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PRESS/TPRB/157
21 February 2001
(01-0886)
INCREASED ACCESS TO FOREIGN AGRICULTURAL MARKETS WOULD HELP
GHANA'S REFORM EFFORTS
Since the early 1990's, the Republic of Ghana has sought extensive reforms to reverse
previous inward-looking policies, and trade and investment liberalization has been an integral part to
them.  Despite real annual growth rates exceeding 4% during the 1990s, macroeconomic imbalances
which have precipitated an economic crisis, threaten economic growth and could endanger thecontinuation of trade and other structural reforms, according to a WTO report on the trade policies
and practices of Ghana.
The WTO Secretariat report, along with the policy statement by the Government of Ghana
will serve as a basis for the second trade policy review of Ghana by the Trade Policy Review Body of
the WTO on 26 and 28 of February 2001.
The report notes that faced with a looming economic crisis, the Government began
implementing corrective measures in  1998.  An annual monetary growth target of 18% was
introduced to control inflation, which fell to 12% in 1999.  Fiscal measures taken to reign in the
deficit included the re-introduction of a broad-based 10% value-added tax, increased to 12.5% in
2000.  Tighter spending controls were also applied.  The budget deficit fell to 6% in 1999.
However, says the report, measures came too late to avert the economic crisis.  The
Government's economic outlook was revised downwards in the 2000 Budget.  Large budget deficits
are set to continue, and the target for achieving fiscal balance has been shifted beyond 2001.  These
deficits will strain the financial system, generating resurgent pressures on inflation, interest rates, andthe external balance.
The report says that trade and foreign direct investment (FDI) are essential to Ghana's
economic development.  Merchandise exports and imports as a share of GDP have expanded
substantially, from 18% and 29% in 1993 to 28% and 39%, respectively, in 1998. Trade is relativelyPRESS/TPRB/157
Page 2
MOREconcentrated, both in commodities and markets.  Primary products, overwhelmingly gold and cocoa,
account for most exports.  Non-traditional exports, including, processed food, timber, and aluminium
products, account for 20% of exports, up from 3% in 1986.  However, export diversification has
slowed.  Most manufactured products, along with machinery and other inputs, are imported.  Ghana's
main trading partner remains the European Union (E U), accounting for almost half of total exports –
partly due to trade preferences – and imports.  Within the EU, Italy has overtaken the UnitedKingdom and Germany as the main export market.  Italy, the United Kingdom, and France are the
main European source of imports.
Ghana, a founding member of the WTO, accords at least MFN treatment to all its trading
partners.  Around 15% of its tariff lines are bound, mostly in agriculture.  Its GATS Schedule covers
commitments on certain services, including tourism, maritime transport, construction, and education.
Ghana also participates in the agreements on Basic Telecommunications and Financial Services.  It is
an observer to the Plurilateral Agreement on Trade in Civil Aircraft, and is neither a signatory, nor anobserver, to the Agreement on Government Procurement.
The tariff remains Ghana's main trade policy instrument.  The simple average tariff had fallen
from 17% in 1992 to 13% on January 2000, when the highest duty rate, levied on consumer goods,
was reduced from 25% to 20%.  However, the average tariff rose to its current level of 14.7% in
February 2000 when a "special import tax" of 20% was re-introduced, covering some 7% of tarifflines.  This raised tariffs on many, mostly consumer goods to 40%, well above their previous rate of
25%.  This contradicts the Government's policy objective of lowering average tariffs to below 10%
within the next three years.
Ghana is heavily dependent on agriculture, especially cocoa, and on natural resources, notably
minerals. Primary production accounts for almost half of GDP; agriculture, at 40%, is the mostimportant sector.  Manufacturing contributes some 10% of GDP. Services are the second largest
component of GDP.  Many basic infrastructure services, such as electricity, ports, and water, are
provided by state-owned statutory monopolies.  Ba sic telecommunication services are supplied by a
statutory duopoly following licensing of a second national carrier in 1997.  These arrangements have
had only limited success in promoting telecommunication services: neither carrier has met its networkexpansion or service quality target.  The Government will consider allowing additional carriers from
March 2002.  The market for value-added telecom services is open.  The National Communications
Authority was formed in 1997 as the independent legislative regulator to promote fair competition and
enhanced efficiency.
Ghana generally applies its trade policies and measures on a non-discriminatory basis,
granting at least MFN treatment to all its trading partners.  Pursuing MFN liberalization while
expanding its bilateral arrangements and deepening regional integration, would maximize benefits,
and help guard against any possible trade diversion. Reliance on ad valorem tariffs, which are being
rationalized, as the main trade instrument contributes to a more transparent trading regime.  Extending
the coverage of tariff bindings beyond agriculture would benefit Ghana and its trading partners by
increasing the predictability of the tariff.  Continued structural reforms, including further trade and
investment liberalization, can improve the economy's flexibility and growth prospects.
However, the economy remains relatively weak and vulnerable to external commodity price
movements and other shocks, such as weather conditions.  Current economic difficulties, both internal
– including the large budget deficit – and from abroad, are placing extra pressures on the economy
which may weaken the Government's resolve for trade liberalization. Ghana's enhanced commitments
to the WTO and compliance with its obligations can help sustain such unilateral reforms.  However,Ghana's trading partners can greatly assist its reform efforts by ensuring stable, increased access toPRESS/TPRB/157
Page 3
MOREtheir markets, especially in agricultural products where Ghana's comparative advantage appears
strongest.
Note to Editors
Trade Policy Reviews are an exercise, mandated in the WTO agreements, in which member
countries’ trade and related policies are examined and evaluated at regular intervals. Significantdevelopments which may have an impact on the global trading system are also monitored. For each
review, two documents are prepared: a policy stat ement by the government of the member under
review, and a detailed report written independently by the WTO Secretariat. These two documents are
then discussed by the WTO’s full membership in the Trade Policy Review Body (TPRB). These
documents and the proceedings of the TPRB’s meetings are published shortly afterwards. Since 1995,
when the WTO came into force, services and trade- related aspects of intellectual property rights have
also been covered.
For this review, the WTO’s Secretariat report, together with a policy statement prepared by
the Government of Ghana will be discussed by the Trade Policy Review Body on 26 and 28 of
February 2001. The Secretariat report covers the development of all aspects of Ghana's trade policies,
including domestic laws and regulations, the institutional framework, trade policies by measure andby sector.
Attached to this press release is a summary of the observations in the Secretariat report and
parts of the government policy statement. The Secretariat report and the government's policy
statement are available for the press in the newsroom of the WTO internet site (www.wto.org). Thesetwo documents and the minutes of the TPRB’s disc ussion and the Chairman’s summing up, will be
published in hardback in due course and will be available from the Secretariat, Centre William
Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992 and
1999), Australia (1989, 1994 and 1998), Austria (19 92), Bahrain (2000) Bangladesh (1992 and 2000),
Benin (1997), Bolivia (1993 and 1999), Botswana  (1998), Brazil (1992, 1996 and 2000), Burkina
Faso (1998), Cameroon (1995), Canada (1990, 1992, 1994, 1996, 1998 and 2000), Chile (1991 and
1997), Colombia (1990 and 1996), Costa Rica (1995), Côte d’Ivoire (1995), Cyprus (1997), the Czech
Republic (1996), the Dominican Republic (1996), E gypt (1992 and 1999), El Salvador (1996), the
European Communities (1991, 1993, 1995, 1997 and 2000), Fiji (1997), Finland (1992), Ghana (1992
and 2001), Guinea (1999), Hong Kong (1990, 19 94 and 1998), Hungary (1991 and 1998), Iceland
(1994 and 2000), India (1993 and 1998), Indonesia (1991, 1994 and 1998), Israel (1994 and 1999),
Jamaica (1998), Japan (1990, 1992, 1995,1998 and 2000), Kenya (1993 and 2000), Korea, Rep. of
(1992, 1996 and 2000), Lesotho (1998), Macau (1994), Madagascar (2001), Malaysia (1993 and
1997), Mali (1998), Mauritius (1995), Mexico (1993 and 1997), Morocco (1989 and 1996),
Mozambique (2001), New Zealand (1990 and 1996) , Namibia (1998), Nicaragua (1999), Nigeria
(1991 and 1998), Norway (1991, 1996 and 2000), Pa kistan (1995), Papua New Guinea (1999),
Paraguay (1997), Peru (1994 and 2000), the Philippines (1993 and 1999), Poland (1993 and 2000),
Romania (1992 and 1999), Senegal (1994), Si ngapore (1992, 1996 and 2000), Slovak Republic
(1995), the Solomon Islands (1998), South Africa (1993 and 1998), Sri Lanka(1995), Swaziland
(1998), Sweden (1990 and 1994), Switzerland (1991, 1996 and 2000 (jointly with Liechtenstein),Tanzania (2000), Thailand (1991, 1995 and 1999), Togo (1999), Trinidad and Tobago (1998), Tunisia
(1994), Turkey (1994 and 1998), the United States (1989, 1992, 1994, 1996 and 1999), Uganda
(1995), Uruguay (1992 and 1998), Venezuela (1 996), Zambia (1996) and Zimbabwe (1994).PRESS/TPRB/157
Page 4
MORETRADE POLICY REVIEW BODY
GHANA
Report by the Secretariat – Summary Observations
Since the early 1990's, the Republic of Ghana has sought extensive reforms, in an effort to
reverse previous inward-looking policies.  Trade and investment liberalization has been integral to
reform, and has continued since Ghana's previous review in 1992.  Government policies are now
focused on making Ghana the Gateway to West Africa.
Ghana achieved real annual growth rates exceeding 4% during the 1990s.  However,
macroeconomic imbalances have again precipitated an economic crisis.  This threatens economic
growth and could endanger the continuation of trade and other structural reforms.  Evidence of this
danger is reflected in some backsliding on tariff reductions and slowed privatization.
Economic environment
The economy shows large budget deficits, the core of Ghana's present economic difficulties.
Fiscal deficits re-escalated sharply during the mid 1990s to 10% of GDP. Funded mainly by centralbank borrowings, these have severely strained public finances and the banking sector.
Excessive money supply growth fuelled inflation, which peaked at 60% in 1995, and
exacerbated rising real interest rates.  Business investment fell, and private sector growth, "crowded
out" by the public sector, stagnated.  Ghana's international competitiveness declined due to real
appreciation of its currency (cedi), propped up by sizeable Central Bank intervention until late 1999.The cedi has since depreciated nominally against the U.S. dollar by some 100%.
The economy's fragility and vulnerability was exposed by recent external shocks, culminating
in a critical balance-of-payments position.  Sharply deteriorating terms of trade, reflecting falling
world prices for Ghana's main exports - cocoa and gold - and rising oil prices, as well as Central Bank
intervention, drained foreign reserves to tenuous levels.  Economic difficulties seem to have beencompounded by problems of governance and weak institutions.
Faced with the looming economic crisis, th e Government began implementing corrective
measures in  1998.  An annual monetary growth target of 18% was introduced to control inflation,
which fell to 12% in 1999.  Fiscal measures taken to reign in the deficit included the re-introduction
of a broad-based 10% value-added tax, increased to 12.5% in 2000.  Tighter spending controls werealso applied.  The budget deficit fell to 6% in 1999.
However, measures came too late to avert the economic crisis.  The Government's economic
outlook was revised downwards in the 2000 Budget.  Large budget deficits are set to continue, and the
target for achieving fiscal balance has been shifted beyond 2001.  These deficits will strain the
financial system, generating resurgent pressures on inflation, interest rates, and the external balance.
Ghana remains a highly indebted developing country (with a GDP per capita of US$390 in
1998), heavily dependent on external concessional financing.  External debt is equivalent to over 75%of GDP, but Ghana has serviced its debt, largely without rescheduling.PRESS/TPRB/157
Page 5
MORETrade and Foreign Direct Investment
Trade and foreign direct investment (FDI) are essential to Ghana's economic development.
Merchandise exports and imports as a share of GDP have expanded substantially, from 18% and 29%
in 1993 to 28% and 39%, respectively, in 1998.
Trade is relatively concentrated, both in commodities and markets.  Primary products,
overwhelmingly gold and cocoa, account for most exports.  Non-traditional exports, including,
processed food, timber, and aluminium products, account for 20% of exports, up from 3% in 1986.
However, export diversification has slowed.  Most manufactured products, along with machinery and
other inputs, are imported.  Ghana's main trading partner remains the European Union (EU),
accounting for almost half of total exports – partly due to trade preferences – and imports.  Within the
EU, Italy has overtaken the United Kingdom and Ge rmany as the main export market.  Italy, the
United Kingdom, and France are the main European source of imports.
Ghana's regional trade with members of the Economic Community of Western African States
(ECOWAS) accounted for 17% of exports in 1999, up from 13% in 1994.  Togo matched Italy as
Ghana's main single export destination in 1999.  The share of African imports also rose, from 23% in
1994 to 27% in 1999.  Nigeria, the main regional source, lost ground, its share falling over this period
from 17% to 14%.
Ghana is a net importer of services, especially of "freight and merchandise insurance". Travel
exports increased substantially during the 1990s, and is currently by far Ghana's largest service
export, accounting for 60% of the sector's exports in 1998.
Over half of Ghana's inward FDI is in services.  Despite a more liberal investment regime,
with new legislation aimed at extending national treatment to overseas investors, FDI remains erratic.Registered FDI from 1994-98 totalled US$1.5 billion, mainly from the United Kingdom, China,
United States, and Germany.  Policy and economic uncertainties in Ghana have reduced investor
confidence.
In the Government's view meeting its multilateral commitments is integral to Ghana's ongoing
reforms. Its agricultural tariffs are fully bound, and steps are being taken to implementWTO-consistent policies on customs valuation and intellectual property protection.  Ghana looks to
bilateral and multilateral donors for technical assistance and support in meeting these commitments.
Institutional and Legislative Framework
Ghana returned to parliamentary democracy in 1992.  The new Constitution vests executive
power with the President and legislative authority with the unicameral Parliament.  The President is
Head of State.  As leader of the Government, he also appoints cabinet ministers.
The main ministries involved in setting and implementing trade-related policies are Trade and
Industry, Finance, and Agriculture.  Several agencies are also responsible for certain subsectors, such
as cocoa, minerals, timber, fishing, and tourism.  The Divestiture Implementation Committee handles
privatization of state-owned enterprises.  The Bank of Ghana, as Central Bank, manages monetary and
exchange rate policies, determined in consultation with the Government.
The Government promotes public dialogue th rough periodic forums, such as the National
Economic Forum and the Policy Forum Dialogue on Partnership for Economic Growth, both held in
1997.  A public forum on Ghana's competitiveness is planned, based on a policy agenda set under the
Trade and Investment Reform Programme (TIRP) overseen by the Inter-Ministerial Committee onPRESS/TPRB/157
Page 6
MORECompetitiveness.  This will examine the adverse impact on Ghana's competitiveness of remaining
trade barriers, including tariffs.
The Government's long-term economic development plan is for Ghana to become a middle-
income country by 2020 – Ghana's Vision 2020.  This is to be met via a series of five-year rolling
medium-term plans aimed at achieving minimum real  annual growth of 8%, based largely on exports.
The current plan terminated at end 2000.
The Government's industrial development strategy is to remove bottlenecks to private-sector
development.  Tariffs are to be structured to afford reasonable protection, including reduced duties on
capital goods;  the effectiveness of the duty drawback scheme is to be improved.  Subsidized loans are
viewed as desirable for viable industries.  The strategy also stresses the need to establish fiscal and
monetary controls, together with central bank independence and inflation targeting, as well as
achieving a realistic market exchange rate.
Trade Policy Features and Trends
Ghana, a founding member of the WTO, accords at least MFN treatment to all its trading
partners.  Around 15% of its tariff lines are bound, mostly in agriculture.  Its GATS Schedule covers
commitments on certain services, including tourism, maritime transport, construction, and education.
Ghana also participates in the agreements on Basic Telecommunications and Financial Services.  It isan observer to the Plurilateral Agreement on Trade in Civil Aircraft, and is neither a signatory, nor an
observer, to the Agreement on Government Procurement.
Ghana is also committed to regional integration, and wishes to accelerate such initiatives.  It
grants tariff preferences on many products to other members of the Economic Community of West
African States (ECOWAS), subject to rules of or igin. Ghana eliminated tariffs on most trade with
ECOWAS members by 1996, under the Community's Trade Liberalization Scheme.  A customs union
and common market among ECOWAS members are also  planned.  As a member of the Organization
of African Unity, Ghana remains committed to the formation of the African Economic Community,
including the creation of a pan-African economic and monetary union.
As a signatory to the ACP-EC Partnership Agreement (the successor to the Lomé
Convention), Ghana receives non-reciprocal tariff and other preferences from the EU on many goods,
as well as substantial financial assistance.
Ghana has bilateral arrangements with several trading partners, such as Malaysia, the Czech
Republic, and Côte d'Ivoire, and is negotiating more, including with Romania, Greece, Burkina Faso,
Zimbabwe, and Libya.  Old bilateral agreements involving countertrade with former Europeancentrally planned economies have been disbanded.  Ghana receives GSP treatment from industrialized
economies, and participates in the GSTP among developing countries.  It is also eligible for enhanced
access to the U.S. market until September 2008, under the U.S. African Growth and Opportunity Act
of 2000, subject to Ghana meeting specified criteria, such as protecting workers' rights.
Type and incidence of instruments
The tariff remains Ghana's main trade policy instrument.  The simple average tariff had fallen
from 17% in 1992 to 13% on January 2000, when the highest duty rate, levied on consumer goods,was reduced from 25% to 20%.  However, the average tariff rose to its current level of 14.7% in
February 2000 when a "special import tax" of 20% was re-introduced, covering some 7% of tariff
lines.  This raised tariffs on many, mostly consumer goods to 40%, well above their previous rate ofPRESS/TPRB/157
Page 7
MORE25%.  This contradicts the Government's policy objective of lowering average tariffs to below 10%
within the next three years.
Although "temporary", no time limits were specified for the removal of the import tax.  Doing
so would improve Ghana's tariff structure by reducing average duty levels and narrowing relatively
wide disparities across rates;  the standard deviation of tariffs is currently 12%.
Special import taxes have been a common feature of Ghana's tariff.  The previous such duty
of 17.5% had only been abolished in March 1999.  The authorities are of the view that such taxes
protect domestic industries from what they consider "unfair trading practices" by foreign traders.
Ghana's tariff structure, with rates of free, 5%, 10%, 20% and now 40% (with the special
import tax), has "built-in" tariff escalation within certain manufacturing groups, especially textiles,
leather, chemicals, basic metals, food, beverages, and tobacco.  Lower, more uniform duties could
improve the tariff structure.
All tariff duties are ad valorem, thus aiding transparency.  But the widespread use of
discretionary exemptions, often administered under poorly specified authority, is non-transparent and
risks providing "tailor made" protection to some industries.  Tariff concessions also apply to specific
importers, such as the Volta Aluminium Company, and on inputs into nominated end-uses imported
by approved manufacturers. These include the maki ng of agricultural implements and machinery,
fishing nets, pharmaceuticals, plastic pipes and bicycles.  Their rationale and administration appearunclear.  A duty drawback system operates inefficiently; refunds are slow.  The Government is
rationalizing such exemptions, including the common use of bonded warehouses, which may be
contributing to duty evasion.
From April 2000, Ghana replaced mandatory preshipment inspection with destination
inspection, performed by two private contractors.  Documentation requirements were also simplifiedand more targeted inspections introduced to facilitate imports.  The use of transaction value for
customs valuation purposes was implemented from February 2000, except for second-hand motor
vehicles, and minimum import prices were terminated, according to authorities.  Price verification and
risk-assessment procedures are aimed at preventing duty evasion from under-invoicing.  Import
clearance delays of up to seven days appear to occur.  A 1% inspection fee on imports, and anECOWAS customs levy of 0.5% apply.
Ghana applies few formal non-tariff trade barriers.  Imported motor vehicles older than ten
years – previously subject to penalty tariffs – were banned in 2000.  Certain import prohibitions and
controls apply for environmental, health, public safety, and security reasons, and under international
conventions.
Ghana applies no trade embargoes, nor any local-content requirements for domestic
production.  Mandatory standards, set by the Ghana Standards Board, mainly in line with international
norms, do not discriminate against imports.  The Gove rnment intends to move to voluntary standards.
Test results from foreign countries are usually accepted. Quarantine requirements apply, but do not
generally appear to be a major constraint on imports.
Ghana has no legislation on contingency protection measures, such as anti-dumping,
countervailing, and safeguards.  However, the special import tax appears to be used for thesepurposes.  The Ministry of Trade and Industry monitors world markets and the impact of imports on
domestic firms so that compensatory measures can be taken.PRESS/TPRB/157
Page 8
MOREGovernment procurement is increasingly be ing decentralized away from the Ghana Supply
Commission.  Ministries and state-owned entities procure many goods directly, largely using non-
transparent procedures.  Government directives favour public procurement of "made in Ghana" goods.
Domestic suppliers also receive a formal 12.5% price preference (since August 1999).
Export taxes are levied on cocoa and certain air-dried sawn timber.  Gold and diamonds from
small-scale mining are exported mainly by the Precious Minerals Marketing Corporation.  Exports oflogs were suspended in 1995, aimed mainly at promoting timber processing.  Raw rattan and bamboo
exports are also prohibited.
Ghana has no export quotas or voluntary export restraints, and no export subsidies per se.
However, income tax concessions assist exporters of non-traditional products, who pay a company tax
rate of 8% instead of 35%.  Exporters of traditiona l products are also eligible for company income tax
rebates tied to their export share:  the maximum rebate of 75% – for companies exporting at least 25%
of their production – also lowers their income tax rate to 8%.  More generous income tax incentives,including an additional ten-year tax holiday, now apply to designated free-zone enterprises, which
must export at least 70% of production.  Benefiting firms can be located outside the free zones.
Substantial leakage of domestic sales above the 30% permitted share appear to be arbitrarily
undermining tariff protection to domestic industries, and facilitating tax evasion.
Ghana has no production subsidies. Certain, mainly agricultural, activities are assisted by tax
concessions, including on investment.  Cocoa income is exempt from tax, and tax holidays of five
years apply to most farm and fishing income, and of ten years for tree crops.  Hotel income is taxed at
a concessionary rate of 25%, and hotels receive duty concessions on certain imported inputs.
FDI, outside mining, fishing and forestry, is no longer screened, but monitored by the Ghana
Investment Promotion Centre, formed in 1994.  Only a few activities, including petty trading and taxiservices, are reserved for Ghanaians.  Joint ventures are optional.  Foreign investors must have
minimum capital levels of US$10,000 for joint ve ntures and US$50,000 for wholly foreign-owned
enterprises, unless engaged solely in exporting Ghanaian goods.  Foreign trading companies must
have capital of US$300,000, and employ at least ten Ghanaians.  No performance requirements per se
exist.
Sectoral policies
Ghana is heavily dependent on agriculture, especially cocoa, and on natural resources, notably
minerals. Primary production accounts for almost half of GDP; agriculture, at 40%, is the most
important sector.  Manufacturing contributes some 10% of GDP.
Cocoa production, a mainstay of the economy, is marketed by the statutory board,
COCOBOD.  Cocoa marketing is be ing further liberalized under the Government's efforts to revitalize
the industry.  The Government's cocoa strategy, adopted in April 1999, is to progressively increase the
growers' price to at least 70% of the world price by 2004-05, by reducing taxation and further
improving COCOBOD's efficiency.  Its "single desk" export monopoly is to be partially relaxed, with
quotas introduced for private sellers, and domestic sales further deregulated.
Exports of logs are suspended and exports of certain sawn timber are taxed to promote
value-added activities and conserve forests.  Logging rates exceed sustainable levels, accentuated bysubstantial illegal felling.  Forest policies are being strengthened to promote sustainable management,
including higher stumpage fees and enhanced monitoring of logging operators.PRESS/TPRB/157
Page 9
MOREOffshore fishing licences are granted only  to fully domestic-owned boats using mainly
Ghanaian crew, except for tuna vessels where minimum domestic ownership of 25% is required.
Licensed foreign vessels must also sell at least 10% of their catch to domestic processors, and
transship all fish through Ghanaian ports.  The fish import ban was terminated in 1997.
Large-scale mining is open to foreign participation.  Joint ventures are not required, but the
Government receives a 10% equity and can buy another 20% equity at "fair market prices".  Royaltyrates and foreign currency retention allowances are negotiated on a mine-by-mine basis.  Mining
companies receive generous capital and other tax allowances, but pay an "additional profits tax" of
25% for earnings above a negotiated threshold rate of return, currently set at 17.5%.  Small-scale gold
and diamond mining is reserved for Ghanaians.
Deregulation of the petroleum subsector has included the termination, in 1996, of the oil
import monopoly and the exclusive supply of locally refined products to oil marketing companies by
the state-owned Ghana National Petroleum Corporation (GNPC).  In 1998, prices were changed from"cost plus" to "import parity".  The sector remains dominated by state-owned enterprises.
Privatization of Ghana Oil Company, the largest oil marketer, and of the Tema Oil Refinery have
been delayed, and the GNPC is no longer a priority for privatization.
Past policies promoted import substitution through widespread direct government
participation, including State ownership.  The Government has divested some of these interests, andintends to sell off more as part of its re-invigorated privatization programme.  Outstanding
divestments are, however, increasingly involving sensitive activities, and several proposals, such as
on petroleum, have stalled since 1997. The Government's revised accelerated timetable covers mainly
divestiture in the transport, energy, and banking sectors, including the State Insurance Company and
the Ghana Electricity Company, by end-2003.
Services are the second largest component of GDP.  Many basic infrastructure services, such
as electricity, ports, and water, are provided by state-owned statutory monopolies.  Basic telecomm-
unication services are supplied by a statutory duopoly following licensing of a second national carrier
in 1997.  These arrangements have had only limited success in promoting telecommunication
services: neither carrier has met its network expansion or service quality target.  The Government willconsider allowing additional carriers from March 2002.  The market for value-added telecom services
is open.  The National Communications Authority was formed in 1997 as the independent legislative
regulator to promote fair competition and enhanced efficiency.
Electricity, a "traditional" export, suffered major hydro-generation problems between 1996
and 1998, due to low water levels in the Volta Lake.  The electricity crisis severely curtailedproduction, including of aluminium, which consumes over one third of Ghana's total power supply.
To improve efficiency, the Government is taking steps to restructure the industry and increase
private-sector participation.  State-owned entities, including the Volta River Authority, are being
separated into companies for the generation, transmission, and distribution of electricity, and a
National Company Grid is to be established.
More efficient infrastructure services should improve the competitiveness of downstream
industries, such as tourism, and encourage FDI.   Private tourism development is a government
priority.  Air transport is being deregulated under the Government's "liberalized skies" regime.  Ghana
has no cabotage requirements protecting coastal shipping, but new legislation provides for their
introduction.
The Bank of Ghana grants banking licences.  The freeze on issuing new bank licences was
removed in 1999.  Banks must meet certain prudential requirements in accordance with the corePRESS/TPRB/157
Page 10
MOREprinciples of the Bank for International Settlements.  Foreign banks may operate locally incorporated
subsidiaries.  Higher minimum capital levels are prescribed for foreign banks – defined as having
below 60% Ghanaian equity.
The Government's Financial Sector Adjustment Programme has begun privatizing several
large state-owned banks.  In 1996, 42% of the Ghana Commercial Bank was sold, and another 40% is
slated for sale, along with 30% of the National Inve stment Bank.  Legislation to enhance the Central
Bank's supervision and enforcement of prudential regulations is under way.  Three licences were
withdrawn in 2000 from banks repeatedly unable to  meet the Bank's minimum capital adequacy ratio.
Bank rationalization and restructuring have occurred through mergers and the closure of non-viable
banks.
Foreign insurance companies may enter Ghana as subsidiaries, subject to a maximum foreign-
equity limit of 40%.  Government equity of 20% is required, and Ghanaians must own another 40%.
The National Insurance Commission regulates the industry.  It sets certain prudential and reportingrequirements, and must approve all premium increases; currently it only intervenes in setting motor
insurance premiums.  The Government intends to privatize the Ghana Reinsurance Company by 2003.
Trade Policies and Foreign Trading Partners
Ghana generally applies its trade policies and measures on a non-discriminatory basis,
granting at least MFN treatment to all its trading partners.  Pursuing MFN liberalization while
expanding its bilateral arrangements and deepening regional integration, would maximize benefits,
and help guard against any possible trade diversion.
Reliance on ad valorem tariffs, which are being rationalized, as the main trade instrument
contributes to a more transparent trading regime.  Extending the coverage of tariff bindings beyondagriculture would benefit Ghana and its trading partners by increasing the predictability of the tariff.
Continued structural reforms, including further trade and investment liberalization, can improve the
economy's flexibility and growth prospects.
However, the economy remains relatively weak and vulnerable to external commodity price
movements and other shocks, such as weather conditions.  Current economic difficulties, both internal– including the large budget deficit – and from abroad, are placing extra pressures on the economy
which may weaken the Government's resolve for trade liberalization. Ghana's enhanced commitments
to the WTO and compliance with its obligations can help sustain such unilateral reforms.  However,
Ghana's trading partners can greatly assist its reform efforts by ensuring stable, increased access to
their markets, especially in agricultural products where Ghana's comparative advantage appearsstrongest.PRESS/TPRB/157
Page 11
MORETRADE POLICY REVIEW BODY
GHANA
Report by the Government of Ghana (Part I, 1)
Economic overview
Ghana has since her first review in 1992, continued her efforts aimed at the transformation of
her economy from a largely state controlled economy to a liberalized market economy. By Ghana's
Vision 2020 development plan, the economy is expected to attain a middle-income status by the year
2020. This process of transformation has seen the private sector increasingly becoming the driving
force of the economy. The government of Ghana has continued pursuing policies with the goal of
creating an enabling environment for the achievement of these objectives.  These include appropriatemonetary and fiscal policies, financial sector reforms, industrial policies and policies aimed at
attracting investments into Ghana.
The major focus of economic policies especially since 1995 has been on macroeconomic
stabilization. To this end, recent fiscal policy measures have centred on central government
expenditure restraint and rationalization of the tax regime.  In addition, there is a policy of zero deficitfinancing of the budget by the Central Bank (Bank of Ghana). These policy measures achieved some
successes by 1998.
In the second-half of 1999 however, Ghana suffered an external terms of trade shock. The
prices of the country's major exports (gold and cocoa) declined at the same time as oil prices on the
international market increased sharply. These deve lopments have resulted in a shortage of foreign
exchange as well as a deteriorating fiscal position.  The exchange rate of the cedi has depreciated by
40% since September 1999.
In response to these external shocks, the Central Bank has further tightened monetary policy
and has increased money market interest rates to 45% to increase the attractiveness of
cedi-denominated securities.  With inflation at 20%, this  implies a real interest rate of over 20%.  It is
envisaged that with the necessary fiscal  adjustments, interest rates will be reduced by the end of the
year. Also, inflation is forecast to fall significantly by 2001 when the economy would have adjusted to
the external shocks.  A single digit inflation level is the objective.
Ghana has signed on to be part of a second Single Monetary Zone in the West African
sub-region by 2003. The stability in exchange rates, which the single monetary zone will bring, willserve to make Ghana even more attractive as an investment destination.
Economic and Trade Policy Environment
The Ghanaian economy experienced very difficult economic and social conditions during the
1970s and early 1980s as a result of severe drought and declining world market prices for Ghana's
principal exports: cocoa, gold and timber. Cocoa production declined steadily and reached a record
low in 1984, while industrial production also fell markedly. Consequently, real per capita income fellsteadily, and by 1983 it was only about two-thirds of its level in 1960.PRESS/TPRB/157
Page 12
The initiation of the Economic Recovery Programme (ERP) in 1983, witnessed the beginning
of a marked transformation of the economy from an administrative system of economic management
to a market-oriented system. This included major structural reforms in both the real and financial
sectors of the economy. As a result, there was a steady recovery in per capita income, a sharp drop in
domestic inflation, and substantial improvement in the external balance-of-payments.
In particular, during 1993-98, real GDP grew at an annual average rate of more than 4%, the
domestic rate of inflation fell markedly to less than 20%, the government overall fiscal deficit
declined to 8.1% of GDP, simultaneously as the domestic primary surplus reached 3.6% of GDP.
Except for 1996, the overall balance of payments recorded continuous surpluses up to 1998
and the ratio of the external current account deficit to GDP fell steadily to 4.7% of GDP in 1998.
Since 1999, the economy has been hit by a very severe external terms of trade shock,
stemming from a more than halving of the world price of cocoa, a marked decline in the price of gold,
and a more than tripling of the world price of oil.
Consequently, in 1999 the balance of payments recorded an overall deficit of  US$94 million,
while the external current account deficit reached 10.6% of GDP. Also, the government's overall
fiscal deficit worsened to 8.2% of  GDP notwithstanding major rest raint on capital outlays and the
credit depreciated by 1.5% on an annual average basis.  However, with tightened monetary policy, the
domestic rate of inflation, which had fallen to 9.4% by May 1999, ended the year at 13.8% comparedwith 15.8% in 1998.
Government fiscal efforts in 1998-99 included the introduction of a value-added tax at 10%,
which was subsequently increased to 12.5% in 2000. The year 2000 has seen the worst impact of the
external terms of trade shock. This has given rise to a massive depreciation of the exchange rate, and
sharp increases in both domestic inflation and interest rates
END