The World Bank on Tuesday approved a US$535 million package for Ghana aimed at helping to improve economic governance and stabilize the economy.
The amount is the first slice of a US$1.2 billion the Bank plans to support the government with over the next three years.
It includes $300 million in budget support to assist the country's efforts to bring the fiscal situation back on a sound and sustainable track, while protecting the development objectives set forth in Ghana's Second Growth and Poverty Reduction Strategy (GPRS II) for 2006-2009.
The government is currently faced with a difficult macro-economic situation as the result of domestic and external shocks.
This was due to fuel and food crisis, droughts and floods in the North, financial crisis and the global slowdown, which exacerbated a number of structural challenges in the public sector in general and the energy sector in particularly.
If the situation is left unchecked could undermine Ghana's growth and development prospects.
Recognizing the severity of the situation and the related financing gaps, the Government requested assistance from the World Bank in April, the statement said.
The credit will be disbursed in two tranches. The first tranche of US$150 million will be effected immediately the financing agreement is signed by the government and the World Bank in early July.
The remaining half will take place in the third quarter of 2009, immediately after the Government has completed actions it has expressed commitment to take.
The actions include budget measures such as the establishment of a single treasury account, improving compliance with the public procurement law, correcting any budget deviations (fiscal deficit, pro-poor expenditures) that may have arisen at mid-year through new fiscal measures, publishing fiscal accounts with less than one quarter lag, and submitting to Parliament the Freedom of Information Bill.
The government must also undertake structural reforms such as reconstituting the Boards of energy related regulatory utilities and authorities, adopting electricity sector financial recovery plan and draft legislation on the Ghana Petroleum Regulatory Authority and Oil and Gas Fiscal Regime.
The reforms must also include the designation of a leader in Government for the Public Sector Reforms agenda, and elimination of ghost workers in the health and education services.
In addition, government must undertake programmes to protect the Poor by extending the number of Livelihood Empowerment Against Poverty (LEAP) beneficiaries, and review the effectiveness of pro-poor expenditures by revising their classification.
According to Ishac Diwan, World Bank Country Director for Ghana, "it is important to stress that these are not externally imposed conditionalities.
These are actions that the government has decided to undertake in order to ensure fiscal prudence, transparency and accountability in the delivery of services. We all, citizens, Parliament and Development Partners alike, need to be vigilant and play our parts in promoting value for money in the disbursement of hard earned resources," he said.
A further $225 would go towards improving the transport sector, the statement said.
The objective of the transport project is to improve mobility of goods and passengers through reduction in travel time, vehicle operating cost, and implementation of safety strategy.
This objective will be achieved by strengthening the capacity of transport institutions in planning, regulation, operations and maintenance.
The Government has developed a Transport Sector Development Programme as the successor programme to the Road Sector Development Programme, setting out an integrated programme of development activities for Ghana's Transport Sector for the period 2008-2012.
The money will be used to improve trunk roads, establish a South-North transport corridor in the West of Ghana and improve urban and feeder roads.
"For Ghana to continue to play its role as the gateway to West Africa, the development of transport infrastructure remains at the centre. A better transport system will improve access to markets and will encourage farmers to improve the quality and quantity of their produce.
Capacity building to enhance the performance of key institutions in the roads, aviation, maritime and railway sub-sectors will be emphasized," says Ishac Diwan.
The statement quoted Ghana's Minister of Finance, Dr Kwabena Duffuor, as saying that "These resources could not have come at a better time. We have been working hard to minimize the impact of the global financial crunch on our people and these facilities will go a long way in supplementing our internal revenue generation and poverty reduction efforts. It is our duty as a government to bring the macro-economic situation back on track, and we are committed to implementing appropriate measures in this regard."
The remaining 10 million dollars will be used for Natural Resources and Environmental Governance operation, targeting the natural resources and the environmental sectors.
The first operation was prepared and executed in 2008. The objectives of the three series of operations are to (a) ensure predictable and sustainable financing for the forest and wildlife sectors and effective forest law enforcement; (b) improve mining sector revenue collection, management, and transparency; (c) address social issues in forest and mining communities; and (d) mainstream environment into economic growth through Strategic Environmental Assessment (SEA), Environmental Impact Assessment (EIA), and development of a Climate Change Strategy.
The facility will be disbursed in a single tranche as soon as the credit agreement is ratified by Parliament and a legal opinion is provided by the Attorney General's Department.