some of the MDGs, but the broad results suggest that improvements across the MDGs have been uneven. Significant progress is taking place in basic education, aided by the abolition of basic school fees in 2005 and enhanced expenditure allocation towards the lagging regions (Ghana Joint Assistance Strategy, 2007), although concerns about _quality_ of education (e.g., test performance) remain. Efforts to reduce child and maternal mortality have practically stalled since Ghana Poverty Reduction Strategy (GPRS) I, which is worrisome since health sector expenditures have risen over the same period (Ghana Joint Assistance Strategy, 2007). Finally, although access to water and sanitation services has been improving, _inequalities_ in access (particularly between rural and urban areas) and issues of _quality_ in this sector remain a major bottleneck for development.

**Table 3 MDG progress in Ghana, 1990-2004**

|||1990|2004|Target|
|---|---|---|---|---|
|Poverty headcount|(%)|52|31|26|
|Primary completion rate|(%)||47|100|
|Under-5 mortality|(per 1,000)|122|112|40|
|Maternal mortality|(per 100,000)|740|503|185|
|Access to safe water|(%)|54|56|85|
|Access to sanitation|(%)|21|35|85|

In the **_baseline scenario_** , we project the current optimism about Ghana’s strong medium-term outlook forward by lining up the dynamic (2004-2015) path of real GDP and external debt stocks with the assumptions and estimates of the latest Debt Sustainability Analysis (DSA) jointly conducted by the IMF and the World Bank in February 2007 (World Bank, 2007). Real GDP grows at an average annual rate of 6.9 percent through 2015, while population grows at 2.6 percent per year (Table 4), leading to an impressive 4.2 percent annual improvement in per capita income, while consumption per capita grows even faster.<sup>9</sup> This is a private investment-led scenario: it includes continued, solid growth in private investments. Total investment-to-GDP ratio is maintained at the level of close to 29 percent, with the private sector contributing nearly 18 percentage points to this ratio by 2015. The economy also shows a dynamic overall export growth of about 6.6 percent per year. The real exchange rate appreciates by about 3 percent between 2004 and 2015 and the growth of exports lags behind import growth by 0.9 percentage points per year. The trade-to-GDP ratio rises by another 3 percentage points from an already high 2004 value of 101 percent. Due to debt relief under the HIPC initiative, the external debt-toGDP ratio is almost halved over the 11 year period, which provides significant reprieve from debt service obligations and frees up public resources for other spending areas, such as human resource development. The volume of public spending (investment and

> 9 It is important to notice that, as for most dynamic general equilibrium models as MAMS, real GDP growth is exogenous during the calibration of the model. This means that, given the growth rate for the labor force and the accumulation of capital, the growth of the productivity parameter is calculated so that the targeted real GDP growth is achieved. As shown below in Figure 2, significant efficiency gains are needed to reach the strong GDP growth assumed by the DSA. These efficiency gains can be, at least in part, attributed to the favorable policy environment and investment climate, however no attempt to econometrically estimate the link between these variables and efficiency gains was carried out for this study.

9