The changing nature of UK aid in Ghana, ICAI, February 2020

11 février 2021Wathinotes débat Europe-Afrique de l'Ouest

Author: The Independent Commission for Aid Impact

Type of publication: Country portfolio review

Date of publication: February 2020

Introduction

After more than two decades of continuous economic growth, Ghana achieved the status of lowermiddle-income country in 2011. As Ghana’s economy transforms, the country’s long-standing development partnership with the UK is also changing. The UK has invested about £2.8 billion in bilateral aid in Ghana over the past two decades. Since 2011, the UK’s aid portfolio has been reoriented towards helping Ghana overcome its economic and governance challenges and mobilising the resources to finance its own development. At the same time, the UK has continued to finance education, health and social protection programmes in Ghana, but with less funding.

Country Context

Ghana is a stable democracy. Since the return to democracy in 1992, its citizens have voted out the incumbent government three times in contested but peaceful and free elections. Ghana has a vibrant civil society and scores above average on international governance assessments of middle-income countries. Ghana is currently ranked sixth out of 54 African states on the Ibrahim Index of African Governance.5In 2017, Ghana ranked second of all African countries on the Reporters without Borders media freedom index.

Ghana is a country in economic and social transition. After more than two decades of continuous economic growth, Ghana has gone from relative poverty to become one of West Africa’s wealthiest countries. It was the first sub-Saharan African country to meet the Millennium Development Goal to halve extreme poverty. By 2015, it also halved the number of hungry people and the proportion of people without access to safe drinking water. It achieved universal primary education and gender parity in primary education, reduced HIV prevalence, and increased access to information and communications technology.

Ghana’s oil discovery in 2007 is credited with fuelling the country’s growth spurt in 2011–12.11 At peak production, oil from known reserves currently exploited could contribute just over 9% of GDP and about 30% of the government’s revenue.12 The government of Ghana recently announced the discovery of a further one billion barrels of reserves, expecting production to almost double by 2025. The windfall from the oil and gas sector could therefore make a substantial contribution to Ghana’s socio-economic transformation, if managed well.

Macroeconomic instability continues to pose a high risk to Ghana’s continued growth and development. From 2012 Ghana’s macroeconomic conditions started deteriorating, brought about by a large public sector wage bill, costly energy subsidies, severe power shortages and worsening terms of trade. Frequent overspending (more pronounced in election years), low tax effort and public financial management weaknesses have undermined the public finances, ratcheted up public debt and largely consumed the fiscal buffer that had resulted from the 2006 Multilateral Debt Relief Initiative.

Gender disparities persist. While girls’ enrolment in primary and junior high school education was on a par with or better than boys’ enrolment by 2011, this was due to shifts in the wealthier south and not true for the poorest girls or girls in northern Ghana. Despite gender parity in senior high school enrolment, significantly fewer female students than male students qualified for tertiary or higher education in all regions, and especially in the north. Women have lower labour market participation and higher unemployment levels than men.

Ghana’s changing relationship with aid

Since taking office in 2017, Ghana’s president, Nana Akufo-Addo, has been vocal about moving the country ‘beyond aid’. The government released its Ghana Beyond Aid Charter and Strategy in April 2019. The Charter is not ‘anti-aid’. In the words of the Chair of the Ghana Beyond Aid Committee, the aim is to “set our development priorities right so that our creative energies and resources, including aid, can all be deployed to fast track our economic transition from an under-developed country to a confident and selfreliant nation”. As yet, the strategy is aspirational, with limited policy and programmatic detail.

UK aid in Ghana

The UK committed £2.8 billion in bilateral aid to Ghana between 1998 and 2017, almost 70% of it spent in the first decade. Of the £2.8 billion, 43% was for debt relief or general budget support. Of the remainder, about three quarters went to the social sectors – mainly education in the first decade, then shifting to health in the second decade. By 2011, UK aid had moved out of the transport and water and sanitation sectors and significantly cut support for agriculture, while increasing spending on civil society and private sector development.

UK aid objectives and strategies in Ghana since 2011

In 2011, at the start of the review period, DFID saw Ghana’s growing inequality, gender disparities, poor social and health outcomes, governance challenges and structural economic constraints as the central barriers to the country’s transition.

Since taking office in 2017, Ghana’s president, Nana Akufo-Addo, has been vocal about moving the country ‘beyond aid’. The government released its Ghana Beyond Aid Charter and Strategy in April 2019. The Charter is not ‘anti-aid’. In the words of the Chair of the Ghana Beyond Aid Committee, the aim is to “set our development priorities right so that our creative energies and resources, including aid, can all be deployed to fast track our economic transition from an under-developed country to a confident and selfreliant nation”. As yet, the strategy is aspirational, with limited policy and programmatic detail

Findings

Mobilising domestic resources

The Department For International Development’s support to boost domestic tax collection and manage oil and gas revenues is relevant to Ghana’s Beyond Aid strategy, which lists higher public resource mobilisation as one of ten priority reforms. DFID’s diagnostic work identified that the oil and gas sector can address two of the binding constraints on growth (cost of energy, access to finance and macroeconomic stability) through its impact on government finances, foreign exchange earnings and energy generation. Based on this diagnostic, DFID designed its Ghana Oil and Gas for Inclusive Growth programme to provide technical support to the government of Ghana, while also working with civil society to strengthen its ability to hold the government to account on how the oil and gas windfall is spent.

UK aid choices in Ghana show commitment to the principle of leaving no one behind

In recent years, poverty reduction in Ghana has stagnated, inequality has grown and regional disparities have widened, showing a growing risk that some communities will be left behind as the country transforms, which in turn will threaten the transformation itself. Our analysis of programming in the health, education and social protection sectors shows a consistent commitment to the principle of leaving no one behind. DFID’s support to service delivery between 2011 and 2019 was targeted at vulnerable groups, the poorest households and lagging regions. Altogether 92% of bilateral UK aid expenditure in the social sectors in Ghana was targeted in full or through substantial components at groups who are (at risk of being) left behind.

The UK’s broad cross-departmental approach to Ghana’s economic development was a coherent and coordinated response to the government of Ghana’s beyond aid priorities

The government of Ghana has clearly expressed that it wants its partnerships to transition over time from aid to trade and strategic economic cooperation. It has asked that development partners help raise additional funds for development through market-based transactions and leveraging private capital.

Since 2018 the UK government, through the Economic Development Investment and Trade (EDIT) working group and the UK-Ghana Prosperity Strategy, has coordinated a broad range of instruments from different UK departments and bilateral and multilateral funds to support Ghana. The ambition is for shared learning, leveraging interventions and presenting a coherent narrative about the UK offering to Ghana. Key participating departments and funds are DFID, the FCO, the Department for International Trade, CDC (the UK’s development finance institution), the Private Infrastructure Development Group and UK Export Finance (UKEF).

The ambition of the EDIT working group is to coordinate all UK official flows better in the interests of the mutual prosperity of Ghana and the UK. This carries risks for UK development assistance (see the next finding) but may also allow the UK to use its assets more effectively in leveraging private capital for development. The initiative supports the UK-Ghana Business Council, which brings the two governments together to reduce barriers to trade and investment and create jobs. In 2018, UK aid funded a UK-Ghana investment summit, attached to the first meeting of the business council. The council and summit were frequently mentioned to us by Ghanaian government ministers as a prime example of how the UK is a leading development partner in forging a new relationship with Ghana.

Conclusion on relevance

The UK aid portfolio included strategic choices that responded well to Ghana’s governance challenges and its need to diversify and grow its economy and self-finance its development. A high proportion of DFID’s programming, especially in the social sector, targeted the needs and priorities of poor people and aligned with the UK’s gender and leave no one behind agendas. A key concern, however, is that crucial decisions on the pace of reducing the financing of service delivery in the social sector were not supported by a comprehensive analysis of the consequences to service delivery. DFID’s planning, programming and monitoring approaches gave it insufficient insight on the needs, priorities and experiences of the poor in Ghana.

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