Ghana WT/TPR/S/81
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I. ECONOMIC ENVIRONMENT
(1) INTRODUCTION
1. The Republic of Ghana is located in western Africa on the Gulf of Guinea.  It has an area of
approximately 239,000 square kilometres, and a population of about 19 million.  Most of the people
occupy the southern regions of Ashanti, and Eastern and Greater Accra;  bout two thirds of inhabitants
live in rural communities.  The main urban area is the capital city, Accra.
2. Per capita income was around US$390 in 1998 (Table I.1).  The United Nations classifies
Ghana as one of the bottom fifteen "medium human development" countries, ranking it 129th in the
world in its latest Human Development Index Report.  The economy is heavily dependent on
agriculture, especially cocoa, and minerals, most notably gold.  These activities provide about half of
GDP.  Ghana's economic performance depends on climatic factors that can adversely affectagricultural output, and movements in international commodity prices.  Since mid 1999, falling cocoa
and gold prices as well as escalating oil prices have weakened the economy through a sharp decline in
the country's terms of trade.  Ghana's manufacturing sector, accounting for about 10% of GDP,
remains underdeveloped and suffers from many inefficiencies.  The services sector (including
electricity, water, gas, and construction), about 45% of GDP, is predominantly characterized bycommerce-related activities.  Average real GDP annual growth during the 1990s barely kept pace with
population growth;  per capita growth averaged 1.5%.  Economic performance in 1998 and 1999 was
considerably affected by the electricity crisis.
1
Table I.1
Main economic and social indicators
Area 239,000 sq. km. Urban share of population 37.3%
Population (1998) 19.2 million Nominal GNP at current market prices (1998) US$7.5 billion
Annual population growth (1975-98) 2.9% Per capita (GNP) income (1998 at current prices) US$390
UN human development index (1998) GNP per capita annual growth rate (1990-98) 1.5%
- Overall ranking 129th out of 174 Nominal GDP at current prices (1998), Cedi 17,296 billion
- Category Medium human
developmentof which:
- Mining and quarrying 6%
- Ranking within category 83rd out of 94 - Agriculture, forestry & fishing 40%
UN human poverty index in
developing countries (1998)- Manufacturing
-S e r v i c e s10%
44%
- Overall ranking 79th out of 109 Enrolment ratio in education (1997)
- Within category 64th out of 74 - Primary 43.4%
Life expectancy at birth (1995-2000) 60.4 years - Secondary 36.0%
Infant mortality rate per '000 (1998) 67 - Tertiary ..
Adult literacy (1998) 69% Energy consumption per capita (1997) 383 kg. of oil
equivalent
.. Not available.
Source : UNDP (2000), Human Development Report;  and IMF (1999a ), Ghana Statistical Appendix [Online].  Available
at: http://www.imf.org/external/country/GHA/index.htm.
3. Merchandise exports and imports averaged 28% and 39% of GDP, respectively, in 1998, up
substantially from the corresponding levels of 18% and 29% in 1993 (Chart I.1).  Nevertheless, these
shares, especially for exports, remain relatively low by international levels.  Despite efforts to
                                                     
1 Electricity shortages are estimated to have reduced national output by 4% in 1998 and by a further 1%
in 1999 (Centre for Policy Analysis, 1998).WT/TPR/S/81 Trade Policy Review
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diversify exports away from traditional commod ities, such as cocoa beans, logs, unprocessed
minerals, especially gold, and electricity, these still account for well over three quarters of
merchandise exports, albeit an improvement from almost total dependence in 1986.
18232226 262829 29
263344
39
05101520253035404550
1993 1994 1995 1996 1997 1998Chart I.1
Merchandise trade as a share of GDP, 1993-98
Per cent
IMF (1999a), Ghana Statistical Appendix [Online]. Available at : 
http://www.imf.or g/external/countr y/GHA/index.htm.Exports
Imports
Source:
4. Ghana is a highly indebted poor country (H IPC).  External debt stood at US$5.9 billion in
1998 and an estimated US$6.4 billion in 1999, up from US$4.8 billion in 1993 (Table I.2).  Most debt
is medium- to long-term and of a concessional nature – some two thirds is held with multilateral
institutions, especially the World Bank and the IMF.  External debt as a share of GDP peaked at 95%in 1994, and remained high at around 79% in 1998 and an estimated 78% in 1999.  However, Ghana's
debt service as a ratio of exports, although high, has fallen substantially, from 57% in 1995 to 22% in
1998 and an estimated 19% in 1999, helped largely by its substantial reliance on concessional debt.
Thus, despite chronic debt levels, Ghana has not needed to re-schedule debt in recent years, and has
generally avoided external arrears.
2  However, delays in loan disbursements by several donors during
1999 have aggravated Ghana's indebtedness by causing shortfalls in aid payments.
5. Ghana has established a National Governance Programme aimed at strengthening economic
governance and institutional capacity.  This is essential if Ghana is to improve its economic and social
performance.  The third parliamentary National Governance Workshop was held in June 1999.
Public-sector corruption is to be targeted by effective investigation and prosecution by the SeriousFraud Office, an independent public agency.
                                                     
2 Non-concessional re-scheduling of certain arrears occurred in 1996.Ghana WT/TPR/S/81
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Table I.2
Public debt liability, 1993-99
(Cedi million, unless otherwise indicated)
1993 1994 1995 1996 1997 1998 1999a
Domestic debt 616,640 674,726 875,586 1,326,397 2,198,440 3,193,136 ..
Bank of Ghana 450,540 450,552 611,617 621,699 622,441 616,840 ..
Deposit money banks 275 275 275 74,125 736,998 1,417,825 ..
Social security fund 94,526 78,325 70,365 54,925 52,504 71,503 ..
Financial intermediaries 71,299 145,574 193,329 575,648 786,497 1,086,968 ..
Domestic debt as a per cent of GDP 16.8 13.6 11.8 11.7 15.6 18.5 ..
External debt (US$ million) 4,763.1 5,134.2 5,304.3 5,517.9 5,405.4 5,884.6 6,385.1
Long- and medium-term debtb 3,827.9 4,179.4 4,685.9 4,970.0 5,051.7 5,563.3 3,826.9
- Bilateral loans 1,423.9 1,479.8 1,710.7 1,837.1 1,861.1 1,987.0 1,957.0
IMF 738.0 686.9 661.9 548.0 353.7 321.3 306.2
Short-term debtc 197.2 267.9 270.6 385.0 287.0 295.0 295.0
External debt as a per cent of GDP 80.1 94.9 82.7 79.9 78.5 78.8 78.1
External debt service ratio (as a per
cent of exports).. 30.5 56.5 21.7 23.5 22.0 19.0
.. Not available.
aP r e l i m i n a r y .
b Including medium-term debt owed by the Bank of Ghana to foreign commercial banks.
c Consists of short-term oil credits, COCOBOD and Bank of Ghana debt.
Source : IMF (1999a), Ghana Statistical Appendix [Online]. Available at:
http://www.imf.org/external/country/GHA/index.htm.
(2) RECENT ECONOMIC DEVELOPMENTS
6. Ghana faces a number of difficult developmental challenges.  Government policies after
independence centred on import substitution and other interventionist measures designed to promote
industrialization.  High and disparate tariffs were introduced.  The State also played an active role in
owning and developing industries by adopting "domestication" policies.  However, the EconomicRecovery Programme, launched in the early 1980s, has seen the introduction of a number of
wide-reaching structural reforms, including trade liberalization and privatization, albeit at variable
pace and priority.  Many structural problems persist, compounded by fiscal and other stabilization
imbalances that worsened during the mid 1990s.  These have fuelled high real interest rates and, until
very recently, the real appreciation of the currency since 1995.  This has penalized the economy's
traded sector and reduced its international competitiveness on export and domestic markets, thereby
exposing producers to greater import competition and placing added pressures on the Government'strade reforms and efforts to promote non-traditional exports.
7. The economy is in a precarious position, compounded by a fragile trading environment,
although having achieved real growth rates during the 1990s of well above 4% (Table I.3).  While real
GDP growth remained at over 4% in 1999, it fell well below the Government's initial target of 5.5%.
Inflation slowed for the first half of 1999 to within the original year-end target rate of 9.5%, butsubsequently accelerated to an annualized end-of-year rate of 14%, just above the revised target level
of 13%.  This left the estimated rate for 1999 at around 12%, still down from 19% in 1998 and much
higher levels in earlier years, such as 60% in 1995.  Recent higher oil prices and the impact of the
rapid depreciation of the cedi since late 1999 have boosted inflation.  The national currency, the cediWT/TPR/S/81 Trade Policy Review
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devalued nominally by 24% against the U.S. dollar in the final quarter of 1999 and by a further 16%
in the first quarter of 2000 to cedi 4,500 per U.S. dollar.3
Table I.3
Economic performance, 1995-99
1995 1996 1997 1998 1999a
US$ million
GDP at current market prices 6,417 6,903 6,882 7,471 7,538
Cedi billion
Nominal GDP 7,752 11,339 14,113 17,296 19,885
Real GDP (1993 prices) 4,160 4,351 4,534 4,747 4,961
Annual percentage change (in domestic currency)
Real GDP growth 4.0 4.6 4.2 4.7 4.5
Real GDP growth per capita 1.3 1.8 1.5 1.9 1.8
Per cent
Inflation (CPI) 59.5 46.6 27.9 19.3 12.4
Interest rates
- Commercial savings deposits .. 27.4 27.5 22.4 ..
- Treasury bills (180 days) .. 35.9 38.6 33.0 ..
- Term deposits (6-months) .. 34.6 35.8 31.1 ..
Broad money growth (M3) 40.8 39.7 40.8 17.7 17.0
Per cent of GDP
Government deficit -6.4 -9.5 -10.3 -8.1 -6.2
- Revenue (including grants) 24.1 20.2 18.7 20.6 21.2
- Expenditure 30.4 29.7 29.0 28.6 26.9
Balance of payments
- Trade -3.9 -7.0 -17.9 -10.8 -11.0
- Current account (including grants) -2.4 -3.1 -14.4 -5.1 -4.5
- Capital account 6.7 6.1 8.1 3.3 3.4
- Overall balance 4.4 .. .. 1.3 0.7
Memorandum items
International reserves
- US$ million 672 599 508 508 543
- Months of non-mineral imports (c.i.f.) 2.9 1.8 1.9 2.0 1.9
.. Not available.
aP r e l i m i n a r y .b Includes public and publicly guaranteed medium- and long-term debt.
Source : IMF (1999a), Ghana Statistical Appendix, and IMF (1999b) Selected Issues [Online].  Available at
http://www.imf.org/external/country/GHA/index.htm.
(3) MACROECONOMIC POLICIES
8. Ghana's dependence on a few primary commodities poses particular policy challenges for the
Government.  Without appropriate macroeconomic and structural policies, the economy's
vulnerability to international conditions will accentu ate and economic diversification will slow.  It has
                                                     
3 Since then, the cedi has continued to fall sharply, dropping by over 40% to cedi 6,500 per U.S. dollar
during September 2000.Ghana WT/TPR/S/81
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been reported that some incoherence in stabilizat ion policies in recent years has contributed greatly to
Ghana's economic woes.4
(i) Fiscal policies
9. At the heart of Ghana's economic crisis have been expansionary fiscal policies, leading to
unsustainable budget deficits.  Fiscal deficits escalated to 10% of GDP in 1997, before being modestly
reduced to 8% in 1998 and an estimated 6% in 1999 (Table I.3).  The deficit is expected to hoveraround 6% of GDP for several years.  Such deficits have precipitated the recent economic crisis,
accentuated by the external shocks.  These deficits were being financed mainly through foreign and
domestic central bank borrowings.  In 1998, about 60% of the budgetary financing requirements were
sourced domestically.  High fiscal deficits have limited the economy's capacity to absorb the recent
serious adverse movements in Ghana's terms of trade.
10. Fiscal discipline has been impaired by a lack of budgetary checks and controls.  Budgets are
often premised on overly optimistic expenditure and revenue projections.  Greater transparency and
accountability in budgetary management would benefit the economy.  However, expenditure controls
have been strengthened, reducing public expenditure as a share of GDP from 29% in 1997 to 28.6% in
1998 and an estimated 26.9% in 1999.  Commencing 1999, the Government implemented a MediumTerm Expenditure Framework, a three-year rolling expenditure programme, as part of its Public
Financial Management Reform Programme aimed at correcting weaknesses in the budgetary process.
5
Nevertheless, the level of outstanding government arrears owed to the private sector, especially forconstruction services, has increased.  Although the full extent of such liabilities is unclear, known
arrears rose from cedi 58.7 billion in 1996 to cedi 103.6 billion in 1998.
6  Revenue-raising initiatives
have also been introduced to help reduce the budget deficit;  revenue as a share of GDP is estimated to
have risen from 20.6% in 1998 to 21.2% in 1999.  The value-added tax was re-introduced in late1998, and the rate subsequently raised from 10% to 12.5%.  Other revenue reforms include enhanced
VAT and customs enforcement/collection, as well as rises in petroleum taxes.
11. The 1999 budget deficit of over 6% of GDP was still above the programmed level of just over
5%.  It will be imperative that the budget blowouts associated with previous presidential elections in
1992 and 1996 are not repeated in 2000-01.
(ii) Monetary policies
12. Monetary policy has generally accommodated expansionary fiscal deficits through monetary
growth.  Broad money supply grew annually by ar ound 40% in the period up to 1997.  This fuelled
inflation, which rose to 60% in 1995, before falling to 28% in 1997.  Monetary expansion declined in
1998 to 18% and inflation fell to 19%, within target levels, as did interest rates.  These were the firstpositive developments in Ghana's monetary indicators since the inception of the Economic Recovery
Programme in 1983.
7  Monetary policy in 1998 focused on controlling inflation, and an annual
monetary growth target of 18% was set.  Open market sales of treasury bills by the Central Bank were
used to reduce liquidity and credit expansion.  Repurchase agreements (REPOs) were introduced by
the Bank of Ghana to provide for more flexible and frequent treasury bill transactions.  Interest ratepressures eased with slowing inflation;  average rates on 180-day treasury bills declined from almost
                                                     
4 Centre for Policy Analysis (2000).
5 Items are no longer split into recurrent and development expenditure but classified as discretionary or
non-discretionary spending.  Budget outcomes for 1998 were within original estimates, a historical first.
6 ISSER (1999).
7 ISSER (1999).WT/TPR/S/81 Trade Policy Review
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39% in 1997 to 33% in 1998.8  The Bank discount rate was cut twice in 1998, for the first time since
1995, from 45% to 42% in September and to 37% in November.  This rate was further lowered to
27% in April 1999.  However, interest rate reductions were short-lived as government borrowing
requirements placed mounting pressure on the Bank's monetary targets, and they again rose in late
1999.
13. High real interest rates, currently around 20%, are severely curtailing business investment and
economic activity.  However, sustainable reductions in interest rates are unlikely while excessive
government borrowings continue to strain the banking system and to "crowd out" the private sector.
Over half of total bank credit is now held by th e Government or public institutions, compared with
10% in mid-1996.  High interest rates also reflect wide margins, partly due to the high non-
remunerated reserve requirements imposed on commercial banks by the Central Bank, and thesubstantial share of non-performing loans held by the banking system.  However, the share of such
loans in the banking system has improved, falling from 14% to 10% over the 12 months ending
June 1999.
(iii) Exchange rate policies
14. Ghana introduced a floating exchange rate system in 1983. Until 1999, the official exchange
rate of the cedi was determined as the average of indicative rates quoted by commercial banks in the
interbank foreign exchange market.
9  Since then the rates relate to actual transactions.  However, the
market responsiveness of the exchange rate system  remains hampered by the thin interbank market;
most transactions occur between the banks and the Bank of Ghana.
15. The recent external shocks imposed by falling cocoa and gold prices and rising world oil
prices, and the domestic pressures generated by high government borrowings, culminated in a balance
of payments crisis (Tables I.3 and I.4).  Ghana's international reserves were heavily strained in mid1999 and fell to critically low levels by end of year, accentuated by significant Central Bank
intervention in the foreign exchange market.  The Central Bank sold foreign currency as a means of
maintaining its reserve money targets.  This policy contributed to a real appreciation of the cedi
which, since 1995, had been reducing Ghana's international competitiveness.
10  This reduced export
profitability and threatened the growth of non-traditional exports, which before 1995 had benefitedfrom the greater exchange rate flexibility.  Since the Central Bank ceased intervening in late 1999, the
exchange rate has depreciated sharply, and domestic interest rates have increased.  International
reserves remain tenuous at around two months' import cover, and the currency remains weak.
Provided domestic wage and price pressures can be contained, the benefits to the economy of having a
lower market-determined exchange rate could be significant.
16. Ghana does not maintain restrictions on payments and transfers for current international
transactions, having accepted the obligations of Article VIII, Sections (2), (3) and (4) of the Articles
of Agreement of the International Monetary Fund in February 1994 (Ghana joined the IMF in
September 1957).
11  All foreign exchange transactions by the private sector are approved and
conducted by authorized banks without reference to the Central Bank.  There is no forward exchangemarket.
                                                     
8 These interest rates fell to 24% in December 1998 and further to 19% in the first half of 1999.
9 However, authorized banks often apply other rates in their transactions (IMF, 1999c).
10 Between 1989 and the mid 1990s, the anti-export bias inherent in the exchange rate had declined
from 1.6 to 1.2 (the ratio of the effective exchange rate on all imports to the effective exchange rate on exports).See Jebuni (1996).
11 These Sections concern the avoidance of restrictions on current payments;  the avoidance of
discriminatory currency practices;  and the convertibility of foreign-held balances.Ghana WT/TPR/S/81
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Table I.4
Balance of payments, 1995-99
(US$ million and percentage change)
1995 1996 1997 1998 1999a
Current account -154.2 -214.1 -990.7 -381.2 -350.0
Merchandise trade balance -253.2 -485.3 -1,231.0 -805.5 -828.0
Exports (f.o.b.) 1,431.2 1,810.2 1,810.2 2,091.4 2,096.0
Imports (c.i.f.) 1,684.5 2,295.5 3,041.3 2,896.9 2,924.0
Services (net balance) -424.1 -210.5 -319.5 -260.0 -228.0
Private unrequited transfers (net balance) 263.2 276.1 400.0 453.8 454.0
Official unrequited transfers 260.0 205.6 159.7 230.5 253.0
Capital account 406.7 200.4 1,016.2 481.1 255.0
Investment (net) 259.2 70.0 55.3 -10.3 ..
Overall balance 252.5 -13.7 25.5 99.9 50.0
Memorandum items Percentage change
External reserves (changes) 13.3 -10.9 -15.2 0 6.8
Terms of trade 7.3 -3.3 -0.7 26.5 ..
Export price index 16.1 -2.3 -4.6 5.5 ..
Import price index 8.2 1.0 -3.9 -16.6 ..
.. Not available.
aP r e l i m i n a r y .
Source : IMF (1999a), Ghana Statistical Appendix [Online].  Available at: 
http://www.imf.org/external/country/GHA/index.htm.
17. Foreign exchange controls are administered by the Central Bank (Table AI.1).  Exporters
must repatriate all receipts within 60 days.  Su rrender requirements apply to traditional exports of
gold and cocoa.  Letters of credit are required as documentation except for non-traditional exports.
(4) TRADE PERFORMANCE AND FOREIGN INVESTMENT
(i) Commodity pattern of merchandise trade
18. Ghana's commodity trade patterns are heavily concentrated both for exports and imports.
Merchandise exports continue to be mostly primary commodities, especially gold and cocoa, which
together account for almost 70% of exports.  Other important exports include logs and timber
products, such as veneer;  processed fish, especially canned tuna;  non-ferrous metals;  and petroleum
fuels.  Non-traditional exports have grown during the 1990s, albeit from a very small base;  most arein processed or semi-processed form.  The share of gold in total merchandise exports increased from
26% in 1994 to 41% in 1999, and the share of cocoa beans increased from 20% to 27% over the same
period (Chart I.2).
12
                                                     
12 Figures in Chart I.2 are based on data provided by  the Ghanaian authorities.  These data differ from
those used by some international organizations, in particular the IMF.  Large discrepancies exist between thecountry's trade data, used by the Ghana Statistical Service for the national accounts and the significantly lower
figures compiled by CEPS and reported by the Central Bank for the balance of payments.  The Government
believes that the customs data is incomplete, and the IM F has therefore revised Ghana's trade data substantially
above that reported by the Government.  In 1999, for example, the discrepancies in merchandise imports andexports between the two sources were US$800 million and US$200 million (Charts I.2 and I.3).  IMF exportstatistics by commodity for 1993 and 1998 are reported in Chapter IV.WT/TPR/S/81 Trade Policy Review
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1994 1999ExportsChart I.2
Commodity composition of trade, 1994 and 1999
Agriculture
12.6
Mining
18.5Agriculture
26.5
Mining  7.3Food 11.3
Other 
Agriculture
1.3
Fuels
15.4
Machinery and 
transport equipment
35.4Chemicals
8.2
Other semi-
manufactures
10.6Textiles and 
clothing
1.8Other 
consumer 
goods
3.6Other
7.8
Manufactures
61.119941999Imports
Manufactures
64.0
Figures may not add due to rounding.
WTO Secretariat calculations, based on data provided b y the Ghanaian authorities.Per cent
Total: US$2,309.4 million Total: US$2,666.0 millionTotal: US$1,929.0 million Total: US$1,841.7 million
Other mining
3.1
Note:
Source:Cocoa beans
20.1
Lumber, non-
coniferrous
9.8Clothing
9.3
Fuels
5.0Gold
25.6Other
0.2
Other food
9.6Agriculture
45.4
Mining
40.5Manufactures
13.9Agriculture
43.5
Mining
49.9Manufactures
6.6
Other raw 
material  5.9
Ores and other 
minerals  2.3Non-ferrous 
metals  7.7Semi-
manufactures
2.4Other manufactures 2.1
Cocoa beans
26.6
Lumber, non-
coniferrous
5.2
Fuels
2.2Gold
40.9
Other food
10.4
Other raw 
material 1.3
Ores and other 
minerals  1.9Non-
ferrous 
metals 4.9Semi-
manufactures
4.6Other manufactures
2.0
Iron and steel
1.5Food 
18.8
Other 
Agriculture
7.7
Fuels  5.9Machinery and 
transport 
equipment
26.5
Chemicals
12.2Other semi-
manufactures
10.1Textiles and 
clothing
3.8Other
 consumer goods
8.3Other
2.2
Other mining
1.4
Iron and steel
3.2Ghana WT/TPR/S/81
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19. Imports continue to be dominated by manufactured products, both for consumption and as
inputs for production, including exports (Chart I.2).  Two thirds of imports in 1999 were
manufactured products, comprising mainly machinery and transport equipment (27%), chemicals
(12%), other semi-manufactures (10%), and other consumer goods (8%).  Other significant imports
are agricultural products, including foodstuffs and unprocessed raw materials (19%), such as wheat,
sugar, and rice, and fuels, mainly crude oil (6%).  The main changes since 1994 have been theincrease in import shares of agricultural and manufactured goods and the decline in fuels from 15%.
Within manufacturing, the share of chemicals has increased since 1994, while the share of machinery
and transport equipment has declined.
(ii) Regional pattern of merchandise trade
20. Ghana's merchandise trade remains heavily concentrated in Europe, especially within the EU
market (Chart I.3).  Almost half  of Ghana's exports in 1999 went to the EU, down from 54% in 1994.
Within the EU, Italy has surpassed the U.K. and Germany as the major market, accounting for 12% of
exports compared with 5% in 1994.  The U.K.'s share fell over this period from 13% to 11%, and that
of Germany from 15% to 5%.  The EU market dominates largely because of duty-free access granted
to Ghanaian exports under preferential arrangements, and the expanding EU membership.  EUmarkets have been an important destination for non- traditional exports, accounting for over two thirds
of these exports in 1998, compared with well under one third in 1988.
21. The share of exports to Africa increased from 13% in 1994 to 17% in 1999, mainly due to a
rise in exports to ECOWAS partners, especially Togo, which with a share of 12% (9% in 1994) was
Ghana's leading single market, along with Italy, in  1999.  Exports to Nigeria remained constant at 3%
over this period.  ECOWAS members continue to be an important destination for non-traditional
exports, accounting for 15% in 1998, but this share has declined from 17% in 1988.  The share ofexports to the United States fell from 13% to 9% between 1994 and 1999.
22. The EU remains the main source of imports, accounting for over 40% of Ghana's imports
during the 1990s (Chart I.3).  Within the EU, Italy ha s joined the U.K. as a main European origin of
imports, both accounting for 9% of imports in 1999;  the U.K.'s share declined from 16% in 1994 and
Italy's rose from 8%.  The share of imports from France rose from 4% to 7% over this period.
23. African suppliers, especially ECOWAS memb ers, remain significant import sources,
accounting for 27% of Ghanaian imports in 1999, compared with 23% in 1994.  However, while
Nigeria remains Ghana's most important single source, its share declined from 17% in 1994 to 14% in
1999.  On the other hand, imports from Côte d'Ivoire rose substantially, from 3% to 8%, and the share
of imports from China doubled to 4%.
(iii) Trade in services
24. Ghana is a net importer of services.  The main change during the 1990s in the composition of
Ghana's export of services was the large increase in travel receipts:  from 7% of service exports in
1994 to 60% in 1998 (Chart I.4).  At the same time, the share of freight and merchandise insurance
services fell from 25% to 15%, and of other transportation services from 32% to 11%.
25. Imported services comprise mainly freight and merchandise insurance, which increased in
relative importance from 34% in 1994 to 46% in 1998 (Chart I.4).WT/TPR/S/81 Trade Policy Review
Page 10
EU
54Africa
13United Kingdom
13
Italy
5
France  6
United States
13Japan
4Togo
9Nigeria
3Other
16
Other Africa
11994 1999ExportsChart I.3
Regional composition of trade, 1994 and 1999
19941999Imports
Source:Per cent
Total: US$1,479 million Total: US$2,041 millionGermany
15
Netherlands
5 Other EU
10EU
49 Africa
17United Kingdom
11
Italy
12
France  4
United States
9Japan  3Togo
12Nigeria
3Other
22
Other Africa
2
Germany
5
Netherlands
7
Other EU
10
EU
43 Africa
23United Kingdom
16
Italy
8
France  4
United States
7Japan
7Nigeria
17Côte d'Ivoire 
3Other 
18
China 2
Germany
6
Netherlands
4
Other EU
5Other Africa
3 EU
42
Africa
27United Kingdom
9
Italy
9
France 7
United States
8Japan
3Nigeria
14Côte d'Ivoire 
8Other 
16
China 4Germany
5
Netherlands
4
Other EU
8Other Africa
5
IMF (1999d), Direction of Trade Statistics Yearbook.Total:  US$2,036 million Total: US$3,466 millionGhana WT/TPR/S/81
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Chart I.4
Composition of trade in services, 1994 and 1998
Exports
Imports1994 1998
1994 1998Per cent
Source :Freight and 
merchandise 
insurance
25Freight and 
merchandise insurance
15
Other transportation
32Other 
transportation
11
Travel
7Travel
60Other 
services
36Other 
services
14
Freight and 
merchandise 
insurance
34
Other transportation
17Travel
5Other 
services
44Freight and 
merchandise 
insurance
46
Other transportation
14Travel
4Other 
services
36Total: US$147.5 million Total: US$469.9 million
Total: US$420.1 million Total: US$584.5 million
IMF (1999a), Ghana Statistical Appendix  [Online]. Available at: 
http://www.imf.or g/external/countr y/GHA/index.htm.WT/TPR/S/81 Trade Policy Review
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(iv) Foreign investment
26. Attracting foreign direct investment (FDI) remains an integral part of Ghana's programme of
economic recovery.  New investment legislation was enacted in 1994 when the Ghana Investment
Promotion Centre was established (Chapter II(5)) .  However, despite these reforms, FDI remains
volatile.
27. Domestic savings in Ghana, both public and private, as in other developing countries, are
insufficient to meet developmental needs, and capi tal inflow provides a vital supplementary source of
funds.  Ghana's gross domestic savings ratio (as a share of GDP) bottomed at less than 10% in 1997,
but has risen to around 20% since 1998 (Table I.5).  Its gross investment ratio has also increased from
17% in 1994 to around 25%.  This has left a substantial gap, or negative resource balance, of around -
5% to be financed by foreign inflows.  Most (some three quarters) of domestic savings comes fromthe private sector, while the Government is responsible for almost half of the gross investment.
Official overseas aid provides most of the extern al financing requirement.  In 1999, this aid amounted
to US$841 million, down slightly from US$890 million in 1997.  Foreign direct investment peaked at
US$233 million in 1994, but dropped to US$20 million in 1996, before rising slightly, to
US$36 million and US$45 million in 1997 and 1998, respectively.
Table I.5
Savings and investment, 1994-2000(Per cent of GDP)
1994 1995 1996 1997 1998a1999a2000a
Gross domestic savings 11.8 16.3 18.4 9.7 19.6 20.1 20.6
Government 4.7 6.9 3.1 0 3.3 4.9 6.0
Non-government 7.1 9.4 15.3 9.7 16.3 15.2 14.6
Gross domestic investment 16.9 18.6 21.5 24.1 24.7 24.5 26.9
Government 13.8 14.5 14.2 12.4 11.3 10.9 12.8
Non-government 3.1 4.1 7.3 11.7 13.4 13.6 14.1
Resource balance -5.1 -2.3 -3.1 -14.4 -5.1 -4.4 -6.3
aP r e l i m i n a r y .
Source : IMF (1999a), Ghana Statistical Appendix [Online].  Available at: 
http://www.imf.org/external/country/GHA/index.htm.
(5) OUTLOOK
28. Ghana's vulnerable external position and weak currency seems set to continue until urgent
macroeconomic and structural reforms are implemen ted and allowed time to work.  Although this
difficult economic outlook has been inflamed by external factors, including the hydro-electricity
shortages and more recently the severe terms of tr ade shocks from collapsed international prices for
major exports, especially cocoa and gold, and escalating oil import prices, the underlying causes of
the economic crisis appear to be domestic.  Economic policies, in particular macroeconomic
instability induced by the unsustainable fiscal deficits, are hampering economic growth.  Subsequentimprovements in Ghana's terms of trade will help relieve the short-term economic situation.
However, these alone will not provide sustainable growth.  Volatile movements in Ghana's terms of
trade will continue to be a factor of its tradin g environment, and improving the resilience of the
economy to such external shocks through better economic management is the best means of ensuring
longer term growth.Ghana WT/TPR/S/81
Page 13
29. In the short term, the Government's ability to continue securing the necessary external finance
to underpin its budget strategy and to implement the reform programme will be crucial.  Repeated
shortfalls in bilateral donor assistance (as in 1999) could be disruptive.  Ghana is one of the group of
pilot countries for the World Bank's Comprehensive Development Framework;  this should help
improve the coordination of international aid among donors.
30. The economy's immediate performance will also depend on how quickly it recovers from the
effects of the terms of trade shocks.  High world oil prices and weak export prices for cocoa and gold
are likely to remain for some time.  Recent real depreciation of the cedi should help maintain export
returns, but could compound domestic inflationary pressures from the rising international oil prices.
The adverse terms of trade is also likely to continue to aggravate Ghana's external position and further
endanger its debt repayment capacity.  Thus, the short-to medium-term economic prospects for Ghanaare subject to significant risk related both to external developments and internal policy issues.
13
31. The Government's economic outlook was revised downwards in the 2000 Budget.  The
targeted date for achieving a zero budget deficit was shifted beyond 2001.  The Government's
macroeconomic targets for 2000-02 are for average real annual GDP growth of 5.4% and an end-of-
period inflation rate of 8% (Table I.6).  The budget deficit is expected to fall to 4% of GDP, and anoverall balance of payments surplus of US$107 million is envisaged.  In 2000, the targeted GDP
growth is 5%, and a budget deficit of 6.1% of GDP.
Table I.6
Government's forecasts of selected economic indicators, 1996-2002(Per cent of GDP, unless otherwise indicated)
1996 1997 1998 1999a2000b2001b2002b
Real GDP growth 4.6 4.24.7c 4.4 5.0 5.3 6.0
Agriculture 5.2 4.3 5.1 3.9 4.2 4.5 5.3
Industry 4.7 6.4 3.2 4.9 5.1 5.5 6.2
Services 4.2 6.5 6.0 5.0 5.9 6.0 6.7
GDP deflator (percentage change) 33.1 19.5 17.1 13.9 14.5 8.7 8.9
Inflationd
Annual average 46.5 27.9 .. 12.4 11.2 9.9 7.2
End-of-period 32.7 20.8 15.7 13.8 12.5 11.0 8.0
Primary balance 0.3 3.2 3.8 2.3 2.4 3.4 3.4
Billion of cedis 33.8 549.7 630.9 474.6 587.7 963.4 1,111.6
.. Not available.
a Provisional.
b Projections.c Revised.
d New series beginning 1997.
Source : Government of Ghana (2000a), The Budget Statement and Economic Policy of the Government of Ghana.
32. The primary objective of monetary policy in 2000 is price stability:  to achieve an end-of-year
inflation rate of 12.5%.  A tight monetary policy is to be maintained, limiting money supply growth to16%, with the Central Bank extensively using open market operations to control liquidity.  The
overall balance of payments is expected to be zero at end 2000, based on a projected current account
balance, excluding official transfers, of US$684 million, equivalent to 10.7% of GDP.  Export values
                                                     
13 Centre for Policy Analysis (2000).WT/TPR/S/81 Trade Policy Review
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are expected to increase by 1.2%.  Substantial falls in cocoa exports are projected to be more than
offset by improved gold, timber, and non-traditional exports.
33. While Ghana has made substantial progress in many areas to reform its economy,
development continues to be heavily constrained by a number of key factors, such as inadequate
infrastructure, insufficient managerial and administ rative expertise, fiscal mismanagement, lack of
accountability, weak institutions, and poor governance.  Comprehensive reforms in these areas,including continued trade liberalization and parastatal reform, coupled with progress in attracting
foreign investment in mining and other sectors, will be vital to Ghana's developmental prospects.