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08.03.2006 General News

Ghana And The $500m US Grant

By Statesman
Ghana And The $500m US Grant

...where is the dough? In April 2004, a few weeks before the Bush administration was scheduled to announce the list of countries eligible for assistance under an expanded foreign aid program, known as the Millennium Challenge Account, Ghana's Minister of Finance at the time, Yaw Osafo-Maafo said in Washington “We fully expect to qualify for the first tranche.” Indeed, Ghana qualified for 2004, again 2005 and, now, 2006. Yet, two years down the line, our officials have hitherto not been able to satisfy the Americans to give us the greenbacks.

And, we are talking here about a project that is expected to create over 700,000 jobs within five years and move about one million of our people out of poverty within a decade.

Ghana is asking for $500 million. If approved that would be the biggest single outlay to any country from the MCA.

For the two years that Ghana qualified yet missed out, $2.5 billion was in the MCA kitty to be shared among qualified countries. President Bush requested $3 billion for 2006 and pledged to increase annual funding for the MCA to $5 billion in the future.

Two weeks ago, our poorer neighbour, Benin achieved what Ghana has failed to so far get her hands on. The Millennium Challenge Corporation signed a five-year approximately $307 million Compact with Benin.

Perhaps, more telling is Vanuatu, a country with a population of 205,754 (July 2005 est) which on March 2 signed a five-year $65.69 million Compact grant agreement with the MCC. The MCC congratulated Vanuatu for a “well designed, comprehensive Compact and reaching this important milestone.”

Other countries that have gotten their hands on the MCA funds are Cape Verde ($110m, Jul 05), Georgia ($295.3m, Sept 05), Honduras ($215m, Jun 05), Madagascar ($110m, Apr 05) and Nicaragua ($175m, Jul 04).

To underline the priority attached to getting Ghana to access this special US grant, President John Agyekum Kufuor has set up a powerful Cabinet team, chaired by himself. Others include Paa Kwesi Nduom, Allan Kyerematen, Kwamina Bartels, Dominic Fobih, Richard Anane, Courage Quashiga and Charles Bintim. Also, since November a special task force led by the Public Sector Reform Minister has been set up to find the proverbial combination to unlock the safe to the US dollars.

Speaking to The Statesman, the man in charge of the project, Paa Kwesi Nduom stated that the agricultural development proposal submitted by Ghana includes the improvement of infrastructure in three areas in Ghana: the Southern Horticultural Area, the Afram Basin and the Northern Agricultural Belt. In all, 24 districts across the country are to benefit.

“Right now we are at the due diligence stage. We've done our technical work. The Americans have been sending experts down every week to do detailed analysis. By the end of May we should know the size of Ghana's compact,” Dr Nduom said.

But, Government is not only looking at the anticipated $500 million from the MCA. It sees the MCA project doing for Ghana's agriculture what the Volta Lake project did for Ghana's energy supply from the 1960s.

“We're promoting a vigorous social sector development attached to this.” This is a document for social infrastructural development for the selected 24 districts, at a cost of an extra $450 million. This is envisaged to be funded partly by the MCA, Government and other donor nations. The Regions to be affected are Volta, Eastern, Ashanti, Central, Western, Northern and Greater Accra. But, this depends on Ghana's proposal being approved by the MCC. First, to qualify for the MCA you must be considered by the Americans to be practicing 'good governance.' But once qualified, you need to convince the Americans for what you intend to use the money.

The rules are simple but strict. MCA assistance will go to those countries that have developed well-designed programmes with clear objectives, benchmarks to measure progress, procedures to ensure fiscal accountability for the use of MCA assistance, and a plan for effective monitoring and objective evaluation of results. Programmes must be designed to enable sustainable progress even after the funding under the MCA Compact has ended.

Until recently, all evidence pointed to Ghana botching up in preparing the documentation. However, so much progress has been made in recent months that Ghana expects to sign the Compact with the Millennium Challenge Corporation in May, with the money expected to flow in by July.

The good turn started last October when the Ghanaian government submitted a revised proposal to the MCC asking for a grant of $500m. The previous submission for $300m was rejected by the Americans.

Part of the MCA project is to build pack houses in the fields “so that the packing of farm produce will be done under hygienic, efficient conditions,” said Dr Nduom, adding that cooling facilities will also be built at the country's ports.

Besides, part of the funds will be used to improve rural banking, especially the system of clearing transactions, by networking the banks and enhancing their capacity to offer credit to farmers.

Integral to this project is the Mallam-Tetteh Quarshie trans-Ecowas highway, which will be expanded and upgraded. Also, over 1,000 kilometres of feeder and truck roads in the three target areas will be fixed.

Dr Nduom, who was instrumental in the formulation of the Ghana Poverty Reduction Strategy, said economic analysis shows that the impact from the MCA programme will be huge.

“Apart from increasing the incomes of rural food crop farmers and their families, the net contribution to the economy annually is expected to be about $160 million in today's prices.”

The Minister in charge of Public Sector Reform added that the overall MCA investment is estimated to have an economic rate of return of about 23.3 percent over a 20-year period.

Beyond the 700,000 direct jobs expected to be created by the MCA project, it is expected to support an additional 1.5 million people, “giving a total of over two million people who will benefit from the MCA investment.”

The country proposal for MCA funding was prepared in January 2006. It operates on the principle that aid is more likely to promote economic growth and raise living standards in countries that are pursuing sound political, economic and social policies. That is, in countries that are ruling justly, investing in their people, and promoting economic freedom. According to a top US official, the selection of the initial 16 MCA-eligible countries, of which Ghana is one, was based on an objective and transparent assessment of their policy performance on 16 indicators that are keys to increasing economic growth.

Ghana's document is based on her Growth and Poverty Reduction Strategy II, a main pillar of which is to develop the rural areas through the modernisation of agriculture. The strategic objectives of Ghana's MCA programme are to increase production and productivity of high value cash and staple crops and enhance competitiveness of agricultural products in regional and international markets. In March 2002 in Monterrey, Mexico, President Bush called for a "new compact for global development," which links greater contributions from developed nations to greater responsibility from developing nations. The President proposed a concrete mechanism to implement this compact -- the MCA - in which development assistance would be provided to those countries that rule justly, invest in their people, and encourage economic freedom. With strong bipartisan support, the MCC was established on January 23, 2004 to administer the MCA. Chaired by Secretary of State Condoleeza Rice, the MCC focuses specifically on promoting sustainable economic growth that reduces poverty through investments in areas such as agriculture, education, private sector development, and capacity building.