$535M World Bank loan conditionalities revealed

On Thursday, July 2, Finance Minister Kwabena Duffour told Ghanaians, during an interview on Citi FM, that there were no conditionalities attached to the record $535 million World Bank loan to Ghana.

He said, the World Bank was being exceptionally generous because it has been impressed with the way the six-month old NDC government has handled the economy in the last six months.

"We are happy to announce that there are no conditionalities contrary to some reports insisting that there are numerous conditions attached to the loan. The World Bank believes we are performing well considering the short time that we took over. Our fiscal consolidation program that we indicated in the budget is working and we have managed to stabilise the high depreciation rate of the cedi", Dr Duffour said.

But, the Executive Director of the Danquah Institute, speaking on Oman FM last Friday exposed the Minister's lies. Gabby, who congratulates the Finance Minister and his team for winning Ghana such a huge loan facility at concessionary terms, quoted from a June letter addressed from Dr Duffuor to Robert Zoellick, President of the World Bank. The Finance Minister disclosed in the letter, “The first tranche prior actions have already been met and Government will ensure that the actions under the second tranche are achieved and are proposing an assessment date of end September 2009.”

Gabby explains, “The synonym for 'conditionalities" here is ‘actions’. The proposed date for assessing government has fulfilled the conditionalities is in order to allow the second tranche to be released in October as scheduled.”

On the morning programme, which was simultaneously beamed life on Net2 TV, Gabby Asare Otchere-Darko brandished 3 official documents from the World Bank, dated June 15, 2009, covering the $535m concessionary loan.

He said the World Bank has, since the turn of the millennium, adopted the style of holding pre-negotiations discussions with the receiving country to make it clear which direction it wants the country to go if it wants support from it. It’s up to the government to adopt or fashion out policies in that nature, which are usually contained in a budget statement. The World Bank then picks up those in the budget that it sees as priorities and then uses them to set out conditionalities.

Gabby said, for example, the release of the first tranche of the loan which is due this month was conditioned on the fulfilment of certain policies classified as “EGPRC first tranche prior action.” These, which were contained in the budget statement, have been by and large implemented, Gabby points out.

“But, there are six others boldly stated as ‘conditions’ contained in page vi of the programme document covering the $300m Economic Governance and Poverty Reduction Credit,” the DI Executive Director points out. Table 4 on page 35 of the same document also contained EGPRC Proposed Trance Release Actions.

$225m of the loan is for the Transport Sector, with the remaining $10m for Natural Resources and Environmental Governance.

In Gabby’s view, some of the conditionalities are welcomed, including the rationalisation and commercialisation of half of the subvented agencies, and the requirement that by September the Mills administration should submit to Parliament the Freedom of Information Bill and, if approved, adopts a related implementation plan, including a budget.

“But, government should come clean. It should tell Ghanaians that it has made a covenant with the World Bank that public sector employment will not go up this year. That public sector workers will be worse of this year because their planned salary increases will be a lot lower than the corresponding rises in prices of consumer goods and services. They should tell Ghanaians that subsidies on utilities are to be scrapped, which should see electricity and water bills going up. That about half of the remaining state-owned enterprises are to be prepared for privatisation, commercialisation or rationalisation.”

Gabby reminded Ghanaians that after President Mills said on BBC, during his official visit to the UK, that the IMF and World Bank facilities agreed at the Spring Meeting in Washington, carried no conditionalities, the Danquah Institute challenged government to come clean because the NDC had been negotiating conditionalities with the Bretton Wood insitutions ever since January 7.

Gabby welcomes the pressure that the World Bank is putting on government to adopt draft legislation on the Ghana Petroleum Regulatory Authority and oil and gas fiscal regime.

“This bill was readied for Parliament in 2008. But the new government has withdrawn it for further consultation. The problem is that civil society is not so clear who is being consulted. What we do know is that government insists oil production is on schedule to begin in 2010. But, we all know that it is the services that flow from upstream to downstream that Ghanaians can benefit directly from. The GPRA bill is what sets the legal framework for local content. So how do we expect Ghanaians to benefit if in the second half of 2009 we still have not set the stage for Ghanaian businesses to be in on the oil action?”

The second tranche of $150m World Bank loan to Ghana is due to be released in October 2009, Condition 1 before the money is released reads: “The recipient has taken contingency fiscal measures, once the public wage rate increase for 2009 has been established, to correct any deviations with respect to the fiscal deficit and the share of pro-poor expenditures targets set forth in the Recipient’s 2009 budget.”

Condition talks about the Freedom of Information Bill.

Gabby says this is excellent news. “Some of us loudly criticised the NPP government for delaying on the Right to Information Bill, after it had been prepared. My only concern is what period of moratorium is the present government going to give itself between passage of the law and implementation? We should guard against government coming out to say it needs at least two years to implement. That is why we welcome the condition from the World Bank that ‘if this is what you have promised to do then at least show us your implementation plan before we support you with this loan.’ It puts positive pressure on the government.”

Condition 3 states: “The recipient has appointed a Minister of State in charge of public sector reform, and eliminated ghost workers from payroll in the Ghana Education Service, initiated employment audits in all remaining MDAs, and classified at least half of the total number of subvented agencies in preparation for their rationalisation, divestiture or commercialisation.”

The head of the centre-right think tank says, “the World Bank has cleverly boxed four major conditionalities into one. But, all four must be welcomed. There is the need to inject more commercialisation and efficiency in the utilities sector for instance. It may not sound pretty but we can’t continue to run away from these tough decisions.”

He said, however, the Minister’s call that these conditions are all home grown is not supported by the fact that neither the NDC Manifesto and the 2009 budget speak of selling off or rationalising half or more of SOEs nor appointing the Minister of State for Public Sector Reform. In fact, the Mills administration oddly scrapped the Minister and Ministry appointed and set up to reform the public sector, with the excuse that it was ‘rationalising’ and cutting out profligate spending.”

Gabby adds, “It will also be interesting to hear the NDC arguing that the decision to implement a net freeze in the public sector was also home-grown by them. We are hoping this should compel them to fulfil their promise to create jobs by helping the private sector to be able to do so.”