91619 IDA at Work Ghana: The Challenges of Becoming a Middle-Income Country G hana is becoming a middle income economy through years of sustained economic growth, enhanced by the recent discover- ies and commercialization of oil and gas. The country can become an example of how to break the “oil curse” through transparent and robust governance of the sector, and by using the windfalls to achieve the MDGs, in particular, those related to sanitation and malnutrition. Challenge The discovery of oil challenges Ghana to create a legal framework which ensures transparency in the administration of the natural resource, and on keeping the country competitive in the face of the potential Dutch disease. Ghana also needs to maintain macro- economic stability to guarantee its citizens low interest rates, low inflation and a stable currency so it does not accumulate high fiscal and current account deficits as it did at the end of 2008. It would also need to adapt its economic policy to the needs of a middle income country, with a more substantive role for the private sector. Approach The International Development Association’s (IDA) strategy to assist Ghana’s progress towards becoming a middle income country involves a division of labor with other Development Part- ners that ensures more targeted interventions. It focuses on three main fronts: first, improvement of private sector competitiveness, including modernization of the agriculture, transport and energy sectors, and the enhancement of natural resources management; second, on human development, by improving service delivery in education, health, water and sanitation, as births in 2008. Antenatal care has improved. well as social protection; and third, the pro- Women giving birth with the attendance of motion of good governance, improved effi- skilled personnel increased from 46 percent ciency and reach of public services through in 2003 to 59 percent in 2008. Neonatal mor- ICT, and the strengthening of social responsi- tality has declined and immunization cover- bility. IDA will continue to provide Ghana with age has increased from 69 percent in 2003 to budget support for critical reforms. 79 percent in 2008. Results In the water sector, Ghana is on course to achieve the MDG target of 78 percent of the IDA’s most important contribution in Ghana population having access to improved water has been its support to the country’s sustained by the year 2015. Access has increased con- economic growth of 5-7 percent over two sistently in rural areas over the last couple of decades, and continued poverty reduction decades, while a major effort will be needed from 39.5 percent in 1999 to 28.5 percent in urban areas to keep up with the high urban in 2006. Virtually all indicators in the infra- growth. Sanitation, however, remains a big structure sector, such as water, sanitation, challenge and Ghana is among the countries electrification, roads, have improved in the with lowest access to improved sanitation last two decades: access to improved urban/ facilities in Africa. IDA’s support to water and rural water sources from 89/68 percent cov- sanitation has included a number of projects erage respectively in 2005 to 90/74 percent that have benefited both urban and rural coverage in 2008; mobile phones per 100 areas. people increased from 13 to 50 from 2005 to 2008; and the electrification rate increased Ghana’s Information Communications Tech- from 54 percent in 2007 to 59 percent in nology (ICT) sector has also registered one 2009. In the education sector, primary school of the most significant growth rates in Africa. completion rates and access have improved The Government’s proactive policy and regu- steadily with completion increasing from 86.3 latory interventions, combined with support percent in 2009 to 87.1 percent in 2010, and from the World Bank Group and other develop- access increasing from 89.4 to 101.3 percent ment partners, has resulted in a competitive between 2005 and 2010. Improvements in and vibrant industry with significant private access to education across the country have sector investment. This has translated into a been supported under the IDA-financed Edu- telephone penetration rate of over 60 percent cation Sector Project. This is being followed in 2010 (from less than 3 percent in 2003), by a Skills and Technology development proj- over 50 percent decrease in local and inter- ect to help with formal and informal training national call rates, and a threefold reduction systems and the adoption of new technologies in internet access prices from US$3 to less in economic sectors prioritized in the govern- than US$1/hr. There has also been a decline ment’s development plans. in the time required for business registration from 129 days in 2002 to 33 days in 2009. This IDA has also supported improvements in positive business climate has translated, in health. Under-five mortality rates have been turn, into strong performance of exports and reduced from 111 in 2003 to 80 per 1,000 live in the country’s ability to draw on foreign 2 savings by tapping the international capital tance (ODA) from 19 development partners— market, attracting foreign direct investors, Canada, France, Denmark (DANIDA), Ger- and continuing to receive large remittance many, Italy, Japan, Netherlands, South Korea, inflows from Ghanaians living abroad. Ghana Spain, Switzerland, United Kingdom (DFID), is also a leader in the Extractive Industries United States (US), IDA, African Development Transparency Initiative (EITI) through which Bank, European Union, United Nations Group, civil society monitors payments from mining IFAD, GAVI Alliance, and Global Fund—total- companies to local and central government, ing US$1,489.5 million in disbursements in and the transparency of the transactions. 2010. Ghana continues to enjoy the support of a whole range of development partners, as IDA Contribution well as the new BRIC partners (Brazil, Russia, India, China and South Africa). IDA is a long term partner of Ghana, and it has been active in adapting its strategy to the Moving Forward current needs of Ghana’s Shared Growth and Development Agenda. Most recently, when oil The Government of Ghana is preparing for a and gas were discovered, IDA moved quickly new phase of international relationships as it to support the Government strengthen new continues on its growth path. IDA is assisting institutions for oversight and train profession- Ghana by focusing its support on strengthen- als of the new hydrocarbon industry. IDA has ing Public Private Partnerships to deal with also worked closely with Ghana by supporting infrastructure challenges; development of it to play a leading role in the West Africa large-scale commercial agriculture, with energy market, by connecting the West Africa more added value that allows the country Gas Pipeline from Nigeria to Benin, Togo and to produce crops competitively at a larger Ghana, including lowering electricity prices scale; to address the geographical inequali- in all these countries and helping intercon- ties between the poorer north and the richer nect the market with power transmission south with a social protection network; and lines, roads for the north-south and coastal finally, to have stronger institutions with the corridors, and agricultural innovation. IDA’s public accountability to use the country’s current commitment to Ghana amounts to natural resources. US$1.2 billion for a portfolio of 21 projects. Disbursements amounts have been increasing Recently approved IDA operations are sup- since FY2009. porting fiscal decentralization with a proj- ect in Local Governments ($175 million), Partners vocational training on demand driven basis ($70 million) Skills and Technology Develop- Ghana is very active in pursuing Paris/Accra ment project, among others. There are also harmonization efforts with development part- important projects for FY2012 such as the ners through the Multilateral Development Commercial Agriculture Project ($100 mil- Budget Support group. The group has a set of lion), Fisheries ($40 million) and the Public agreed benchmarks used by all partners and Private Partnership Project ($45 million). there are working groups in fifteen sectors. Ghana with IDA support is also connecting Ghana received official development assis- government through its electronic network 3 under the e-Ghana project which will allow sound legislation and strong institutional the country to have a modern public financial capacity to ensure a prudent, transparent management system. IDA is also contributing and accountable use of these new resources. to the modernization of land management in The role of civil society in influencing policy Ghana, by making sure all stakeholders are and in shaping well-informed developmental included. debates, as well as tracking actions, has thus become more crucial, and underlies the As in many natural resource-endowed coun- importance of establishing access to timely tries, the arrival of oil in 2011 provides Ghana and unbiased information on public spending with both important opportunities and sub- and developmental results. IDA will support stantial risks. The government is fully aware efforts to strengthen participation of local of the need to further pursue economic think-tanks and civil society organizations, stabilization over the next several years, in promoting a demand-driven, socially while encouraging growth through reforms in accountable approach—one that fosters civic infrastructure, agricultural modernization, engagement—to deepen the government’s private sector development and investment commitment to improving the lives of its in social services. IDA will continue to pro- people. vide support to the Government on all these efforts, including the use of oil revenues for Last Updated April 2011. development initiatives. This will require http://www.worldbank.org/ida 4