Government of Ghana (GoG) recognizes the importance of aid financing the country’s development. Between 2000 and 2008, total external aid was $9.6 bn. As a percentage of Gross Domestic Product (GDP), it declined significantly from 25.2 percent in 2000 to 9.8 percent in 2008, but aid still accounted for approximately 20 percent of total annual government budget resources. GoG is determined to channel aid more effectively towards Ghana’s development goals and eventually reduce aid dependency. In early 2008, as GoG prepared to host the High-Level Forum on Aid Effectiveness, it requested that ACET serve as an independent advisor in developing an aid policy.
Support GoG in developing a framework for the government and its development partners (DPs) to coordinate aid and establish institutional arrangements for aligning funds with government’s development priorities.
GoG surmises that aid effectiveness and efficiency is hampered by many factors including difficulties in operationalizing development priorities and aligning aid; limited use of country systems in aid delivery; fragmentation in sourcing and managing aid; high transaction costs and inadequate capacity in aid delivery; conditionality and unpredictability of aid; lack of a mutual accountability framework; inadequate information on aid flows; and insufficient coordination among stakeholders.
ACET conducted extensive consultations with the government, DPs and civil society organizations. Subsequently, ACET’s policy advisors and Senior Associates assisted the Government in producing a draft Aid Policy and held a number of review sessions with the leadership of the Ministry of Finance. The recommendations included:
- Alignment: Ensuring an effective division of labor among donors to ensure that identified sectors and districts receive the necessary support as prescribed in the national development plan.
- Aid modalities and country systems: Resolving differing perceptions on improvements in country systems with DPs to facilitate a shift from project aid to budget support.
- Aid coordination: Rationalizing aid coordination within the Ministry of Finance and Economic Planning and creating clear procedures for harmonization of DP procedures.
- Coordination with DPs: Rationalizing dialogue with DPs to ensure more effective policy and technical coordination to increase mutual accountability and predictability of flows.
- Capacity Development: Developing a comprehensive plan to ensure that external development assistance is strategically used to build capacity in GoG.
ACET remains committed to supporting GoG in the effective implementation of the aid policy.