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AfricaJuly 1 2004

From chaos to confidence

Finance minster Yaw Osafo-Maafo tells James Eedes how Ghana has managed to shake off financial chaos in the past four years and take the lead in establishing new benchmarks of governance in Africa.
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Ghana’s ambitious economic reform programme has simultaneously received strong US endorsement and separately gone under the microscope in a move designed to map its successes for use elsewhere in Africa. Speaking to The Banker, finance minister Yaw Osafo-Maafo says that Ghana is taking the lead in establishing new benchmarks of good governance in Africa that he believes will set the standard for other countries to follow.

US aid

The country is one of eight African states – including Benin, Cape Verde, Lesotho, Madagascar, Mali, Mozambique and Senegal – that were selected earlier this year to receive aid from the US Millennium Challenge Account (MCA). Qualifying countries had to meet defined standards of political and economic governance before becoming eligible for aid from the $3.5bn fund.

“The MCA selection process provides yet another strand of evidence that our overall performance and trajectory for economic, social and political advancement in relation to our peers is on the right track,” says Mr Osafo-Maafo.

He says that Ghana sailed through the selection process, leading the rankings in six categories: civil liberties, political rights, voice and accountability, quality of government institutions, rule of law and control of corruption. Spending on primary education and public health services was also above average. Countries were ranked by independent monitors on a series of civil, social and economic benchmarks.

Action on governance

At about the same time, Ghana became the first country to be subjected to the African Peer Review Mechanism (APRM), a voluntary undertaking to submit to an independent assessment of governance by monitors from different African countries.

The APRM is the creation of the New Partnership for Africa’s Development (Nepad) which espouses good governance as part of its vision for Africa. The APRM is as much about developing a blueprint for African governance as it is about assessment and measurement.

“Africa must learn from itself,” says Mr Osafo-Maafo. “Ghana has taken the lead in opening itself up to the review; we are providing leadership in setting the standard.”

That view echoes the vision of Ghana’s first post-independence leader, Krame Nkrumah, a passionate pan-Africanist. Mr Osafo-Maafo believes Africa must assert itself in sorting out its problems.

Transformation

It is a remarkable turnaround. Ghana was the first country in colonial Africa to gain its independence, in 1957. Since then there have been eight changes of government, mostly by military coup, culminating in the suspension of the constitution in 1981 and the banning of political parties. A new constitution restoring multi-party politics was approved in 1992 and Jerry Rawlings, head of state since 1981, was elected president.

When Mr Rawlings was constitutionally prevented from running for a third term in 2000, incumbent president John Kufuor was elected, inheriting an economy in disarray.

At the start of 2001, inflation was racing at over 40%; the bank lending rate was 55%; the government deficit to gross domestic product was at 8.5%; import cover was down to three weeks; and there was just six days’ reserve supply of petroleum products.

In contrast, Mr Kufuor’s government has been able to slash the deficit (recording a 0.3% surplus in 2003), fulfil criteria making it eligible for debt relief under the highly-indebted poor countries initiative this month, resulting in debt relief of $3.7bn, and slow inflation almost to single digits.

Reform programme

Ghana’s ongoing reform programme is built around five main priorities: infrastructure development; agricultural modernisation; social sector development; governance; and private sector development.

Heavily dependent on primary industries, in particular cocoa, the country has focused on agriculture in the past four years. Growing the annual cocoa harvest from 385,000 tons in 2001 to 600,000 tons in 2004, through various supply-side measures, has bolstered rural incomes and had a positive impact on government revenues in the form of taxes.

However, Ghana remains poor and vulnerable. The country goes to the polls again in December, threatening to slow the pace of reform. If, as it seems, Mr Kufuor is able to hold on to power, Ghana’s prospects are bright: the reform agenda has been clearly articulated and has the backing of important stakeholders, such as the International Monetary Fund.

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