Review of World Bank assistance begins October
THE fourth review of the World Bank's assistance programme to Ghana begins in October this year. The Bank's team will conduct the review and later discuss the budget for 2006. In December this year, the Bank's Executive Board will also meet to review the fourth Poverty Reduction and Growth Facility. In June 2005, the Bank's staff visited Ghana to assess recent developments in preparation for the fourth PRGF review.
By March 2006, the Bank will conduct the fifth programme review and its board will meet in April for the fifth PRGF review. It is expected that the Bank will conduct the sixth or final programme review in September next year and launch a discussion on the prolonged use of International Monetary Fund resources. In October 2006, the bank's board will convene a conference for the final review of the PRGF.
Since May 2003, Government has been implementing a financial and economic programme with support from the PRGF. Last May, Government requested for the completion of the third programme review and disbursement of the fourth loan installment in an amount equivalent to SDR 26.35 million.
“Also, we are requesting an extension of the current PRGF arrangement to October 31, 2006, so that the final and sixth review (based on June 2006 test date) and disbursement could be completed,” noted Finance and Economic Planning Minister Kwadwo Baah-Wiredu.
On February 23, 2005, petroleum prices were adjusted upward as part of the commitment on petroleum sector deregulation made by President John Agyekum Kufuor during the discussions for the second review. The implementation of a new automatic adjustment mechanism to price petroleum products was met and an independent oversight body, the National Petroleum Authority, to monitor the pricing mechanism for petroleum products was established in June this year. At the time the IMF approved an arrangement under the PRGF, the GPRS targeted a decline in poverty over the long term and improvements in social indicators in line with the Millennium Development Goals. Accordingly, government polices aimed to raise GDP growth during 2003-2005 to an average of 5% a year; reduce inflation to the single-digit range and build gross international reserves to three months of imports of goods and services by 2005.
The goal of monetary policy will continue to be to reduce inflation. To achieve this goal, the Bank of Ghana will keep the pace of monetary expansion broadly in line with the projected growth of nominal income, implying an annual growth of reserve and broad money, excluding foreign currency deposits of 18% and 23% respectively during 2005.
By maintaining a firm stance, the central bank will be able to contain the indirect effects of petroleum price deregulation, thereby preventing an upward spiral of inflation.
The BoG has been developing its set of policy instruments, recently adding bank bills to complement treasury securities for conducting open market operations.
Furthermore, the BoG has promoted transparency by regularly and candidly assessing and reporting economic conditions and its policy stance through reports from the Monetary Policy Committee. The committee determined in March 2005 that the policy stance was appropriate to contain the indirect effects of the petroleum-related spike in inflation, leaving the BoG's prime rate unchanged at 18.5%.
Government continues to improve public expenditure management in a way that will enhance transparency and accountability. Fiscal reporting in the budget has recently been expanded to include the internally-generated funds of the Ministries, Departments and Agencies as well as the financial statements of statutory funds and the Social Security and National Insurance Trust. In addition, the legislative framework has been strengthened and the Budget and Public Expenditure Management System, the key instrument for the full implementation of the legal framework, has been deployed in a significant number of MDAs. In the coming period, the objective will be to follow through with the proper enforcement and implementation of several key pieces of legislation, particularly the Financial Administration Act, Financial Administration Regulations, the Procurement Act and the Internal Audit Agency Act. Government fiscal developments are primarily monitored from below-the-line BoG data. As no comprehensive audited accounts have been published during the last few years, above-the-line fiscal aggregates are monitored by a combination of cash-flow data from the BoG and various identifiable components of revenue and expenditure provided by the Ministry of Finance and Economic Planning and the Controller and Accountant General's Department.
The BoG produces revenue, debt and domestic financing data. The Aid and Debt Management Unit of the MOFEP provides external debt data and information on foreign project loan and grant disbursements. The CAGD provides data on non-interest recurrent expenditure and domestically financed capital expenditures. The compilation of a full set of integrated accounts that record stocks and flows, for all the sub-sectors of the general government sector, in accordance with GFSM 2001 guidelines, could largely improve and harmonise the fiscal accounts in Ghana. Comprehensive solutions to some of the data problems, however, may have to await the full implementation of the new BPEMS mechanism and the incorporation of IMF technical advice.
A joint Bank-IMF mission in 2004 assessed progress on monitoring poverty-related spending through the HIPC Assessments, Action Plans and a Fiscal Transparency Report on Observance of Standards and Codes was undertaken in July last year, and further technical assistance was provided by STA in March 2005. The BoG has initiated work on implementing the recommendations of a technical assistance mission on balance of payments statistics in 2000, including the introduction of surveys of key establishments. A key survey of shipping companies was introduced in 2004 but the companies at the time proved unable to submit the required data.
The collaboration among the various government agencies responsible for data collection has improved. A new immigration form to capture data on travel statistics, in line with the Tourism Satellite Account developed by an inter-institutional committee, was introduced in March 2005. The survey on private capital flows carried out in 2000 has been published and the BoG intends to implement the second phase of the capital flow project in September 2005.