The context of implementation: macroeconomic and agricultural policies

The implementation of IFAD projects in Ghana coincided with the implementation of the Economic Recovery Programme (ERP), which was initiated in 1983 with support from the World Bank and the International Monetary Fund. The programme introduced a series of far-reaching policy reforms including exchange rate adjustments, liberalization of external trade, elimination of subsidies and price controls (including interest rates), rationalization of government budget and civil service structure, reform and/or gradual dismantling of parastatal bodies and privatization of direct production and marketing activities where the public sector had previously played a major role. As part of the reform package, in 1988 Ghana started decentralizing its government structure entrusting development activities to the regions and districts. More than USD 1 billion was lent by the World Bank to Ghana in support of adjustment operations.

Ghana is frequently cited as a success story of sustained adjustment and resumed growth. While macroeconomic indicators did improve in the decade following the ERP, since 1992 the economy sharply deteriorated because of a number of factors (including a large wage increase in the civil service and a sharp rise in the money supply) which led to the re-emergence of internal and external imbalances. The rate of inflation rose from 10% in 1991 to 34% in 1994 and estimates for 1995 vary from 55 to 70%. Nevertheless the GOG remains committed to pursuing adjustment with a strong emphasis on continuing liberalization, revitalization of the private sector and decentralization. Ghana's per capita income was still a low USD 410 in 1995 with a total population estimated at 17 million and growing at the rate of 3% per annum.

Under ERP, the performance of the agriculture sector has been disappointing. Between 1984 and 1992 the sector's rate of growth averaged only 1.7% per annum, far below the rate of population growth, and it fell further to 1.2% in 1994. To enable the agriculture sector to realize its potential (with an average of 4% growth rate till 2000) in 1990 the GOG formulated the Medium-Term Agricultural Development Strategy; the strategy emphasizes maintaining an outward-looking focus, with a strong emphasis on export promotion and efficient import substitution, strong economic incentives, liberalization of agricultural prices, and an effort to tap the initiatives of the private sector. The strategy document details recommendations to achieve the objectives which are in many ways an extension of earlier efforts at the sectoral level, and includes reforms to rationalize extension and research and to restructure the rural financial sector. It does not, however, address comprehensively the issue of rural poverty alleviation.

Within this overall macroeconomic and sectoral context the implementation of IFAD projects has been affected by a number of aspects of the ERP: (i) The total elimination of subsidies on fertilizers and the steep devaluation of the Cedi led to multiple fold increases in fertilizer prices, while the increase in farmgate prices for food crops lagged severely. This rendered input utilization almost impossible for many smallholders, and a shift in crop patterns in favour of root crops was observed; (ii) The increase in the interest rate for rural credit combined with low farmgate prices depressed demand for crop production credit and their loan recovery rates, but demand for marketing and income-generating activities does not seem to have been affected greatly; (iii) The GOG budgetary constraints associated with the ERP have negatively affected the flow and timeliness of government counterpart funds to all IFAD projects slowing implementation; (iv) The reduction in staffing of government implementing agencies (IAs) has affected the services provided to smallholders; and (v) The encouragement given to the private sector has allowed several project components to be executed with the help of dynamic private operators in the rural areas which speeded up implementation. Equally, the move to decentralization has facilitated several aspects of project implementation, but ambiguity remains concerning the exact role of the districts and the regions.

Despite the macroeconomic achievements following ERP, poverty is still widespread in Ghana and particularly in rural areas. Various indicators of poverty verify its persistence and high concentration in the northern parts of the country in the drier, lower potential, degradation-prone agro-ecological zones. Food crop producers are much poorer than other categories and they account for more than half of the country's poor. While poverty alleviation and environmental rehabilitation are mentioned in various policy documents, they have not received adequate priority in resource allocation.

More recently, with the growing realization of the persistence of poverty the GOG with World Bank support, mounted an Extended Poverty Study (EPS) in 1993, including a Participatory Poverty Assessment which dealt simultaneously with the quantitative and qualitative aspects of poverty. On the basis of the EPS recent agricultural policy statements emphasize measures for rural poverty alleviation in the most affected northern regions. The Ghana Vision 2020 (The First Step, 1996-2000) published in 1995, calls for the identification of deprived areas, on the basis of agreed criteria, within the agricultural sector to receive priority in resource allocation. A significant element of the recent agricultural policy is the emerging importance of cassava production. This reflects the growing realization of the importance of cassava and other root crops for smallholders in response to the changing relative prices. In March 1996, the GOG put in place a multi-disciplinary National Cassava Task Force to promote increased yields, consumption, processing and exports of the crop.

The development of IFAD's strategy

IFAD operations have been guided by a coherent Country Strategy drawn up in 1988 by the Special Programming Mission (SPM), after two projects were approved. This strategy is based on a comprehensive socio-economic and poverty analysis and its main elements have remained robust. To complement the GOG's policy aimed at export promotion, the SPM outlined a three-pronged strategy to increase food production and increase income of the rural poor. The first element relates to the enhancement of regional food security and arresting environmental degradation through assisting the northern regions. The second element is to assist smallholders in the Transitional Zone who provide the bulk of the national food requirements and to select pockets of poverty for specific support. The third element focuses on enhancing income opportunities through targeted income-generating activities. A number of implementation approaches consistent with the strategic objectives were also indicated.

Overall, the design of all IFAD-initiated projects in Ghana conformed to IFAD's strategy. Projects designed after the SPM did so explicitly; those designed before (SRDP) had features which implicitly reflected the thrust of the strategy. Nevertheless, both positive and negative deviations have been observed. On the positive side, the inclusion of various financial institutions has enhanced implementation of the credit components; emphasis on technology development and rural infrastructure, beyond that outlined in the SPM, and the inclusion of private sector operators during implementation have responded well to perceived needs and a changing environment and are offering promising opportunities for replication. On the negative side and contrary to strategic indications, some IFAD projects have many components and IAs, creating a need for intensive coordination beyond the existing institutional capacity. Most projects cover wide geographical areas creating large logistic and organizational problems. Environmental degradation, despite its seriousness, has been addressed in only one project. Institutional support was extended to all IAs; sometimes, as in the case of Non-governmental Organizations (NGOs), with no proportionate benefit to the project. Finally, the geographical coverage of IFAD projects while extensive, still falls short of fully covering the northern region where poverty is pervasive.

Main features of IFAD's portfolio

Development of the Portfolio. A notable aspect in the development of IFAD's portfolio in Ghana is a gap of more than six years between the approval of VORADEP (1980) and SRDP (1986), which marked the beginning of an era of accelerated programming and project design. The gap is a reflection of a temporary slow-down of all donor support to Ghana due to political turmoil and instability. The resumption of activities beginning with the design of SRDP was a response to the need to protect the poor during adjustment. In 1987 IFAD participated in the Programme of Action to Mitigate Social Cost of Adjustment which gave the momentum to field the SPM in 1988 and marked the beginning of an active portfolio. Of the four ongoing projects two, the Smallholder Credit, Input Supply and Marketing Projet (SCIMP) and LACOSREP are just at the mid-term stage of implementation; the Rural Enterprises Project (REP) became effective in early 1995 and UWADEP in March 1996, after fielding the CPE mission.

Location and Geographical Coverage. The projects are located in the rural areas of Ghana, except for REP which has some urban orientation. Progressively, the emphasis has shifted towards the poverty-stricken northern area, although according to strategy, projects like SCIMP and REP, have been designed to address the pockets of poverty in the Transitional Zone. Most projects have a wide geographical coverage which has cut across many regional and district administrative units, and one has a nationwide component. The design of SCIMP has incorporated most of the Transitional Zone spreading over three regions and fifteen districts with many areas difficult to reach directly from project headquarters because of natural barriers. REP also extends over two regions and eleven districts. LACOSREP and UWADEP are each concentrated in one region, but the area is wide and communications are poor.

Beneficiaries' Coverage. The total number of project beneficiaries is estimated at about 300 000 households, but women targeted specifically represent only about 14%. The number of beneficiaries in each project depends on the spread of the project area and the density of population. SCIMP has the largest number of beneficiaries since it extends over three regions. The investment cost per household varies from USD 830 in VORADEP to USD 193 in SCIMP. All IFAD projects in Ghana, except VORADEP, use the group formation mechanism to facilitate delivery of services to the target group and strengthen beneficiaries' participation. All IFAD-initiated projects, except REP, included the use of NGOs as intermediaries for implementing project activities. This was not the case for VORADEP, the only non IFAD-initiated project in Ghana.

Cost Structure. The total cost of IFAD-supported projects amounts to about USD 124 million, of which IFAD contributions in loans and grants amount to USD 71.6 million (58%) and USD 0.32 million (0.26%), respectively. The World Bank and the WFP each cofinanced one project for a total of USD 30 million(24%). The GOG and project beneficiaries contributed USD 19 million (15%) and USD 2.6 million (2%), respectively.

Agricultural and livestock development, small-scale irrigation and development of roots and tubers, all used as vehicles for technology transfer and development, represented 32% of the total cost of the six projects. Rural credit, which has been used as a means to assist smallholders and women to invest in food production, marketing and processing, represented about 21% and institutional strengthening 23% of the total cost. Rural infrastructure (roads, drinking-water supply, etc.,) was allocated about 19%. For IFAD-initiated projects only (i.e. all projects with the exception of VORADEP) the cost structure varied somewhat with rural credit increasing to 31% in parity with technology transfer and development activities. Institutional strengthening remained at about 23%, but the rural infrastructure dropped to 10%. The small-scale enterprises represent about 6% of the portfolio.

Project Duration and Disbursement. The two projects completed had a 60% time overrun (IFAD averaged 45% in 1995) and their average time-lapse between approval and effectiveness was 10.8 months (IFAD averaged 12.5 months 1992-1994). For these two projects, VORADEP closed at 78% disbursement rate, while SRDP had a disbursement rate of 96% from the Regular Resources and 94% from the Special Resources for Sub-Saharan Africa (SRS). SCIMP and LACOSREP had cumulative disbursements of about 53% of their Regular Resources loans, but SCIMP had a lower rate of about 40% of the SRS loan. REP has achieved a disbursement rate of about 12% in 16 months of operations up to June 1996. The trend in aggregate disbursement for the portfolio as a whole was roughly comparable to that of all IFAD projects in sub-Saharan Africa though the last two years witnessed a remarkable increase in disbursement, pushing the portfolio trend above that of the average for the projects in the region.

Overall, the performance of IFAD's portfolio in Ghana has been satisfactory; the two projects completed largely achieved their objectives and the two at mid-term are progressing well. Nevertheless, difficulties and constraints are still hampering better achievements, and a number of successful areas offer chances for replication. These are identified in the following sections. For more details the main report and annexes should be consulted.