Thursday, September 22, 2011

Remittances from Ghanaians abroad higher than international aid to country

By Emmanuel K. Dogbevi

Remittances from Ghanaians abroad is a major part of the country’s economy, available figures show.

And even though Overseas Development Assistance (ODA) or international aid is an important source of external finance for the government budget, the amount remitted into the country is above the total amount of ODA, consisting of loans and grants from donors.

Many of Ghana’s donors having realised that all non-income Millennium Development Goals (MDGs) are likely to be missed, scaled-up their ODA to Ghana in recent years. ODA now accounts for about 42% of the national budget.

In 2009, the Bank of Ghana reports show that remittance inflows amounted to $1.6 billion, higher than the World Bank’s recorded $1.5 billion and almost 10 times the $114 million recorded by the International Monetary Fund (IMF).

The significance of these citizens living abroad cannot be overlooked, as there are over 500,000 Ghanaians living in the UK alone and about 1000 Ghanaians doctors living and working in the US. There are Ghanaians living and working almost in every corner of the world in various capacities who send money to relatives back home.

In 2010, remittances or private unrequited transfers (net) in the year amounted to $2.12 billion, the World Bank Ghana Country office told And that amount exceeds the total volume of ODA that the country received in that year.

According to figures provided to by the Public Relations Office of the Ministry of Finance and Economic Planning, in 2010 the total amount of ODA the country received was $1.8 billion.

The breakdown as provided by the Ministry is as follows: Grants – $612 million; and Loans - $1,242 billion.

Tuesday, September 13, 2011

Ghana’s efficient country system for aid management not complemented by donor conduct – Study

 By Emmanuel K. Dogbevi

A major new study on aid effectiveness to be published in the run-up to the High Level Forum on Aid Effectiveness (HLF-4) in Busan, South Korea has found that even theough Ghana has made significant progress in applying  Overseas Development Assistance (ODA) or international aid by using country systems, the unwillingness of donor countries to change their attitude is a drawback to achieving the objectives of the Paris Declaration (PD) and Accra Agenda for Action (AAA).

The study conducted by the European Network on Debt and Development (Eurodad), says ” While Ghana has made much progress in reforming country procurement systems, this progress does not seem to have been complemented by changes in donor conduct. Donors’ own reporting suggests that the extent to which they use country systems has not changed a great deal.”

The report to be published at the end of November 2011 focuses on six country case studies including Namibia, Uganda, Bangladesh, Bolivia, Nicaragua and Ghana.

The report titled, “How to spend it: smart procurement for more effective aid,” will be published to assess progress towards these aid effectiveness commitments. The report includes suggestions for a new and ambitious agreement in Busan and it constitutes one of the few civil society research reports ahead of the HLF4.

The report investigates how aid is actually spent, who the beneficiaries are and what the local economic impact is.

In its summary on Ghana,  titled: “For whose gain? Procurement, tied aid and the use of country systems in Ghana”,  the report argues that “the use of recipient country systems can increase the effectiveness of ODA by enhancing ownership and harmonization, reducing transaction costs and strengthening institutions.”

“Channelling ODA through country systems facilitates the alignment of aid allocation to national development plans. Using country systems is therefore a central pillar of the current aid effectiveness reform agenda as agreed on in international agreements, in particular the Paris Declaration and the Accra Agenda for Action,” it adds.

According to the report almost all of the donors interviewed for the study noted that in recent years progress has been made in improving Ghana’s public financial management and procurement systems.

“Past and ongoing reforms have enhanced donors’ confidence in the country systems, and scaled-up budget support has led to open dialogues between donors and Ghanaian authorities on the quality of the Public Financial Management (PFM) system, and how to improve it,” it says.

During interviews for the report most donors said they would channel more funds through the country system, in particular through the Multi-Donor Budgetary Support (MDBS) framework.

“However, the actual figures in the most recent official assessment, the 2008 Survey on Implementing the Paris Declaration (PD), give a different picture: the proportion of aid using country public financial management systems actually decreased to 57 per cent in 2007 from 62 per cent in 2005, contrary to the commitments made by donors,” the report says.

The report however, noted that the use of country procurement systems showed a slight increase, from 52% to 57%.

While it indicates that some donors, such as France and the Netherlands make full use of the country procurement system for all their ODA, it has been totally side-lined by others such as the USA and the African Development Bank (AfDB).

The report however says in a previous research on the use of country systems in Ghana carried out by Eurodad, it found that the US aid agencies are constrained by policies and regulations set at headquarter level. Moreover, the large number of vertical funds in Ghana, in particular in the health sector is also a contributing factor for the continued underuse of the country systems, despite an increase in their quality.

According to the report, some donors, mainly European Union (EU) Member States, explained that although they committed to using country systems as a first option, they use their own procurement procedures in cases where the procurement involves supplies or services which need to be procured internationally since they are not available on local markets.

Donor representatives also pointed to persistent structural or political constraints for using country systems. These are for example risk aversion by donor country parliaments which require that spending is visible and attributable, and well-documented and properly accounted for. Real or perceived fiduciary risks lead to the continued use of parallel implementation by donors. Some donors also continue to tie technical assistance and provide consultancies in kind rather than in cash, it said.

Citing a study by Osei Baffour titled “How tied aid affects the cost of aid-funded projects in Ghana“, in which he drew the conclusion that “there is significant mark-up on the prices of the tied funded inputs, and that the mark-up translates to a significant cost to Ghana,” the report said empirical research has shown that tied aid makes aid less efficient and less effective.

Since 2001, Ghana, the report noted  has undertaken a large number of reforms of its Public Finance Management (PFM) system in general, and the procurement systems in particular. Central is the Public Procurement Act, passed in 2003, which provides a comprehensive legal framework for public procurement. New institutions such as the Public Procurement Authority (PPA) and the Appeals and Complaints Panel have been set up to formalise and improve procurement processes, it says.

It also acknowledged that the development of software for procurement planning, a standard bid document and short –term training modules as well as the Public Procurement Model of Excellence (PPME) for assessment and monitoring have aided in enhancing the image of public procurement.

Several interviewees, the study said, explained that the PPME represents a significant step forward for monitoring the performance of public procurement entities and their compliance with the legal provisions.

The PPA and the Auditor General have indicated that the implementation of the Act has reduced leakages and led to more transparency in public spending. However, many government officials’ respondents bemoaned the delays associated with the implementation, it added.

The study therefore, recommends among others that all donors should deliver on their aid effectiveness commitments and use country procurement systems as the first option, while at the same time providing scaled-up support to strengthen local procurement capacities and improve accountability of the procurement process.

It suggests further that, where donors continue to procure themselves, they should end all practices of formal and de facto aid tying. They should also thoroughly assess their procurement practices and remove all barriers which hinder better access and participation of local economic actors, with the final aim of maximizing the share of contracts which are awarded to Ghanaian firms.

Wednesday, September 7, 2011

Rise in world food prices has implications for Ghana

By Emmanuel K. Dogbevi

I first wrote and published this article elsewhere in 2008 at the onset of the global financial and food crises.

As the world faces the emergence of another food crisis, I thought I should share with you, especially if you didn't get the chance to read it.

Ghana’s recent successes in the agriculture sector could suffer setbacks as a result of the rise in world food prices if the appropriate steps are not taken.

Ghana is still celebrating the positive mention it received in the recently launched World Development Report 2008 of the World Bank. In this Report, Ghana was extensively used as a case study, indeed as a success story in agricultural growth in sub-Sahara Africa, including halving poverty by Millineum Development Goal benchmarks.

Unfortunately, the rise in world food prices for grains, especially wheat, could possibly erode the gains made in agriculture in the country.

The world price of wheat has risen to $19.88 a bushel on the Minneapolis Grain Exchange (MGE) according to the website, World Socialist, and that rise is 79% higher than a year ago. The site says that the surge was as a result of the announcement that Japan had purchased 190,000 tons of US wheat shortly after the Egyptian government bought 235,000 tons, and in anticipation of weather-related food disruptions in China.

The Financial Times (FT) reports that in Chicago wheat and rice prices for delivery in March 2008 have jumped to an all-time record, soyabean prices are at a 34-year high and corn prices at an 11-year peak.

In early trading on Monday according to the FT, the new benchmark price of wheat for March delivery rose 30 cents to $10.09½ a bushel, more than 7.5 per cent higher than the expiring December contract of $9.39 and first time it has traded over $10 a bushel. The December contract expired on Friday and the March 2008 contract became the market’s benchmark on Monday.

New benchmark prices for corn are also more than 5 per cent higher than previously. Corn for March 2008 rose to $4.43¼ a bushel, the highest level in 11 years for a front-month contract.

The benchmark prices for soyabeans delivered in January rose on Friday to a fresh 34-year high of $11.92¼ a bushel.

Rice, also for January, has jumped to an all-time high of $13.310 a hundredweight.

The FT report quotes Bill Lapp, analyst at US consultancy, Advanced Economic Solutions as saying “We’ve already seen food prices increase this year at their fastest pace since the early 1980s, but the full brunt of those increases will begin in earnest in 2008.”

The agricultural commodities price rises are the result of high demand, poor harvests and low stockpiles of food. Emerging economies, where rising incomes are boosting consumption of meat and dairy products, have added to pressures already generated by the biofuel industry.

Cereal supply was this season lower than expected as several countries suffered weather-related losses. Jean Bourlot, head of agriculture commodities at Morgan Stanley in London, said: “High cereals prices are here to stay.”

The US Department of Agriculture has predicted that global corn stocks will fall to a 33-year low of just 7.5 weeks of consumption, while global wheat stocks will plunge to their lowest level in at least 47 years at 9.3 weeks.

But the World Food Programme (WFP) has predicted that the price of wheat will remain high for atleast the next two years.

According to the group, Action Against Hunger, an NGO that is in the forefront of fighting hunger in the world, the cause of the rise in the world price of cereals was due to some factors including increased consumption of cereals both as food and for animal feed in China and Brazil.

The challenges facing food production in most parts of the world according to Action Against Hunger are, biofuel production, increase in fuel prices, and global warming.

Biofuel’s effect on food production is as a result of the use of productive land for the production of non-food crops.

The increase in fuel prices has affected agricultural production, because farmers have to pay more for less energy sources to produce.

The effects of global warming on the world is being felt in the loss of water sources. Most of the world’s water sources are drying up as a result, and this is affecting agricultural production.

There is also the challenge posed by deforestation, loss of soil fertility and land degradation which have resulted from other industrial activities.

Most developing countries now have to spend a lot more on food imports. It is estimated that developing countries spend between 70%-80% of their budget on food imports.

According to the Food and Agriculture Organisation (FAO), the global trade in foodstuffs has grown rapidly and changed radically over recent decades. Between 1970 and 2001, gross world food imports, measured in terms of calorie equivalents, rose by almost 60 percent.

But this growth differed markedly among both country and commodity groups.

The FAO reports that gross imports of food by developing countries grew by 115 percent over this period. Imports by developed countries, which already import a higher proportion of their food, grew by 45 percent.

A closer look at the data reveals that food imports by developing countries increased rapidly during the 1970s, grew more slowly during the 1980s and accelerated again over the 1990s. This pattern holds true both for the volume of food imports and for the ratio of food imports to availability for consumption per capita.

The expansion of food imports meant that the food trade surplus of US$1 billion of developing countries was transformed into a deficit of more than US$11 billion during this period. Moreover, this trend is expected to continue: according to FAO projections, by the year 2030, the net food trade deficit of developing countries is expected to swell to more than US$50 billion in constant 1997-99 US$.

These figures do not portend good for developing countries in the light of the challenges.

African countries in particular, like Sierra Leone and Liberia that depend so much on rice and Kenya which depends on corn are likely to be hard hit by the developments.

Ghana, which also imports a large amount of rice would likely face great constraints on the country’s budget.

According to the FAO, at an annual growth rate of 12.84 per cent, Ghana’s rice import grew from 121,000 metric tons in 1993 to 507,600 metric tons in 2002.

An environmental group, Environmental Rights Action, based in Nigeria, has put Ghana’s rice imports from the USA alone at 166.400 metric tons between 2004 and 2005.

The challenges that the rise in world food prices could pose to Ghana, is the diversion of funds for other sectors into food importation.

This could bring short term relief. But for a long term approach to the challenge, the Ghana government must go back to the drawing board and have a second look at agriculture in the country.

Particular attention should be given to developing irrigation systems.

Agriculture research institutions should also be given attention and the funding they require to develop new varieties of crop for farmers, especially pest and disease resistant varieties.

While Ghanaians are entitled to celebrate the achievements documented in the World Bank’s World Development Report 2008, the challenges posed by the rise in world food prices, should goad the country on to more pragmatic and goal oriented agricultural practices.

It is time to move away from lip service to the agriculture sector, it is time to put more money where it is needed most, and that is the agriculture sector, so that Ghanaians can be well fed, because well fed citizens always have the energy to build a better, stronger nation.