. Priorities include increasing access to healthfacilities in underserved areas, including the construction of 16 new healthcentres at Betiako, Amantin, Badu, Somanya Begoro, Madina, Bortianor, NimaTolon, Palbe Wauchiki, Matayili, Binduri Dzemini, Kwamekrom and Kpando.

—and improve coverage ofother services

The government has allocated C1bn for antenatal services at district and sub-district levels. The budget also set aside funds for continuing construction ofnew regional hospitals at Ho and Sunyani, which started last year, and forcompleting the new Cape Coast Hospital. Last year the government completed15 new health centres, and started rehabilitating regional and district hospitalsat Kibi, Keta and Yendi. In a clear reference to press criticism of services at somehospitals, Mr Peprah acknowledged lapses in Ghana’s health services, singlingout Korle Bu and Okomfo Anokye teaching hospitals as cases where manage-ment needs to be improved by training.

Primary and junioreducation continues

expanding

The budget’s allocation for education is 17% higher than last years, at C18.2bn,which together with anticipated donor financing of C38.9bn, should raiseinvestment to around C57.1bn. While providing no breakdown of plannedexpenditure, Mr Peprah announced plans to continue the Free Compulsoryand Universal Basic Education Programme launched last year. The governmentplans to open 100 new primary schools and 206 junior secondary schoolsthroughout the country in 1997; this appears to be a continuation of two majorprojects which opened 100 new primary and 200 new junior secondary schoolslast year. The budget has also allocated funds to open five new senior secondaryschools, raising the total number in Ghana to 460. The government will con-tinue to fund ongoing work on science resource centres and the AmankwaakromTechnical Institute in Afram Plains, all of which are scheduled for completionthis year.

Business and finance

Trading on the GSE issubdued

Trading on the Ghana Stock Exchange (GSE) was subdued in the first quarter of1997, the all-share index rising only slightly. Guinness Ghana (GGL) was the

14 Ghana


quarter’s star performer; its share price grew by 29% to C356, far surpassing itsdirect competitors, Kumasi Brewery (KBL) and Accra Brewery (ABL), whichgained 9% and 5% respectively. Standard Chartered Bank (SCB) was the bestperformer in March, gaining C500 or 11% on its share price over the month,although its share price rose by only 2% over the quarter. SCB declared a finaldividend of C600, which raised the total payout for the year to C1,000. AshantiGoldfields Corporation (AGC), Ghana’s biggest gold mining company, whichaccounts for over 80% of market capitalisation, performed disappointingly; hitby falling international gold prices, its share price fell by more than 5% overthe quarter.

Ghana Stock Exchange: share price performance(C unless otherwise indicated)

Share price, Share price, % change,Dec 30, 1996 Mar 26, 1997 year to date

GGL 275 356 29

SSB 1,057 1,250 18

PTC 133 155 17

EIC 430 475 10

MGL 150 165 10

KBL 660 720 9

MLC 53 57 8

ABL 576 606 5

HFC 136 140 3

SPPC 105 108 3

SCB 5,000 5,100 2

UNIL 800 810 1

CFAO 20 20 0

UTC-E 50 50 0

PAF 171 170 –1

FML 404 388 –4

AGC 22,500 21,300 –5

ALW 1,415 1,300 –8

MOGL 5,900 5,200 –12

GCB 701 609 –13

PZ 370 315 –15

Note. ALW: Aluworks; CFAO: Compagnie française d’Afrique occidentale-Ghana; EIC: EnterpriseInsurance Company; FML: Fan Milk; GCB: Ghana Commercial Bank; HFC: Home Finance Company;MGL: Metalloplastica Ghana; MLC: Mechanical Lloyd; MOGL: Mobil Oil Ghana; PAF: PioneerAluminium Factory; PTC: Pioneer Tobacco Company; PZ: Paterson Zochonis; SCB: StandardChartered Bank; SPPC: Super Paper Products Company; SSB: Social Security Bank; UNIL: UnileverGhana; UTC-E: UTC Estates.

Source: Strategic African Securities (SAS), Monthly Newsletter.

HFC plans anothercorporate dollar bond

In a move likely to boost further the GSE’s nascent bond market, the mortgagefinancier and trader Home Finance Company (HFC) plans to issue a secondcorporate dollar bond in July. The company, which values the planned issue at$2.8m, says the structure will resemble its maiden issue last September, andanticipates the yield at around 7% annually. HFC’s $2m first issue, comprisingfive-year bonds each with a face value of $100, was 25% oversubscribed. Many

Ghana 15


buyers use the bonds, which can be paid for in cedis, to hedge against cur-rency depreciation.

Foreign investors buildstakes in Ghanaian banks

A consortium of Blakeney Management, Morgan Stanley Asset Management,Alliance Capital Management, JP Morgan Asset Management and New AfricaInvestors have taken a controlling stake in Social Security Bank (SSB). Theconsortium, which bought 40% of the equity in February, added a further 11%to its stake in early April. Meanwhile, financial sources in Washington say thatMalaysia’s Denko Industrial Corporation has paid over funds for a core stake inGhana Commercial Bank (GCB), the country’s largest deposit taker and its onlysizeable institution with foreign branches.

Cocoa and agriculture

The main-season cocoacrop is disappointing—

Cumulative cocoa purchases from farmers for the week ending April 3 totalledonly 299,166 tons, indicating a main crop that was disappointing, but notunexpectedly so. Hopes of a reprieve from the smaller midseason crop, whichruns from May to September, have faded after dry weather affected flowering.Analysts estimate this crop will total around 35,000 tons and are converging onforecasts that the total 1996/97 (October-September) crop will yield no morethan 330,000-340,000 tons, well below last year’s 404,000 tons.

While it is still too early to forecast the 1997/98 crop with much precision, theEIU’s World Commodity Forecasts (WCF) thinks that next season, assuming areturn to normal weather, will show an improvement to about 370,000 tons.This takes account of the higher production base that Ghana has establishedduring the past few years, after replanting with high-yielding hybrid trees andreform of the internal marketing system.

—but better prices willimprove earnings in 1998

While forecasting a modest upturn in global cocoa production in 1997/98,WCF reckons that consumption will continue to outstrip supply during thenext two years and drive the stocks/consumption ratio to around 36.8%, thelowest level since 1985/86. This augurs well for prices, which WCF forecasts torise from a 1996 average of 65.9 cents/lb ($1,452/ton) to 75 cents/lb($1,653/ton) this year and 91 cents/lb ($2,005/ton) in 1998.

As usual, Ghana Cocoa Board (Cocobod) has not disclosed the price at which ithas sold some of the current crop forward. The budget, which has erred on theside of caution in recent years, assumes 1997 earnings in the region of $450m.This would imply that the current crop was sold at even less than the 1996average price, and that the government is making little of the price recoveryanticipated for later this year. Although the government obviously knows moreabout its own transactions than we do, we are tempted to revise the 1997earnings projection upwards to $500m, on the assumption that Cocobod willsell some of the early 1997/98 deliveries forward to take advantage of the recentmore bullish outlook. Assuming that this is correct, and that the crop doesimprove to 370,000 tons, earnings could be as high as $741m in that year.However, our forecast for 1998 remains cautious at $650, strengthening thecurrent account slightly (see Forecast summary).

0

50

100

150

200

250

300

350

400

450

1992/9393/94

94/9595/96

96/97(a)97/98(a)

Cocoa production'000 tons

(a) EIU forecasts.Sources: Cocobod; EIU.

16 Ghana


Donors assess coffeepotential

While coffee production has languished at around 6,000 tons/year, experts saythere is plenty of potential for expansion. Officials of the World Bank, which isconsidering funding Ghana’s expansion plan to raise coffee output fivefold by2002, say the good robusta growing areas in Ghana are as good as those in majorproducers such as Uganda and Cameroon. Local interest in coffee growing haspicked up since international prices rose in 1995, but growers say bureaucracyand high interest rates are stifling expansion. Kumasi-based Goldcrest boughtthe 1,400-ha Otoka Farms Plantations from the government several years ago,and has rehabilitated 150 ha. It needs finance to continue the rehabilitation, buthas been waiting for a loan from the Agricultural Development Bank for oneyear. Help could also be on the way from the International Finance Corporation(IFC, the World Bank’s private lending arm), which will soon appraiseGoldcrest’s request for finance to rehabilitate three of its plantations.

The government outlinesplans to accelerate

agricultural growth

In his 1997 budget speech Mr Peprah reiterated the government’s concernabout the agricultural sector’s sluggish performance, and said the governmentwas designing a framework for an Accelerated Agricultural Growth Strategy,aimed at achieving year-round availability of reasonably priced food and agri-cultural raw materials. The strategy aims to accelerate the sector’s growth to5-8% annually over the medium term. While providing few specifics,Mr Peprah pledged active government “intervention” to support the estab-lishment of medium- and large-scale agricultural enterprises and to improvesmall farmers’ productivity. Mr Peprah also said the government would set upa “mechanism” to guarantee the credit requirements of commercial farmers,and set aside startup capital of C2bn to fund small farmers’ microprojects. Itwill also step up outgrower programmes for cereals and tubers, which will drawon the experience of successful ventures such as the Twifo Oil Palm project(1st quarter 1997, page 27).

Industry and mining

The EPA gives Tarkwa thegreen light—

The Environmental Protection Agency (EPA) in April finally gave Gold FieldsGhana the go-ahead for its proposed open-cast gold mining project in Tarkwa,south-west Ghana. The project, set to be the country’s second largest afterAshanti Goldfields Corporation (AGC)’s Obuasi operations, includes the Tarkwaunderground mine and an open pit heap leach operation, already under devel-opment. The mine is scheduled to start production towards the end of this year,and will initially produce 120,000-130,000 oz/year. Its main shareholders, GoldFields of South Africa (70%) and Canada’s Golden Knight Resources (17.5%),plan to build production up to 230,000 oz by 2000. They estimate that cashproduction costs will be around $210/oz during the first five years, and thatcapital costs will total $125m. Proven reserves are estimated at 13m oz.

—after delays overresettlement

The EPA had been expected to approve the Tarkwa project last year, but thedecision was delayed by concern about environmental and social issues, not-ably the resettlement of people living in the area, which gave rise to severallocal protests and demonstrations. The project requires the relocation ofaround 20,000 people, half of whom Gold Fields Ghana has already paid tomove away. Most of the rest have agreed to move to a new village that the

Ghana 17


company will build, but a small group of 100 remain in their properties in thehope of securing a more favourable settlement.

Mineral production, 1996(tons unless otherwise indicated)

Gold (m fine oz) 1.6

Diamonds (’000 carats) 272

Bauxite 383

Manganese 300Source: Local news reports.

The pace of explorationaccelerates—

The pace of exploration in Ghana’s minerals sector will continue to acceleratein 1997 and 1998, judging by the number of mining leases approved. Last yearthe government granted 100 leases compared with 70 in 1995. Demand forleases has been fuelled in part by reports of sizeable discoveries. Accordingto the Paris-based newsletter Africa Energy and Mining, Australia’s ResoluteSamantha says it is close to proving up to 1m oz of gold at its Obotan project.The company has already confirmed proven reserves of 900,000 oz, and saysthat drilling currently under way should increase the total. Deep drilling(below 250 metres) at Nkran Hill has already uncovered 9.4 grammes/ton (g/t)of gold over 14 metres at some intersections, and 7.3 g/t over 13 metres atothers. Resolute has also found gold at two other sites within its project area.The company plans to produce 126,000 oz/year.

At the adjacent concession, Canada’s Golden Knight and its partner, Leo Shield,say they have outlined an area containing 597,800 oz at the Abore North Zoneof its Oda River Concession in south-western Ghana. The duo are also drilling inthe Edubia zone, 4 km east of Abore North. Golden Knight currently has stakesin 14 concessions in Ghana, including 17.5% in the Tarkwa concession.Elsewhere, Canada’s West African Mining Corporation, known as SEMAFO,plans a feasibility study to determine resources at its Teleku Bokasso Concession.The company thinks the concession could contain 1.25m oz.

—but GMC orders a checkon Canadian samples

In March the Ghana Minerals Commission (GMC) ordered an independentcheck on gold samples produced by Canada’s Golden Rule Resources and HixonGold Resources, which are prospecting at Stenpad, south west of Kumasi. GMCconfirmed its move was prompted by revelations that another Canadian miningfirm, Bre-X, had falsified rock samples from its Indonesian mine, with direimplications for its investors. In January Hixon and Golden Rule said thatsamples taken from a 100-metre trench showed an average of 8.7 g/t. The firstsample contained 20.91 g/t, while the last had 19.02 g/t. Last November, thegroup said other samples ranged from 7.3 g/t to 54.4 g/t, indicating a potentiallylarge discovery.

Energy and infrastructure

The ports authorityannounces upgrading

plans—

The Ghana Ports and Harbour Authority (GPHA) announced on April 10 that itplans to raise $365m to finance further upgrading and rehabilitation of Temaand Takoradi ports. A new 15-year master plan for the ports, designed toaccommodate anticipated traffic into free-trade zones created last year, calls for

18 Ghana


the dredging of both ports to accommodate larger vessels, the construction ofnew dedicated container terminals and the addition of extra berths to handleliquid and dry bulk cargo. It aims to dredge the ports to a depth of 14 metres,from the current 9.6 metres, to enable larger container vessels to enter. Thenew berths would handle cocoa and liquefied petroleum gas (LPG).

—including privatisation In a new departure, the GPHA hopes to fund some of the work with commer-cial loans and private investment. To attract the latter, the authority will haveto privatise some services. It is currently talking to an unidentified US companyinterested in building and managing a container terminal that would operatemodern gantry cranes. Earlier rehabilitation (phases one and two of the portmodernisation programme are already completed) was financed entirely withaid money from the World Bank, Japan, Saudi Arabia and the EU.

Port throughput isimproving

Port throughput improved last year, thanks partly to a new crane and tugboats.The number of vessels calling at Tema port rose by more than 13% to 1,127, andaverage turnaround time fell by more than four hours, to 53.4 hours. Importsrose by nearly 8%, to 4.2m tons, although exports increased by only 1%, to690,000 tons. At Takoradi, the number of calling vessels rose by 23% to 500,while the turnaround time was slashed by more than one-third from the pre-vious year, to 40.1 hours. While import throughput improved by 15% to755,000 tons, exports fell by nearly the same margin, to 1.04m tons. Officialsattribute the fall in export volumes to higher value added on timber exports,which would imply less tonnage but more value. However, this does not squarewith preliminary data on timber exports for last year, which point to a generaldownturn in both timber sales and values (1st quarter 1997, page 27). Despitethe overall improvement, the ports, which were constructed in the 1920s andpartially rehabilitated in the late 1980s, appear to be operating at less than halfof capacity.

Port statistics

1995 1996

TemaVessels (no) 993 1,127Turnaround (hours) 57.7 53.4Imports (m tons) 3.90 4.20Exports (’000 tons) 681 690

TakoradiVessels (no) 407 500Turnaround (hours) 65.4 40.1Imports (’000 tons) 657 755Exports (m tons) 1.20 1.04Source: GPHA, cited in press reports.

A Tema Shipyard clientwants to expand

Another piece of good news for Ghana’s port industries is that an offshoreconstruction company, Global Offshore International (GOI), is negotiating toexpand its operations at Tema Shipyard and Drydock Corporation (TSDC). GOI,whose activities include building and repairing gas pipelines, has a shed at TSDCand is negotiating a ten-year lease on a berth, where it plans to install a crane.On April 9 Captain Peter Acy of GOI said the company wanted to make Tema itsbase for West African operations, and use Tema’s dry dock to repair pipelaying

Ghana 19


barges. If GOI does base its operations at Tema, it would be a significant coup forTSDC’s new majority owners, Malaysia’s Penang Shipbuilding, which acquired60% of the company in January and which wants to diversify TSDC’s operations(1st quarter 1997, page 24). The increase in exploration activity off the WestAfrican coast in Côte d’Ivoire, Ghana and Equatorial Guinea in recent years isgenerating much work for companies such as GOI, and the planned construc-tion of the 650-km West Africa gas pipeline from Nigeria to Benin promisesplenty more. The company has two large barges operating off the West Africancoast and says it plans to spend about $5m rehabilitating them. It is alreadyrefurbishing one of them, the 7,300-ton Global Comanche, at Tema and mooredits other, the 7,800-ton Global Cheyenne, in early April.

Ghana hosts a regionalenergy conference

Exploiting growing interest in West Africa’s energy reserves, the GhanaNational Petroleum Corporation (GNPC), the petroleum parastatal, hosted aregional oil and gas conference, which brought governments together withupstream companies keen to assess the region’s potential. Opening the confer-ence Mr Rawlings set out the challenges facing potential investors, includingweak regional infrastructure and dangers to the environment. Developmentand appropriate use of gas reserves could help preserve Ghana’s thinning for-ests, he said, pointing out that gas currently flared wastefully in Nigeria couldbe exported to Ghana through the West Africa gas pipeline, and used as asubstitute fuel for wood.

The Tano fields projectprogresses—

GNPC’s chief executive, Tsatsu Tsikata, has announced that the Tano offshoredevelopment project is moving ahead. The drilling of development wells willstart in July, two months after work on the generating barge is scheduled tobegin, and Mr Tsikata estimates the first electricity will be produced in mid-1998. The project, funded and guaranteed by commercial banks, the USEximbank and the US Maritime Administration (Marad), will produce electri-city from Tano’s estimated 200bn cu ft natural gas reserves, using barge-mounted power plants moored on the coast. A subsidiary of GNPC, WesternPower, will supply energy to the national grid for mines and other industries inwestern Ghana. GNPC plans to float Western Power on the GSE eventually,after it teams up with a strategic investor, preferably an international oil com-pany or utility. GNPC is already courting potential partners including a US gascompany, thought to be Enron.

—and more exploration isunder way

In late March two UK-based independent oil companies, Dana Petroleum andSeafield Resources, signed a preliminary agreement to explore and developoffshore oil and gas reserves in the Western Tano basin in a 2,341-sq km area,close to neighbouring Côte d’Ivoire. The agreement, which had yet to be rati-fied by parliament at the time of writing, provides for the acquisition of seismicdata this year, and a drilling programme to follow. Each company holds a 45%stake, with GNPC holding the balance. The deal follows Mr Peprah’s signing ofanother agreement with the US-based Nuevo Ghana Inc and South Korea’sYukong, to explore and develop Cape Three Points. All the agreements call oninvestors to shoulder 100% of the costs. If their discoveries are declared com-mercial, GNPC has an option to raise its stake to 20% of each project.

20 Ghana


Foreign trade and payments

The budget projects awider current-account

deficit in 1997—

A smaller cocoa crop and lower gold prices have prompted fairly pessimisticexpectations for the key exports this year, the government anticipating earn-ings of $448m and $621m respectively. However, without giving much detail,it appears to assume a partial recovery in timber, and that growth in othersectors will prevent a decline in overall visibles exports. The budget projects avery modest 2.6% increase in overall export earnings, to around $1.5bn. It alsoassumes a slightly higher rate of growth for imports—around 4.3%, to $1.9bn—which would widen the trade deficit by around $41m to $353m. This is pre-sented as the main contributor to a wider projected current-account deficit of$305m. The finance ministry forecasts net inflows of $405m on the capitalaccount, including net official loans of $240m and private capital net inflowsof $34m. The government will use this to finance the current-account deficit,while generating a surplus of $100m for the year. The EIU is slightly morepessimistic about the invisibles component of the balance of payments, andconsequently forecasts a current-account deficit of $375m.

Balance of payments ($ m)

1996 1997Budget Outturn Budget

Exports (fob)a 1,543.7 1,510.2 1,549.8 of which: cocoa 425.3 508.6 448.0 gold 678.4 612.4 621.3 timber 212.4 141.3 184.2

Imports (fob) –1,868.1 –1,823.0 –1,903.4 Non-oil –1,662.9 –1,563.9 –1,631.0 Oil –205.2 –259.1 –272.4

Trade balance –324.4 –312.8 –353.6

Net services –413.6 –421.7 –429.2 of which: investment income 130.5 144.7 147.9

Private transfers 329.8 276.1 313.9

Official transfers 214.8 205.6 164.1

Current-account balance –193.4 –252.8 –304.8

Capital-account balance 276.5 233.9 404.8Official capital flows (net) 266.5 258.2 240.2Private capital flows (net) 133.5 70.0 33.6Short-term capital flows (net) –123.5 –94.3 131.0

Overall balance 83.1 –18.9 100.0

a A later bulletin on the trade deficit reports that rock aluminium fetched $120m, diamonds $10mand sawn wood $90m.

Source: Budget data.

—and external accountsfor 1996 were worse than

expected

Despite a bumper cocoa crop and non-traditional export earnings exceeding allexpectations, Ghana’s external accounts performed well below expectation lastyear, with the current account recording a deficit of $253m. This was well inexcess of the $193m deficit projected in the 1996 budget, as well as our earlierestimates. Yet the main source of the shortfall was not the trade account, where

Ghana 21


the deficit was narrower than projected, but the transfers and invisibles sectors:while the 1996 budget rightly anticipated a fall in official transfers from the$260m received in 1995, it failed to foresee a decline in private transfers, whichcame to only $276m against the $330m projected in the budget. This shortfall,combined with lower than expected capital inflows, caused the overall externalbalance to move into the red by $19m.

The export sector’sperformance begs

questions

Mr Peprah’s account of the trade outturn raises some questions. In the 1997budget, Mr Peprah blames lower than expected exports (estimated at $1.51bncompared with projections of $1.54bn) on shortfalls in gold and timber vol-umes. Gold yielded $612m, $66m short of target, and timber brought in$141m, some $71m less than expected. But this provides only part of the story,given that the combined $137m shortfall from gold and timber was more thanoffset by the better-performing sectors. Cocoa delivered some $83m more thanexpected, at $508m, and non-traditional exports appeared set to deliver $400magainst a 1996 target of $250m. This implies underperformance in other sectorswhich are not detailed. The provisional outturn for imports, at $1.82bn, was$45m lower than expected.

Ghana’s debt profile ischanging—

The World Bank’s latest report on debt trends estimates that Ghana’s externaldebt stock rose by 7.5% in 1995, to $5.87bn. The report, formerly the annualWorld Debt Tables, now revamped and renamed Global Development Finance,shows that while growth in total debt is much in line with previous years, thecomposition of Ghana’s debt is changing. Obligations on export credits (debtguaranteed or funded by export credit agencies and export-import banks) roseby 36.3% to $612m, possibly the highest ever. While the World Bank reportgives no reason for this, it probably reflects a growing confidence by exportcredit agencies in Ghana’s creditworthiness which, after diving severely in the1970s and early 1980s, has gradually improved since the current governmenttook power in its previous guise as the Provisional National Defence Councilin 1982.

The report also shows that, despite rising debt, Ghana’s debt-service ratio fell to23.1% in 1995, the lowest for a decade. This reflects rising export earnings andgreater concessionality in Ghana’s obligations. In 1995 some 64.9% of Ghana’stotal external debt was concessional, compared with 56% in 1990 and 1991.Foreign exchange reserves, put at $775m by the IMF in 1995 were also thehighest for a decade. The reserves, which provided more than four months ofimport cover, are attributable to that year’s healthy export total.

—but net resource inflowshave dropped

Net resource inflows dropped to $1.08bn, reflecting a drop in portfolio invest-ment interest in 1995. This was inevitable, given that after the government hadsparked a literal goldrush with its offer of shares in its most attractive asset,Ashanti Goldfields Corporation, in 1994, it had no similarly attractive assets tosell the following year. Portfolio inflows moved from zero in 1993 to a stagger-ing $557m in 1994, before dropping to $267m in 1995. Global DevelopmentFinance shows that the government’s efforts to attract foreign direct investmentbegan to work in 1993 and 1994, after languishing in the $10m-25m range forseveral years. Direct investment picked up to $125m in 1993 and almost

22 Ghana


doubled in 1994 to around $233m. Investors ploughed in a similar amount thefollowing year.

External debt($ m unless otherwise indicated)

1994 1995

Total debt stocks 5,463 5,874

Long-term debt 4,180 4,595 Public & publicly guaranteed 4,148 4,568 Private non-guaranteed 32 27

Use of IMF credit 700 649

Short-term debt 583 631

Export credits 449 612

Disbursements 457 551

Principal repayments 248 273

Net flows on debt 312 348

Interest payments 119 97

Net transfers 193 251

Total debt service paid 367 370

Debt to export earnings (%) 389.7 366.5

Debt service to exports (%) 26.2 23.1Source: World Bank, Global Development Finance.

Net resource flows($ m)

1994 1995

Net flow of long-term debta 291 343

Foreign direct investment (net) 233 230

Portfolio equity flows 557 267

Grants (excluding technical cooperation) 218 238

Technical cooperation 88 108

Net transfers 1,207 999

Interest on long-term debt 82 59

Profit remittances on FDI 10 20

a Excluding IMF.

Source: World Bank, Global Development Finance.

Ghana 23


Quarterly indicators and trade data

Quarterly indicators of economic activity

1994 1995 1996

3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr

Agriculture Qtrly totals

Cocoa: exports ’000 tons 69.0 48.7 62.4 79.1 65.9 31.4 92.1 82.8 124.3 n/a

Prices Monthly av

Consumer prices, Accra: 1990=100 207.5 225.1 255.1 304.3 350.6 382.8 426.8 468.9 488.8 510.5

change year on year % 24.0 31.8 39.2 56.1 69.0 70.1 67.3 54.1 39.4 33.4

Cocoa, New York &

London US cents/lb 69.5 64.7 67.5 65.8 63.0 63.7 61.4 68.3 67.6 66.8a

Money End-Qtr

M1, seasonally adj: C bn 571.41 627.64 688.36 749.24 781.92 837.36 931.27 1,008.52 1,136.80 1,109.72

change year on year % 44.5 50.3 55.7 52.4 36.8 33.4 35.3 34.6 45.4 32.5

Foreign trade Qtrly totals

Exports fobb $ m 387.7 401.7 438.4 455.5 425.8 370.3 534.9 429.2 461.1 160.1c

cocoa beans “ 90.1 50.1 106.0 130.4 107.2 51.3 188.4 194.0 306.0 6.8c

Imports cifb ” 484.2 659.2 581.7 592.1 593.1 715.0 794.6 685.0 716.0 305.7c

Exchange holdings End-Qtr

Monetary authorities:

goldd $ m 80 79 78 80 79 79 80 80 79 78

foreign exchange “ 538 554 614 421 590 669 683 648 605 802

Exchange rate

Market rate C:$ 980.4 1,052.6 1,111.1 1,176.5 1,298.7 1,449.3 1,587.3 1,666.7 1,724.1 1,754.4

Note. Annual figures of most of the series shown above will be found in the Country Profile.a Average for 1 Qtr 1997, 65.4. b DOTS estimate, figures are subject to revision. c October only. d End-quarter holdings at quarter’s average ofLondon daily price less 25%.

Sources: ICCO, Quarterly Bulletin of Cocoa Statistics; IMF, International Financial Statistics; Direction of Trade Statistics, quarterly.

24 Ghana


Foreign tradea

($ ’000; monthly averages)

UK Germany USAb

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan Dec1995 1996 1994 1995 1994 1995

Exports to Ghana fobFood, drink & tobacco 1,142 1,467 336 422 2,848 3,109 of which: cereals & preparations 213 545 90 107 2,679 2,877Textile fibres 403 325 202 205 402 448Petroleum & products 458 331 240 274 426 638Chemicals 4,205 4,795 922 1,785 1,150 1,799Paper & manufactures 493 704 266 378 34 123Textile yarn, fabrics & mnfrs 308 314 70 61 191 166Non-metallic mineral mnfrs 380 597 118 97 38 140Iron & steel 944 1,080 137 411 191 87Metal manufactures 1,663 2,293 435 598 150 175Machinery incl electric 11,800 11,512 2,931 4,407 2,678 4,008Transport equipment 2,975 4,145 2,136 3,283 796 726Total incl others 31,580 39,017 8,643 13,900 10,114 13,891

Imports from Ghana cifCocoa beans 8,266 14,036 5,700 3,602 934 4,592Cocoa butter 776 1,448 1,662 3,433 0 0Wood 1,601 1,189 3,712 4,518 228 324Industrial diamonds 2 18 42 25 403 365Metalliferous ores & scrap 920 879 381 342 0 37Petroleum & products 0 257 146 371 2,032 0Non-metallic mineral mnfrs 1 3 8 4 11,940 9,987Aluminium & alloys 6,419 1,933 7,101 2,911 403 30Total incl others 21,548 24,778 20,097 17,285 17,132 16,897

a Figures from partners’ trade accounts. b US exports to Ghana averaged $13.9m and $24.6m per month in the period January-December 1995and 1996. US imports from Ghana averaged $16.9m and $14.9m per month in the period January-December 1995 and 1996.

Sources: UK HM Customs & Excise, Business Monitor, MM20; UN, External Trade Statistics, series D; USA Department of Commerce News, FT900.

Direction of tradea

Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-Dec Jan-DecExports fob 1993 1994 1995 Imports cif 1993 1994 1995

Germany 14,833 18,250 19,475 UK 29,667 26,833 34,100UK 8,167 16,083 19,425 Nigeria 27,750 28,583 32,300USA 16,583 15,583 15,367 Germany 9,750 9,500 14,733Togo 8,917 10,167 13,067 USA 19,667 11,417 14,400France 4,833 7,167 10,442 Italy 4,917 13,667 12,175Total incl others 103,333 132,917 140,825 Total incl others 4,917 13,667 212,975

a DOTS estimate.

Source: IMF, Direction of Trade Statistics, yearly.

Ghana 25


country report - international university of japan · may 29, 1997 summary 2nd quarter 1997 outlook...

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