US embassy cable - 05ACCRA2401

UNCLAS SECTION 01 OF 02 ACCRA 002401 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EFIN, EAGR, PREL, SENV, EMIN, GH, economy 
SUBJECT: GHANA ECONOMIC HIGHLIGHTS, OCTOBER-NOVEMBER 2005 
 
 
1. This report covers noteworthy economic events and 
activities in Ghana for October-November 2005.  The issues 
covered are: 
 
-- Government Submits Annual Budget to Parliament 
-- World Bank Review of Consultative Group Meeting 
-- World Bank Seminar on Fighting Corruption 
-- Treasury Advisors Host HR Management Workshop 
-- Fitch Rating Agency Reviews Ghana Rating 
-- Ghana Increases Cocoa Grinding Capacity 
-- Diamond Development Initiative Meeting 
-- Ghana Makes Strides in Air Quality Management 
 
Government Submits Annual Budget to Parliament 
--------------------------------------------- - 
2. President Kufuor submitted the draft annual budget to 
Parliament on November 10, fulfilling the GoG's ambitious 
promise to complete the 2006 budget prior to year-end 2005. 
Parliament has agreed to debate the budget during December, 
so that it will be ready for implementation at the beginning 
of the financial year, a first for Ghana.  In his letter to 
Parliament, Kufuor claimed the budget would usher Ghana "onto 
a new economic plateau which facilitates the process of 
attaining the status of a middle income country in the next 
decade within the framework of good governance, private 
sector development, rule of law, respect for human and 
property rights and prudent fiscal and economic management." 
 
3. The local press has questioned some of the data presented 
in the budget, especially for 2005 where the government 
predicts it will meet every target -- including 5.8 real GDP 
growth, despite high oil prices and lower cocoa revenues. 
Nevertheless, the IMF has certified that the budget meets the 
commitments of the Poverty Reduction and Growth Facility 
program, and it also increases the accountability of HIPC 
funds (a concern in the past).  The GoG commits to using 20% 
of HIPC funds to pay down domestic debt and 80% for poverty 
reduction. 
 
World Bank Review of Consultative Group Meeting 
--------------------------------------------- -- 
4. World Bank Country Director Mats Karlsson hosted a Donors' 
Heads of Mission meeting November 18 to review the results of 
the November 7 Consultative Group (CG) meeting between Donors 
and the GoG.  The CG resulted in three useful documents that 
together provide the development/assistance roadmap:  1) the 
Results Matrix, showing the Growth and Poverty Reduction 
Strategy's (GPRS) goals, expected outcomes, government 
actions, and donor contributions; 2) the Aid Harmonization 
and Effectiveness Matrix, which coordinates donor and GoG 
spending; and 3) the Development Partner Support Overview, 
showing projections of donor assistance levels.  The next 
GoG/Donors meeting is scheduled for June 2006.  Donors agreed 
to meet about every two months to coordinate, with the first 
meeting set for late February 2006.  The GoG hopes to 
finalize the GPRS by March 2006, and DPs will update the 
Support Matrix at that time.  Donors agreed to consider 
changing the name of the June 2006 meeting from "CG" to 
"Ghana Partnership Strategy." 
 
World Bank Seminar on Fighting Corruption 
----------------------------------------- 
5. The World Bank organized a November 15 seminar on 
"Achieving Middle Income Status:  The Need to Fight 
Corruption by Implementing the Procurement, Financial 
Administration and Internal Audit Acts."  Local radio station 
Joy FM broadcast the first three hours of the seminar. 
Presenters expressed concern about evidence of both 
increasing corruption in Ghana and increasing tolerance for 
corruption among Ghanaians.  The consensus was that Ghana 
must address this issue now, to prevent it from becoming the 
major obstacle to achieving middle-income status by 2015. 
Joe Abbey, the Executive Director of the Center for Economic 
Policy Analysis, and one of the most respected Ghanaian 
economists, emphasized that the GoG should act because 
corruption raises risks to doing business, therefore 
deterring investment or making it less productive. 
 
6. Participants agreed that the GoG had not yet fully 
implemented nor enforced the Procurement, Financial 
Administration and Internal Audit Acts, which combined should 
reduce government corruption, given that in 2004 public 
procurement totaled $750 million, or over 70% of the 
operational budget.  The seminar occurred around the same 
time that Transparency International published its 2005 
Corruption Perceptions report, with Ghana falling slightly in 
the rankings. 
 
Treasury Advisors Host HR Management Workshop 
--------------------------------------------- 
7. U.S. Treasury advisors working on tax reform in Ghana 
cosponsored a November 16-18 workshop for Ghana revenue 
agencies with the German Technical Cooperation (GTZ) Agency 
and the Ghana Revenue Agencies Governing Board (RAGB).  The 
workshop focused on three human resource topics:  job 
descriptions, performance appraisals, and career management. 
The revenue agencies ) IRS, VAT, Customs, and Large Taxpayer 
Unit -- plan to merge into one organization, and a unified HR 
system is critical.  Treasury and GTZ experts presented world 
best practices to the 35 participants.  Sixty five government 
officials and private sector representatives attending the 
opening session, which received widespread and positive media 
coverage. 
Fitch Rating Agency Reviews Ghana Rating 
---------------------------------------- 
8. EconChief met November 17 with Fitch Rating Agency 
officials to review recent economic events.  Fitch raised 
Ghana's Sovereign Credit Rating to "B plus" from "B with 
Positive Outlook" in March 2005, and is now conducting a 
regularly scheduled review.  The Fitch Reps heard a uniformly 
positive message about Ghana's economic and political 
policies from the IMF, World Bank, and Ghanaian private 
sector.  However, they said Ghana would need to accelerate 
the pace of structural reforms for Fitch to raise the rating 
beyond "B plus," and commented that Standard and Poor's would 
likely agree. 
 
Ghana Increases Cocoa Grinding Capacity 
--------------------------------------- 
9. On November 7, the Ghana Cocoa Processing Company (CPC) 
inaugurated newly installed machinery that doubles the CPC's 
capacity to grind raw cocoa beans.  The expansion is part of 
the GoG's policy of adding value to cocoa exports, instead of 
only exporting raw cocoa beans.  With the expansion, Ghana's 
grinding capacity is approximately 45% of total production, 
which totaled about 600,000 million tons in the 2004/2005 
season.  Local private banks financed the 22 million Euros 
expansion, with most of the equipment imported from the U.S. 
and Switzerland.  CPC plans is also rehabilitating a factory 
to increase processing of cocoa liquor, butter, cake, and 
powder.  (Note:  The GoG partially privatized CPC in 
September 2002 by floating 40% of its shares on the Ghana 
Stock Exchange.  CPC's board is, however, still dominated by 
GoG appointees.  The CPC exports over 90% of its products. 
End Note) 
 
Diamond Development Initiative Meeting 
-------------------------------------- 
10. The Diamond Development Initiative (DDI) took place 
October 28-30 in Accra, with the goal of improving the plight 
of Africa's diamond miners and to direct more of the diamond 
trade into formal channels subject to regulation and 
taxation. DDI aims to build on the regulatory structure of 
the Kimberly Process (which focuses on exports and 
international trade).   The conference focused on five 
themes: money, banking and parallel economies; policy and 
regulatory frameworks; social issues; technical issues; and 
security issues.  (Note:  readout provided by AmEmb Monrovia 
EconOff, who attended the conference.  End Note) 
 
Ghana Makes Strides in Air Quality Management 
--------------------------------------------- 
11. U.S. EPA organized an Outreach Workshop in Ghana November 
8-9 as a wrap-up to the initial phase of the EPA/USAID-funded 
Air Quality Monitoring Capacity-Building Project.  The 
purpose of the workshop was to provide information to 
stakeholders (government, public, media, donors) about the 
accomplishments in establishing an air monitoring system in 
Ghana, and also present on air quality management and hold 
technical consultations with government on air quality 
monitoring.  The project has three goals: promote local 
capacity to conduct air quality monitoring, analyze air 
quality data on key pollutants, and provide policymakers with 
information on air quality and its impact on public health. 
Preliminary results from the project, announced during the 
workshop, reveal that the phase-out of leaded gas starting 
2004 has resulted in a marked decrease of the toxic material 
in Accra's air. 
 
12. The project is unique in that it is the first to build 
local capacity to sustain a long-term monitoring program. 
Next steps include continued monitoring and health analyses, 
refining health-based air quality standards, public 
education, and advice on pollution mitigation options and 
behavioral change strategies.  U.S. EPA and the Research 
Triangle Institute are providing technical assistance under 
the project, with USAID funding.  UNEP is funding in-country 
costs, and Ghana's EPA coordinates the implementation 
committee consisting of government, NGOs, and academia. 
BRIDGEWATER