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Money and prices (In billions of cedis except as noted)

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17 All 1991 figures are provisional estimates.
27 Crop year begins September.
3/ Only data available for unemployment (1.9 percent)

and size of labor force (6,477 mn) are from 1987

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Ghana living standards survey. 47 Exchange rates are given as: average annual for

official auction and actual range for the foreign exchange bureaus. Forex bureaus supplanted parallel

market activity, starting in mid-1988. 5/ Data for aid flows converted to US$ at exchange

rates prevailing at time of disbursements; data are for calendar year.

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Ghana has implemented a structural adjustment program for eight years with impressive results. Annual GDP growth averaged 5.5 percent from 1984-89, dipped to 3.0 percent in 1990 but will rebound to about 5.0 percent in 1991. Key reforms included liberalized private access to foreign exchange, relaxation of import controls, a rehabilitation of basic infrastructure, civil service reform, steps toward privatization of parastatals, and market incentives for agricultural and export sectors. Large aid inflows have helped rebuild infrastructure and restore basic services. Good rains and higher producer prices for cash crops boosted farm output while industry and mining have experienced a private sector led resurgence. However, more could have been done to encourage private sector enterprise and attract foreign investment.

Ghana still relies excessively on cocoa and gold for export revenues. Inflation rose above 40 percent in the last quarter of 1990, reflecting higher oil prices but by the end of the second quarter had dropped below 18 percent. The government expects inflation to fall to 10 percent by year end 1991. Commercial lending rates of 28 - 32 percent discourage business investment. There are few official data on unemployment and underemployment but underemployment rates are believed to be high. Foreign exchange and trade liberalization improved prospects for U.S. exports. Access to credit is a significant constraint on importers.

Fiscal policy: The Government uses its annual budget to finance its reform program and channel resources to rehabilitate productive sectors. Public investment is targeted at projects described in a rolling, three-year investment plan. The Government of Ghana raises civil service salaries annually. Resource mobilization efforts include rationalization of the tax system and reinvigorated collections (income taxes and customs/excise taxes). Donor inflows provide a large percentage of government revenues. Tight liquidity is a problem as the Government, with World Bank support, restructures the banking system. Foreign aid helped Ghana achieve a modest budgetary surplus in 1990.

Monetary policy: Monetary policy has a limited effect because of a weak banking system. The government is working with the World Bank and IMF to improve monetary policy. The Central Bank relies on credit ceilings and adjustments in the discount rate and reserve requirements to control money supply. The annual level of financing for the cocoa sector significantly influences money supply. The Bank of Ghana

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(BOG) periodically sells controlled volumes of new treasury bills to commercial and merchant banks, but open market operations are not extensive enough to significantly influence money supply.

Foreign exchange remittances may contribute more than had been realized to M2 growth. Substantial liquidity circulates outside the formal financial system, partly because public confidence in the banks is low due to a history of mismanagement and government interventions.

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Ghana maintains two foreign exchange rates. The BOG holds weekly auctions that determine the official exchange rate for the following seven days. The weekly level of auction is about $6-7 million. Importers must bid through their banks. Only designated banks or financial institutions are permitted to participate. There is an unwritten rule barring importation of luxury consumables with foreign exchange purchased through the auction. In April 1991 restrictions on remittances of income earned by non-Ghanaians were ended, virtually eliminating exchange controls.

The government of Ghana legalized private foreign exchange (forex) bureaus in 1988. The bureaus buy and sell currencies at market rates without governmental controls. The spread between the auction and bureau rates is about ten percent or less. Forex bureaus have virtually eliminated the parallel market.

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Since 1983, the government has progressively liberalized the market structure. Price controls have been largely dismantled. While some state owned enterprises still set prices for agricultural products (e.g., maize), the market increasingly determines food prices. Ghana has eliminated price subsidies on hundreds of products and commodities but retains controls on a few items, including petroleum products, cement, utility tariffs, beer, cigarettes, machetes, fertilizers and selected pesticides. Surviving subsidies may affect regional trade but has minimal effect on U.S. exports.

The annual budget statement in January, 1991 announced several changes to the tax regime. The marginal tax rates on personal income were cut from 55 to 25 percent and the top corporate rate (for banking, trading, insurance and printing) was lowered from 55 to 50 percent. For the construction sector, the rate dropped from 50 to 45 percent. The basic corporate tax rate remained at 45 percent. The import duty structure was simplified in 1990, and new "super sales taxes" on large engine capacity passenger cars and luxury consumer goods were introduced (ranging from 50 to 500 percent). To enforce payment of sales tax and excise duties, a sales tax clearance certificate is required from manufacturers before goods clear the port. 1990 data indicates that excise duty receipts are below projected levels. No major structural policy changes affecting direction or character of investment

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Ghana's structural adjustment program is supported by the World Bank and the IMF. Ghana will complete its Enhanced Structural Adjustment Facility (ESAF) with the IMF by December 1991. Ghana has not rescheduled official credits under the Paris Club and has not rescheduled commercial bank credits. At year-end, 1990, Ghana's total external debt was estimated at $3.04 billion. A breakdown of external public debt as of 1990 follows (in millions of U.S. dollars):

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Ghana succeeded in eliminating its remaining payments arrears by mid-1991.

The profile of Ghana's external debt has improved with access to IMF resources on better repayment terms (ESAF) since 1987 and cancellation of portions of its bilateral debt. Debt service ratios dropped from a peak of 68 percent (1988) to 57 percent (1989), 38 percent in 1990, and 36 percent in 1991. Relations with the international financial institutions are good. A debt management unit was established in 1988 at the finance ministry, equipped with a computer program to analyze Ghana's external obligations.

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In January 1989, the last vestiges of Ghana's import licensing system were abolished. Importers still submit an import declaration form and a current tax clearance certificate.

Service Barriers: Service barriers affect many activities in the following sectors: advertising, insurance, shipping, and tourism and travel services. The following business and/or investment activities are prohibited to non-Ghanaian proprietors: commercial overland transportation, laundry/dry cleaning, small scale wholesale/retail operations, taxi/car hire service, tire retreading, beauty/barber shops, real estate, agricultural commodity brokerages, and certain other agencies and distributorships.

Standards: Ghana has its own standards for food and drugs, and conducts testing according to accepted international practices for imports with suspicious characteristics. But all locally manufactured goods are subject to standards testing, labeling and certification regulations.

Investment Barriers: The government has designated priority sectors for investment (agriculture, manufacturing, building/construction and tourism) and strongly favors

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export-oriented enterprises using predominantly local raw materials. There are also incentives for certain categories of investments in under-developed regions of the country. For foreign investors, the minimum equity is $60,000 (joint venture) or $100,000 (wholly-owned); the latter must be a net earner of hard currency. Expatriate quotas are in force and a special tax on expatriates was raised in 1988 to 500,000 cedis ($1,450). Waivers are granted for government contract employees, projects financed by international organizations or bilateral donors, and on an exceptional basis.

Under the 1985 investment code, the government guarantees free transferability of dividends, loan repayments, licensing fees and repatriation of capital; provides guarantees against expropriation or forced sale; and delineates dispute arbitration processes.

Prospective investors are screened in accordance with their capacity to contribute to any of nine goals listed in the investment code (e.g., development and transfer of technology). The Ghana Investment Center (GIC) registers and may regulate such transfers. Foreign investors are not subject to differential treatment on taxes, prices or access to foreign exchange, imports and credit. Official policies do not restrict U.S. exports or direct investment, although some economic activities are closed to foreign investment. Land ownership by non-citizens is prohibited although expatriate companies may own property constructed on leased lands.

The GIC may stipulate the amount and source of capital, nationality and number of shareholders, project size, training of Ghanaians, time for implementation, utilization of local raw materials and other criteria. While the government has exhibited flexibility and pragmatism in applying these requirements, they will remain an integral part of its economic strategy.

Separate legislation provides for investments in mining and petroleum and applies equally to foreign and Ghanaian investors.

Government Procurement Practices: Government purchases of equipment and supplies are usually handled by the Ghana Supply Commission, the official purchasing agency, through international bidding and, at times, through direct negotiations. The Central Bank does not encourage countertrade because of adverse past experience of over and under-invoicing. However, the government has traditionally conducted countertrade with Eastern European countries and Cuba. Except for aid-tied imports, Ghana does not discriminate against any country, with two exceptions: imports from South Africa and Iraq are prohibited.

Parastatal entities continue to import some commodities, principally wheat, though most former government monopolies have been abolished. The parastatals no longer receive government subventions to finance imports.

Capable private sector importers are permitted to bring in almost any commodity, except for wheat (though flour is permitted) and the five items remaining on the prohibited

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