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World Bank Approves US$215million Budget
Support for Ghana
Funds to help consolidate
macro-economic stability, public financial
management, public sector reform, energy and
social protection.
WASHINGTON, January 20, 2011 - The World
Bank board today approved a US$215 million
Poverty Reduction Support Credit (PRSC) to
the Government of Ghana. The goal of the
credit is to support the governments efforts
to consolidate ongoing fiscal stabilization
and promote the development objectives set
in the Ghana Shared Growth and Development
Agenda (GSGDA) Ghanas national medium term
development policy framework for 2010-2013.
Over the last decade Ghana has received a
total of six Poverty Reduction Support
Credits from the World Bank, averaging
US$100million per year in budget support
between 2003 and 2008, to support
implementation of the Ghana Poverty
Reduction Strategy (GPRS I and II). After
the fiscal crisis of 2008, an agreement was
reached to increase budget support in a
countercyclical manner to help Ghana reduce
its macro-imbalances in a way that does not
hurt growth, the process of job creation,
and the poor. Accordingly, a record total
support of US$300 million was delivered in
2009, and US$215 million now. It is expected
that this particular support will continue
to fall in the future as the
macro-imbalances continue to be reduced, and
that Banks efforts will shift back towards
support for job creation.
Our PRSCs have played an important role in
supporting the gradual stabilization of the
economy the reduction of inflation and the
prime rate in ways that preserve growth and
job creation, said Sebastien Dessus, World
Bank Lead Economist for Ghana. Indeed,
growth has continued during 2009 and 2010
and has remained well above 5% per year,
which is a remarkable record for an economy
undergoing deficit reduction.
The GSGDA has supported government actions
to tackle some of the key structural factors
behind macro-instability, including
long-standing public sector and energy
issues, while protecting the poor and
preparing for the oil era through effective
sector management and regulation.
The specific reforms which government had
undertaken to implement, within its medium
term development framework, included : (i)
establishment of a process for an efficient
cash management system for Government of
Ghana consolidated funds; (ii) establishment
of a process of compiling claims and
outstanding payments system; (iii)
preparation of a harmonized chart of
accounts for budgeting, accounting and
reporting for all its MDAs; (iv) completion
of a definitive roll of Subvented Agencies;
(v) implementation of recommendations of the
electricity financial recovery plan for the
Volta River Authority (VRA), the Northern
Electricity Department of the VRA,
Electricity Company of Ghana and Ghana Grid
Company (power utility companies); (vi)
assignment of institutional
responsibilities, budget, detail objectives,
action plan and timeline for the adoption
and use of a common targeting mechanism for
the Livelihood Empowerment Against Poverty
(LEAP); (vii) submission of a Petroleum
Revenue Management Bill to the Cabinet based
on broad consultations with stakeholders;
(viii) submission to Cabinet for decision a
revised Extractive Industries Transparency
Initiative (EITI) institutional framework to
include the oil and gas sectors.
The above commitments were all met during
the past year.
The current facility also outlines the
government commitments, again drawn from its
own medium term plan, that would need to be
met to allow for the next disbursement of
the budget support operation (PRSC8),
foreseen to happen in about a year. These
relate to the main challenges facing Ghanas
macroeconomic objectives, and include the
improvement of the quality of government
spending, job creation constraints, the
burden of arrears on job creation, and the
poor performance of state-owned enterprises.
The specific commitments include:
Action #1:The Government, through the
Ministry of Finance & Economic Planning, and
the Controller & Accountant Generals
Department, reinstates and enforces
commitment controls for all MDAs, such that,
no new arrears over their budget accrue
through uncontrolled spending on Item 3 and
4.
Action #2: The Government, through the
Ministry of Finance & Economic Planning,
develops and submits to Cabinet for decision
the second Financial Sector Strategic Plan,
FINSEP II.
Action #3: The Government, through the
Ministry of Finance & Economic Planning, and
the Public Sector Reform Secretariat,
develops and submits to Cabinet for decision
and announcement the action plan on
Subvented Agency reform (i.e. decisions on
those for closure, withdrawal of subvention,
those on reduced subvention and timelines
for implementation).
Action #4: The Government, through the
Ministries of Local Government & Rural
Development, and Finance & Economic
Planning, finalizes the Comprehensive
Decentralization Policy following all
consultations, and submits the Policy and
Implementation Plan to Cabinet for approval.
Action #5: The Public Utilities Regulatory
Authority establishes and implements an
electricity automatic tariff adjustment
mechanism.
Action #6: The Government, through the
Ministries of Energy, and Finance & Economic
Planning, submits to Cabinet for decision an
action plan regarding the restoration of
Tema Oil Refinery financial sustainability
Action #7: The Government, through the
Ministry of Employment and Social Welfare,
pre-tests and validates the Common Targeting
mechanism, in collaboration with Ministries
of Agriculture, Health, Education, Local
Government & Rural Development.
Action #8: The Government, through the
Ministry of Energy, submits to Cabinet for
decision a policy proposal establishing a
petroleum regulatory authority
To preserve macro stability while creating
jobs, we need to improve the quality of our
expenditures, and broaden the tax base in
order to collect more revenues. To do so, we
need to continue our efforts to reform
public financial management, review the
import duty exemption regime, improve the
management of our State Owned Enterprises,
continue to rationalize recurrent
expenditures, and remain vigilant in the
face of the threat of high debt burden. We
also need to finalize our preparations for
the oil era, notes Dr. Kwabena Dufuor,
Ghanas Minister for Finance and Economic
Planning. In 2011 in particular and over the
medium term in general, the Government of
Ghana is committed to continuing the fiscal
consolidation that it began in 2009 by
further reducing the fiscal deficit while at
the same time accelerating growth.
Beyond providing financial and technical
support, the World Bank is keen on enhancing
citizen engagement and participation in the
discussions leading to important policy
decisions, stresses Ishac Diwan, Country
Director for Ghana.
We welcome the fact that the government has
managed to reduce progressively macro
imbalances while preserving growth. Mr.
Diwan said. The role of civil society
organizations in keeping a close watch on
the quality of government expenditure is
very valuable, and the role of think-tanks
in supporting the emergence of fiscal
responsibility traditions in Ghana is also
critical, and we will endeavor to accelerate
our support to these civil society groups.
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