Document o f The World Bank

FOR OFFICIAL USE ONLY

Report No. 43477-GH

INTERNATIONAL DEVELOPMENT ASSOCIATION

PROGRAM DOCUMENT FOR A PROPOSED CREDIT

IN THE AMOUNT OF SDR 15.8 MILLION (US$25 MILLION EQUIVALENT)

TO

REPUBLIC OF GHANA

FOR A

GHANA AGRICULTURE SWAP (AGSSP II)

May 2,2008

Sustainable Development Department Country Department 1, Ghana Africa Region

This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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GHANA - GOVERNMENT FISCAL YEAR January 1 -December 31

AgSSIP APRM APL CAADP CAS C E M CEA CIDA CFAA DFID DPs DPO EL4 ERPFM EPA EU F A B S FASDEP FBO GEF GFDRR GLSS GIDA GIS GoG GPRS GSS GDP GN-P HEII HIPC IBRD IDA

CURRENCY EQUIVALENTS (Exchange Rate Effective as o f (December, 10 2007)

Currency Unit Cedis U S $ l .oo GH# 1.05

ABBREVIATION AND ACRONYMS

Agricultural Services Sub-sector Investment Program Afr ica Peer Review Mechanism Adaptive Program Lending Comprehensive African Agriculture Development Program Country Assistance Strategy Country Economic Memorandum Country Environmental Analysis Canadian International Development Agency Country Financial Accountability Assessment Department for International Development Development Partners Development Policy Operation Environmental Impact Assessment External Reviews o f Public Financial Management Environmental Protection Agency European Union Food and Agriculture Budget Support Food and Agriculture Sector Development Policy Farmer Based Organization Global Environment Facility Global Facility for Disaster Reduction and Recovery Ghana Living Standard Survey Ghana Irrigation Development Authority Geographical information System Government o f Ghana Ghana’s Growth and Poverty Reduction Strategy Ghana Statistical Service Gross Domestic Product Gross National Product Horticulture Exports Industry Initiative Heavily Indebted Poor Countries International Bank for Reconstruction and Development International Development Association

.. 11

FOR OFFICIAL USE ONLY

IFC IMF JAS JSAN LSC LAP LDP MDBS MDRI MDGs MoFEP MoFA MoFi M o U MTEF NAP NEPAD NEAP NPCDR NREG NSBCP PPMED PER PCDR PEFA PFM PRSC PSIA PHRD ROSC SDR SLM UNDP WAAPP WDR

International Finance Corporation International Monetary Fund Joint Assistance Strategy Joint Staff Advisory Note Large Scale Commercial Land Administration Project Letter o f Development Policy Multi-Donor Budget Support Multilateral Debt Relief Initiative Millennium Development Goals Ministry o f Finance and Economic Planning Ministry o f Food and Agriculture Ministry o f Fisheries Memorandum o f Understanding Medium-Term Expenditure Framework National Action Program New Partnership for Africa’s Development National Environmental Action Plan Non-Poor Complex Diverse Risk Natural Resources and Environmental Governance Northern Savanna Biodiversity Conservation Project Policy Planning, Monitoring and Evaluation Directorate Public Expenditure Review Poor Complex Diverse Risk Public Expenditure and Financial Accountability Public Financial Management Poverty Reduction Support Credit Poverty and Social Impact Analysis Japan Policy and Human Resources Development Trust Fund Report on the Observance o f Standards and Codes Special Drawing Rights Sustainable Land Management United Nations Development Program West Africa Agricultural Productivity Program World Development Report

Vice President: Obiageli Katryn Ezekwesili

Sector Manager: Karen Mcconnell Brooks Country Director: Ishac Diwan

Task Team Leader: Christopher Jackson

This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I t s contents may not be otherwise disclosed without Wor ld Bank authorization.

Ghana GHANA AGRICULTURE SWAP (AGSSIP II)

TABLE OF CONTENTS

CREDIT AND PROGRAM SUMMARY ..................................................................................................... vi I . INTRODUCTION ............................................................................................................................. 1 I1 . COUNTRY CONTEXT .................................................................................................................... 2

RECENT ECONOMIC DEVELOPMENTS IN GHANA .......................................... 2 MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY ...................... 6

A . B .

THE GOVERNMENT’S PROGRAM ............................................................................................ 17 Government’s Response to Global Trends in Food Prices ................................................... 20

BANK SUPPORT TO THE GOVERNMENT’S STRATEGY ..................................................... 23 LlNK TO CAS ...................................................................................................................... 23 COLLABORATION WITH THE IMF AND OTHER DONORS ....................................... 23 RELATIONSHIP TO OTHER BANK OPERATIONS ....................................................... 25 LESSONS LEARNED .......................................................................................................... 28 ANALYTICAL UNDERPINNINGS .................................................................................... 30 PUBLIC EXPENDITURE MANAGEMENT: A CHALLENGE TO IMPLEMENTING FASDEP I1 ............................................................................................................................ 32

THE PROPOSED GHANA AGRICULTURE DEVELOPMENT LENDING PROGRAM ...... 38 OPERATION DESCRIPTION ............................................................................................. 38

OPERATION IMPLEMENTATION ............................................................................................. 53 POVERTY AND SOCIAL IMPACTS ................................................................................. 53 FIDUCIARY ASPECTS ....................................................................................................... 55 IMPLEMENTATION, MONITORING AND EVALUATION ........................................... 58 ENVIRONMENTAL ASPECTS .......................................................................................... 61 RISKS AND RISK MITIGATION ...................................................................................... 62

In . I V .

V . VI .

LIST OF TABLES Table 1 Selected Economic Indicators. 2002-10 ..................................................................................................... 3 Table 2: Composition of Agriculture GDP 2000 . 2006 ......................................................................................... 4 Table 3: Allocations across GPRS I1 Pillars ($ million) .......................................................................................... 6 Table 4: Internally Generated Funds for MoFA and MoFi, 2006 - 2007 (GH$ millions) .................................... 37 Table 5: The Ratio of Actual to Budgeted MoFA Expenditure by Item; 2004 - 2006 .......................................... 37 Table 6: Actual Expenditure as a Percentage of the Approved Budget and Budget Received .............................. 45 Table 7: Progress against Agriculture DPO 1 prior actions ................................................................................... 46

Table 9: DPO Reporting and Responsibility Assignment ..................................................................................... 59 Table 10: Assessment o f Risks .............................................................................................................................. 63

Table 8: Policy Matrix for the Agriculture DPO ................................................................................................... 49

LIST OF FIGURES Figure 1 : Policy Diamond for Agriculture Based Countries ................................................................................. 11 Figure 2 : Share o f Expenditure (actuals) MoFA and Cocoa (1998-2006) ............................................................ 35

LIST OF BOXES Box 1: Objectives. Strategies and Performance Targets of FASDEP I1 ................................................................ 22 Box 2: The Ghana-Joint Assistance Strategy ........................................................................................................ 23 Box 3: Gender Impacts of the FBO Development Fund ........................................................................................ 41 Box 4 : The Role o f Agriculture in Reducing Regional Disparities ...................................................................... 54 Box 5: Ghana’s Public Financial Management (PFM) System - Key findings of PEFA ....................................... 57 Box 6: Good Practice Principles on Conditionality ............................................................................................... 60

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ANNEXES ANNEX 1 : LETTER OF DEVELOPMENT POLICY ......................................................................................... 64 ANNEX 2: OPERATION POLICY MATRIX ..................................................................................................... 69 ANNEX 3: IMF Assessment Letter ....................................................................................................................... 79 ANNEX 4: LIST OF ON-GOING ANALYTICAL WO RK.................................................................... 82 ANNEX 5: Country at a Glance ............................................................................................................................ 86 ANNEX 6: MAP IBRD 36148 ......................................................................................................... 87

The Agriculture Development Policy Operation was prepared by a World Bank team consisting o f Gayatri Acharya (AFTAR - TTL for the majority of the preparation); Chris Jackson (AFTAR - TTL at latter stages) ; Patience Mensah (formerly of AFTAR); E l Hadj Adama Toure; Christine Kimes (AFTRL); Christine Richaud (OPCCE); Edward F. Dwumfour (AFTEN); Paola Agostini (AFTEN); Beatrix Allah-Mensah (AFTCS); John Nyaga (AFTFM); Robert W. DeGraft-Hanson (AFTFM); Ferdinand T. Apronti (AFTPC); Manush A. Hristov (LEGEF); Rajiv Sondhi (LOAFC); Carlos Cavalcanti (AFTP4); Daniel K. Boakye (AFTP4); Rose Abena Ampadu (AFCW 1) and Victoria Bruce-Goga (AFCWl). Overall guidance was provided by Ishac Diwan (Country Director, AFCWl), Karen Mcconnell Brooks (Sector Manager, AFTAR); Katherine Bain (AFCWl); Martien Van Nieuwkoop (AFTAR) and Stephen Mink (AFTSN). Peer reviewers were: Dina Umali-Deininger (Lead Agriculture Economist, SASDA), Derek Byerlee (Senior Adviser, DECWD) and Shashi Kolavalli (IFPRI). The World Bank team worked in collaboration with the Government o f Ghana’s Ministry o f Food and Agriculture, the Ministry of Fisheries and the Ministry of Finance and Economic Planning as well as Development Partners including Canadian International Development Agency (CIDA); German Development Cooperation; Agence Franqais de Dkveloppement (AfD); and other Development Partners engaged in agriculture support in Ghana.

V

CREDIT AND PROGRAM SUMMARY

Ghana GHANA AGRICULTURE SWAP (AGSSIP II)

Borrower

Implementing Agency

Amount

Terms

Tranching

Description

Benefits

Republic Of Ghana

MINISTRY OF FOOD AND AGRICULTURE

SDR 15.8 mi l l ion (US$ 25 Mil l ion)

Standard IDA terms: 40-year maturity with a 10-year grace period

Single tranche

The objective o f this programmatic series o f operations i s to support the Government's efforts to encourage agriculture led growth to achieve the objectives o f the GPRS II. In harmony with other development partners, the proposed DPO wil l support the implementation o f Ghana's Food and Agriculture Sector Development Policy (FASDEP). The DPO will build on the reforms, policies and activities supported under the f i rst phase o f AgSSIP. A three year program i s proposed with annual disbursements o f $25 mil l ion for the first DPO and $15 mi l l ion each for the 2"d and 3'd DPOs. The proposed credit is noted in the Joint Assistance Strategy and Country Assistance Strategy for Ghana. I t consists o f single tranche disbursement o f SDR 15.8 mi l l ion (US$25 mil l ion equivalent). The proposed operation would be followed by two additional Agriculture Development Policy Operations covering the same pol icy areas and designed to deepen and consolidate the implementation o f reforms introduced under the present oDeration. This operation wil l support planning and budgeting processes that take into account the multi-sector and economy wide linkages that support agricultural growth. By linking lending to the implementation o f the revised FASDEP and the evolution o f the Sector Wide approach, this operation will support the sector's objective o f supporting broad based growth and increased private sector investments. Using the Government's budget procedures, the proposed operation will also help

vi

Risks

I Operation ID Number

I strengthen the decentralization process, especially as related to agriculture. The main risks are: (i) political risk associated with the 2008 election campaign (low); (ii) continued delays in decentralization process (low); (iii) delays in the completion o f the SWAP framework (moderate); (iv) delays in budget allocations and releases (moderate). Releases to the sector to support the implementation o f the revised FASDEP may not be made in timely or adequate manner over the next 3 years. This risk could be mitigated by deepening the dialogue on expenditure frameworks and the budget process, including GPRS II financing discussions held at the PRSCMDBS level. Triggers associated with improved budget execution are also included in the DPO and the broader MDBS to address this concern. P102675

vii

IDA PROGRAM DOCUMENT FOR A PROPOSED GHANA AGRICULTURE SWAP (AGSSIP 11)

I. INTRODUCTION

1. The proposed operation i s a single tranche Credit to support the implementation o f the Food and Agriculture Sector Development Policy in Ghana for SDR 15.8 mi l l ion (about $ 25 mi l l ion equivalent) to the Republic o f Ghana on standard IDA terms. The proposed operation i s the f i rst o f a programmatic series o f credits and constitutes an integral part o f the Bank’s strategy to support the implementation o f Ghana’s Growth and Poverty Reduction Strategy (GPRS II) and Food and Agriculture Sector Development Policy (FASDEP). The GPRS 11 emphasizes the importance o f the transformation o f agriculture and rural livelihoods to achieving poverty reduction. Development o f the agriculture sector i s central to the likely success o f the vision outlined in the GPRS II. The proposed operation i s the first in a proposed series o f 3 such operations, covering the period 2008 to 2010, and aims to support this objective.

2. The proposed Agriculture DPO reflects support for the 2007 Food and Agriculture Sector Development Policy (FASDEP II) which has taken on lessons learnt under the implementation o f FASDEP I and the last decade o f agricultural growth in the country. I t builds on the achievements under the Agricultural Services Sub-sector Investment Program (AgSSP) and analytical work carried out over the last few years, as wel l as ongoing analytical work by the World Bank, Government o f Ghana and other Development Partners (DPs). The process has been consultative with a broad range o f stakeholders and coordinated with agricultural development partners leading to commitments on part o f the development partners to support a sector wide approach for agricultural development.

3. The revision o f the FASDEP has created an opportunity for development partners to align their support for the agriculture sector strategy and the proposed operation i s in line with this. Bilateral and multilateral donor assistance will continue to play an important role in supporting the implementation o f the GPRS 11 and the FASDEP. This sector oriented budget support is therefore an important step to support the principles o f harmonization, providing a framework for pol icy dialogue and decisions linked to the implementation o f the FASDEP and the GPRS II overall.

4. The Bank has contributed to the Multi-Donor Budget Support (MDBS) through a series o f PRSCs (PRSC 1 to 5). These PRSCs have tackled many issues o f governance and macro-management, including key pol icy issues relevant at the sector level. This experience suggests that budgetary support can be an appropriate instrument for development assistance. However, the PRSC, and the M D B S more broadly, are not appropriate instruments to deepen the policy dialogue at the sector level since they necessarily focus on cross-cutting targets. At the same time, the Government has not fully

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addressed budget needs at the sector level, relying predominantly on investments through rural development and agriculture projects. Such investments have provided for faster agricultural growth and diversification o f exports. Nonetheless, strengthening the sector’s ability to plan and implement using budgetary resources instead o f project resources i s a critical element o f implementing a coordinated and internally consistent development policy in the sector which also addresses the need o f the sector at the local government level.

11. COUNTRY CONTEXT

A. RECENT ECONOMIC DEVELOPMENTS IN GHANA

5. Ghana’s economic performance continues strong, notwithstanding disruptions in power supply in the latter part o f 2006 that persisted into the f i rst hal f o f 2007. Economic growth reached 6.3% in 2007, slightly below the 6.4% real GDP growth level recorded in 2006. The recent growth performance reflects a skewed sectoral breakdown, however. Output growth has been concentrated in mining (up 20%), in finance, insurance, and real estate (up 15%), in construction (up 11%), and in services (up 11% on the good performance o f wholesale trade - up 25 percent). The performance o f these sectors greatly outweighed the output declines in manufacturing (down 2.3%) and electricity and water production (down 15%). There was also the stimulus provided by fiscal policy, with Government services rising by 6 percent, and yielding an additional 1% o f real GDP growth (Table 1).

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Table 1 Selected Economic Indicators, 2002-10 _ _ _ _ ~ ~ ~

2002

2003

2004

Real GDP Consumer Export Import Growth Balance o f Gross Credit to the Growth Price Index Growth Index Index Payments International Private Sector

(2000=100) Current Reserves (% o f tota1l3 Account (months

Deficit MG&S)

(% change)’ (2000 =loo)

(% o f GDP)’

4.5 15.2 106 98 5.3 1.9 47.3

5.2 23.5 128 108 0.5 3.2 52.3

5.6 11.8 144 149 2.7 3.3 49.7

6. The good performance o f the export sector, as wel l as sustained capital inflows, has not been enough to reverse the weakening in the country’s external position, however. End-2007 foreign currency reserves are estimated to have reached 2.9 months o f import coverage, maintaining around the same level o f import coverage reached at end-2006. However, since about one-third o f the projected end-year reserves are unused proceeds o f the recent Eurobond issue, in the absence o f these unused bond proceeds the import coverage would have fallen to 2.4 months. The weakening in the country’s external position reflects primarily the recent surge in imports, which are estimated to have risen by about 17% on strong increases in o i l and non-oil imports. Oil imports have r isen in line with the increase in crude o i l prices in international markets, while non-oil imports have increased as a result o f higher consumer demand and rising food prices. The latter explains the need for additional financing through this DPL, since additional budget support i s necessary to preserve the Government’s planned expenditures that support farmers’ activities. Preserving these programs i s important because the overall public sector deficit i s projected to reach 11.5% o f GDP in 2008, up from the already high 9% o f GDP recorded in 2007. The additional financing is also important because, in l ine with these projections, the balance o f payments current account deficit is projected to widen further to 12.6% o f GDP (including official transfers) in 2008, up from 11% in 2007.

7. Overall poverty headcount in Ghana decreased between 1991/92 and 1998/99 from 51.7% to 39.5% and to 28.5% in 2005/06. The Country Economic Memorandum (CEM) (2007) notes that national rural poverty has decreased from 64% in 1991/92 to 50% in 1998/99 to 39% in 2005/06. Moreover, the depth o f poverty among rural households as measured by the poverty gap has also fallen over the same period from 0.24 to 0.18 to 0.14.

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8. This remarkable achievement i s in part due to the strong growth o f the agriculture sector over this period. Cocoa earnings this year amount to about $1.2 billion, exceeding that from gold. Farmers now receive 70% o f international prices, increasing the impact on the local rural economy. The agricultural sector experienced sustained growth rates averaging around 5% per annum’ between 2001 and 2006 (compared to 2.1% in 2000), in excess o f the population growth rate estimated at 2.7% per year. Over the period 2000 - 2005, crops and livestock sub-sectors grew by 30% in real terms - equal to an average increase o f 5.4% per annum (Table 2).

Table 2: Composition of Agriculture GDP 2000 - 2006

Source: CEM background paper o n Agriculture

9. The C E M background paper on agriculture further notes that aggregate growth in the agricultural sector - including fishing and forestry - has exceeded 4% in every year since 2000. W h i l e the structural distribution o f growth across agriculture, manufacturing and services has remained fairly balanced over the last decade, it i s clear that the agriculture sector i s also moving away from a heavy reliance on cocoa and building i t s strengths in non-cocoa sectors. There has been investment in the promotion o f non- traditional exports, some o f which i s starting to be reflected in export earnings. Exports played an important role - the increase in production o f cash crops o f 10.4% over the period 2001 - 2006 accounts for 40% o f the increase in GDP. Horticultural exports are currently at $65 million, a 132% increase over the baseline established in 2000, and marine fish exports have also grown substantially. Agricultural exports (including timber) are the primary source o f foreign exchange accounting for over ha l f o f export receipts in 2006. A review o f the sector suggests substantial scope to increase physical yields; opportunities to substitute low-value production for higher value crops, including those for export, and further scope to attract domestic processing and increased value addition.

10. Along with the PRSC (as part o f the Multi-Donor Budget Support), the Agriculture DPO seeks to allow a multi-year commitment to the Ghana Growth and Poverty Reduction Strategy (GPRS II). Ghana’s first national Poverty Reduction Strategy (GPRS I) was finalized in 2002 with the aim o f generating growth, controlling inflation and increasing expenditure on programs targeting the poorest and most vulnerable in society. W h i l e much o f the government’s macroeconomic agenda was achieved during the GPRS I period (2003-2005), high-growth issues, gender equality, inclusion and social

’ Data are f rom M o F N PPMED. There are number o f different estimates o f agricultural GDP, with significant differences between sources. A s part o f the improvements in sector monitoring, M o F A will need to work with Ghana Statistical Services (GSS) to agree o n a consistent set o f sub-sector statistics.

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protection required further attention. Although there has been an improvement in the national poverty levels over the years, poverty at the regional level has worsened in some regions. In the Upper West Region for instance, the poverty level increased from 66.9% in 1992 to 88.25% in 1999 (GSS, 1999 and 2000) and it remained at 87.9% in 2005 (GSS, 2007). A second generation GPRS was produced by government in late 2005, with an ambitious overarching goal o f raising average per capita income levels to middle- income levels by 2015, rising from about $500 in 2007 to the $1,000 range.

11. The GPRS 11 (2006-2009) i s an agriculture-led strategy which seeks to diversify the economy's structure from dependence on cocoa to cereals and other cash crops for export markets. Other sectors considered to have long-term potential include: tourism, information and communication technologies, light industry based on textiles and garments, and value-added to minerals. The GPRS II emphasizes policies to promote equitable growth that wil l be sustainable over the medium to long term. GPRS II presents its strategies and actions according to three thematic pillars: Private Sector Competitiveness; Human Resource Development; and Governance and Civic Responsibility. Development partners consider that the GPRS 11, together with the recommendations o f the Africa Peer Review Mechanism (APRM), provides an acceptable basis for aligning support over the short to medium term although a greater strategic depth in the discussion o f trade-offs, a more credible costing o f GPRS 11 priority programs, and a robust results framework are st i l l required and are starting to be addressed by the National Development Planning Commission.

12. GoG estimates resource needs for GPRS II implementation to be about $2 bi l l ion per annum. About one-third o f this i s allocated to Pillar I: Private Sector Competitiveness. Within the agriculture sector, as specified in the costed GPRS 11, public investments are focused on the food security element. The GPRS II notes that much o f the productivity enhancements are expected to come from private sector activity supported by limited public investments and a conducive institutional framework (hence the attention to institutional reform under this strategy; see Table 3). The financing framework for the GPRS II identifies a significant funding gap. W h i l e the PRSC 5/ M D B S contributes additional budgetary resources, i t i s not sufficient to fully meet financing needs and a financing gap remains for GPRS II implementation even with budgetary support. Noting this, the Agriculture DPO seeks to support the financing needs o f the GPRS 11, with a specific focus on increasing and improving agriculture outcomes.

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Table 3: Allocations across GPRS I1 Pillars ($ million)

Source: GPRS I1

13. The Ghanaian economy continues to experience real GDP growth and macroeconomic stability despite disruptions in power supply and increases in domestic prices for retail petroleum prices. A growth rate o f 6.2% for 2006 occurred despite disruptions in power supplies. Cocoa remains an important element o f this growth performance. The pol icy distortions that characterized Ghana’s agricultural sector until 1983-84 have been reduced substantially. The exchange rate, which now floats, i s no longer consistently overvalued; trade policies are relatively even in their treatment o f different sectors, with relatively uniform tar i f fs and logical exemptions, for example for inputs and products conducive to improved health and education. Nevertheless, specific distortions s t i l l afflict Ghana’s agricultural sector. Import-competing sectors are protected by the standard tariff o f 20%, while there is some implici t taxation o f exports.

14. That said the recent rapid rises in global food prices present additional challenges for Ghana. Analysis indicates that foreign exchange receipts resulting from increased earnings from cocoa and gold has off-set the rising food import bill. However, projections suggest food prices could continue to rise posing continued threats to headline inflation. Moreover, by weakening purchasing power it r isks undermining recent progress in poverty reduction.

B. MACROECONOMIC OUTLOOK AND DEBT SUSTAINABILITY

15. The outlook for 2008 is for real GDP growth to reach 6.7%, with economic growth driven by the good performance in the mining sector, high public sector expenditure, and strong public and private sector investment activity (including new power generation investments). This outlook i s contingent o n continued high prices for Ghana’s export commodities, and actions on four fronts: (i) carrying out the Government’s planned investments in the infrastructure, especially the increase in thermal-electric power generation capacity and the upgrading o f the power transmission

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system; (ii) sustaining progress on the private sector development (PSD) agenda; (iii) accelerating overall exports, including by reaching a consensus on a new WTO- compatible trade agreement with the EU, and by taking steps to manage potential o i l revenues; and (iv) taking actions aimed at enhancing the efficiency o f investment and raising productivity throughout the economy. While cocoa exports have seen an almost 90% increase in volume since the beginning o f the decade, i t has been the increase in prices for cocoa and gold that have been driving the increase in exports revenues. The prices for these two commodities have r isen considerably from the l ow levels earlier in this decade, increasing by 60% and 125% for cocoa and gold, respectively, over the last 7 years. Although it appears that the prices for these two commodities might have reached a peak, if they remain at their presently high levels, these exports should continue to ensure sustained foreign currency revenues for the foreseeable future. . 16. The widening o f the current account deficit also reflects in part the weakening o f the country’s fiscal stance. Since the second hal f o f 2006 government expenditures have risen faster than revenue collections, leading the overall fiscal deficit to reach 7.5% o f GDP in 2006, which is estimated to have r isen further to 9.0% o f GDP in 2007. The main drivers o f government spending have been the public sector wage bill, reaching almost 10% o f GDP as a result o f pay awards that triggered further requests for pay increases within the public sector. Energy sector subsidies are also one o f the factors placing pressure on the budget, as budget subsidies need to bridge around a 1% o f GDP difference between the revenues from end-user utility tar i f fs and the actual cost o f power generation and distribution. While the utility tariff adjustment announced by the Public Utilities Regulatory Commission (PURC) on October 19, 2007 was an important f i rs t step in bridging this gap, the rising crude o i l prices in international markets continuously shiRs the goal o f full cost recovery electricity tariffs.

17. The economic developments on the fiscal and external fronts have been reflected in interest and exchange rates. Between early September 2007 and mid-March 2008 domestic interest rates on 91-day treasury bills rose by just over one percentage point, while the exchange rate (cedis to U S dollar) declined during this same period by 5.2% (against an already declining US dollar). The Bank o f Ghana’s Monetary Policy Committee has responded to these developments in two separate occasions. First, in mid- November by raising i t s prime rate to 13.5%, up from the 12.5% level i t had been kept over the previous year, and then again in mid-March by raising the prime rate to 14.25. These changes are important because foreign investors currently account for between 20% - 25% o f the domestic bond market, and are more l ikely than domestic investors to respond to these developments. Also, rising inflation has recently become a concern. The 2007 end-year consumer price index (CPI) rose to 12.7%, up from 10.9% in 2006, and maintained i t s upward momentum in January, February and March 2008, reaching 12.8%, 13.2% and 13.8%, respectively. These price developments reflect supply-side shocks coming from external developments (e.g., higher crude o i l prices, higher imported food prices), and domestic sources (e.g., higher food prices following the drought and flood in Northern Ghana, adjustments in utility tariffs), as wel l as buoyant domestic demand.

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18. Notwithstanding the need to accommodate higher spending on energy sector subsidies, Government spending maintained i t s pro-poor orientation in 2007.2 Poverty reduction expenditures are projected to have ended 2007 slightly lower than in 2006, reaching 9.4% o f GDP compared to the 10.5% o f GDP recorded in 2006 but up from 8.5% reached at end-2005. At the current levels, poverty reducing expenditures account for just over one-third o f overall expenditures. The budget execution o f these poverty reducing expenditures over the f i rst 9 months o f 2007 was very uneven, however. There were higher rates o f budget execution in some programs with large payrolls, such as primary health programs, as well as in priority investment programs, such as rural water and feeder roads. Spending o n basic education programs and poverty focused agricultural programs lagged behind, however.

19. Ghana’s recent non-concessional borrowing confirms that the country is at a moderate risk o f debt distress. On. September 27, 2007, Ghana issued a $750 mi l l ion Eurobond on international capital markets at a fixed coupon o f 8.5% with a ten-year bullet repayment o f the p r i n ~ i p a l . ~ The Government o f Ghana also signed, on September 25, 2007, a $292 mi l l ion loan from the China ExImbank to be used toward the construction o f a hydro-electric power plant at the Bui Dam. This loan from the China ExImbank carries an average interest rate o f 6.1 %, with a 17-year amortization period, a 5 years grace period, and a zero grant element. The debt servicing cost o f the Eurobond and the China Exhbank loan are projected to reach just under 0.5% o f GDP in 2008, or about 1.4% o f exports. Thus, the new borrowing increases in the immediate short run the country’s debt service ratios to GDP and to exports by about one-fifth, up from the 2.2% o f GDP and 6.5% o f exports o f goods and service envisioned by end-2008 in the April 2007 debt sustainability analysis (DSA).4 With time these increases in the debt service to GDP ratio and debt service to exports are expected to decline because o f sustained real GDP growth and continued export growth, notably in case o i l export revenues begin flowing as planed in 2010.5’6 In the absence o f any increases in exports due to future o i l

Poverty related expenditures include the following expenditures from the appropriation act: (i) Education - non-formal education, pre-school, basic education, technical & vocational education, teacher training, and education management and supervision, plus a fraction o f the expenditures on special education (go%), general administration (50%), etc; (ii) Health - district health services, regional public health expenditures, oncology expenditures, funding for the international red cross, and health learning materials, plus a fraction o f the expenditures on regional health support services (50%), psychiatric hospital (50%), regional clinical care (50%), health training institutions (70%), institutional care (60%), etc; (iii) Agriculture - crop services provided through the regional agriculture development uni ts and projects funded by IDA; (iv) Works and Housing - the community water and sanitation, rural housing and rural hydrological drainage; (v) Feeder Roads and Transport - feeder roads and road safety; (vi) Energy - rural electrification programs; and (vii) Other - national vocational training, social welfare programs, etc. The coupon on the bond translates into a re-offer (before management and transaction fees) o f 387 basis

points over IO-year U S Treasuries, or 326 basis points over the US dollar LIBOR, and a zero grant element. The real GDP and export growth rates during the 2008-2026 period, as assumed in the joint 2007 DSA,

were, respectively, 5.3 and 6.7%. These revised projections reflect estimates provided by the IBRD policy division for O i l Gas and Mining

COCPO staff, and assume very conservatively that o i l exports would begin already in 2010 at just over US$850 million, peaking at just under US$2.0 bi l l ion in 2012, and then gradually declining to zero by 2020.

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revenues, however, the new borrowing would have removed any ambiguity o f the current risk rating, confirming Ghana as a country at moderate risk o f debt distress agencies.

20. Assuming that actions aimed at increasing exports and at raising the efficiency o f investments are implemented, the projected growth outlook would be supported by rising exports and maintaining investment to GDP ratios at present levels. National savings are projected to recover to historical levels, meeting over three quarters o f the investment needs by 2011. While the difference between savings and investment ratio suggests a relatively small contribution from external savings, it i s important to note that estimates o f public sector savings include official transfers in the form o f grants, as well as HIPC and MDRI debt relief. If one excludes official transfers, however, the external current account gap would average around 17.5% o f GDP for the 2008-10 period, meaning a projected overall external financing requirement during this projection period averaging $3.5 billion. After accounting for donor project and program assistance (including an annual average o f just under $200 mi l l ion in HIPC and MDRI debt relief), another $700 mi l l ion on average would be provided by concessional and non-concessional loans, leaving an average financing gap o f around $2.0 bi l l ion for the 2008-10 period, which i s expected to be covered by project financing and additional budget support from development agencies, as well as non-concessional funds for the capital markets and project financing from official export credit.

21. It is because o f this positive outlook, the country’s strong institutions, and the positive business environment that Ghana’s policy framework is assessed as adequate for the purpose o f the proposed operation. The I M F ’ s assessment letter (Annex 3) commends the country’s authorities for their willingness to balance last year’s pre-election fiscal slippages with a tighter planed budget for 2008, and countervailing monetary policy. The targeted overall fiscal deficit to GDP ratio in 2008 i s 6%, down from an estimated 9% outcome in 2007. To achieve the fiscal target, the IMF notes, additional fiscal measures aimed at containing further increases in the wage bill and ensuring a closer alignment between end-user electricity tar i f fs and cost recovery levels are required. To address possible expenditure overruns in both wages and transfers to state-owned enterprises in the energy sector, the ongoing technical assistance program o f the IMF envisions joint work with the Bank and other development agencies operating in Accra aimed at strengthening the Government’s own efforts to improve public expenditure and financial management, as well capacity building in areas such as aid coordination, monetary forecasting, debt management, and statistics.

Under this baseline scenario, real GDP growth i s assumed to grow by 6.2% on average between 2008 and 2012, and then by 6.1% over the remainder o f the projection period, representing a 1.4% increase over historical average o f the period 1995-2005 and 0.7% above the real GDP growth assumed in the joint Bank- IMF DSA conducted in 2007. T h i s projected increase in real GDP i s contingent on sustained export growth (projected to average 8.4% during the period from 2008 to 2026, slightly higher than the 6.7% used in the 2007 joint Bank-IMF DSA), as well as the result o f the projected increase in infrastructure investment related to the drive to restore the country’s electricity generation capacity and each the MDGs.

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C. AGRICULTURE DEPENDENCY AND CONTRIBUTION TO GDP

22. A central message o f both the World Development Report 2008 entitled “Agriculture for Development”, and IEG report entitled “World Bank Assistance to African agriculture” i s that better agricultural performance is essential to overall growth, food security and poverty reduction. African governments are pursuing these objectives including through coordinated actions and support provided through NEPAD’s Comprehensive African Agriculture Development Program (CAADP). The Bank’s Africa Action Plan commits i t to support agricultural growth objectives, giving increased attention to agriculture and laying out targets for agricultural GDP growth, and land and labor productivity. The commitment i s now being translated into an operational road-map for achieving these goals through support to a scale-up o f public sector delivery o f core public goods and services and tackling o f policy and institutional constraints to improved sector outcomes. However identifying the right mix o f policies and adequate financing to make a fundamental change in agricultural performance remain constraints.

23. The WDR analysis suggests that agriculture strategies in general should reflect four objectives in a “policy diamond” that set priorities in the agriculture-for- development agenda. The first objective is establishing efficient markets and value chains. The second i s accelerating smallholder entry to agricultural markets and raising smallholder innovativeness and competitiveness. The third i s improving livelihoods and food security in subsistence agriculture and low-skilled rural occupations. The fourth i s increasing employment and investment opportunities in the rural economy while enhancing skills to allow the rural poor to seize these opportunities or to successfully migrate. Together these objectives drive the three pathways out o f poverty-farming, rural employment, and migration. W h i l e a l l four objectives are necessary, the relative priority changes according to how dependent countries are on agriculture. For countries which are largely agriculture based, the pol icy diamond for agriculture based countries i s as in Figure 1. Based on this analysis, harnessing agriculture’s potential contribution to African development wil l require success in two priority areas: improving smallholder competitiveness in high-and medium-potential areas, where returns to investment are highest and improving livelihoods, food security, and resilience in remote and risky environments.

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Figure 1 : Policy Diamond for Agriculture Based Countries

1 Building markets and value chains + +

Smallholder-based revolution;

promote exports

3 Securing I ivet i hoods

and food security of subsistence farmers

+ + e Source: WDR 2008 team. Note: The number of diamonds indicates the relative priorityfor policy attention, assigning 10 points across objectives.

Securing livelihoods and food security

24. This policy framework presented in the WDR has direct relevance to agricultural policies in Ghana. Firstly, agriculture in Ghana is a critical element in vulnerability reduction strategies. According to a recent survey o f 20 districts around Ghana, respondents identified twelve 'frequent' natural disasters and shocks, and another eleven "less frequent" events. These include natural events such as floods, draught, bush f ire and livestock diseases as wel l as the consequence o f human activity including alien herdsmen, livestock theft and soil and water pollution (MoFA 2007). Another survey in 25 districts in five regions7 identified a set o f risk coping strategies, many o f which are agriculture- based. The survey identifies 5% o f households as vulnerable, characterized as those with extremely low returns to labor, high dependency ratio, poor quality housing, and land holdings o f less than 0.5 hectare.

' The survey took place in the following regions: Upper West, Upper East, Northern, Brong Ahafo and Ashanti Regions.

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Supporting small holder agriculture and promoting exports

25. Second, an important feature o f Ghanaian agricultural performance has been the increasing role o f the small holder farmer in supporting growth. The WDR notes that growth in agriculture i s increasingly driven by the rapidly expanding demand for livestock products and high value crops and that the poverty impact o f growth in the agricultural sector wil l depend on the extent to which the poor can connect to these new growth processes, either as smallholders or as laborers. Agricultural growth will rest on a balance o f food staples, traditional bulk exports, and higher-value products, including livestock, with different groups o f smallholders l ikely to participate in each. Staple crops dominate current production, and they will continue to do so in the near future. Demand for food in Sub-Saharan Africa i s expected to reach $100 bi l l ion by 2015, double i t s level o f 2000. The recent history o f agricultural growth in Ghana indicates that i t can in fact support value addition for key export and cash crops through increasing small holder access to credit, irrigation, market information, research and technologies. The cocoa and horticulture sub-sectors are areas where coordination and value chain consolidation has resulted in significant improvements, even for small holders. A key factor has been the increasing focus on organization o f small holder groups who can coordinate better to access key inputs and markets.

26. Cocoa production has clearly been an area o f successful contribution by smallholder agriculture to growth and poverty reduction. Ghana has a comparative advantage (and receives a premium price) in cocoa, and this remains the backbone o f the rural economy for many areas o f the country. While this strong dependence on one export crop makes the sector vulnerable to external price fluctuations, strong management by the Cocoa Board (Cocobod), an increase in quality and improved extension services have had a positive impact on the sector and on the economy. Reductions in production and marketing costs, stabilized farm gate prices and greater use o f the local buying companies are s t i l l required actions to improve efficiency and enhance farmer resilience to a decline in world market prices. Another important concern is the sustainability o f production, as the expansion o f the cultivation o f cocoa in primary forest areas, when trees get old and soil fertility exhausted, wil l put pressure on forest areas. Children’s education, non-farm income opportunities and improved working conditions are increasingly being demanded by cocoa farmers and wil l need to be addressed as the industry transforms. Value addition in the cocoa sector remains low, with very little processing taking place but with a strong focus to increase this and secure success in this sector. In 1998/99 about 11% o f domestic production was processed into butter, liquor, cake and powder as wel l as small amounts o f finished chocolate; i t i s currently about 15%. Processing capacity i s restricted to about one-fifth o f current production suggesting that substantial investment i s required if more domestic cocoa bean production is to be processed domestically. Export earnings from existing processed cocoa already amounts to $102 mi l l ion (2002 - 2004), having increased three-fold over the previous decade.

27. A second emerging sector, also characterized by small holders, is that o f horticulture. The Horticulture Exports Industry Initiative (HEII) supports the development o f Ghana’s Horticulture Export Industry which has seen a dramatic increase in volumes

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exported and the value o f these exports over the last few years. HEII has effectively responded to the crisis caused to the pineapple industry by helping small scale farmers convert their varieties to the variety demanded by the market. Once the conversion is complete, smallholders who contribute over 40% o f exported pineapple should be able to export 23,000mt o f MD2 by November 2009. A rehabilitated cold storage facility at the Sea Port (Shed 9) wil l support improvements in fruit quality and perhaps an increased market share, with the potential for the industry to reach a capacity o f 300,000mt by 2010. In addition, a certification scheme for accessing high quality planting materials o f mango, citrus and pineapple coupled with knowledge o f improved production techniques has been initiated. Mango i s likely to become an important export crop for smallholders, and has the additional attraction o f being cultivated in the North as well. About 70% o f 2,000 out-growers have been supplied with planting materials o n a 50% grant basis. Publdprivate collaborative research has been facilitated by the PublicPrivate Research Committee and a Geographic Information System (GIS) Database Management System has been established to provide reliable and accessible data for planning.

Addressing productivity constraints

28. Applying these lessons to other commodities and farmers in order to secure livelihoods and improve smallholder competitiveness will require attention to productivity. Macro-economic simulations highlight the potential o f stronger agricultural growth based on improved yields and improvements in marketing (IFPRI, 2006). As i s true for much o f Africa, however, expansion in agricultural production has come largely from expansion o f cultivated areas and less so from productivity gains. In 2002 the area under cassava, yams, cocoyams and plantain was 54% greater than in 1993 while the area under cereals increased by 30%. Only cassava demonstrated a clear increase in average yield, though only about 8% higher than the average at the beginning o f the decade. Rice and mil let registered yield gains in 2002, but in the past three years their average yields have been lagging. Compared to demographic growth (2.7% per year), production per capita (agricultural labor productivity) increased by 8%. Increase in production resulted from 5.3% improvement in average yield (land productivity), and 26.3% expansion and diversification o f cropped areas, particularly for groundnut, cowpea, plantain, yam, and maize. At the same time, performance in production output contributed to food security improvement and additional income to the farmers. Compared to the NEPAD/ CAADP target o f 6%, this performance has been good although there is room for improvements in yields o f staple crops in particular.

29. L o w yields o f staple crops continue to be an area o f concern both because o f the impact on poverty and for meeting domestic demand. Besides an increase in the yield per hectare o f cassava, yields per hectare o f the main other crops have remained stagnant over the last 5 years. Yet, broad-based crOp production contributes to 20.3% to GDP growth, ahead o f forestry and cocoa, and therefore plays a very important role in increasing Agricultural GDP. The technology to raise productivity exists in many cases but farmers are yet to h l l y exploit these opportunities. Technology delivery has been hampered in the past by ineffective delivery systems. Adoption i s l o w because o f disconnects between the research and extension system, and in the access to critical complementary inputs. In

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some instances farmers lack the incentives to make productive investments. A more diverse system of delivery, using public-private partnerships, needs to be developed, which can cater for the more complex needs o f the entire commodity chain needed for successful development of high value crops and livestock products.

30. Irrigation and improved water resource management wil l also be an important factor in meeting growth targets and addressing rainfall variability in marginal areas. The Agricultural Services Sub-sector Investment Project (AgSSIP), together with GoG and other donor support, supported the increase o f irrigated agricultural production through the rehabilitation o f 9 irrigation schemes, covering 1,864 hectares o f rice (70%) and vegetables (30%). However, improving the management o f these schemes, increasing water user fees for maintenance, addressing electricity tar i f fs are needed to sustain and take full advantage o f these investments. Development o f small scale irrigation in the country wil l depend on the implementation o f a sound irrigation pol icy that addresses the business environment issues, and devolves more responsibility to water users associations in selection o f required irrigation equipment, routine maintenance and rehabilitationl renewal o f irrigation infrastructures and equipments. The enactment o f the irrigation pol icy i s therefore critical and attention needs to be paid to the sustainability o f these schemes and future developments.

Developing markets and value chains

3 1. The third priority for agriculture based countries, as identified by the WDR, is that o f developing markets and value chains. Here, Ghana has started to make progress which it will need to sustain. Food safety and good agricultural practices to meet international standards and access to new markets has been recognized by the country as a necessary aspect o f agricultural policy. A harmonized pesticide list, to guide pesticide usage in line with international standards, has been published by the Environmental Protection Agency. The Ghana Standards Board laboratory i s being upgraded for IS017025 certification. Farmers are being trained in Good Agricultural Practices and are being trained to meet EurepGap certification requirements which are expected to offer smallholders better access to the European market. Implementation o f the Horticulture Export Industry Initiative (HEII) has promoted collaboration between development partners, public sector and the industry*.

Environmental sustain ability

32. Agricultural growth, and consequently economic growth, i s undermined by increasing land degradationg. Improving environmental sustainability to both safeguard current trends and boost the ability o f agriculture to contribute to the national

* HE11 has had a strong impact on the horticulture industry and has served as a model for other programmes. The AfDB’s Export Marketing and Quality Awareness Programme (EMQAP); Mi l lennium Challenge Account (MCA) programme and USAID’s Trade and Investment Programme for Competitive Export Economy (TIPCEE) have drawn lessons f rom the HE11 and the public-private partnership approach.

land resources in Ghana. Land degradation (mainly caused by unsustainable agricultural practices) i s estimated to affect 69% o f

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development agenda, and in particular, to address the ago-ecological constraints o f marginal areas i s part o f the development through agriculture agenda. As noted by the WDR, agriculture i s a major user - and potential abuser - o f natural resources. In Ghana, i t i s estimated that soil erosion in agricultural lands costs about 2% o f the national GDP annually, thus reducing Ghana’s potential for growth. However, current trends o f increasing production through area expansion, decreasing or stagnant soil productivity, rising competing demands for water, higher demands for electricity, and increasing concerns about environmental costs by consumers o f exported commodities, are motivating a shift in the agriculture sector towards adherence to sustainable agricultural practices and environmental management. Increasing agricultural productivity through improved and sustainable technologies and practices (Le. sustainable land management) and addressing issues o f environmental sustainability are critical elements for the agricultural sector to have positive impacts on the rural population. In addition, moving to a broader recognition o f agriculture as a major provider o f environmental services (such as sequestering carbon, managing watersheds, and preserving biodiversity) also needs to be recognized and addressed within the implementation o f the sector policy.

Fisheries: supporting livelihoods, value chains and the resource base

33. In the sub-sector o f fisheries, this aspect o f sustainable use to contribute to and maintain economic growth i s particularly relevant. Ghana has access to substantial marine and inland fisheries, including a 550km coastline and the largest inland lake in Africa, as well as many rivers and ponds. Fishing i s an important source o f income for local communities: Data from the GLSS IV revealed that communities o n the coast derive 40% - 50% o f their incomes from fishing, while for those on the Volta these figures are as high as 75% - 80%. (GDP data only captures Volta lake inland fisheries and the coastal fishing resource - and even these data are subject to wide margin o f error.) I t is reported that the fishing industry provides livelihoods for 1 - 2 mi l l ion fishermen, processors and traders, including 200,000 marine and inland fishermen and 500 public servants responsible for fishing-related policy and services. Marine fishing is characterized by (i) artisanal coastal fishing; (ii) domestic commercial fleet and (iii) illegal encroachment into Ghana’s Exclusive Economic Zone (EEZ) by foreign vessels. According to IMM (2003), there are 200 fishing communities along Ghana’s coastline with 3 10 beach landing sites. There are no recent estimates o f the extent o f illegal commercial fishing in Ghanaian waters. Inland fishing i s focused on Lake Volta, home to around 1,200 fishing communities producing around 50,000mt per annum as well us other (unrecorded) communities dependent on fishing in other lakes, rivers and ponds. I t i s estimated that Lake Volta’s potential yield is being exceeded and catch per unit i s reported to be falling, with many observers attributing this to over-exploitation, as well as environmental degradation (including poisoning from the use o f insecticide as a method o f fishing). Aquaculture has recently emerged as a growing industry but it remains a marginal source, although is an important source o f tilapia and catfish, often sold to urban markets. Moving forward, the overall policy agenda for the sector i s expected to follow the Ministry o f Fisheries’ Aquaculture Strategic Framework (2006).

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34. Limited processing means very short value chains, with l i t t le value addition between steps except the marketing margin. There is very little processing beyond (i) freezing and or canning commercial marine landings and (ii) smoking or drylng artisanal marine and inland production. At the same time, post-harvest losses from artisinal fishing are high - some estimates report levels o f up to 70%, particularly in high season when there is a glut o f production and landing sites are saturated. Official export data reports significant increase in fish exports, increasing three-fold over from 2001 - 2006. Spain i s the biggest importer accounting for 41% o f official exports (by value) in 2005. Other important destinations are France (11% o f exports), Cote d’Ivoire (lo%), Portugal and Chile (7% each), and Greece, Panama and Mauritania (4% each). Overall, the export industry has undergone major consolidation in recent years, with the number o f exporters falling from 328 in 1996 to 120 in 2002 even though the value o f exports has doubled from $12.4 mi l l ion to $24.5 million. Tuna has come to dominate exports, increasing from $2 mi l l ion to $12 mi l l ion over the period, attracting new entrants into this segment o f the market.

35. Fish stocks - both inland and marine - are falling, due to over-fishing, especially due to illegal practices. Second, the decline in available firewood i s threatening smoke- fish enterprises; local deforestation also leads to decline in water quality. Exporters to the EU now have to meet stringent sanitary and phyto-sanitary (SPS) conditions. Standards have been met but the clear evidence is that meeting these standards i s costly, and act as a fixed costs thereby generating economies o f scale that provide an advantage to larger operators. Some efforts to improve fisheries management are underway; including traditional management, government regulation and a recent innovation o f co- management by government and stakeholders (particularly in the marine sub-sector). In addition, a number o f interventions in support o f improved landing and handling facilities in artisanal fishing communities aim to reduce post-harvest losses and strengthen the value chain. This includes new improved smoking technology although the update has been low due to high cost compared to the traditional alternatives, breakages and the absence o f young entrants into the industry. However the sector needs to make progress in reducing excessive pressure on fisheries and improving the management o f the sector.

36. Using lessons learnt from commodity chain development for crops such as cocoa and pineapple, Ghana can in fact address the priorities identified in the policy diamond to improve agricultural performance across the country. The analysis carried out for the AgSSIP ICR and the C E M suggests growing evidence in Ghana that small-holders can be successfilly integrated into value chains and contribute to poverty reduction and growth. As noted earlier, successfil developments in cocoa and horticulture are based squarely on the small-holder systems. The challenges o f penetrating global markets for both primary commodities (cocoa) and high-value exports (horticulture) are indeed significant but Ghana has shown an ability to overcome the global challenges and export successfully.

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111. THE GOVERNMENT’S PROGRAM

37. To support the objectives o f the GPRS 11 and based on lessons learned from past operations, a new Food and Agriculture Sector Development Policy (FASDEP II) has been prepared and there is renewed focus on developing a sector wide approach for the agriculture sector. lo Agriculture i s characterized by smallholder, family-operated farms using rudimentary technology to produce about 80% o f Ghana’s total agricultural output. I t i s estimated that about 2.74 mi l l ion households operate a farm or keep livestock. According to the 2000 census, 50.6% o f the labor force, or 4.2 mi l l ion people, are directly engaged in agriculture. About 90% o f farm holdings are less than 2 hectares in size. Larger scale farms and plantations produce mainly o i l palm, rubber and coconut and to a lesser extent, maize, rice and pineapples. Agricultural production i s generally dependent on rainfall, although an estimated 6,000 farm enterprises nation-wide were using some means o f irrigation in 1999. In 2006, the total area under formal irrigation is around 18,000 hectares whereas the potential area - including inland valleys - that could be developed for irrigation is estimated at 500,000ha. The policies and policy instruments in both the GPRS 11 and FASDEP 11 that promote agricultural modernization include storage, processing, input supply, output marketing, irrigation (small and large scale), mechanization (for production, processing, etc), technology development (Le. research), agricultural credit (micro-finance), extension services, and the development o f Farmer Based Organizations (FBOs). These are not without precedence but there is a clear move away from large scale government interventions towards farmer and industry led interventions in agricultural growth.

38. Decentralization o f budget and functions to enable greater planning and implementation at the local level i s increasing and a decentralization pol icy has been submitted to Cabinet. Over time, district assemblies are to assume responsibility for infrastructure management. The assemblies wil l rehabilitate feeder roads, manage forests resources and provide agricultural extension services. M o F A i s expected to concentrate on formulating policies and regulations that create a favorable environment for agricultural development. I t will also designate national priority areas for research, monitor and evaluate sector development, promote private sector growth, provide technical support to decentralized extension units and keep stakeholders informed o f new developments concerning research, analysis and markets. There i s recognition in the FASDEP II o f the need to work within the decentralized framework and considerable progress has been made towards functional and fiscal decentralization.

39. FASDEP 11 is consistent with the increasing orientation o f government to rely on private sector to lead investment and economic growth and the devolution o f significant

lo A number o f policies and programmes have been formulated for the agricultural sector since the early 1990s. These included the Med ium Term Agricultural Development Programme (MTADP) and the Accelerated Agricultural Growth and Development Strategy (AAGDS). In 2002, the first Food and Agricultural Sector Development Pol icy was formulated as a sector wide approacWprogramme and been revised based o n changes in the structure o f the sector, results o f the studies o n the pro-poor nature o f current policies, focus o n diversification o f exports and private sector as a key actor in supporting agriculture led growth.

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responsibilities from central government to local authorities. The pol icy supports a sector wide approach and achieving consensus among stakeholders (including donors) with a view to implementing a new sector-wide policy by 2008. In the context o f the GPRS II, agriculture i s expected to lead the growth and structural transformation o f the economy. Given the high incidence o f poverty in the sector, such a growth path i s expected to maximize the benefits o f accelerated growth.

40.

e

e

e

e

41.

The strategies adopted by the FASDEP 11 are focused on the following six areas:

Food security and emergency preparedness Improved growth in incomes Increased competitiveness and enhanced integration into domestic and international markets Sustainable management o f land and environment Science and technology applied in food and agriculture development Effective institutional coordination

The last decade has seen progress against a l l these areas with a greater refinement o f strategic focus emerging in the last few years. The sector has contributed to increased food security, lower rural poverty and increased competitiveness o f export crops. The sector i s moving towards greater diversification o f exports, improved farmer access to infrastructure, technology, international markets and improved quality control. The role o f farmer-based organizations and other private sector actors has increased, reducing the role o f the state in direct interventions. Under AgSSIP and other donor supported programs, critical investments to facilitate private sector participation, such as the cold storage facility for horticultural products at the Tema port have been completed, FBOs have been strengthened and value chains for some commodities such as pineapple and mango have been emphasized and supported. FASDEP 11 builds o n these achievements through continued focus on non-state actors such as farmer groups, water user groups, private sector etc in the management o f assets and in terms o f increasing investments in the sector. Farmer participation in identifylng research priorities will also continue to be emphasized. Increased focus on improving the productivity o f staple crops while consolidating gains made in promoting non-traditional agricultural exports are also expected. The Government’s pol icy aims to sustain and scale up progress in these areas and address outstanding concerns o f sustainability, application o f new technologies for increased productivity and effective institutional coordination.

42. Recognizing the challenges to integrating different types o f smallholders into commodity markets, the sector pol icy wil l target different categories o f farmers according to their needs. Risk-prone, largely subsistence, farmers wil l be targeted with interventions to reduce their vulnerability and help them improve productivity. Smallholder commercial and semi-commercial farmers wil l be supported to improve productivity and to integrate them into markets competitively. The FBO development fund, which wil l continue to be an area o f emphasis under FASDEP 11, has been an important instrument for garnering support for basic processing enterprises, to be run at the community level. This supports the view that farmers are aware o f opportunities for value-addition but lack

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the means to make the necessary investments. Most FBOs supported under the FBO program have invested in processing equipment and marketing.

43. FASDEP II emphasizes the sustainable utilization o f a l l resources and a market based approach to commodity development. I t i s selective in targeting a few commodities to be supported for food security and income diversification, especially for resource poor fanners' ', Improvement along commodity value chains, through the application o f science and technology and with attention paid to environmental sustainability is emphasized. A greater engagement o f the private sector and collaboration with other partners wil l be pursued to facilitate implementation o f policies. This policy wil l be complemented with a strategic framework which will specify how the policy strategies in this document wil l be implemented.

44. The focus on food security and emergency preparedness recognizes that staple crop productivity needs to increase. It also notes the need to enhance nutrition through coordination o f programs and institutions for food security, dissemination o f nutrition and health information, and advocacy for food fortification. Strengthening early warning systems and emergency preparedness and disaster management schemes, including contingency planning to ensure access o f the poor to food during disasters and establishment o f strategic stocks to support emergency preparedness are also identified as key actions to be undertaken.

45. The purpose o f interventions for enhancing growth in incomes in the sector i s to provide opportunities for diversification into cash crops and livestock, and for value addition on al l commodities. This area wil l build on the on-going efforts for diversification, FBO development and increased private sector participation. Crops such as mango, cashew, o i l palm, rubber, plantain and citrus, as wel l as, small ruminants, poultry and vegetables wil l be promoted on the basis o f comparative and competitive advantage o f agro-ecological zones and the availability o f markets. Staple crops produced by the poor wil l be supported through better integration into supply and value chains for these commodities and through improving access to input markets for these farmers.

46. Responding to the concern that agriculture production has increased through expansion rather than real gains in productivity; the policy recognizes the need to maintain the quality o f natural resources for continued increases in productivity. The Government will support efforts to scale up sustainable land management (SLM) practices in addressing objectives around both environmental resilience and agricultural productivity in the country's overall development agenda. In addition to addressing issues (barriers or opportunities) o f productivity in both agriculture and in environmental services, this objective wil l serve as entry point in addressing the interactions between agriculture and climate change and biodiversity loss. The planned Strategic Environmental Assessment o f FASDEP II and the development o f a Country Investment

'I Commodities identified for focus are: Staple foods - maize, cassava, rice, yam and cowpea; Tree crops: oil palm, citrus, mango, cashew and cotton; Horticultural crops: pineapple, pawpaw, banana and vegetables; - Livestock Sheep, goats, pigs and poultry (including guinea fowls). A further refinement o f focus and targets i s expected under the process o f developing a CAADP pact over the course o f the next year.

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Framework for SLM (CSIF) wi l l help the policy i s identify issues which might require focused attention during implementation.

47. Ghana has pursued a demand-led growth based on exports since the mid- 1990s as part o f the strategy to diversify the country’s export base and now needs to increase i t s competitiveness in the sector. New opportunities are emerging in the international market and the country has started to respond to these. The aim i s to enhance Ghana’s comparative advantage and translate it into competitive advantage in producing the needed volumes o f demanded commodities and with the quality and frequency required by the market. The potential for expanding domestic markets for some o f these products (vegetables, fruits) also exists as the economy expands and incomes grow. Efforts wil l therefore continue to improve value chains through capacity building for good agricultural practices, facilitation o f private sector participation and addressing constraints related to public infrastructure, finance and input markets.

48. Research and technolom development for livestock, crop production and other agriculture based income generating activities in poor regions continues to be inadequate but are areas o f focus for FASDEP II. While research has started to be more farmer-led and efforts to invite private sector funding have commenced, these areas must continue to strengthen the role o f the farmer and the private sector to motivate more participation and thereby make the research and technology development more relevant to needs. Increased uptake o f new technologies and increased regional collaboration in applying new technologies for higher productivity are areas o f priority under this strategy. Demand led research, focused on areas o f comparative advantage or areas where productivity i s stagnant will be supported. M o F A will partner with the national agriculture research system to ensure that research focuses on the development o f value chains o f commodities targeted for food security, income growth and diversification, external markets, and linkage with industry. Under the West Africa Agricultural Productivity Program (WAAPP), support for regional cooperation in the dissemination and uptake o f improved technologies i s also expected. Principles o f best practices o f land and environmental management wil l be applied.

49. The strategy o f improved institutional coordination recognizes that the dominant role o f the public sector in the delivery o f services must change. The transformation o f the sector requires greater involvement o f the private sector in service delivery, and investment and management o f the sector as a whole. Likewise, inter-ministerial collaboration and decentralized planning and execution must improve to create the enabling environment for private sector participation and more effective public sector interventions. A renewed focus on strategic planning, efficient use o f scarce public resources and accountability o f expenditures i s emerging under the new pol icy framework.

Government’s Response to Global Trends in Food Prices

50. In addition to the above results, the Government has responded rapidly to mitigate the high food prices in Ghana. Thus far, Ghana’s terms o f trade have not been adversely

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affected since gains from commodity exports o f cocoa and gold have off-set increasing food imports, although this may not continue as food prices increase hrther. Moreover, net food consuming households face significantly deteriorating purchasing power. Boosting production o f net food producing households can raise incomes as well as improve national food security. Households in the northern regions, st i l l reeling from the consequences o f last year’s drought and floods, are particularly vulnerable. In response, GoG has proposed a number o f policy initiatives to (i) strengthen support for farmers to maximize national food production and improve food availability and (ii) deepen assistance to small farmers in vulnerable regions to boost subsistence production.

5 1. Three policy responses are proposed by Government. First, M o F A will develop an institutional framework for mobilizing essential inputs to boost short-term food production in response to crises. For instance the drought and floods in 2007 affected about 97,000ha o f agricultural land. Many households now lack certified seed and this measure will ensure that sufficient seed i s available for the next planting season. The policy will also extend to dry-season vegetable production, which has shown to be an effective short-term measure to sustain rural incomes. Second, GoG will develop a fertilizer policy to increase the utilization rates o f fertilizer among small farmers by reducing the costs paid by beneficiary small-holders. The pol icy wil l specify an appropriate targeting mechanism and wil l stipulate the use o f existing private sector distributors.

52. The third pol icy measure wil l establish an agriculture-related public works program, using a labor-intensive approach, where feasible, utilizing cash- and/ or food- for-work modalities to provide additional incomes during the lean season. Technical assistance wil l be requested for the development o f this innovative approach, possibly as part o f the GFDRR.12 The Government is committed to regular monitoring and reporting o f these programs, within the context o f the existing agriculture sector monitoring arrangements. Technical assistance wil l be obtained as appropriate.

53. The objective o f the proposed operation is to support the Government’s efforts to encourage agriculture led growth to achieve the objectives o f the GPRS II. In coordination with other development partners, the proposed DPO will support the implementation o f Ghana’s Food and Agriculture Sector Development Policy (FASDEP). Expected areas o f focus for the DPO are to maintain the positive trend o f export diversification, encourage non-state actors such as farmer organizations and private sector to increase investments and manage assets; address constraints to productivity increase particularly for staple crops and to improve planning and execution o f budgets, including those for services and investments. A three year program i s proposed with an annual disbursement o f $25 mil l ion in DPO 1 and $15 annually in DPOs 2 and 3.

*’ The Global Facil ity for Disaster Reduction and Recovery. Ghana is currently receiving support under Track 11.

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Box 1: Objectives, Strategies and Performance Targets o f F A S D E P 1113 ~~ ~~ ~

The policy objectives and expected outputs for the FASDEP I1 are: Food security and emergency preparedness

Research extension linkage strengthened.

Sel f sufficiency in staple food production (maize, yam, cassava) maintained and production of rice and cowpea increased by 10% and 5% respectively by 2010 5% of maize demand for human consumption, animal feed and seed secured as national strategic stocks by 2010 10,000 hectares of additional land put under irrigation (30th formal and informal) by 2010 Consumption of locally produced nutritionally balanced foods increased

Population of small ruminants (sheep and goats) and guinea fowls increased by 50% by 2010. Production of tree crops (oil palm, citrus, mangoes and cashew) increased by 5,000 hectares each by 2010. Production of vegetable in the dry season increased by 100% by 2010. 50,000 youth farmers trained and provided with farm plots by 2010. Production of agricultural non-traditional exports increased by 100% by 2010.

Environmental sustainability issues mainstreamed in MOFA’s policies, plans and programmes by Dec. 2008. Adoption of technologies and practices for reducing land degradation increased by 10% by 2010 National agricultural land use policy developed and implemented by Dec. 2008.

50% of farmers and all processors and exporters trained in export production and marketing by 2010. Cool house facilities provided along the main trunk route from North to South and transport vans provided to feed the cool houses by 2010. FBOs developed and trained in production, processing, marketing and export Standards, weights and grades are employed in the marketing of agricultural commodities by 2010. Market information provision improved by 2008.

Adoption of agricultural technologies increased from 10% to 50% by 2010. 30% of Ghanaian farmers empowered to receive extension information through audio-visual aids by 2010. Application of relevant agricultural research findings increased by Dec. 2008.

Improved growth in incomes and reduced income variability

Sustainable management of land and environment

Increased competitiveness and enhanced integration into domestic and international markets

Science and technology applied in food and agriculture development

Enhanced institutional coordination

Public -private partnership projects increased by 100% by 2010. Al l agricultural sector projects reviewed to make them more effective by 2008. Framework for collaboration and coordination of sector activities established at the national, regional and district levels by December 2008.

Reform of land acquisition and property rights Accelerating provision of irrigation infrastructure Enhancing access to credit and inputs for agriculture Promoting selective crop development Improving access to mechanized agriculture Increasing access to extension services Provision of infrastructure for aquaculture Restoration of degraded environment

Agricultural growth rate of 6 4 % per annum over the next 4 years Crops and livestock leading the growth at an average annual growth rate of 6% Foreshy and logging, and fisheries, each growing at 5% per annum. Cocoa will remain robust in support of other sectors.

The strategies in FASDEP Il include the following:

The performance targets specified in FASDEP I1 are:

l3 These targets are expected to be revised along with the preparation o f the longer term development plans being prepared by the N D P C since planning time horizons for the various sector plans are expected to b e harmonized with the NDPC development plan.

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IV. BANK SUPPORT TO THE GOVERNMENT’S STRATEGY

LINK TO CAS 54. In March 2007 donors signed the Ghana Joint Assistance Strategy (G-JAS) in Accra. The 17 donors are African Development Bank, CIDA, Danida, DFID, EC, France, Germany, IFAD, Italy, Japan, Mil lennium Challenge Corporation, Netherlands, Spain, Switzerland, UN, USAID and World Bank. The Ghana JAS notes that modernization o f agriculture i s central to the diversification and expansion o f exports needed to achieve and sustain higher economic growth. Strategic priorities include strengthening rural infrastructure, especially rural roads and irrigation, improving land tenure and management, promoting promising agricultural value chains, enhancing access to credit for women and men by strengthening rural financial institutions, and strengthening the provision and targeting o f agricultural research and extension services. The proposed DPO supports this approach and the agenda for harmonization with donor partners. The Country Assistance Strategy for 2008-1 1 notes that this DPO would be the fol low up to the closed Agricultural Services Sub-sector Investment Project (AgSSP) responding to the adoption by government and partners o f the Food and Agriculture Sector Policy (FASDEP) and in support o f a sector-wide approach in agriculture. The CAS notes that this series o f DPOs for the Agriculture sector will also be accompanied by Global Environment Facility (GEF) funds to support the scale-up o f sustainable land management practices.

Box 2: The Ghana-Joint Assistance Strategy

GJAS: Commitment of Donor support to Agriculture

To promote the productivity and diversification o f agriculture and rural non-farm growth, G-JAS partners will support the development o f a SWAP framework focusing o n enhancing the productivity o f crops, livestock and aquaculture and land resources, improving food security and expanding vital infrastructure including irrigation and supply chain development. To promote rural development more generally, partners are supporting sector reforms and investments in rural roads and energy and measures to promote micro-finance institutions and the tourism sector. Analytical work relating to land tenure, bio-safety regulations, capacity development o f microfinance institutions and improving access to finance for micro-, small, and medium enterprises will help guide work in this area.

COLLABORATION WITH THE IMF AND OTHER DONORS

55. As part o f the implementation o f the Comprehensive Development Framework initiated in Ghana in 1999, donors active in the sector have been meeting more frequently to discuss GoG’s strategy and policies in the agriculture sector. The donors, active in the agriculture sector, including, the European Union, CIDA, DFID, GTZ and JICA participated in the preparation o f AgSSIP and in its pre-appraisal and appraisal. This

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forum was to be used to follow-up on the implementation o f the Accelerated Agricultural Growth and Development Strategy and AgSSIP. While al l the support to AgSSIP was to be given in the form o f parallel financing, donors agreed that, to the extent possible, they would field joint implementation support and program evaluation missions. Joint implementation support missions were held and the coordination between the donors improved, particularly after the mid-term review and restructuring o f AgSSIP.

56. A sector budget support program (earmarked funding) was initiated by C IDA in 2004. C IDA committed $85 mi l l ion Canadian Dollars to M o F A over five years (2004-09) for implementation o f FASDEP (approximately $15 mi l l ion per year). Through i t s M O U with MoFEP, C I D A funds f low through GoG channels, using existing GoG policies and procedures but funds are earmarked for the Agriculture sector (including fisheries). Disbursements comprise base and performance payments, and C I D A trigger and target mechanism which underlies disbursements. C I D A has established a trigger and target review process which includes a) a M o F A assessment o f i t s performance against the annual targets, and b) an independent review by an external consultant whose confirmation (or otherwise) o f M o F A achievement causes the appropriate resource transfer. DfD has chosen the FABS mechanism as i t s vehicle to provide sectoral budgetary support, increasing the overall volume o f funding by approximately $9 mi l l ion dollars for the period 2006-09. DfD has also adopted the C I D A target and trigger mechanism, adding five further targets and three triggers to the original 13 to address result areas under the DFID Support to Agriculture Sector Harmonization project.

57. With the experience gained in Phase I o f AgSSIP, GoG preference i s for funding to f low through the budget rather than through discrete projects. To facilitate this, a SWAP framework i s identified as the organizing principle based on which a memorandum o f understanding amongst donor partners can be developed. The FASDEP i s the Government’s pol icy on food and agricultural development and the DPO series supports its implementation and associated pol icy reforms. If the FASDEP i s implemented as envisioned, i t requires a number o f Ministries and sectors to be involved. The DPO i s considered to be the appropriate response to the intention o f the Government to develop a sector wide approach to support the implementation o f FASDEP II. Other donors active in the sector are also expected to align their support to FASDEP II and the sector investment plan under the sector wide approach.

58. The proposed DPO series wil l seek to incorporate the existing triggers within the policy framework. C I D A and DFID will also do the same and al l three institutions will coordinate across these benchmarks and triggers with the intention to converge over the course o f the proposed DPO series into one set o f actions. Appraisal o f the benchmarks and prior actions will be done jointly. This will allow donors to agree on pol icy actions which can be supported by various project funding regardless o f whether the funds are in the form o f budget support or not. A mid year assessment o f sector performance is proposed in M a y o f each year, followed by a budget discussion towards the end o f each calendar year.

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59. The DPO also supports the objectives and approach o f the TerrAfiica multi- stakeholder partner~hip, ’~ in that i t wi l l contribute to promote the adoption and wide-scale replication o f sustainable land management technologies and practices in a programmatic way. The DPO i s one o f the instruments through which the country’s SLM agenda will be implemented, the other being the Natural Resources and Environmental Governance DPO (NREGP), the Land Administration Project (LAP), and the GEF operation on Sustainable Land Management (under preparation).

60. Alignment with the assessments o f the multi-donor budget support and the PRSC program in Ghana is essential for the sector DPO. I t is expected that the assessments o f these programs wil l occur at around the same time each year to fully utilize country systems (annual reports, etc) and to share information on macro-economic assessments. Budget analysis at the sector level must also inform the broader public financial management assessments.

RELATIONSHIP TO OTHER BANK OPERATIONS

61. Ghana has signed on to the West Afr ica Agricultural Productivity Program (WAAPP; Ghana: $15 million). This regional project i s the f i rst phase o f a 10-year Adaptive Program Lending (APL) concerning three countries: Ghana, M a l i and Senegal. This APL will be the first o f a series o f overlapping, similar APLs, each involving different groupings o f countries. Taken together, this series o f APLs is expected to span 12 to 15 years, at the end o f which period it wil l have covered al l ECOWAS countries eligible for regional support. The overlapping APL design addresses four key considerations: incite countries to collaborate in a regional setting; allow countries to leverage regional f inds to boost their IDA allocation; provide long-term support (10 years) in agricultural R&D to each participating country; and give flexibility to groups o f countries to participate in the WAAPP as they become eligible, rather than wait at the gates for the end o f the first phase o f the initial APL. Each 10-year APL, in two phases o f five years each, follows a vertical approach. The series o f overlapping APL follows a horizontal approach. Each o f the three participating country committed one-third ($5 million) o f the total project cost from its regular IDA allocation, and the region committed two-thirds ($10 million). Each country will transfer funds to the West Af i ica Council o f Agricultural Research and Development (WECARDEORAF) to help the sub- regional organization conduct and coordinate regional initiatives. Thus, the instrument addresses both the national and regional levels to enhance the regional spillovers o f technologies developed at national levels. Other partners’ parallel financing o f the global WAAPP is in the form o f grants to CORAF. This proposed DPO complements this program by focusing on productivity increases within the national program.

l4 TerrAfrica i s a multi-stakeholder platform and Wor ld Bank’s Global Partnership Program (GPP) aiming at creating enabling conditions to increase sustainable land management in Sub-Saharan Africa. Ghana has been actively engaged in the TerrAfrica partnership since i t s f i s t framing workshop in 2004. I t is currently a member o f the Executive Committee, representing West Africa, and i s one o f the four countries for priori ty support under the TerrAfrica W o r k Program.

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62. The Land Administration project LAP ($20.5 mi l l ion IDA), total project costs $55 million) seeks to improve procedures for accessing land, develop land markets and foster sustainable land management in urban and rural areas. The LAP has supported the adoption and full-scale implementation o f a national land policy and efforts are ongoing to improve governance systems in the delivery o f land administration services through reforms; participatory procedures under customary and statutory systems; reinforcement o f customary land administration systems to create a fair and equitable land administration system. The decentralization o f deeds registration and creating deeds registries in 8 regions in the country has led to (i) reduction o f turn-around time from over 36 months (base year 2003) to less than 7 months (2006), (ii) reduction in cost o f processing land administration services from $217 (base year 2003) to $87 (2006) for residential plots, (iii) reduction in the incidence o f land litigation cases, (iv) 1760 land cases struck out o f over 35,000 backlog cases in the formal courts, (v) 745 women registering deeds in 2006 compared with 288 women in 2003, (vi) high acceptance levels o f deed certificate as collateral by commercial banks, (vi) increase in total revenues to decentralized public land sector agencies from $661,260 (base year 2003) to $1 8,078,740 (2006).

63. The Rural Financial Services Project (IDA $5.13 million/IFAD $10.12 million/ AfDB $5.01 million) assisted Rural Banks in identifying and assessing viable enterprises and provided training in microfinance to rural bank staff. The project has facilitated increased access to financial services for rural dwellers. Financial literacy programs, targeted at women, are being implemented to ensure women benefit from the project. The numbers o f depositors and borrowers in the rural banking system have increased two fold in the last five years. An Apex bank for rural banks has been established and i s providing improved services to the rural and community Banks (RCBs). The Apex Bank has developed new products for domestic find transfer and i s also playing an intermediary role for the RCBs with cocoa-buying companies in the cocoa trade.

64. The current portfolio also indicates continuity in the focus we have placed on community based development. The Village Infrastructure Program VIP ($30 mi l l ion IDA, $60 mi l l ion total) contribution to agricultural growth has been in the areas o f rural water supply (in particular in some micro-irrigation systems), rural transport (feeder roads) and post harvest infrastructure (some processing industries), with a direct support to agricultural growth o f probably less than hal f the total IDA Credit amount. The Natural Resource Management Project NRM ($25.7 million, with $9.3 mi l l ion from IDA, now completed) has been able to establish most o f the policy framework for sustainable forest management and pi lot investments in community based NRM.

65. The community based rural development project CBRDP ($30 mi l l ion IDA; €10 mi l l ion AD) i s a follow on to the VIP, expanding the sectors to include natural resource management, thereby extending the work initiated under the NRM project as well. The CBRDP aims at strengthening the capacity o f rural communities to enhance their quality o f l i fe by improving productive assets, infrastructure and access to services. The project intends to achieve this through the decentralised governance system, working with District Assemblies (DAs), Area Councils (ACs) and the Ministry o f Local Government,

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Rural Development and Environment. Block grants are allocated to districts and area councils to implement sub-projects identified through participatory planning. The project support public and private goods (through Rural Bank loans) for agriculture and social development.

66. The GEF portfolio supports and builds on 2 important aspects o f the development trends in the rural sector: decentralization and recognition o f natural assets as important for maintaining the livelihoods o f the rural poor. The $8.7 mi l l ion GEF-supported High Forest Biodiversity Project supported protected area management and capacity building to identify economic opportunities for communities around the protected areas. Similarly, the $7.3 mi l l ion GEF supported Northern Savanna Biodiversity Conservation Project (NSBCP) finances sustainable landscape management activities in the Northern Region ranging from Protected Areas Management, to the creation o f biological trans-frontier elephant corridors, to sustainable livelihood activities (indigenous crops, fruit trees, small ruminants, small enterprises, soil and water conservation techniques). In addition, a new GEF operation on Sustainable Land Management ($7.4 million, under preparation, expected implementation FY09) will provide additional and complementary support to the DPO to promote the adoption and replication o f sustainable land management practices.

67. In order to address the overcapacity and subsequent resource depletion o f the fisheries sector, the Government o f Ghana implemented a World Bank-finded Fisheries Sub-sector Capacity-Building Project. The project launched in 1996 with a total cost o f $10.5 million. Through the project, the Government established an ad hoc Fisheries Management Operations Committee (FMOC) comprised largely o f staff from the Directorate o f Fisheries in order to draft a Fisheries Management Plan that would address the sustainable use o f the marine and inland fisheries, including the common property coastal fisheries. In 2001, the Fisheries Management Plan was approved by the Minister o f State for Fisheries, with over 100 pages o f specific recommendations and measures for sustainable management o f the fisheries, and numerous recommendations for regulating access to the coastal fisheries and reducing fishing effort and capacity. In order to provide a regulatory framework that would support the implementation o f this Fisheries Management Plan, the Government consolidated the numerous existing rules and regulations into the Fisheries Act o f 2002 (Act 625). Developed to conform to the Code o f Conduct for Responsible Fisheries ratified by the member countries o f the United Nations Food and Agriculture Organization (FAO) in 1995, the new Fisheries Act placed a particular emphasis on establishing an effective institutional framework for fisheries governance that could implement the Fisheries Management Plan.

68. Budget support in the form o f the Poverty Reduction Support Credit (PRSC) and Natural Resource and Environmental Governance DPO (NREG) are o f significant relevance to the current operation. The PRSCs have tackled many issues o f governance and macro-management, including key pol icy issues relevant at the sector level. The PRSC and the multi-donor budget support process wil l remain key instruments to motivate cross-cutting pol icy and institutional changes. The NREG DPO i s a f i rst in a planned series o f three operations designed to provide annual budget support and to

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sustain the implementation o f a broad program o f reforms under Ghana’s natural resources and environmental governance (NREG) program over the period 2008-201 0. The proposed series focuses on a set o f policies and reforms in the inter-related sectors o f forestry and wildlife, mining, and environmental protection intended to (a) ensure predictable and sustainable financing o f the forestry and wildl i fe sector; (b) ensure effective forest law enforcement; (c) improve mining sector revenue collection, management, and transparency; (d) address social issues in mining and forest communities; and (e) mainstream environment into growth through Strategic Environmental Assessment and Environmental Impact Assessment. There wil l be no cross-conditionality between the NREG DPO, Agriculture DPO, or the PRSC. The two proposed sector DPOs, Le., NREG and Agriculture, wil l rely on macroeconomic assessments and debt sustainability analysis carried out under the PRSC. Issues related to expenditure frameworks, budget allocations, and budget execution wil l also be carried out as part o f the PRSC dialogue, which may require broadening the current scope o f the External Review o f Public Financial Management (ERPFM) but wil l also be informed by sector level budget analysis.

LESSONS LEARNED

69. The current operation draws from lessons learnt in the implementation o f the now closed Agricultural Services Sub-sector Services Investment Project. AgSSIP ($67 mi l l ion IDA, total project costs $123 million; closed April 2007) aimed to reduce rural poverty by increasing agricultural productivity and incomes, through the strengthening o f M o F A and decentralized agricultural planning and development, and the promotion o f demand driven agricultural services and farmer based organizations. AgSSIP has made progress in developing the basic institutional framework for a number o f innovations, which can be o f critical importance for the future growth in the sector.

70. The AgSSIP featured prominently in the government’s development strategy and the Bank’s CAS, and its management was based o n country systems. While this was overall beneficial to gradual capacity building, technical assistance to help accomplish difficult institutional reforms should have been provided earlier in the program. Government o f Ghana prepared a Vision 2020 document which called for alleviating poverty through strong and broad-based economic growth, especially o f the agricultural sector. Accordingly, the Ministry o f Food and Agriculture (MoFA) prepared an accelerated agricultural growth and development strategy (AAGDS). The AgSSP was one o f the main instruments for implementing th is strategy. In preparing this operation, the Bank mobilized considerable financial and human resources. However, the overall demands o f the program to carry out investments, pol icy reform and institutional reform were probably too demanding within the design o f the program and the short time frame, resulting in multiple extensions.

71. Notwithstanding these difficulties, the program has contributed significantly to the direction o f agricultural development in the country. The main lesson to be learnt i s that

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the level o f engagement by Government and the Bank to continue support along the lines o f a sector wide approach and through a revised Food and Agriculture Development Policy must be maintained. The Government’s strong desire to have a budgetary support mechanism to help consolidate improvements in the sector and strengthen focus on productivity i s therefore being addressed through this proposed sector budget support. Technical assistance i s also being provided by a number o f donors and coordinated support to the FASDEP can help address the difficulties associated with institutional reform.

72. As the main support to the Government to implement i t s sector pol icy in agriculture, AgSSIP has been instrumental in supporting the transition o f the sector towards a more diversified and export led sector. This move was reflected in Ghana’s Poverty Reduction Strategy (GPRS) which was approved by Parliament in Feb 2003. The program targeted the sources o f potential growth identified in the Bank’s 2004-7 CAS, namely, the development o f non-traditional export crops, improved farmer access to infrastructure, technology, international markets and improved quality control. The project also responded to GoG’s desire to expand the role o f farmer-based organizations, disengaging M o F A from non-core activities and supporting private sector participation in agricultural and rural development. The first phase o f AgSSIP i s rated as marginally satisfactory and the proposed DPO seeks to consolidate gains made so far and support the move towards a Sector Wide Approach in agricultural development. The sector recognizes the need to coordinate with infrastructure, district level planning, private sector and health, amongst others, to increase agricultural growth, facilitate the transition from production to value addition and thereby unleash the potential o f agriculture as an engine o f overall growth in the economy.

73. Most o f the policy actions completed under the AgSSIP, and supported by the f i rst PRSC series, focused on laying out the groundwork for legislative changes, and developing strategies for key areas o f the reform agenda. These actions have helped reinforce the importance o f ensuring broad ownership o f the program from the onset, and o f building in mechanisms for regular consultations during implementation. I t has also supported the sector’s efforts in developing sector monitoring frameworks which are in l ine with the GPRSII. The PRSC-6 action related to the Agriculture sector is in fact focused on the sector monitoring and evaluation framework.

74. Lessons from support provided to increasing access to rural credit under the Rural Financial Services Project suggest that access to credit for agriculture remains a constraint even though rural banks are performing well. Farmers often cite the lack o f access to agricultural credit as one o f the key binding constraints to agriculture. The little financing provided by financial institutions i s often limited to the short-term. This i s often attributed to the high risks and administrative costs involved and the lack o f proven instruments for mitigating both production risk and credit risk. The absence o f financial lending products that favor agriculture, in particular, smallholder production and marketing. The Rural Financial Services Project and the broader support to the financial sector under the Economic Management and Capacity Building project have started to address these constraints but further efforts are required to focus attention o n agricultural

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financing since financing the continuum o f procurement and distribution o f produce i s critical to accelerating agricultural growth. Without capital to finance intensification, farming wil l continue to be expansive, resulting in the depletion o f the natural resource base, and failing to achieve productivity gains required for sustained growth. While agriculture’s contribution to the GDP is significant, its share o f total institutional credit i s merely 8 percent. Farmers’ own equity for investment is very limited. Rapid agricultural growth will require that financing o f agriculture, especially in the medium and long-term finance i s available at reasonable cost. The DPO draws on this important lesson and focuses action in this area under the broader financial sector strategy.

75. The level o f harmonization among development partners around the M D B S framework have resulted in higher and timely disbursements o f budgetary support. This has also reduced transaction cost for the government in dealing with external aid as a result o f the reduction in the number o f visiting missions and o f reporting requirements. There have also been high returns from greater knowledge dissemination among development partners, leading to improvements in the pol icy dialogue and better assistance to the Government’s reform program. This increase in harmonization strengthens the case for a sector focused DPO which uses the PRSCI MDBS assessment modalities and approaches, while simultaneously deepening the sector level pol icy dialogue.

76. Another lesson relevant to this DPO is that adequate allocation and timely disbursement o f budget to the sector level has not been successfully addressed by the broader M D B S dialogue. The sector level budget issues need to be elevated in order to a) understand the budget needs o f the sector and b) address the weakness at the sector level related to timely applications for budget and timely releases to the sector. In addition, budget allocation also needs to be understood better (see detailed discussion in section III). There is a need to distinguish between “agricultural spending’’ and M o F A budget and improve efficiencies across the board. Adequate allocation, timely releases and budget execution are al l areas where improvements can be made and should therefore be a significant area o f pol icy dialogue both at the sector level and at the broader M D B S level.

ANALYTICAL UNDERPINNINGS

77. This program document draws on existing and ongoing work on social and economic analysis, as wel l as on recently completed work o n public financial management. The poverty update draws on preliminary results o f the 2006 Ghana Living Standards Survey (GLSS-5), identifylng recent trends in poverty and human development. The findings o f this ongoing poverty analysis appear to validate the policy directions proposed in the GPRS II, and supported by the PRSCs, namely the importance o f (i) prudent management o f public finances to ensure macroeconomic stability for growth and to preserve the finding for the social sectors; (ii) investing in human capital to mitigate the situation o f chronic and persistent poverty among a large number o f households, especially in view o f the ongoing urbanization process; (iii) targeting women and children

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in the delivery o f education and health services (including nutrition program); and (iv) sustaining increases in agricultural productivity for maintaining the long term trends in growth, urbanization and poverty reduction.

78. This program document also draws on background papers o f the Country Economic Memorandum (CEM) entitled Ghana: Meeting the Challenge o f Accelerated and Shared Growth. The report focuses on necessary actions to reach the Government’s stated goal o f attaining middle-income status by 2015 and documents how the recent growth acceleration results from the combination o f high commodity prices and improvements in the general economic policy environment and in the investment climate. These factors have contributed, in turn, to increasing overall output resulting from rising amounts o f aggregate investments, including investment financed by increasingly harmonized aid. These pre-conditions are noted as important because, while past growth was driven mainly by factor accumulation, most recently, there i s evidence o f gradual productivity increases, including from small, privately owned cocoa farms. As noted in the CEM, al l sectors o f Ghana’s economy-especially rural areas-participated in growth. This shared growth was key to the rapid pace o f poverty reduction. Rural incomes rose because o f greater use o f land as wel l as some productivity gains and higher agricultural export commodity prices. Agriculture has the potential to further grow, but it must be supported by improved policies, institutions, and investments.

,

79. The impact o f land degradation on the agricultural sector has also been extensively analyzed recently through two pieces o f Economic and Sector Work. A Country study on Natural Resources Management and Growth Sustainability and the recently completed Country Environmental Analysis (CEA) analyzed management and policy issues and proposed solutions to address natural resources depletion and environment degradation in four sectors driving growth and poverty reduction in Ghana: agriculture, mining, forestry & wildl i fe and urban development. Addressing land degradation, promoting sustainable land management, and improving land tenure are identified as key areas o f focus for FASDEP II. The sector work also developed a number o f recommendations for fisheries management to reduce fishing effort and pressure in the coastal fisheries in order to allow the stocks and ecosystems to recover to levels that could sustain viable livelihoods: These recommendations addressed: (i) coastal fisheries as a whole, (ii) industrial fisheries, (iii) artisanal fisheries and (iv) coastal wetlands.

80. The FASDEP review process, the AgSSIP I C R analysis, and related beneficiary assessments and FBO fund impact assessment have been instrumental in informing the formulation o f this program. Eleven on-going studies under the Policy and Human Resources Development Grant (PHRD) are expected to provide further detailed analysis o f public expenditures, institutional weaknesses, post-harvest loss situation, food safety amongst others. These studies will continue to inform implementation o f the policy.

81. The recently completed WDR o n Agriculture analyses the importance o f agriculture for development, identifllng the strategies adopted by different countries, regions and type o f rural households. The report investigates the central question o f how agriculture can contribute to development across three categories o f countries:

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agriculture-based, transforming, and urbanized. In the first category, which comprises most o f the Sub-Saharan African countries, agriculture accounts for a large share o f GDP growth and most o f the poor are in the rural sector. The report notes that to grow and reduce poverty, these countries wi l l need a well performing agriculture sector. These findings wil l continue to guide the program to be supported by this DPO, particularly by informing the implementation o f the FASDEP II.

82. This operation also responds to the recent finding o f the IEG report on agriculture assistance. The LEG specifically recommends that the Bank focus attention on achieving improvements in agricultural productivity by a) establishing realistic goals for expansion o f irrigation; b) recognizing the need to increase productivity o f rain-fed agriculture through improvements in land quality, as wel l as water and drought management; c) helping to design efficient mechanisms, including public-private partnerships, to provide farmers with critical inputs, including fertilizers, water, credit, and seeds; and d) supporting the development o f marketing and transport infrastructure. The IEG report firther recommends that the Bank improve its work on agriculture by increasing the quantity and quality o f analytical work on agriculture and ensure that policy advice and lending are grounded in its findings and support public expenditure analyses to assess resource availability for agriculture and to help set Bank priorities. The DPO i s designed to address these issues by supporting critical actions required to increase productivity, public private partnerships and improved public financial management. A third set o f recommendations coming out o f the LEG report are focused on improving data management and effective monitoring and evaluation. These are also supported by this operation and build on the PRSC focus on stronger sector level monitoring frameworks.

83. The PRSC and the FY06 and the FY07 External Reviews o f Public Financial Management (ERPFM) also provide key analytical information for this program. The ERPFMs note greater aggregate fiscal discipline and the increased predictability o f the budget, while identifying challenges involved in implementing the new regulatory framework for public financial management - the new Financial Administration Act, the new Public Procurement Act and the new Internal Audit Act - and in integrating public sector staffing and salary decisions into the budget process. The FY07 ERPFM applied the new common fiscal performance framework - the Public Expenditure and Financial Accountability (PEFA) framework (discussed in section VI). As discussed in greater detail below, public expenditure i s a critical element o f implementing the new pol icy and ensuring the efficient use o f scare public resources.

PUBLIC EXPENDITURE MANAGEMENT: A CHALLENGE TO IMPLEMENTING FASDEP I1

84. The WDR analysis suggests that a comprehensive policy agenda for agriculture- based countries calls for sharply increased investment. Aligning agricultural strategies and policies with budgets i s important to avoid underinvestment and mis-investment. Donor finding can help meet finding gaps, but increasing the domestic revenue base and

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improving budget planning and management are national responsibilities. Medium-term expenditure frameworks, based on program budgets with clear objectives, specific costing, and transparent planning, help align financial resources with priorities. The share o f public spending on agriculture in agriculture-based countries (mostly in Africa) i s significantly less (4% in 2004) than in the transforming countries during their agricultural growth spurt (10% in 1980).

85. L o w public expenditure on public investments, together with the low availability o f affordable credit for rural households creates an impediment to private sector led growth in agriculture. As noted by the WDR, this trend in Africa i s in stark contrast to other regions where public expenditure in agriculture as a share o f agricultural GDP has increased. As reported in the WDR, the average expenditure for agriculture-based countries i s around 4% which itself i s extremely l ow and less than the allocations in less agriculture-dependant economies. Recent trends in Africa are contrary to other regions exhibiting stronger growth rates, where public expenditure in agriculture as a share o f agricultural GDP has increased. In Asia public expenditure in agriculture increased from 9.5% in 1980 to 11 .O% in 2004, but i t fel l in Sub-Saharan Africa from 7.4% to 6.5% over the same period. In Ghana, there have been large increases in donor aid in recent years, with the net inf low o f aid climbing from an average o f 2.8% o f GDP between 1996 and 2000 to 7.1% o f GDP between 2001 and 2003, in part due to debt rel ief (Bank o f Ghana 2005). These funds have partly supported public investments for agriculture which are critical to allowing the sector to play i t s role in contributing to higher growth rates and private sector development.

86. To fully understand the level and returns to expenditure in the sector, a public agriculture expenditure analysis i s required. A public expenditure analysis on Ghana by a recent IFPRI study shows that a 1% increase in public agriculture expenditure i s associated with a 0.17% increase in agricultural production per capita or 2.27% increase in total agricultural production (Benin et al. f~r thcoming) '~ . The study used recent (2002 to 2006) district and region disaggregated AgSSIP expenditure and GoG allocation to M O F A and household production data from GLSS5. This expenditure-growth elasticity i s used in estimating the resources required to achieve the CAADP and M I C growth targets. The results show that public agriculture expenditure yields the largest returns on agricultural growth with a benefit cost ratio o f 23, while investments in feeder roads ranks second followed by health and then education. Even more striking i s that this return to investment i s higher in the northern savanna ago-ecological zone. Assuming that the government's allocation to non-agricultural sectors grows in proportion to non- agricultural GDP growth, public agriculture expenditure has to increase by 2.75% per year in real terms in order to meet both the CAADP and M I C agricultural growth targets, respectively.

87. MoFA's estimates o f the resource requirements for full implementation o f FASDEP II (public expenditure across a number o f institutions) are in the region o f

l5 Benin, S, et al, 2008. Reaching Middle income status in Ghana by 2015: Public Investments and Agricultural Growth, IFPRI working paper.

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GH6320m per annum'6. W h i l e the definition o f agricultural spending could be broader than budget allocated to the Ministry o f Agr i~u l ture '~, GoG allocation to the Ministry o f Agriculture i s historically significantly lower than most African countries, at consistently less than 2% o f all public spending, and with a share of just 1.3% in 2004 and 1.86% in 2007. This share i s also inconsistent with established priorities as set out in the GPRS II, which envisaged 5% - 7% o f public suending for the Modernizing Agriculture theme (Table 3:). According to GoG's own criteria, over 95% o f agriculture sector spending i s classified as poverty reduction expenditure. '* 88. The current levels o f agriculture expenditure (as defined by the budgets allocated to Cocobod and MoFA) suggest that the priorities placed on food security and crop diversification under the GPRS II are not being funded. Added together, M o F A and Cocobod expenditure suggests that public expenditure on agriculture i s high at approximately 9.7% o f the total budget in 200719. Currently, the share o f cocoa expenditure in total public expenditure on agriculture i s around 85% (Figure 2). This misalignment calls into question the ability o f Ghana to meet its stated goal o f diversifylng into crops other than cocoa for income generation and export earnings. If expenditures in agriculture are to increase, hrther analysis i s required to understand where these expenditures should increase to maximize returns. It also requires a deeper understanding o f why cocoa requires the level o f public financing it currently appears to receive.

l6 The costed pol icy includes suggested expenditures required across various sub-sectors such as feeder roads, needed to implement the policy. I t does not suggest that the Min is t ry o f Agriculture should manage these funds but that each sub-sector play i t s part in helping to achieve the objectives o f the FASDEP. l7 According to the IMF, Government spending o n agriculture includes a l l nonrepayable payments, whether current o r capital, and whether a benefit or service was delivered for the payments. Government spending o n agriculture includes: administration o f agricultural land conservation affairs and services; reclamation o r expansion o f arable land; construction o r operation o f f lood control; irrigation and drainage systems; research and development; administration o f agrarian reform and land settlement; administration o f affairs and services designed to stabilize or improve farm prices and farmers' incomes; public information and statistics collected; administration o f veterinary affairs and services; administration o f forestry affairs and services; outlays in the form o f loans, transfers, and subsidies; and a l l aspects o f forest management including operation o r support o f reforestation work, forest f ire fighting, and extension services to forest operators; and administration o f commercial o r sport fishing and hunting affairs and services (International Monetary Fund's Government Finance Statistics Yearbook). '* This includes relevant l ine items o f budget expenditure plus programmes funded by debt rel ief HIPC and MDRI, in addition to those agriculture-related activities financed by the Distr ict Assembly Common Fund. l9 Other agriculture related M D A s could be CSIR (research); Ministry o f Lands, Forests and Mines, Ministry o f Fisheries, Ministry o f Roads and Transport, Ministry o f Local Government, Rural Development and Environment, Min is t ry o f Women and Children's Affairs, Min is t ry o f Trade and Industry amongst others. The level o f agriculture related expenditure in the MDA programmes will need to be assessed and i s the subject o f an ongoing public and institutional expenditure analysis as we l l as part o f the pol icy dialogue under the PRSCMDBS.

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Figure 2 : Share of Expenditure (actuals) MoFA and Cocoa (1998-2006)

Share of Expenditure (MOFA 8, COCOA) in total Govt Expenditure (%)

Share of MOFA Expenditure in Total Govt Expenditure

Share of Cocoa Expenditure in Total Expenditure on Ag ri c u I t u re

89. As wel l as l ow allocations to the non-cocoa sector, other weaknesses in public expenditure management could undermine the achievement o f sector results. Many o f these are generic across GoG and are wel l documented in the ERPFM (discussed earlier) but wil l need to be a priority for M o F A in order to be able to implement the sector policy on a very l ow budget. It i s expected that a shift from project based assistance to budget support will leverage improvements in P F M in the sector, thereby improving the impacts o f overall public investments in the sector. The budgeting and planning process in Ghana remains essentially incremental, particularly for the personal and administration budget headings (Items 1 and 2) with no established screening mechanism for services and investments spending (Items 3 and 4). W h i l e budgets are ostensibly bottom-up exercises, initial proposals reflect needs rather than available resources and are arbitrarily cut back to fit within available ceilings. While over hal f o f ‘development’ spending (Items 3 and 4) is budgeted at the District and regional level (i.e. DADUs and RADUs), arbitrary cuts without recourse to local decision making significantly undermines the extent to which funded programs reflect local priorities across Ghana.

90. Although Ghana does have an MTEF, i t i s not fully used for budgeting and planning purposes. As reported by the 2007 ERPFM: “Although the MTEF assembles a mass o f information on program activities and expected results, little subsequent use is made o f this information. Budgeting i s still, at bottom, incremental, with MDAs petitioning MoFEP for additional b d s instead o f taking responsibility for managing their portfolios within an aggregate fiscal strategy and collectively agreed priorities”. I t remains largely an academic exercise.

91. The treatment o f aid inflows is confusing in the budget allocation process. MoFEP includes al l programd inflows in the M o F A budget ceiling even though much o f this is implemented outside MoFA’s control and i s technically ‘off-budget’ and therefore non-

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discretionary. In this year’s budget hearing, M o F A pointed out that o f GH6117 mi l l ion o f aid included in their budget ceiling set by MoFEP, fully 52% was from projects in which M o F A had no implementing role and should not be considered as part o f MoFA’s budget (although i t i s an important aspect o f the overall resource allocation to the sector). The agricultural sector also benefits from HIPC and MDRI funding, which, in practice, functions somewhat outside o f the main budget and planning mechanism in a manner more akin to specific project funding. Of total HIPC funding o f GH6221 mi l l ion in FY2007, 65% is allocated to Sector programs o f which GH$17.4 million (about 8%) i s for MoFA. In 2008, no funds are allocated to M o F A under HIPC and MDRI.

92. M o F A does not contribute significantly to internally generated funds (IGFs) for GoG, with projected receipts in 2007 o f GH61.46 mi l l ion (less than 1% o f total receipts). In accordance with prevailing fiscal rules, the majority o f revenues must be returned to the consolidated account; with about 5% retained by the generating units (primarily the two semi-autonomous bodies ICOUR and the Grains Development Board). As i s seen elsewhere, the incentive for additional revenue effort are undermined by fiscal rules that limit prospects for revenue retention; prospects for additional cost recovery in these public services wil l feature in the forthcoming PER and institutional diagnostic assessments.

93. Weak budget discipline results in large discrepancies between allocations and actual spending, both between and within MDAs. The Government’s own budget allocations to M o F A are (i) not meeting MTEF forecasts and (ii) declining over time. The 2008 Budget allocation o f Ghana cedis 31.0 mi l l ion represents a reduction o f 43% compared to those predicted in the 2007 MTEF o f Ghana cedis 54.0 mi l l ion and lower than the 2007 budget allocation o f Ghana cedis 33.8 million. Compared to these allocations, actual spending by M o F A i s less than budgeted. Within MoFA, wage pressures lead to overspending in salary and administrative items with resources vied from services and investments (Table 5). For instance, actual spending on salaries was 33% higher than budgeted in 2006 while investment spending was one-third lower than planned. The result i s that actual expenditures primarily fund staff costs with few services provided or investments made.

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Table 4: Internally Generated Funds for MoFA and MoFi, 2006 - 2007 (GHZ millions)

Min o f Fisheries Fisheries directorate sub-total Fisheries Total GoG

0.70 0.70 1.20 1.20 0.50 0.50 0.40 0.40 1.20 1.20 1.60 1.60

253.81 182.60 71.21 317.52 223.39 94.13

Source: MoFA.

Item1 (personal emoluments) I t em 2 (admimstration) I t em 3 (services) I t em 4 (investments) MoFA total

2004 2005 2006 111% 133% 134% 112% 106% 122% 25% 125% 1196% 56% 28% 63% 92% 85% 103%

94. The current system o f budgeting for staff separately from programs inhibits the effective deployment o f human resources. MoFEP ceilings for Item 1 are based on last years Item 1 expenses and means that new hires and or he filling o f vacant positions cause overspends identified above. Timing o f expenditure releases are particularly important when finding activities are inextricably linked to climatic conditions and in the case o f agriculture, planting season.

95. As reported by the EWFM, the disbursement profile, particularly for investment spending, i s skewed toward the fourth quarter. This is due to poor submissions by M o F A as well as reportedly slow release procedures by MoFEP. However there are clear indications that decentralized spending i s increasing. Between 50-75% o f M o F A expenditure, including expenditures under the AgSSIP were made at the regional and district levels.

96. The consensus i s that the sector dialogue must include important issues o f public finance and this i s already delivering results, for instance in the accurate treatment o f donor financing within MoFA’s discretionary budget. For 2008, the budget o f the Ministry o f Food and Agriculture is GH# 87.10 mi l l ion (GoG plus donor support) which reflects a 27.8% decrease from 2007 when the allocated budget was GH9!120 million.

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This decrease is a reflection o f an accurate treatment o f the budget allocation to the Ministry. It st i l l suggests a very low allocation by any standards but i t is a cleaner baseline from which to measure increased allocations and budget execution.

97. Recognizing that agricultural expenditures cut across a number o f public institutions and not just M o F A i s a critical part o f improving the efficiency o f public expenditure within these institutions to meet the objectives o f agricultural development as laid out in the FASDEP. Major improvements in P F M in the agriculture sector can be achieved on the basis o f existing diagnostic instruments (such as the ERPFM) and the continuation o f the detailed sector dialogue on budgetary process initiated this year which has already yielded results in improving budgetary processes. As additional binding constraints are addressed in the f i rst DPO, additional PFM reform actions for the second and third DPOs wil l be drawn from the on-going PER assessment and wil l build on system-wide improvements supported elsewhere and augmented by reforms within M o F A supported by this operation.

V. THE PROPOSED GHANA AGRICULTURE SWAP (AGSSIP 11)

OPERATION DESCRIPTION

98. The development objectives o f the proposed operation are to increase the contribution o f agriculture to growth and poverty reduction while improving the management o f soil and water resources. The proposed DPO for Agriculture aims to provide focused attention to accelerated growth in agriculture to meet GPRS 11 goals and poverty alleviation through pro-poor growth in agriculture. In order to achieve this, there is a need to broaden the existing sources o f growth in the sector beyond the cocoa sector and area expansion by creating enabling conditions for increasing total factor productivity growth and the diversification o f production systems diversification. This operation supports the implementation o f the Food and Agriculture sector development pol icy by focusing particularly on actions that are aimed at establishing these enabling conditions.

99. The Proposed DPO follows the f i rst phase o f the APL Sector Investment Program (AgSSIP I). The APL closed on April 30, 2007 and instead o f proceeding to the second phase, i t was determined to be more appropriate to start a 3 series DPO to meet the budget requirements to implement the FASDEP II. It is also aligned with the f i rst component o f the PRSC-5 which reflects the objectives o f the first pillar o f the GPRS II, focusing on actions aimed at accelerating sustainable private sector-led growth. The f i rst component o f the PRSC-5 includes measures to create a more diversified financial sector, opening room for increased credit to the private sector, and measures to strengthen the business environment through the expansion o f energy supply services and the removal o f administrative barriers for business development. This f i rst component also supports measures to improve the performance o f the rural sector through policy actions aimed at

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strengthening government’s support to agriculture, and at improving the management o f natural resources with a focus on forestry resources.

100. The use o f a Development Policy Lending instrument (DPO) focused on a specific sector would require that (i) a strategic sector policy framework, (ii) sound institutional and financial management arrangements, and (iii) a sector- wide M&E framework with specific indicators and targets are in place. During the course o f AgSSIP I implementation, donor coordination has improved considerably, and the time seems ripe for real coordinated, joint donor support to agricultural sector development. The sector pol icy framework has been improved to take on board lessons learned from the last few years and to focus attention on areas o f growth and poverty reduction. To maintain the strong contribution o f this sector to growth and poverty reduction, the new pol icy and its implementation provide a good opportunity for donors to work in a knowledge partnership with the Government. This partnership, facilitated by the proposed lending program wil l be aimed at consolidating gains made so far and finding opportunities to make further advances. A sector-wide M&E framework, linked to the overall GPRS 11, has been prepared with input from EU supported technical assistance and technical assistance to further improve financial management i s also being provided by CIDA.

101. The proposed operation is noted in the Joint Assistance Strategy for Ghana. The proposed credit would be followed by a second and third Agriculture Development Policy Operation covering the same policy areas and would be designed to deepen and consolidate the implementation o f reforms introduced under the present operation. The proposed Credit, amounting to SDR 15.8 mi l l ion ($25 mi l l ion equivalent), consists o f a single tranche to be disbursed upon effectiveness on the basis o f prior actions met before negotiations.

102. Policy areas to be supported under the first year o f this program are: a) implementation o f the sector policy and completion o f supporting policies or pol icy actions; and b) improved planning and fiscal management, in line with the sector policy. The second and third years o f the program will build on these two key policy areas to increase public sector efficiency in the delivery o f agricultural services, increase the participation o f non-state actors in agricultural activities, and increase competitiveness o f export crops and the productivity o f staple crops. The conditions for the first DPO are met by the completion o f prior actions. The actions identified in this program are aimed at consolidating gains made over the last decade and to strengthen the ability o f the sector to contribute to growth and poverty reduction. Under AgSSIP and other donor supported programs, critical investments to facilitate private sector participation, such as the cold storage facility for horticultural products at the Tema port have been completed, FBOs have been strengthened, value chains for some commodities such as pineapple and mango have been emphasized and supported. FASDEP 11 builds on these achievements through continued focus on non-state actors such as farmer groups, water user groups, private sector etc in the management o f assets and in terms o f increasing investments in the sector. Farmer participation in identifylng research priorities wil l also continue to be emphasized. Increased focus o n improving the productivity o f staple crops while

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consolidating gains made in promoting non-traditional agricultural exports are also expected.

103. Policy actions supported under Sector Objective 1: Food security and emergency preparedness aim at improving the sector’s ability to respond to situations o f food insecurity and emergencies. A fundamental issue i s that o f l ow productivity o f staple crops, particularly in marginal areas and vulnerability to weather related shocks. The WDR states that “strengthening markets requires “hard” investments in infrastructure, with particular attention to roads and communications to link farmers to towns, and “soft” (institutional) investments for regulation, risk management, market information, and organizing producers”. The FASDEP and the 2008 Budget statement recognize the importance o f addressing these soft investments and place an emphasis on risk management instruments. Examples from other countries suggest that risk management instruments such as futures and options and weather-based index insurance can be developed for organized smallholders to reduce r isks from price volatility. Many countries subject to frequent climate shocks manage public grain reserves to reduce price instability - with very mixed success. The sector pol icy aims at addressing these weaknesses and the DPO supports this objective by requiring actions aimed at improving current constraints to productivity and value chain developments, improving post-harvest storage options and developing an appropriate mechanism for strategic buffer stocks. Post harvest losses in Ghana are considered to be very high - in the order o f 30% loss. Reducing this level while increasing production o f staple crops i s necessary for improving food security. For that reason, the post harvest survey wil l a) establish overall baselines for post-harvest losses and b) identifv specific areas alonp production chains where these losses may be stemmed. I t i s a critical first step in identifymg specific interventions require along commodity supply chains, which fully support the goals o f improving food security and o f increasing returns to smallholders.

104. Policy actions supported under Sector Objective 2: Increased Growth in income focus on increasing the participation o f non-state actors (farmer groups, water user associations) and increasing access to irrigation and finance. The actions require the completion o f the irrigation pol icy (Ghana’s first), impact assessment o f recent investments in irrigation schemes and the promotion o f FBOs and water user associations in managing irrigation facilities. The finalization and submission o f the irrigation pol icv document to Cabinet. consistent with the Food and Agriculture Sector Development Policy (FASDEP) is a critical f i rst step in motivating and supporting a move away from public management o f irrigation facilities to a higher degree o f private (water user based) management o f these facilities in order to increase efficiency. ensure better maintenance and promote higher levels o f investment. At present, less than 1% o f the total agriculture land area under cultivation in Ghana i s irrigated. The new policy would endeavor to define clearer rules for operations and maintenance, and enshrine the role o f water user association in the management o f irrigation schemes, ultimately given them greater responsibility and control over the management and maintenance o f secondary structures for irrigation. Subsequent actions will continue to support this emphasis on higher efficiency while helping the sector establish a more robust knowledge base on the current state o f irrigation and potential for expansion

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105. FASDEP J I sets out stronger role for farmer based organizations, water user groups and other community-based organizations. Over the past 7 years, support to demand led research and extension and capacity building for farmer based organizations has been a focus o f the Food and Agriculture development policies o f the Government. There are currently 326 farmer groups registered with the Department o f Cooperatives, with 6,553 female and 3,853 male members (Box 3). The co-operative law has been revised, an F B O database has been developed, and the FBO fund has been established to provide capacity building o f FBOs through training and provision o f matching grants, mainly for small projects. Significant progress has been made towards the completion o f appropriate legislation for FBOs and Cooperatives. These are noted as prior actions under the f i rst DPO while DPO 2 identifies actions needed to further consolidate the achievements made to date with the aim to strengthen farmers’ access to markets because o f better organization and corresponding lower transaction costs o f doing business.

Box 3: Gender Impacts of the FBO Development Fund

O f the 1,266 FBO executives trained at the Cooperative College as at March 2007, 603 (48%) were women and 663(52%) were men. The youth (in the age range 18 to 39) constituted 548 (42%) o f the total number trained.

Out o f the 326 FBO projects supported, 100 were solely for women with the remaining consisting o f mixed groups. None o f the projects supported fe l l into solely men’s group.

I t was noted that over 70% o f the FBO projects across the six study districts that were into processing tended to be largely women, with between one to four male members who served as secretaries and o r operated the processing machines. In most cases, these males served as secretaries due to the high il l i teracy levels o f the women groups.

Source: Report o n Evaluation and Impact Study o f FBOs, MOFA, 2007

106. Sector Objective 2 also highlights the need to address access to agriculture credit. Across the board, access to credit remains a constraint to farmers, even when they are formed into groups. However, there are certain benefits which are now becoming evident to these groups. For example, the tractor leasing or hiring scheme initiated by the Ministry o f Food and Agriculture through the districts is more affordable by a wel l functioning farmer group than by any one small holder. These groups are also finding i t possible to access credit from rural banks under donor supported programs. In addition, the 2008 Budget makes a commitment to addressing this issue through tax incentives to financial institutions to increase not only the f low o f credit to the sector but also to reduce interest rates on agricultural loans to the 5%-10% range and to lengthen the maturities o f term loans; and the development o f an agricultural investment Fund/Farm Credit Corporation with 100% agriculture focus to provide a range o f financial services such as working capital and term loans, insurance, and leasing. The DPO proposes that these proposals, including that o f setting up an Agriculture Development Fund (ADF), be developed further and their relative merits and constraints be discussed hrther. An action plan for promoting agriculture financing needs to be prepared to support progress towards

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these goals. It i s expected that because o f these actions there will be a considerable improvement o f credit flows going to agriculture.

107. Under fisheries development, the submission o f necessary legislation to Parliament i s considered an important step made by the Ministry. These legislations are required urgentlv to ensure improved and more sustainable management o f the sector and include regulations to govern the use o f fishery management plans, fishinp vessels, nets and equipment and fishing licenses. This critical step must however be supported by a fisheries pol icy and most importantly a resolution o f the stalemate created by the unclear roles and responsibilities o f the Fisheries Commission relative to those o f the Ministry. Submission o f the fisheries pol icy to Cabinet is identified as a target under DP02 in improving management and development o f fisheries, as is the follow up to recommendations made in the review o f the sector by the NRM and CEA, and the determination o f a clearly defined role o f the Fisheries Commission vis a vis that o f the Ministry. Prior to 2005, implementation o f the policies and regulations governing the coastal fisheries had been the responsibility o f the Directorate o f Fisheries, under the Ministry o f Food and Agriculture (MOFA) and were supported by AgSSll?. However, in 2005, the Government o f Ghana established the Ministry o f Fisheries as an independent ministry. The role o f the Fisheries Commission relative to that o f the Ministry and reporting channels have yet to be clarified and as a result regulations submitted to Parliament are pending approval. This wil l need to be resolved in order to improve institutional h c t i o n i n g and enable the implementation o f the policy under preparation. By providing support under the DPO to improving the sector pol icy environment and clar i f jmg institutional roles and responsibilities, i t i s expected that, in line with FASDEP 11 and GPRS 11 objectives, the sector wil l be better positioned to meet food security and export objectives.

108. Policy actions supported under Sector Objective 3: Increased competitiveness and enhanced integration into domestic and international markets are aimed at deepening the impact o f the strategy to diversify exports and increase private sector participation. These pol icy actions are aimed at securing the high level o f interest expressed by the private sector in public-private partnerships to boost agricultural exports. Shed 9 i s a critical component o f the integrated cold chain approach being promoted and developed in the horticulture sector. As the largest cold storage facility at the sea-port, this facility provides an important incentive for private sector to invest in maintaining cold chains for their products and thereby maintain the quality o f their products. The facility must be properly managed on a commercial basis to increase investments in non-traditional agricultural products. I t needs to be managed efficiently and with the purpose o f providing access to both large-scale and small exporters. As a critical f i rst step in real imina roles and responsibilities o f the public sector, and in line with the obiective o f increasing public private partnerships. the Government has initiated the process o f transferring the management o f this public asset to the private sector. The Government has also facilitated smallholder participation in export markets by supporting farmer groups gain access to improved varieties o f export commodities. The organization o f these groups provides a good starting point for the inclusion o f small holders into export value chains, thereby encouraging value-addition. To support increased competitiveness, improved sk i l ls and

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institutional capacity to meet food safety standards and adopt good agricultural practices are needed and wil l be critical elements o f this program.

109. Policy actions to support Sector Objective 4: Sustainable management o f land and environment include the completion o f the sustainable agricultural land management strategy as a prior action for DPO 2. The strategy i s being prepared and will form the basis for a new approach to expand the use o f sustainable land management technologies and incentive based systems. Adoption o f specific indicators for sustainable land management and a strategic environmental assessment o f FASDEP II are to be completed in 2008. Support for this area wil l be maintained through the DPO series, with specific focus on the implementation o f the sustainable agricultural land management strategy (e.g. through the preparation o f a budget action plan and the establishment o f baseline data) and the strengthening o f the Environment Unit o f MOFA to be further detailed under DPO 3. Besides creating conditions for putting the management o f agricultural production systems on a more sustainable basis, it i s envisaged that by doing so the sector wil l be better positioned to eventually capture opportunities associated with the provision o f environmental services and their associated revenue streams.

110. The DPO series wil l seek to strengthen mechanisms to improve demand driven research and adoption o f improved technologies under Sector objective 5: Science and Technology Applied in Food and Agriculture Development. Under previous programs o f support, a mechanism to increase participation o f farmer representatives in the priority setting o f adaptive research was established through Research Extension Liaison Committees (RELCs). Functional RELCs, with active farmer participation, are identified as a critical action under DPO 1 because they wil l form an important element o f promoting a demand driven, and therefore more relevant approach to research and extension. The DPO series wil l also focus its support on the area o f technology adoption and thereby leverage the IDA support provided under the WAAPP as well. An adoption rate study wil l help highlight areas o f further focus to address the pervasive issue o f l ow adaptation rates amongst fanners, where possible with explicit attention to the North. Early results from the use o f competitive research grant schemes and the subcontracting o f extension delivery to private service providers, through the pi lot Extension Development Fund, suggest that there is potential to develop alternative models o f extension delivery with promising results. These need to be analyzed further and there is an opportunity now to develop pluralistic approaches to extension delivery. The actions supported under this sector objective will therefore continue to support this positive trend with the ultimate expectation to considerably reduce existing yield gaps.

111. Critical pol icy actions supported by Sector Objective 6 on institutional coordination include efforts to improve budget allocation and execution the sector and within the sector. These triggers are aimed at helping the sector achieve a higher impact o f public investment spending in the agriculture sector through the following processes:

112. Reflecting GPRS LI and agriculture sector strategic priorities in an appropriate expenditure framework: the selected prior actions and triggers will ensure that the composition o f public spending becomes more consistent with the priorities identified in

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the GPRS II and related strategies in the agriculture sector. The use o f the MTEF i s therefore identified as a critical prior action. with the 2008 Strategic Plan reflecting priorities in FASDEP II. At the global level, the PRSC dialogue will maintain i t s focus on the overall budget allocations and composition o f public spending. At the sector level, the sector strategy has been translated into an adequate expenditure framework. This MTEF needs to be improved under the overall effort being made by MoFEP through a series o f capacity building programs to improve MTEFs. DPO 2 identifies the completion o f a detailed public expenditure and institutional review as a follow up action to identify actions the sector needs to take to improve resource use efficiency and improve strategic planning.

113. Addressing the underlying weaknesses in budget management: A number o f issues have been discussed earlier in the sector on public expenditure management. The 2007 ERPFM notes that there i s a greater emphasis on spending on services and investment during the second hal f o f the year. An important factor appears to be the detailed processes required (including submission o f work plans and monthly cash requirements) to get the requests for expenditures from the districts to the headquarters. However, there is also a critical need to highlight the detrimental effect o f low releases for investment, particularly at a time when IDA funds are being re-directed through the budget. The main issues that constrain the timely release o f funds to M o F A and affect budget execution at the Ministry and district levels are that planning and execution start late in the year and are poorly linked to the medium term expenditure framework. Late applications to MoFEP result in late processing, while delays in processing at MoFEP also add to the length for fund releases to the sector. Both issues need addressing and stem from weak capacity and understanding o f the budget process at the district level and within certain institutions o f the sector. The public expenditure and institutional analysis which i s currently underway at the Ministry o f Food and Agriculture i s expected to help improve budget creditability within the sector, while the PRSC trigger on improving budget execution rates more broadly (including capacity building and timely releases) will address inter-Ministerial constraints to improved public financial management. I t i s expected that better budget execution coupled with higher effectiveness o f public expenditures in the sector will set the stage for increased budget allocations to the sector, thereby moving Ghana towards compliance o f its NEPAD commitments to increase public expenditures to agriculture to at least 10% o f annual public expenditures.

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Table 6: Actual Expenditure as a Percentage of the Approved Budget” and Budget Received

.

Budget by Parliament (millions o f Ghana cedis)

Budget Received by MoFA from MoFEP (millions o f

as a % o f

Received

2004 2005 2006 2007

Ghana cedis) 39.44 34.81 32.65 88.3 82.8 93.8 63.52 46.62 42.13 73.4 66.7 90.4 78.37 67.06 62.39 85.6 79.6 93.0 122.3 58.46 46.4 (sept) 47.8 37.9 79.4

114. Links with the MDBS/ PRSC on these budget issues i s particularly important in this regard. The MDBSI PRSC trigger proposed for Agriculture for 2008 i s to establish a baseline for agricultural spending based on the needs o f what drives agriculture in Ghana. This is, in essence, a baseline o f how wel l costed the FASDEP is. Having established this baseline, the role o f the Ministry o f Food and Agriculture would be to spearhead a more strategic allocation o f public funds across the sectors to help implement FASDEP. This action, together with improved public financial management in M o F A wil l contribute to greater returns from investing in agriculture.

115. Progress towards DPOl critical actions i s satisfactory with the exception o f Cabinet approval o f the irrigation pol icy (Table 7). The policy has been submitted, considered by the Cabinet Sub-committee and returned to the Sector with questions. These questions have subsequently been answered and the policy has been re-submitted to Cabinet for final approval.

1 16. Prom-ess towards achieving the triggers (indicated in bold in the pol icy matrix) for the second DPO wil l be verified in M a y 2008 and the operation wil l be appraised in December 2008. The program i s aligned with the on-going Food and Agriculture Budget Support (FABS) program o f C I D A and DFID and draws on MoFA’s monitoring and evaluation matrix for monitorable performance indicators. The selection o f triggers i s made with the government, drawing from the benchmarks that have been identified during the policy dialogue carried out at the sectoral level and are seen as critical steps in helping the sector achieve i t s stated pol icy goals. However, the adoption o f the sector Monitoring and Evaluation framework requires the collection o f reliable data which can be accessed in order to carry out analysis o f sector performance. Detailed data related to crop production, export data, extension services etc., are expected to be collected by the restructured monitoring and evaluation framework and will be used to assess progress towards the expected outcomes. Appraisal o f DPO 2 i s expected in December 2008.

2o Approved budget includes project funds not directly managed by MoFA

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Table 7: Progress against Agriculture DPO 1 prior actions

Prior Action Sector Obiective 1: Food s

I Why i s this prior action critical? I Status ~ . . .~ ~~

1. Value Chain focused post-harvest loss survey completed by MoFA in accordance with Food security objective

Sector Objective 2: Increa 2. Submission o f the Irrigation policy to Cabinet

3. Develop a legal framework to support the development o f farmer based organizations through, inter alia: (a) preparing a draft cooperatives bill, and (b) concluding a memorandum o f understanding between the Recipient’s Ministry o f Food and Agriculture and Ministry o f Local Government, Rural Development and Environment providing for the implementation o f

:urity and emergency preparedness Post harvest losses in Ghana are reported to range between 1040% depending on the commodity - low for the grains and high for the perishable commodities. As efforts are made to increase agricultural production, distribution, processing and storage to obtain a year-round supply, post-harvest loss prevention technology i s necessary. I t i s therefore critical to update and measure the value o f loss within the value chain from harvesting through transportation, handling, storage, processing and marketing, and to establish a regular monitoring system with the objective o f mitigating post harvest loss in the food system. d Growth in income The irrigation policy marks a new beginning for irrigation development in Ghana where less than 2% o f the land i s under formal irrigation. Under the Ghana Poverty Reduction Strategy (GPRS), irrigation development i s expected to play a key role in achieving national food security, alleviating rural poverty and contributing to equitable economic development. The development o f a practical and comprehensive irrigation policy i s a critical step to sound management o f water resources and irrigation facilities. Based on t h i s policy, which emphasizes the role o f private, non-state actors in the management o f irrigation schemes, irrigation i s expected to play a pivotal role in increasing productivity and supporting agricultural development in Ghana.

The agricultural extension policy o f M o F A highlights service delivery through farmers’ groups as a dominant strategy for a more cost effective and rapid diffusion o f technology to small-scale farmers. These small scale farmers face diseconomies o f scale in accessing inputs, credit and markets for their outputs. Organizing farmers into groups enables them to engage more effectively in input markets and in value chains as economic agents. The cooperatives b i l l and the district corporation regulation will provide essential legal cover and regulatory guidance to these organizations as they increase their participation and investments in the sector, thereby providing a more sustainable institutional framework for cooperatives, for- profit and not-for-profit farmer and civi l society

Met, report submitted

Met. Irrigation policy submitted to Cabinet, revised based on Sub- committee comments and re-submitted for final review.

Met. The Cooperative bill i s revised and will be submitted to Cabinet as a prior action for DP02. The legislations are complete and an MOU between MLGRDE and MoFA establishes the next steps o f implementing the District Corporation Regulations

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Prior Action the Recipient’s District

6. Increased participation o f farmer representatives in priority setting o f adaptive research through Research Extension Liaison Committees

Corporation Regulation, for the purpose o f enabling the establishment and operation o f farmer based organizations as district corporations 4. Submit fisheries regulations LI 1832 to Parliament to strengthen governance in the sector

The RELCs provide an opportunity for farmers to voice their constraints and indicate their preferences for research. I t i s expected that by increased participation, the priority constraints o f farmers are to a large extent what becomes the focus o f research and extension. This i s a

Met, report submitted

Why is this pr ior action critical? organizations engaged in farming or agro- processing activities.

The fisheries sector i s important for both export earnings and for livelihoods, in particular as a source o f protein for many poor households. The Fisheries Act o f 1992 requires the elaboration o f certain regulations governing the use o f fishing technologies. These regulations have been developed and submitted to Parliament and are critical for improving compliance with good fishing practices in the sector which i s showing severe s igns o f stress due to over-fishing and the use o f harmful and illegal technologies.

Sector Objective 3: Increased competitiveness and enhanced integration mto c markets 5. Export diversification supported through improvements in value chains, especially through

a) issuing a request for expressions o f interest to transfer management o f “Shed 9 Multipurpose Fruit Terminal” at Tema to the private sector with the aim to improve efficient management o f the cold chain facility and encourage private sector participation;

b) inclusion o f s m a l l holders in export value chains through improved organization and access to improved technologies

The fruit terminal at Tema (Shed 9) has been upgraded to a cold storage facility. Ownership remains with the Ghana Ports and Harbor Authority. Given that the structure presents an opportunity for higher exports o f fruits from Ghana, the private management o f the structure i s the most efficient option for the Government to achieve i t s objectives o f facilitating higher levels o f private sector activity in the sub-sector o f horticultural production. The Government therefore intends to transfer the facility through a transparent, competitive process, to the private sector under an industry ownership or a private- public partnership arrangement.

Small holders have been organized and integrated into the value chain o f pineapple. These s m a l l holders are critical to the survival o f the horticulture industry in Ghana, especially pineapple where 40% o f supply comes from

Status

Met, copies made available

mestic and international

Met, advertisement copy made available

Met, Small holders inclusion started with capacity building for 106 farmer groups who have established 106 nurseries for generating MD2.

Prior Action (RELCS)

Why i s this prior action critical? necessary step towards making research more relevant to farmer needs and motivating higher adoption of improved technologies and increasing agricultural productivity over the medium term.

Status

Met. Strategic plan and 2008 workplan submitted

7. Approval of Strategic Plan 2008-2010 that i s based on Medium term Expenditure Framework

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The Medium Term Expenditure Framework i s a budgeting tool used in preparing three year rolling budgets by MDAs. The preparation of the 2008-2010 Strategic Plan and 2008 work plan and budget of the Ministry are based on the MTEF. This i s a necessary step towards improved and strategic planning and budget execution in the sector.

L 0 s v1

0 I

P 5

3

0 3

t

*z s 5 t s

0

0 VI

e,

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VI. OPERATION IMPLEMENTATION

POVERTY AND SOCIAL IMPACTS

117. Under real GDP growth rates in the 6% range, poverty i s projected to decline further, meeting the MDG goal o f halving the 1990 rate o f poverty incidence before 2015 and Ghana i s also expected to reach the goal o f halving hunger by 2015. The proposed DPO complements the PRSC-5 and places emphasis on actions aimed at facilitating private sector development, increasing agricultural productivity o f staple crops and maintaining progress in expanding the country’s export potential.

118. To inform the policy making process supported by the PRSC series, the Government o f Ghana, with support from i t s development partners, carried out a series o f poverty and social impact analysis (PSIAs), including in Agriculture. The PSIAs focused on four key areas, namely, (i) tackling vulnerability and exclusion; (ii) the economic transformation o f the agriculture sector; (iii) power sector reforms and setting electricity tariffs; and (iv) decentralization and pro-poor service delivery. The PSIA on Agriculture identified five categories o f farmers: (1) Large Scale Commercial (LSC); (2) Small Commercial (SC); (3) Semi-Commercial (S-C); (4) Non-Poor Complex Diverse Risk Prone (NPCDR), and (5) Poor Complex Diverse Risk Prone Farmers (PCDR). The weakness o f FASDEP I, in terms o f targeting, was that it failed to recognize the different categories o f farmers and that smallholders are not a homogenous group.

119. The revised FASDEP has responded to the PSIA findings by focusing both on growth and on poverty, and addresses regional differences in agricultural growth. In the short-term to medium term, selected commodities (in particular staple crops) will be targeted to improve food security and for income diversification, based on comparative and competitive advantages and by promoting sustainable land management approaches, given that many o f the poorer areas are also challenged by difficult agro-ecological conditions. A major research effort will be pursued to promote the commercialization and linkage to industry o f selected indigenous agricultural commodities as a strategy for poverty reduction. Th is indicates a clear recognition by the policy that strategies which are starting to produce results for larger, less vulnerable farmers, can and should be tailored to address the needs o f smallholders.

120. It will however be important for FASDEP to monitor i t s impact on poverty reduction and a PSIA wil l be carried out towards the latter part o f this programmatic series to a) verify progress under the FASDEP towards poverty reduction targets and b) inform the national development planning process. The PSIA should be consultative in nature, building on the consultations carried out during the revision o f the FASDEP. The PSIA wil l use analytical work undertaken by various stakeholders (including under existing projects in the sector and qualitative or quantitative assessments done by c iv i l society organizations) and identify how the reforms undertaken by the policy (including those supported by the DPO series) are impacting the rural poor, including potential impacts on addressing regional disparities (Box 4). The PSIA will recommend changes in policy direction as determined by the analysis.

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Box 4 : The Role o f Agriculture in Reducing Regional Disparities

Ensuring that all Ghanaians are able to benefit from Ghana’s continued economic development remains a key challenge. Strong economic performance and poverty reduction at the national level masks significant spatial differences. For instance, while the proportion o f poor people fe l l dramatically in the 199Os, poverty rates actually increased or fell only marginally in the three administrative regions o f Northern Ghana. Recent analysis suggests that had the North performed according to the national average over the 199Os, aggregate GDP would have increased by an additional 0.7 percentage points (’ OD1 & CEPA (2005), Economic Growth in Northern Ghana). Simply ensuring shared growth w i l l make a significant contribution to stepping up growth rates from 6% to 8%.

Agro-climatic conditions in the North are more challenging, with poorer soils and less rainfall but drought and flood prone as well. More recently, the drivers o f growth in agriculture - which provides livelihoods to 70% o f households in the North, compared to 56% nationally - have been in crops o f marginal importance to farmers in the North, namely non-traditional exports and cocoa while yields in food staples have remained largely stagnant. Moreover, the constraints to private sector activity, including adequate infrastructure and telecommunication networks are arguably more severe in northern areas further encouraging agglomeration o f employment opportunities in the Greater Accra area. The full potential from a virtuous cycle o f increased farm incomes providing forward and backward linkages to local enterprises, which in turn generates a robust rural economy, as i s starting to happen in other regions o f the country, i s yet to be realized in the 3 regions o f the north.

The challenges identified above are not insurmountable: while ago-climatic conditions and historical factors are largely exogenous, a number o f policy options are available that would bolster the economic performance o f the north, particularly by harnessing their agricultural potentials. A recent study by I F P N shows that agricultural growth based in food staples wi l l have a greater poverty reducing impact than a strategy focused exclusively on (traditional and non-traditional) export crops (Al-Hassan and Diao, (2007) “Regional Disparities in Ghana: Policy Options and Public Investment Decisions”, I F P N Discussion Paper #00693, March.) Moreover, the North has comparative advantage in certain export crops (Shea butter, mango), and prospects for processing exist as does the potential to tap into new markets such as bio-diesel. Improving the rural investment climate through easing business regulation, increasing access to finance and addressing power shortages wi l l be critical if rural processing and ancillary industries are to expand.

FASDEP I1 recognizes the value o f this approach and i s expected to support value chain development for commodities grown across the countries, with a focus on using appropriate strategies for different groups o f small holders. Large areas o f Ghana, agro-ecologically inferior with more limited production opportunities, have grown slowly. The cost o f this lagging growth i s significant: if Northern regions had grown at the same rate as the rest o f Ghana in the last decade, the average growth rate would have been 0.7 percentage points higher - i.e. one-third o f the way in meeting the challenge o f increasing the growth rate from 6% to 8%. Private sector participation in cotton, o i l seeds, mango development can be encouraged while supporting the small holder/outgrower model while has proven to be successful elsewhere in the country. The DPO series supports the strategies in the FASDEP to a) address the low productivity o f staple crops, especially those grown in the north; b) linking smallholders to markets; c) facilitation o f key investments in linking production areas in the north to markets in the south. Actions supported by the DPO series which are expected to have a particular impact on the North include improvements in food security through reducing post-harvest loss and weather related shocks; improving irrigation management (particularly relevant in the north); access to agricultural credit and the development o f non-traditional agricultural exports.

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FIDUCIARY ASPECTS

121. Public Financial Manapement: The government’s ongoing public financial management reforms address the fiduciary issues identified in the latest External Review o f Public Financial Management (ERPFM), as well as in the FY04 CFAA and the FY03 CPAR. Cash and commitment controls have been strengthened, minimizing the risk o f budget slippages and the accumulation o f arrears. There i s now a more prompt reconciliation o f budgetary and banking accounts, increasing the frequency and timeliness o f reporting on budget execution; as well as enhanced oversight from the Auditor General’s Department, with external audit reports submitted to Parliament within less o f 12 months o f the closing o f the accounts, ensuring that the legal deadline i s met and, as a result, more judicious use o f public resources. The budget coverage has also been broadened to include more information on internally generated funds and donor grants.

122. The enforcement o f procurement rules, now with the approval o f the new law, i s receiving increasing attention to ensure the efficient use o f public funds, as well as greater transparency and accountability. Further efforts should deliver the expected outcomes o f better value for money, and greater transparency and accountability in the management o f public expenditure. Another important step i s continuing to make progress in broadening the coverage o f fiscal reports, incorporating detailed spending by statutory funds in the in- year reporting cycle. The overall assessment, therefore, i s that, while s t i l l requiring further upgrade, Ghana’s fiduciary framework i s adequate for the implementation o f the proposed credit.

123. Ghana’s fiduciary environment for development policy lending i s considered adequate. The June 2006 Public Expenditure Financial Accountability (PEFA) assessment carried out in the context o f the 2006 ERPFM concluded that the P F M system in Ghana has a solid legal and regulatory framework, and performs at an average and occasionally above-average standard. The joint Public Expenditure and Financial Accountability (PEFA) (2006) assessment highlighted some positive features o f Ghana’s public financial management. These include the predictability o f the budget at the aggregate level (both expenditures and revenues) as a result o f disciplined budget execution and low levels o f arrears (see additional discussion o f the PEFA in Section VI). There has also been progress in areas o f recent reforms, such as (i) greater budget comprehensiveness, with the budget statement including information on retained internally generated funds (IGFs), HIPC proceeds, statutory funds, and donor support by MDAs alongside funding from the consolidated fund; (ii) closer attention to internal fiscal controls, with the development o f a robust internal auditing system; (iii) enhanced transparency in public procurement; and (iv) adherence to the budget calendar. These conclusions apply equally to MoFA, where project level efforts have contributed to a generally higher capacity o f financial management and application o f procurement procedures. The P F M triggers in the joint matrix (Annex 2) will provide additional oversight and performance assessment on this aspect.

124. As part o f the Public Sector Reform Program, the GoG has aimed to strengthen central government structures and organizations by introducing programs to make them more efficient, effective, and private sector-friendly. Public Financial Management laws, namely, the Financial Administration Ac t o f 2003, the Internal Audit Agency Act o f 2003, and the Public Procurement Ac t o f 2003, have been enacted to regulate the use o f public funds. New approaches in the scope, timing and quality o f reporting on budget management have also been introduced.

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125. Additional actions by GoG are expected to strengthen this trend. The computerized budget and public expenditure management system has been installed in Accra offices o f pilot ministries and in three regional capitals. The new system i s expected to enhance financial reporting, budgetary control and reduce transaction processing time. Also, GoG i s scaling up efforts to develop more efficient data collection systems, bring more transparency to the operations o f statutory funds, and enforce greater control over the budget o f state-owned enterprises.

126. The PEFA assessment has also identified areas that require attention. These include the need to: (i) reduce budget deviations across administrative units, which result in part from the extensive use o f budget contingencies and the need for closer controls in allowing the transfers o f funds across budget items; (ii) strengthen the l i n k s between the medium term expenditure framework (MTEF) and budget execution by, inter alia, improving expenditure costing at budget design stage; and (iii) ensure more timely updating o f payroll information. As discussed earlier, public financial analysis o f the agriculture sector suggest that there i s significant room for improvement in budget analysis, planning and execution and this will be an area o f focus for the proposed DPO.

127. Procurement. A new Public Procurement Ac t came into force in 2004 providing the legal framework for a public procurement system based on transparent and fair competition, and clear and comprehensive procurement procedures and regulations. A Public Procurement Board (PPB) assigned to monitor the application o f the new law and to regulate public procurement, became operational in October 2005. The 2007 ERPFM included a detailed assessment o f Ghana’s procurement practices. The review concluded that Ghana had made commendable progress with reforming the public procurement system and that i t scores above average on the basis o f the OECD/DAC methodology for evaluating public procurement systems. Plans to further strengthen the public procurement system are outlined in the annually revised three year strategic plan o f the PBB, and also in MoFEP’s Short Term and Medium Term Action Plan for PFM.

128. MoFA exercises internal control through a system o f financial planning, reporting, monitoring and evaluation and audit. The main areas within MoFA involved are the Budget Unit, the Finance Unit, the Policy Planning, Monitoring and Evaluation Directorate (PPMED) and the Audit Unit. The Auditor General’s Department i s the key government body responsible for the integrity o f MoFA’s accounts and maintains external control over these accounts. The Auditor General (AG) audits the accounts o f the MoFA annually. The findings are contained in the AG’s Annual Report to Parliament. M o F A i s required to act on any findings and recommendations and to report to the AG’s Department on corrective measures taken. M o F A must report also to the Parliamentary Committee on Agriculture to answer any questions on issues raised in the Annual Audit Report.

129. MoFA also introduced a public review o f i t s operations for the f irst time in 2007. Representatives from MoFA, Development Partners, farm organizations, NGOs, c iv i l society and farmers were invited to a public evaluation o f i t s performance. It i s expected that this useful exercise will continue.

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Box 5: Ghana’s Public Financial Management (PFM) System - Key findings o f PEFA

The key findings o f the 2006 PEFA assessment against six core PFM objectives are as follows:

Credibility of the Budget: Aggregate expenditure and revenue outturns broadly matched the budget plans, but credibility was diminished by variance across budget heads, reflecting weaknesses in budget formulation and the treatment of contingencies.

Comprehensiveness and Transparency of the Budget: This improved considerably over the period 2004 - 2005, through the incorporation in the Budget Statement o f information on internally generated revenues, direct donor disbursements, HIPC and statutory finds. However, in-year reporting was less comprehensive, hampering overall budget scrutiny and management.

Policy-based Budget: While budgets have become more policy-based in recent years, performance i s held back by limited ability to cost strategies, the lack o f effective wage bill planning, and the absence of a transparent link between planned and executed budget activities. Predictability and Control in Budget Execution: GoG has improved commitment and other internal controls, but recognizes weaknesses in management and oversight of control systems.

Accounting, Recording and Reporting: Predominantly a paper-based system, resulting in delays and data errors. Analytical and technical capacity constraints hamper MoFEP and MDA efforts to monitor and analyze budget performance.

External Scrutiny and Audit: There are now more timely completion of accounts and financial statements and submission of audit reports to the legislature, which in turn i s more actively scrutinizing both budget and accounts. However, effective follow-up on audit findings remains a question, and excessive detail of budget documents undermines effective Parliamentary scrutiny.

Disbursements and Auditing

130. Credit Amount. The Credit amount o f SDR 15.8 mi l l ion ($25 mi l l ion equivalent) will be disbursed in a single tranche upon meeting the triggers for DPO 1. It i s expected that this wil l be the first agriculture DPO in a series o f three.

13 1. Disbursements. The loan disbursement wil l follow the standard Bank procedures for Development Policy Lending. Once the Credit i s approved by the Board and becomes effective, the Credit amount will be disbursed into a foreign currency account o f the Borrower at the Bank o f Ghana which forms part o f Republic o f Ghana’s official foreign exchange reserves. The equivalent amount in Cedi will immediately be transferred to the Ghana Government Ma in Cash Account and appropriately recorded in the general operational account o f the Borrower that i s used to finance budgeted expenditures, as the Credit i s intended to be used to support the general government budget. The Borrower wil l provide to the Bank a written confirmation within 2 working days that this transfer has been completed and provide to the Bank any other relevant information relating to these matters that the Bank may reasonably request. Disbursements o f the loan will not be linked to any specific purchases and no procurement requirements have to be satisfied, except that the Borrower i s required to comply with the standard negative l i s t o f excluded items that may not be financed with Bank Credit proceeds. In the event that the proceeds o f the Credit are used for ineligible purposes as defined in the Financing Agreement, the equivalent amount o f Credit wil l be cancelled and the Borrower will be required to refund an amount equal to the amount o f the said payment. The administration o f this Credit will be the responsibility o f the Ministry o f Finance and Economic Planning. Ongoing

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discussions with the Government on the overall reform program being supported by this operation will form the basis for reporting on substantive policy issues. Fiduciary aspects and r isks o f this operation are discussed elsewhere in this document.

132. Foreign reserve account. The Government o f Ghana will acknowledge receipt to IDA o f the money into the foreign reserve account and the crediting o f this amount in local currency to the Ghana Government Ma in Cash Account. It i s expected that the confirmation o f receipt wil l be countersigned by the Accountant General and the Controller and Auditor General.

133. Public (government) accounts. The Controller and Auditor General i s required by law to produce his/ her annual report to Parliament on the public accounts within 6 months o f the financial year-end. IDA will have access to those accounts.

134. Bank of Ghana. The annual entity financial statements o f the Bank o f Ghana, audited in accordance with international auditing standards as promulgated by the International Federation o f Accountants, are publicly available. Central Bank o f Ghana. In the IMF’s view, the Ghanaian banking system i s stable, liquid, sound and profitable. While there are concerns with the Bank o f Ghana’s involvement in large exchange transaction involving cocoa exports and crude o i l imports, the most recent IMF staff report indicates that the stability o f the Ghanaian Cedi reflects primarily a sound macroeconomic environment, with strong export earnings and large capital inflows. While the IMF has not completed a safeguards assessment o f the Bank o f Ghana, it has found that the new central bank law o f 2002 places the Central Bank on a more solid legal foundation by giving the Bank o f Ghana more independence: limiting the Government’s access to bank resources, providing improved auditing functions, and introducing price stability and inflation targeting as the central bank’s primary objectives.

135. Auditing. Financial resources provided as budget support become part o f the Consolidated Fund o f the Treasury. The Association reserves right to request, at any time, an audit o f the receipt and accounting o f the disbursement in the budget management system o f the Borrower. Upon the Association’s request, the Borrower shall: (i) have the account and the recording o f amounts o f the Credit into the Borrower’s budget management system audited by independent auditors acceptable to the Association, in accordance with consistently applied auditing standards acceptable to the Association; (ii) furnish to the Association as soon as available, but in any case not later than four months after the date o f the Association’s request for such audit, a certified copy o f the report o f such audit by said auditors, o f such scope and in such detail as the Association shall have reasonably requested; and (iii) furnish to the Association such other information concerning the said account and recording o f Credit amounts into the budget management system, and the audit thereof, as the Association shall have reasonably requested.

IMPLEMENTATION, MONITORING AND EVALUATION

136. Implementation. The following ministries will be responsible for implementing this operation on behalf o f the Government: Ministry o f Finance and Economic Planning, Ministry o f Food and Agriculture (MoFA) and Ministry o f Fisheries. Their functions will be in line with their normal institutional mandates. Disbursements will be released each year to MoFEP upon satisfactory attainment o f the year’s prior actions. Each DPO in the series will be scheduled for presentation in the first quarter o f the calendar year, to enable

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GoG to fully incorporate the DPO in the budget before it i s presented to the Parliament during the fourth quarter o f the calendar year. Joint assessments will be carried out in May and December o f each year with the former assessment focusing on progress and sector performance and the latter assessment verifying achievements o f prior actions and analysis o f budget execution and allocations.

137. Supervision arrangements. Bank supervision wil l be aligned with the activities o f other donors, in particular with C IDA and DfID and with the sector monitoring activities. The Ministry o f Finance and Economic Planning (MoFEP) would be responsible for the overall implementation o f the proposed budget support, together with the Ministry o f Food and Agriculture and the Ministry o f Fisheries. Bank supervision will be aligned with the activities o f other donors, including coordination with the verification process that monitors the implementation o f the policies being supported by the PRSCMDBS. Bank supervision would also be aligned with the government’s monitoring and evaluation o f the GPRS II.

138. The actions to be monitored under the proposed DPO are extracted from government policy documents (e.g., GPRS II, the 2007 budget statement and the sector monitoring and evaluation matrix), ensuring this alignment and reducing the transaction costs o f managing budgetary support for the government. During the period o f implementation o f the program supported by the proposed DPO, supervision would draw on a) monthly reports on budget expenditures with breakdown by Ministry, Department and Agency with a lag o f no more that 6 weeks after the end o f each month, and with the breakdown for Items 1-4 o f the Ghanaian budget (personnel, administration, services, investment); (b) quarterly reports on domestically financed poverty-related (including HIPC and MDRI financed expenditures), with a lag o f no more that 6 weeks after the end o f each month; (c) sector progress reports (MoFA and MoFi) and (d) sector monitoring and evaluation reports.

Table 9: DPO Reporting and Responsibility Assignment

139. Monitoring and evaluation. The new sector monitoring and evaluation framework wil l serve as the basis for monitoring sector performance and hence progress under this operation as well. The benchmarks in the proposed DPO are aligned with the sector M&E framework. Progress reviews and appraisal o f the benchmarks will be done joint ly with other Donor Partners (in May and December 2008). While some alignment with FABS and SASH i s already evident in the DPC2 action, i t i s therefore expected that the policy action matrix for DPO 3 under this series will be aligned more fully with other Donor partners, particularly those who are ready to move to sector or general budget support. During the program o f work it i s expected that surveys on livestock and adoption

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rates for improved technologies, amongst others wil l be carried out and will add to the data base available for the sector. A detailed Agriculture Sector Review will then be carried out by the end o f this program, in partnership with the Government and other donor partners.

Box 6: Good Practice Principles on Conditionality

Principle 1: Reinforce Ownership

The Government of Ghana developed the FASDEP 11, on the basis of which the current Agriculture DPO series i s being prepared, through broad consultations on issues and challenges of promoting growth and poverty reduction through agriculture. Several workshops were carried out during the preparation period, aiming at: (i) reviewing the draft document for each thematic area, examining the policy actions needed to achieve FASDEP and GPRS I1 goals; (ii) ranking and prioritizing the proposed set of policy actions according to agreed criteria; and (iii) strengthening policy synergies between and across sectors by identifying complementarities and overlaps. The ultimate objective of these workshops was to prioritize and ensure policy coherence throughout the document.

The proposed operation complements the multi-sector policy dialogue carried out in the context of the Multi- Donor Budgetary Support (MDBS). The MDBS i s organized across several sector groups, focused on both carrying out the sector dialogue and providing the MDBS with the opportunity to elevate policy issues deemed important by these sector groups to the level of the Minister of Finance and Economic Planning and, ultimately, to the Cabinet. The proposed operation allows for the sector specific policy issues to be deepened further as required at this time, without adding to the MDBS transaction costs.

Principle 2: Agree up front with the government and otherfinancialpartners on a coordinated accountability framework

The DPO i s part of a concerted effort with development partners grouped around the revised FASDEP and the sector investment plan. The DPO aims at reducing the Government’s transaction costs in dealing with development assistance by ensuring that the support i s geared towards the sector strategy and investment plan. Over the “AgSSIP period”, development partners have conducted joint missions and donor coordination through regular sector group meetings has improved. Policy actions supported by the DPO are aligned with the sector monitoring and evaluation framework.

The agreed policy matrix combines policy-based actions and outpuffoutcome-oriented benchmarks aligned with the sector strategy. These expected outcome indicators reflect the sector objectives and M&E indicators for the FASDEP and for the sector wide approach under preparation.

Principle 3: Customize the accountability framework and modalities of Bank support to country circumstances

The proposed operation will increase the share of aid provided through general budget support while helping to deepen sector level policy dialogue. The general budget support i s provided through the MDBS, of which the PRSC i s part, accounting for between one-fifth to one-third of all aid flows, depending on the year. Budget support programs are expected to reduce transaction costs of accessing aid, and instil ownership by relying on the government’s own priorities and domestic procedures for procurement, disbursement and reporting. This operation provides this support while simultaneously strengthening the sector’s ability to work with country systems and wean i tse l f off “projects”. The program will help strengthen the budget process at a time when support for agriculture by other development partners i s reasonable thereby reducing the r isks o f inadequate funding for agriculture.

Principle 4: Choose only actions critical for achieving results as conditions for disbursement

* The number of critical actions in the policy matrix for DPOl being supported by this operation i s 7. These were chosen based on their critical role in achieving sector objectives and in order to complement the triggers and conditions under the on-going CIDA/DFID supported FABS. They aim to support the Government’s se l f determined budget allocation for the sector. Collectively, the performance framework aims to support the Government’s own sector objectives without adding any additional burden on the sector or the Government. DPOs 2 and 3 identify 17 and 18 benchmarks each, some of which are aligned with FABS. I t i s expected that the full policy matrix as presented in Annex 3 wil l become more aligned as the program i s being implemented.

Principle 5: Conduct transparent progress reviews conducive to predictable andperformance-basedjinancial support

The reviews under the DPO will be harmonized with other Development Partners and with the timing of MoFA’s own assessments through annual progress reports. The reviews will also draw on the MDBSRRSC assessments and will be aligned with the timetables of these assessments.

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ENVIRONMENTAL ASPECTS

140. There are no significant anticipated negative environmental impacts from the activities supported by the proposed operation and there should be beneficial effects arising from actions aimed at strengthening the management o f land, soil and water and the promotion o f good agricultural practices. The revised FASDEP policy states the important o f improving the implementation o f sector environmental impact assessments and strengthening land and water management. Th is has a bearing not just on environmental resources and services but also on the productivity o f the sector itself and on the well-being o f the people o f Ghana. Food safety, good agricultural practices (including careful use o f pesticides, fertilizer, hygienic practices), soil and water management will be emphasized in policy dialogue and the implementation o f the revised FASDEP. It i s also expected that GEF support will be provided in the second DPO to strengthen sustainable land management activities. A fundamental focus o f increasing productivity i s also to ensure higher productivity through improved agricultural practices, and to rely less on area expansion. It i s therefore expected that the careful implementation o f the policy should result in a positive impact on the environment.

14 1. Ghana has a robust environmental institutional framework and considerable capacities to set environmental management standards. The main frameworks are the 1991 National Environmental Policy, the 1992 National Environmental Action Plan, and the 1994 Environmental Protection Agency (EPA) Act. This framework laws give an adequate reflection o f the national environmental policy objectives, seeking to reconcile economic development and natural resource conservation. The EPA has since the late 1980s adopted environmental impact assessment as a management tool to screen undertakings likely to pose adverse impact on the environment. Environmental screening and assessments became legal requirements in 1999 with the promulgation o f the Environmental Assessment Regulations (Legislative Instrument 1652) and Environmental Impact Assessments (EIAs) are applied to most development projects. Procedures have been established to screen and evaluate al l development projects and programs that may have significant social and environmental impacts. Under the country’s Environmental Assessment Regulations (Legislative Instrument 1652), an EIA i s mandatory for seventeen types o f activities classified as critical. These activities include: (i) mining, (ii) petroleum and gas field development and exploration, (iii) construction o f dams, harbors and roads, and (iv) logging and disposal o f timber.

142. The planned DPO will support the use o f environmental safeguards in the agriculture sector and an environmental assessment o f the FASDEP II will be conducted. A critical constraint to effective environmental governance i s the implementation o f these regulations and policies where they are needed. A new environment department in the Ministry i s expected to spearhead the development o f the Sustainable Agricultural Land Management Strategy. The GPRS II also identifies the requirement to ensure that EIAs and Environmental Audits are carried out for projects and also proposes strengthening o f the capacity o f institutions involved in enforcement o f environmental protection. The Environment Department in the Ministry o f Agriculture would need to be strengthened for this to happen effectively and will need to work more closely with the EPA. A parallel operation on Natural Resource and Environmental Governance will also strengthen the ability o f the EPA to respond to these needs across the sectors.

143. Sustainable management o f Ghana’s water and land resources i s a critical factor in sustained agricultural growth. The recognition o f this i s implicit in various national and

61

ENVIRONMENTAL ASPECTS

140. There are no significant anticipated negative environmental impacts from the activities supported by the proposed operation and there should be beneficial effects arising from actions aimed at strengthening the management o f land, soil and water and the promotion o f good agricultural practices. The revised FASDEP policy states the important o f improving the implementation o f sector environmental impact assessments and strengthening land and water management. T h i s has a bearing not just on environmental resources and services but also on the productivity o f the sector itself and on the well-being o f the people o f Ghana. Food safety, good agricultural practices (including careful use o f pesticides, fertilizer, hygienic practices), soil and water management wil l be emphasized in policy dialogue and the implementation o f the revised FASDEP. It i s also expected that GEF support will be provided in the second DPO to strengthen sustainable land management activities. A fundamental focus o f increasing productivity i s also to ensure higher productivity through improved agricultural practices, and to rely less on area expansion. I t i s therefore expected that the careful implementation o f the policy should result in a positive impact on the environment.

14 1. Ghana has a robust environmental institutional framework and considerable capacities to set environmental management standards. The main frameworks are the 199 1 National Environmental Policy, the 1992 National Environmental Action Plan, and the 1994 Environmental Protection Agency (EPA) Act. This framework laws give an adequate reflection o f the national environmental policy objectives, seeking to reconcile economic development and natural resource conservation. The EPA has since the late 1980s adopted environmental impact assessment as a management tool to screen undertakings likely to pose adverse impact on the environment. Environmental screening and assessments became legal requirements in 1999 with the promulgation o f the Environmental Assessment Regulations (Legislative Instrument 1652) and Environmental Impact Assessments (EMS) are applied to most development projects. Procedures have been established to screen and evaluate a l l development projects and programs that may have significant social and environmental impacts. Under the country’s Environmental Assessment Regulations (Legislative Instrument 1652), an EM i s mandatory for seventeen types o f activities classified as critical. These activities include: (i) mining, (ii) petroleum and gas field development and exploration, (iii) construction o f dams, harbors and roads, and (iv) logging and disposal o f timber.

142. The planned DPO will support the use o f environmental safeguards in the agriculture sector and an environmental assessment o f the FASDEP II will be conducted. A critical constraint to effective environmental governance i s the implementation o f these regulations and policies where they are needed. A new environment department in the Ministry i s expected to spearhead the development o f the Sustainable Agricultural Land Management Strategy. The GPRS 11 also identifies the requirement to ensure that EIAs and Environmental Audits are carried out for projects and also proposes strengthening o f the capacity o f institutions involved in enforcement o f environmental protection. The Environment Department in the Ministry o f Agriculture would need to be strengthened for this to happen effectively and will need to work more closely with the EPA. A parallel operation on Natural Resource and Environmental Governance will also strengthen the ability o f the EPA to respond to these needs across the sectors.

143. Sustainable management o f Ghana’s water and land resources i s a critical factor in sustained agricultural growth. The recognition o f this i s implicit in various national and

61

sector policies, strategies and action plans, including the National Environmental Action Plan (NEAP), the Soil Fertility Management Plan, the National Wildl i fe Policy, the Water Policy and the National Irrigation Policy. The National Action Program to Combat Drought and Desertification (NAP) provides a long-term strategy to address land degradation in affected areas in Ghana. Sustainable natural resource management i s an essential component o f the prevailing policy frameworks, including GPRS 11, FASDEP II and NEPAD’s CAADP. The development o f a Sustainable Agricultural Land Management Strategy i s included in the FASDEP II as an important tool to implement the policy provisions o f the Land Policy and provide an opportunity to better integrate sustainable land management into the existing policy frameworks. Equally important, the formulation o f a Country Investment Framework for SLM (CSIF) (a benchmark under the NREG DPO) would be an important tool to facilitate dialogue and inter-ministerial planning around the cross-cutting issue o f land degradation. These are necessary to inform the goal, objectives and policy actions to facilitate increased attention paid to sustainable land management in Ghana.

R I S K S AND RISK MITIGATION

144. The main r isks identified for this operation are related to both the sector and to the broader political economy since this i s a budget support operation and not earmarked funding for the sector. The r isk identified are: (a) political risk associated with the 2008 election campaign (low); (b) continued delays in decentralization process (low); (c) delays in budget allocations (moderate); and (d) delays in the completion o f the SWAP framework (moderate).

145. Political risk associated with the 2008 election campaign may move budget allocations and utilization away from sector priorities as established under FASDEP. However, the Government has stated that no supplementary budget wi l l be prepared for this year to allay these fears. Developments will be closely monitored during program implementation, and policy dialogue with any new administration wil l be pursued as soon as possible following the elections. The strong involvement o f the technical staf f in the preparation o f this program and the relatively enhanced sector dialogue can help in ensuring the continuity o f policy focus.

146. Slow decentralization poses a risk in general but no specific risk i s identified for this operation. M o F A i s a highly de-concentrated Ministry and better coordination at the local government level would no doubt improve efficiency. There are no explicit r i sks associated with this for this operation since the Ministry has committed to improving efficiency within i t s own institutional structure. However, continued delays in decentralization process might compromise MoFA’s capacity to improve strategic planning. This risk i s recognized in the Ministry and i t has identified specific steps it can take to address this issue, including the completion o f the on-going institutional review.

147. A moderate risk i s that the releases to the sector to support the implementation o f the FASDEP may not be made in timely or adequate manner. T h i s risk could be managed by regular and more detailed dialogue on budget allocation and sector level MTEFs, in parallel with the budget discussions under the ERPFM and the PRSC processes. Benchmarks in the AgDPOs 2 and 3 on improving budget commitments and releases to MoFA have also been proposed to mitigate this risk. Similarly, a trigger on improving budget processes more broadly i s included in the multi-donor budget support.

62

148. A SWAP framework i s the organizing principle based on which a memorandum o f understanding amongst donor partners can be developed. The FASDEP i s the Government’s policy on food and agricultural development and the DPO series supports i t s implementation and associated policy reforms. If the FASDEP i s implemented as envisioned, it requires a number o f Ministries and sectors to be involved. Given the large number o f development partners in this sector, this risk i s rated as moderate but the mitigating factor i s in fact the design o f the proposed DPO which attempts to a) initiate a harmonized approach with the existing FABS and the sector monitoring framework and b) motivate a joint sector assessment by development partners on a regular timetable. The Government has also shown a strong commitment to the development o f the SWAP framework and the associated memorandum o f understanding. A training program for Government and Development Partners on SWAPS was completed in September, 2007. Within a SWAP framework, financing for the FASDEP can come from stand alone projects, pooled funds or budget support. The MDBS policy matrix will also include a prior action on setting a baseline for what agriculture expenditure which wil l then help inform FASDEP implementation in terms o f determining where financial support i s needed and help the sector set targets for achieving returns from these investments. The SWAP MOU i s not required if the FASDEP could be implemented as a policy (with a sector investment plan) but i s helpful to motivate coordinated behavior amongst Development Partners and Government Agencies.

Table 10: Assessment of R i s k s

Source o f Risk

Political risk associated with the 2008 election campaign may move budget allocations and utilization away from sector priorities as established under FASDEP Continued delays in decentralization process might compromise MoFA’s capacity to improve strategic planning

Delays in budget allocations could hamper effective execution of the program

Delays in the completion of the SWAP framework prevents leverage o f IDA resources

Mitigation Strategy

Developments will be closely monitored during program implementation, and policy dialogue with any new administration will be pursued as soon as possible following the elections. Continuity in technical/civil servant level staff should however help to promote continuity of the program The public expenditure and institutional review will highlight htions which the Ministry can take on despite slow progress in decentralization to improve efficiencies within its own institutional set up Regular and more detailed dialogue on budget allocation and sector level MTEFs; Active participation of the Ministry in the External Review o f Public Financial Management; target in AgDPOs 2 and 3 on improving budget commitments and releases to MoFA; trigger on improving budget processes more broadly i s included in the multi-donor budget support. MoFA i s one of five ministries participating in a dedicated capacity building program managed by MoFEP to deal with identified structural issues. Initiation o f a harmonized approach with the existing FABS and the sector monitoring framework; commitment by GoG and donor partners to a joint sector assessment on a regular timetable

Post Mitigation Rating Low

Low

Moderate

Moderate

63

ANNEX 1: LETTER OF DEVELOPMENT POLICY

25th April. ZtWH

trr,,, &/ \,A ...........................

64

65

66

67

For: ItON. MIY1STF.K ttON. CLEMENT ECEIB1

DEPl T Y MINI.STEH, %FA

68

1

' I

3

d ’E

ANNEX 3: IMF Assessment Letter

Ghana-Assessment Letter for the World Bank and the Multi-Donor Budget Support Group

February 20,2008

Growth rernaim strong although short-rem nsacroeconornic vulnerabilities haw increased in [he contar oj’u worsening esbernai ertvironnrenb. Coniirtued~fiscal stimulus and strong private sewor demand have led lo a weakening in the external current account position, same exchange rate depreciation arrd-mgerher wirh rising oil and utili@ prices-un increase in headline inflation to I?. ?percent by end-2007. The auth0rities’fu;cal deficit target of 6 percent of GDPfor 2008 is unlikely lo be atrained without additional measures. Star cautions against an mpansion in the.frrcal deficit porn ifs level in 2007, Without supporting fiscul policy. monetary policy w i l l need to carry increasing burden for bringing inflation buck on a path ~OWQF& its rurget range of 6 8 percent for 2008. Slnicfural reform in the uti& sector is critical lo safeguard nzedium-term growth prospects. The risks to external debt distress have increased somewhat. but remain moderute.

Growth has remained strong but Ghana’s external pasitlan bas weakened and inflation has risen. Boosted by strong public and private sector demand (fuelled in part by very rapid crkdit growth), real GDP growth i s estimated to have reached 6% percent in 2007, despite energy supply problems in the fvst half o f the year. Surging demand, with increasing imports of machinery and equipment (in part to address the energy shortage), played a role in widening the external current account deficit to an estimated 12 percent of GDP in 2007 from about 10 percent of GDP a year earlier. Strong capital inflows helped international reserves remain at an equivalent of close to 3 months o f imports (2.4 months if the unspent portion o f the US$750 million sovereign bond issue were excluded). Headline inflation, which hovered just above 10 percent through October, climbed to 12.7 percent by yearend, compared to the authorities’ inflation target range of 7-9 percent. The rise reflected not only a depreciating exchange rate and demand pressures, but also significant supply shocks from increases in international oil prices and adjustments in administrative utility prices. Core inflation, which ex~ludes energy and utility prices, also rose measurably later in the year a f k r having declined through September. The Bank of Ghana increased its prime rate by 100 basis points in early November, in response to the prospects of rising inflation.

The overall fiscal deficit is estimated at about 7% percent o f GDP in 2007, compared to the authorities’ target o f 4 percent o f GDP and a defidt of 7.8 percent of GDP B year earlier. The deficit reflected expenditures to address the energy crisis, including capital spending, as well as utility subsidiedtransfers (despite substantial increases in electricity and water tariffs in November); the wage bill was also somewhat above target. Fiscal revenues were strong, thanks to improved revenue collection. Total grass public debt rose to an estimated 48 percent of GDP (including recent nonconcessional borrowings from international capital markets and China); the NPV o f external debt rose by about 4 percentage points of GDP, approaching the ‘“warning” annual debt accumulation limit established in the Bank-Fund external debt sustainability framework for low-income countries. However, staff considers that the nsks to external debt distress, while increased somewhat, remain moderate, with Ghana’s key external debt sustainability indicators remaining within the thresholds.

79

For 2008, staff projects pi slight increase in real GDP growth to 6.7 percent driven by strong domestic demand. Staff commends the authorities’ goal o f reducing the fiscal deficit to 6 percent of GDP in 2008, but projects that the deficit could reach 9 percent of GDP without funther fiscal measures. The increase in spending reflects, inter alia, the implementation o f large infiastmcture projects that address long-standing bottlenecks to growth and thus could be considered both necessary and temporary. 3ut utility price subsidies and transfers arr? also projected to increase. Also, shortly after enacting the budget, the government extended B c%fe-liney’ budget subsidy that initially had benefited only the poorest households to cover the majority o f the population, putting additional strains on the budget. A key additional fiscal measure would be to bring utility prices to fbll cost recovery levels so as to eliminate associated budget subsidies (and quasi-fiscal deficits) for the VRA and the ECG, the two state-owned utility companies. Adhering to wage increases consistent with the 2008 budget will also be critical in this election year. Putting inflation back on a path toward the authorities’ target range o f 6-13 percent will require significant monetary tightening, particularly if the fiscal deficit i s not contained. The external current account deficit i s projected to widen to 12% percent of GDP, while international reserve coverage to decline to below 2 K months of impm. Staff considers that some build up of international reserves would be advisable to cushion against any adverse external shocks, including a possible deterioration in commodity prices and slowing of private inflows.

Structural reforms have generally advanced in the past year, although they have slowed in a few areas. Ghana continued to make goad progress in financial sector reforms, public financial management, and privatization. The banking system appears to be healthy, but it will be important to continue enhancing regulation and move over time toward risk-based supervision, particularly in the context of continued very rapid credit growth to enterprises. After a year of delay, utility prices for industrial users were adjusted upward in both May and November 2007, when utility prices to households were also substantially increased. However, prices are s t i l l far &om hfull cost recovery levels, In this regard, staff welcomes the government’s intention to prepare financial recovery plans for the two utility companies. Meanwhile5 civil service refoms appear to have stalled.

The recent discovery of oil i s likely to improve Ghana’s outlook for poverty raduction and debt sustainability (oil has yet to be declared commercially viable), The Fund strongly supports the authorities’ efforts to design a transparent petroleum revaue management systkm that also suits Ghana’s development needs, as well as efforts to introduce a fiscal responsibili*ty law that would incorporate key elements o f petroleum management,

Pelky dialogue between the authorities and Fund staff has remained active, although discussions OR a Policy Support Instrument (PSI) have not advanced. The 2008 Article IV consultation mission planned for MarchlApril2008 wilI offer an opportunity for further discussion o f the economic outlook, including macroeconomic and balance of payments risks, the likely impact of the oi l discovery, and appropriate policy responses. The Fund provides capacity building support to the authorities in monetary forecasting, debt management, fiscal management, and statistics. With DFID co-sponsorship, the Fund has placed an additional staff member in i t s Accra ofiice to help with aid coordination and reforms in public financial management.

80

3

iAnru# PecaRlllpa chwgw. W S O I I B N l U i S Speul lsd)

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81

ANNEX 4: LIST OF ON-GOING ANALYTICAL ~ 0 ~ ~ 3 3

The Ministry o f Food and Agriculture (MoFA) is carrying out the following studies in coordination with the World Bank and Development Partners.

Agriculture Sector Public Expenditure and Institutional Review (PEIR). The purpose o f this study i s to establish a good baseline o f information which can be used to enable M o F A deliver its new FASDEP 11 more efficiently. The study includes three broad components: (i) Component one: compile full details o f expenditure and revenue pertaining to the agriculture sector from a number o f MDAs; (ii) Component two: assess the public expenditure system, identify areas o f inefficiencies and weakness and make recommendations; (iii) Component three: analysis o f the institutional arrangements in M o F A including organizational structure and human resource management systems, identify areas o f improvement in the short, medium to long term

The results o f the above study wil l be used to improve internal processes including, financial and procurement processes and to inform the planned human resource development policy for MoFA. The PEIR i s being carried out by IFPRI and is due to be completed by March 2008.

Action/Investment Plan for Food Safety and Capacity Building for Certification: This study i s being hnded by the Bank Netherlands Partnership Program and i s expected to be completed by March 2008. A national action plan o n food safety is required to consolidate gains under previous support and inform fbture support from various donors and the Government o f Ghana. This plan will include an evaluation o f institutional support in the areas o f food safety, updating o f food safety standards with respect to SPS; private investment in improved technologies and equipment for post-harvest, particularly for small farmers and processors; rationalization and decentralization o f laboratory infrastructure capacity; upgrading o f inspection systems for livestock products; training and capacity-building programs for certification.

Strategic Support Systems for Agribusiness, Horticulture and Other Cash Crops: This study wil l include (i) evaluation o f the whole value chain o f commodity industries to provide the basis for proper targeting o f support (ii) market update and strategic profile o f Ghana horticulture and cash crop exports (iii) economic, environmental and social impact assessment; and (iv) training and capacity-building needs assessment. The study wil l identify areas o f support needed to maintain the growth o f Ghana’s agribusiness and horticulture sector. It wil l provide a long-term vision for the horticulture industry in Ghana.

Economic Analysis of New Initiatives to be supported under the revised FASDEP: T o carry out economic and financial analysis o f various agricultural interventions in the country to determine if these activities are viable. At the same time, i t should also provide a (qualitative and quantitative) macro-economic assessment o f the contribution o f these interventions in the overall agricultural growth and exports.

33 These studies are largely financed by MoFA and the PHRD preparation grant, funded by the Government o f Japan. Co-financing from other Development partners, including the Bank-Netherlands Partnerhip Program, GTZ and CIDA i s also provided for some studies as determined by individual donor interests and availability o f funds.

82

Study in rate of adoption of improved technologies: To assess the impact o f the research and extension efforts initiated under AgSSIP in helping farmers to adopt good agricultural practices, increase their yields and income as means o f wealth creation and reducing poverty among farming households. Analyse priority setting methodologies with CSIR to provide estimates o f the expected outreach and adoption rates.

Estimation of post-harvest losses: Update the value (index) o f loss for major commodities (crops, livestock, fish) along the respective value chains, in the two different contexts: food subsistence farming and commercial farming. Identify the main factors o f loss to be mitigated. Establish a cost-effective monitoring system for harvest and post harvest loss (Report submitted to PPMED on 18th Jan, 2008).

Review of the agricultural statistics system and MIS: Study current decentralisation arrangement and resource f low and the impact on the quality o f the agricultural statistics system. The outputs would include recommendations on the right combination o f resources and methods for producing timely and accurate agricultural statistics.

Livestock growth trend study: The purpose wil l be to provide baseline information for the determination o f national livestock productivity and for monitoring o f growth trend in the livestock sector countrywide. The outputs wil l include a report on livestock productivity and constraints to production by species, ecological zones, production systems, size o f enterprises as well as the role o f livestock in rural food security and livelihoods. Also the socio-economic impact o f livestock production, crop-livestock linkages, vulnerability range o f livestock holdings etc. A format wil l be developed for monitoring livestock growth trend and a manual for monitoring livestock growth trend.

In addition, a detailed Awiculture Sector Review will be initiated by the World Bank in 2008, building on the analytical pieces noted above and wil l coordinate with other Development partners who are also carrying out detailed studies o f sub-sectors.

83

Ghana at a glance 1w;ClW

5.8 4 9

-33 0.8

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1S86-36 19864

4.4 4.7

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6.2 4.2

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2.403

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19 2.3

30 59 75

75 61

1(u $08 PI)

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19c6 1996

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2 1 3 4 2 8 6 6 ill 4 0 7 5 5 3 4 0 5 5 4 7 1 0 8 9 3 2 8.8 4 4

2005

37.5 25.1

37.4 i .e

84.9 11.7 61.7

2005

4.5 9,s

5.8

6.7

2006

37 2 25.4

1.3 37 3

780 132 83.8

2006

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Mount AfadjatoMount Afadjato(880 m) (880 m)

U P P E R W E S TU P P E R W E S T

B R O N G - A H A F O B R O N G - A H A F O

A S H A N T IA S H A N T I

W E S T E R NW E S T E R N

C E N T R A LC E N T R A L

E A S T E R NE A S T E R N

V O L T A V O L T A

U P P E R E A S TU P P E R E A S T

N O R T H E R NN O R T H E R N

GREATERGREATERACCRAACCRATemaTema

WinnebaWinneba

EnchiEnchi

KadeKade

PresteaPrestea

Twifo PrasoTwifo Praso

TarkwaTarkwa

OdaOdaDunkwaDunkwa

KpanduKpandu

KrokosueKrokosue

DiasoDiaso

BibianiBibiani

GoasoGoaso

TechimanTechiman

YejiYeji

KwadwokuromKwadwokurom

DambaiDambai

NakpayiliNakpayili

YendiYendi

GushieguGushiegu

WalewaleWalewale

WalewaleTumuWalewaleTumu

NakpanduriNakpanduri

HamaleHamale

BoleBole

SawlaSawla

FufulsuFufulsu

AtebubuAtebubu

JemaJema

KintampoKintampo

MakongoMakongo

SalagaSalaga

AgogoAgogo

BerekumBerekum

NavrongoNavrongo

ObuasiObuasi

HoHo

WaWa

KumasiKumasi

TamaleTamale

SunyaniSunyani

KoforiduaKoforidua

BolgatangaBolgatanga

Takoradi

Newtown

Tema

Winneba

Axim

Enchi

Kade

Prestea

Aflao

Twifo Praso

Tarkwa

OdaDunkwa

Kpandu

Krokosue

Diaso

Bibiani

Goaso

Techiman

Yeji

Kwadwokurom

Dambai

Nakpayili

Yendi

Gushiegu

Walewale

WalewaleTumu

Nakpanduri

Hamale

Bole

Sawla

Fufulsu

Atebubu

Jema

Kintampo

Makongo

Salaga

Agogo

Berekum

Navrongo

Obuasi

Ho

Wa

Kumasi

Tamale

Sekondi

Sunyani

Koforidua

Cape Coast

Bolgatanga

ACCRA

U P P E R W E S T

B R O N G - A H A F O

A S H A N T I

W E S T E R N

C E N T R A L

E A S T E R N

V O L T A

U P P E R E A S T

N O R T H E R N

GREATERACCRA

TOGO

BENIN

CÔTED'IVOIRE

BURKINA FASO

White Volta

Kolpawn

Daka

Oti

Pru Tain

Bia

Tano

Pra

Anum

Afram

Volta

Birim

Ank

ob

ra

Blac

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Black Volta

Gul f of G uinea

LakeVolta

To Porto-Novo

To Abomey

To Sokodé

To Djougou

To Dapaong

To Tenkodogo

To Bobo-

Diolasso

To Ferkéssédougou

To Bouna

To A

gbov

ille

To A

bidj

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To Djougou

K w a h u P l a t e a u

A

k wa

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Mount Afadjato(880 m)

6° N

8° N

10° N

6° N

8° N

10° N

2° W

2° E

0°

2° W 2° E0°

GHANA

0 20 40 60

0 20 40 60 Miles

80 Kilometers

IBRD 36148

MAY 2008

GHANAAGRICULTUREDEVELOPMENT

POLICY OPERATIONSELECTED CITIES AND TOWNS

REGION CAPITALS

NATIONAL CAPITAL

RIVERS

MAIN ROADS

RAILROADS

REGION BOUNDARIES

INTERNATIONAL BOUNDARIES

This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, o r any endo r s emen t o r a c c e p t a n c e o f s u c h boundaries.