PUBLIC COMMUNICATION BRIEF ON OPERATIONS REPUBLIC OF GHANA CGH1113

Transcription

1 PUBLIC COMMUNICATION BRIEF ON OPERATIONS REPUBLIC OF GHANA CGH1113 Programme to finance investments and institutional strengthening in 170 Ghanaian districts TABLE OF CONTENTS I - SECTOR AND ISSUES PRESENTATION OF THE SECTOR: RECENT AND INCOMPLETE DECENTRALISATION PROCESS GOVERNMENT POLICY IMPORTANCE FOR THE COUNTRY CONTRIBUTION TO THE STRATEGIC AREAS OF FRENCH AND AFD AID Lessons learned from the main activities of AFD and other French actors in the sector Contribution to the strategic areas of French and AFD aid... 8 II - THE PROGRAMME OBJECTIVE SPECIFIC OBJECTIVES PROGRAMME CONTENT Component: allocation for investments Component: allocation for capacity building INTERVENORS AND OPERATING METHOD Organisation Operating method COST AND FINANCING PLAN TYPE OF FINANCIAL PRODUCT PROVIDED BY AFD III - EVALUATION OF PROGRAMME IMPACTS ECONOMIC IMPACTS ENVIRONMENTAL AND SOCIAL IMPACTS INSTITUTIONAL IMPACTS SUSTAINABILITY OF PROGRAMME IMPACTS IV - SUPERVISION-EVALUATION MECHANISM /12

2 List of acronyms AFD AI CIDA DACF Danida DCE DDF ECF FOAT GAS GoG GUMPP IMF KfW LGA LGSS LOGNET MC MDA MLGRD MMDAs MoFEP NALAG NDAP NDPC PSF RCC SCAC Agence Française de Développement Aggregatable Indicators Canadian International Development Agency District Assemblies Common Fund Danish International Development Agency District Chief Executive District Development Facility Extended Credit Facility Functional Organisational Assessment Tool Ghana Audit Service Government of Ghana Ghana Urban Management Pilot Programme International Monetary Fund Kreditanstalt für Wiederaufbau (Credit Institute for Reconstruction) Local Government Act Local Government Service Secretariat Local Governance Network Minimal Conditions Ministerial Departments and Agencies Ministry of Local Government and Rural Development Metropolitan, Municipal, and District Assemblies Ministry of Finance and Economic Planning National Association of Local Authorities in Ghana National Decentralisation Action Plan National Development Planning Commission Priority Solidarity Fund Regional Coordinating Council Service de coopération et d action culturelle (Cooperation and Cultural Action Office) 2/12

3 I - SECTOR AND ISSUES Presentation of the sector: recent and incomplete decentralisation process Decentralised territorial authorities (MMDAs or districts) within Ghana s public system Since 1992, Ghana has been going through a process to delegate and transfer responsibilities to MMDAs (Metropolitan, Municipal, and District Assemblies or districts), which are decentralised territorial authorities with an elected assembly and autonomous powers devolved to them by the law. This process fits in with the aim of decentralising public action set out in the constitution of 1992 (which is still in force): Ghana shall have a system of local government and administration which shall, as far as practicable, be decentralized functions, powers, responsibilities and resources are at all times transferred from the Central Government to local government units (article 240). The Rawlings Government, in power from 1993 to 2000, reinforced the legal framework of this decentralisation process. In particular, the LGA (Local Government Act) of 1993 specified the areas of competence of local governments, notably their responsibility as the leading actor in local development: MMDAs have the political and administrative authority in their territory, as well as for the coordination and development of infrastructure and services. They have a legislative power or planning and own-source tax revenue. The LGA also sets out the budgetary and financial framework of districts (description of the internal resources of MMDAs, debt framework, setting of tax rates and license fees, etc.). The LGA of 1993 lists the generic functions assigned to MMDAs. The districts are responsible for: planning on their territories, the provision of local collective goods and services, improving the environment, and contracting authority for public infrastructure works. However, no law provides for an explicit devolution of State powers to districts, although the Constitution considers this transfer of powers as a necessary stage in decentralisation. The LGA provides for a specific decree to assign a territory and competences to each district. These decrees exist for each district, but in reality, the competences are practically always the same for the different districts in the following sectors: primary health care, road systems, urban planning and construction, markets, education, sports, cultural and leisure activities, rural and community development, agriculture, child care, the promotion of economic activity, civil registration, support for traditional authorities, traffic, fire protection, etc. The MMDAs are the only level of decentralisation (i.e. with a devolution of competences) in the system of Ghanaian public institutions on the basis of the following pyramid: - Central level: technical ministries; - Regional level: there are 10 regions, which are decentralised administrative institutions. The political entity of each region is the RCC (Regional Coordinating Council), chaired by a minister of the region appointed by the President of the Republic: the MDA (ministerial departments and agencies) are the decentralised bureaucratic and technocratic entities which correspond to the perimeter of regions. The RCC and DAM strictly implement the instructions given by the central level and thereby act purely as an intermediary between the central level (technical ministries) and MMDAs. The role of the RCC is to monitor the districts (control of material, financial and human resources made available to the districts by the central Government), coordinate the planning of districts with central Government planning and evaluate their performance; - MMDAs or district level: the initial 170 MMDAs which were increased to 216 MMDAs in 2012 are decentralised administrative institutions. They have legal personality and implement the competences that are entrusted to them in the framework of national policies. The political entity of each MMDA is the Assembly, the deliberative assembly, where 70% of the members are elected, with the remaining third being appointed by the 3/12

4 President of the Republic, as is also the case for the DCE (District Chief Executive), who carries out the executive functions of the district. - Level of sub-mmdas: there are administrative subdivisions of the districts, which simply act as intermediaries for the MMDAs. There were 110 MMDAs in 1993, there are now 216, classified depending on their population: 6 Metropolitan Assemblies (population of over 250,000 inhabitants), 55 Municipal Assemblies (> 95,000 inhabitants) and 155 District Assemblies (< 95,000 inhabitants). The MMDAs are under the responsibility of MLGRD (Ministry of Local Government and Rural Development). Mixed decentralisation process in its principles Limited political autonomy for MMDAs: between devolution and decentralisation The MMDAs are composed in a mixed manner: the DCE, as well as a third of the members of the deliberative Assemblies, are directly appointed by the President of the Republic and have a 4-year mandate. The DCE chairs ex officio the executive committee, which carries out the administrative and executive functions of the district, giving him significant powers. Furthermore, while all the MMDAs prepare and vote their budget, their autonomy in terms of programming is, however, limited, in law and in practice, by the supervision of the central administration. Consequently, it can be considered that the districts operate both as a management authority for the devolved State services and as a decentralised local government. Limited budgetary and financial autonomy The financial and budgetary autonomy of MMDAs would also appear to be limited, in direct relation with political autonomy. The Constitution of 1992 provides sound bases for the budgetary and financial construction of MMDAs. It in particular recognises that there shall be established for each local government unit a sound financial base with adequate and reliable sources of revenue (art c), and article 242(1) designates the endowment of the DACF (District Assemblies Common Fund) as the basis for this strengthening of the financial autonomy of districts. The DACF is the main financing mechanism of districts and was set up in 1993 to finance the development expenditure of MMDAs: 5% of tax revenue collected nationwide was transferred to the districts by the Government of Ghana (GoG) between 1994 and 2007 on a quarterly basis, for the implementation of their investment projects. The principle of this payment of at least 5% of the tax revenue collected nationwide to MMDAs is set out in the Constitution of However, until 2010, the use of DACF allocations by districts was constrained by a series of directives and by the definition of national priorities (the allocation for each MMDA was accompanied with instructions for its use). The central level thereby maintained a very strong control over the use by MMDAs of the resources it transferred to them. Yet until 2009, State funds (mainly DACF) were practically the only source of financing of MMDAs. The own resources of MMDAs are mainly made up of license fees and fines, licenses, tax revenues (taxes on built land/property tax, flat-rate property tax), building permits and market duties. In 2007, they accounted for an average of only 18% of the total resources of MMDAs (although this average masks considerable disparities between rural and urban districts), while external resources (State transfers, in the form of DACF or sectoral grants, and support from international donors), mainly pre-earmarked, accounted for 82% of the total resources of MMDAs. This low level of own resources of MMDAs is mainly due to the fact that the latter mobilise their tax potential very little (lack of reliability of cadastral bases and no regular reassessment of property values, lack of competent staff for local collection, high administration 4/12

5 costs, etc.). Recourse to borrowing is extremely rare 1 and in reality only constitutes cash advances. Consequently, the financial autonomy of MMDAs would currently appear to be weak. However, MMDAs have considerable leeway in terms of more effectively mobilising their tax potential, setting rates (which continue to be controlled), borrowing, etc. All in all, these limits in the political, budgetary and financial autonomy of MMDAs reflect the Ghanaian Government s choice in terms of the organisation of its territory: maintain a certain control over the decisions taken at local level, while providing its population with high-quality basic public services. Consequently, its choice for basic territorial organisation was to transfer administrative and financial competences to its representatives in the MMDAs (directly via the institution of the DCE, appointed by the President of the Republic, and indirectly via the control of supervisory authorities), which is a first stage with a view to decentralisation itself in the long term. And still under construction Considerable leeway for progress Within this decentralisation framework, which has mixed foundations, there is still considerable leeway for progress and the process is unfinished: - Legislative loopholes and overlapping of responsibilities: the fact that no law explicitly provides for the devolution of State competences to MMDAs leads to an overlapping of responsibilities between the devolved State departments (departments and ministerial agencies) and MMDA departments. The same competences can sometimes be assigned to both, which is, for example, the case for education and health; - The capacity of MMDAs to generate own resources is insufficiently exploited: they mobilise few own resources, whereas they would have the potential to do so. Legally, they can indeed decide rates and bases for property taxes, licenses, duties and fines, within the limit of the maximum amounts set by the State. However, certain districts, aware of their potential for local taxation, are in the process of modernising their addressing and collection system and there has been encouraging progress. Most of the district staff, who are civil servants from the central level, under the hierarchy of their sector ministry, are about to be transferred under the direct supervision of local governments. The creation of a territorial public service is in the process of coming to fruition. Until now, the municipal contracting authority only had a limited number of management staff and was still widely under the control of the devolved State services. Constant developments On the basis of the impetus given to decentralisation by the Rawlings Government in the early 1990s, the Governments that succeeded it after 2000 continued the effort in favour of decentralisation. Consequently, the NDAP (National Decentralisation Action Plan) was adopted in 2003, then the Intergovernmental Fiscal Decentralisation Framework 2 in During the same period, the Ghanaian Parliament ratified an increase in the taxation transferred from the State to local governments from 5% to 7.5%. 1 Section 88 of the LGA of 1993 stipulates that MMDAs can borrow or obtain advances subject to the authorisation of the Ministry of Local Government, in consultation with the Ministry of Finance. This authorisation is not necessary if the loan amount does not exceed 20,000 cedi, a ceiling which has not been reviewed since 1993 and which today appears to be derisory in view of the financing needs of MMDAs. 2 The Intergovernmental Fiscal Decentralisation Framework document proposes: a) a clarification of the responsibilities of the different levels in terms of local public investment, based on the principle of subsidiarity; b) the allocation of resources adapted to these (newly) devolved competences; c) the management of local taxation and the possibility of access to credit or financial markets within the defined limits; d) the implementation of transparent financing mechanisms allowing capacity building and reinforcing the sound management of districts. 5/12

6 A Decentralisation Policy Framework and Action Plan were finally validated in November 2010, representing the result of a consultative process. They aim to reorient the decentralisation process in pursuance of its initial impulse. They set out the initial elements of an assessment of the decentralisation process and in particular identify the shortcomings, including: the lack of progress in establishing a territorial civil service, the slow integration of decentralised departments by MMDAs, the incomplete fiscal decentralisation (insufficient mobilisation of MMDAs' own resources), the unclear role assigned to regions, the lack of MMDA officers competences, especially regarding territorial planning, financial management, financial management, mobilising resources, etc. The policy framework is designed to solve the problems identified by defining 9 priority action areas: the political aspects of decentralisation (which includes clarifying competences), the administrative aspects (including managing staff at the local level), land use planning, local economic development, decentralised planning and budgeting, fiscal decentralisation, civil society participation and transparency, the social agenda (integration of social issues at the local level), and the involvement of non-governmental actors in local governance. These priority actions are set out in the action plan in the form of key activities with a 4-year implementation schedule and the identification of the entities responsible for effectively implementing them. For example, the action plan provides for the formulation of directives for the integration of decentralised departments in the MMDAs, the transfer of staff to the MMDAs, the review of the selection method of the DCE, the establishment of human resources departments in the MMDAs, the increase in the resources of MMDAs to allow them to implement their plans and priorities, support for the MMDAs in order to improve the generation of own resources, etc Government policy In 2009, the Ghanaian Government established a new financial allocation for MMDAs with donor support, the DDF (District Development Facility), which is complementary to the DACF. The allocation firstly aims to finance the investment projects of districts (88% of the annual budget of the allocation) and, secondly, to build the capacities of the staff of the MMDAs (12% of the annual budget of the allocation). This leads to a performance culture between districts which has demonstrated its effects. The following main principles regulate access to this new resource: - Autonomy in the choice of investment projects (investment grant): 88% of the allocation is earmarked for investment projects depending on the priorities they define; 5% of the investment grant may be earmarked for maintenance activities; - Allocation modulated depending on the performance of districts: the reception of the investment allocation by districts is conditional upon the achievement of MC (Minimal Conditions) 3 by the districts and is modulated depending on the level of achievement for the performance indicators defined by the FOAT (Functional Organisational Assessment Tool). These indicators concern the managerial capacity MMDAs to decide on and implement basic services, in accordance with Ghanaian regulations; - Support for capacity building (capacity building grant): 12% of the DDF funds are earmarked for capacity building actions for staff in the districts in order to remedy the weaknesses identified (particularly in terms of financial management, the mobilisation of resources, planning, procurement, etc.) The Capacity Building component is partly managed at central level by LGSS (Local Government Service Secretariat), which is housed at MLGRD, and whose role is to identify the training requirements of districts on the basis of 3 The MC are as follows: functioning of the planning coordination unit; preparation of an annual action plan, consistent with the medium-term development plans of each district; preparation and submission of annual financial statements; no negative comment from the audit report; availability of the procurement plan and its compliance with the legislation in force; regular holding of meetings of the assembly; submission of quarterly and annual reports on the implementation of activities. 6/12

7 the result of their assessments and to organise training which meets these needs (with the mobilisation of external service providers as training officers). A key element of the DDF mechanism is the notion of management performance (application of Ghanaian regulations) based on indicators of sound management at local level. This approach is based on the consideration that it is necessary to give MMDAs the means to finance the development of basic services, but that it is necessary to ensure beforehand that they will be able to efficiently absorb these funds. This approach has two objectives: - Provide financing to MMDAs for the implementation of their public service mission; - Establish actors at local level who are able to manage funds and act as efficient entities Importance for the country Through the decentralisation system which is currently being built, the Ghanaian Government is seeking to provide its populations with access to high-quality basic public services. Consequently, the developments in the decentralisation system are an important issue for Ghana. Within this system, DDF is an innovative source of financing for MMDAs. In addition to the fact that the DDF provides additional resources, it is a step forward for the decentralisation process in Ghana for the following reasons: The assessment exercises for the MMDAs make it possible to identify the weaknesses of these actors. They are a tool for reflection and dialogue for the MMDAs and central level, with a view to remedying the weaknesses of the staff of MMDAs; In direct relation to the assessment exercise, the actions to strengthen the competences of MMDAs are essential: progress in the decentralisation process is conditional upon the establishment of competent staff able to assert its autonomy and its knowledge of local issues. The DDF is the first systematised and institutionalised approach to capacity building for MMDAs. MMDAs directly implement part of the capacity building grant, depending on the needs identified at local level; For MMDAs, the DDF allocations provide a strong inventive to improve their functioning. The DDF has also been built in addition to the DACF (allocation to districts since 1994) and with the aim of integrating the criticisms made against the latter: The DACF is in line with a rationale of equalisation, with poverty reduction targets being taken into account: in 2010, 40% of the DACF was evenly divided amongst the MMDAs, 40% based on a criterion of access to services (education and health structures, access to drinking water, roads), 10% based on a population criterion, and 10% based on a criterion of the capacity to collect taxes; The DACF is a system whereby fund management is devolved, but not decentralised in the strict sense, as the resources supplement national priorities (sector pre-allocation until 2010); The amount of the DACF allocation announced at the beginning of the year was readjusted during the year according to the State s tax revenues, which does not allow the MMDAs to plan their investments in satisfactory conditions. For these various reasons, the DDF is a major instrument in the framework of decentralisation in Ghana. It is even more so in a context of strong economic and urban growth (4% a year), which creates considerable needs for local investment Contribution to the strategic areas of French and AFD aid Lessons learned from the main activities of AFD and other French actors in the sector 7/12

8 Since 1998, AFD has participated in financing 5 urban programmes for a total amount of EUR 98m. These projects mainly concern the improvement in traffic flows, sanitation, the development of districts and service provision in medium-sized districts. Between 2005 and 2010, AFD also provided EUR 10m of cofinancing, with the World Bank, for a project only for rural districts, which allowed local investments to be made in social, productive and environmental sectors, as well as a training programme to be implemented for district staff. The impact of the projects is generally considered as being positive by their contribution to improving living conditions and to accelerating economic growth. Nevertheless, the capacity of local contracting authorities still needs to be strengthened under the DDF system. Furthermore, in April 2010, AFD s Board of Directors approved EUR 40.5m of financing for the GUMPP (Ghana Urban Management Pilot Programme), which will make it possible to assist 4 urban districts (Kumasi, Tamale, Ho and Sekondi-Takoradi) in their mandates to plan and finance investments in social and productive sectors (roads, markets and infrastructure). The project is currently being launched. Finally, the French Embassy in Ghana is very involved in the support to the decentralisation process: 2 PSF (Priority Solidarity Funds), with a unit amount of EUR 1.5m, are currently being implemented in the sector (completion scheduled in 2012). The first provides specific support to the West region and the second assists the public sector reform. A cooperation attaché from the Embassy monitors the reflection, reforms and projects on decentralisation and leads the Public Sector Reform working group. Furthermore, SCAC (Cooperation and Cultural Action Office) and AFD are the two deputies to the leader of the decentralisation working group. Finally, in December 2010, a technical assistant took up his post at MLGRD and the Ministry of Public Sector Reform, which is currently being overhauled, in order to complete the two PSF. The size of the portfolio to support local governments in Ghana, the success of the funded projects, as well as the effective coordination with the other partners in the sector, make France one of the leading donors in the field of support to local governments Contribution to the strategic areas of French and AFD aid The support for decentralisation processes and technical and financial strengthening of local governments undertaken by the country is central to the assistance from international donors, and especially in the focus sectors for French aid in general and from AFD in particular. Support for local governments is one of AFD s three focus sectors, along with agriculture and energy. II - THE PROGRAMME Objective Continue to support the financial and technical strengthening of the 170 districts in Ghana in order to ensure there is an efficient provision of infrastructure and basic services at local level Specific objectives The DDF is a mechanism to transfer resources to the local level in Ghana. It more specifically makes it possible to: Earmark an additional part of tax resources collected by the Central State for districts; Contribute to developing the State endowment system towards a freer allocation by the districts (which can thus finance their own local investment priorities) in order to ultimately provide a high-quality public service at local level; Create an incentive system for improving their management ( performance ); 8/12

9 Support the structuring of local governments by upgrading them in terms of management skills (training of local officers) Programme content The DDF allocations allow investment programmes to be implemented, as well as training activities for district staff. The distribution between investment and capacity building is made on the basis of an allocation formula which has been defined by mutual agreement between GoG and the donors Component: allocation for investments The investment grant which accounts for 88% of the total available allocation is received by the districts which have fulfilled the minimum assessment conditions (FOAT). It allows them to finance investment projects in line with their priorities, i.e. infrastructure and equipment in the economic sector (market facilities, roads and networks, etc.), social sector (health and education facilities, water, sanitation) and environmental sector (solid waste management) Component: allocation for capacity building 12% of the allocation is earmarked for the capacity building component for district teams. 40% of this allocation is implemented by the central level in a standardised format with the aim of harmonising the competences of the districts, while the remaining 60% are directly implemented by the districts, depending on the local issues and needs identified. The training is conducted by approved service providers. It supports the structuring of districts, some of which have difficulty in implementing basic rules for planning infrastructure and services, budgetary and financial management, etc. All the districts in Ghana receive the same budget for the implementation of training activities, whether or not they have fulfilled the minimum conditions Intervenors and operating method The financing agreement is signed with MoFEP (Ministry of Finance and Economic Planning) and contracting authority is delegated to MLGRD Organisation The DDF started in An operational manual, which was updated in December 2010, defines its operating rules, which include the following: A Steering Committee is responsible for the supervision of the system, the management of the assessment of districts (FOAT) and the calculation of the allocation needed to make the adjustments required to improve the system. It comprises representatives from MoFEP, MLGRD, LGSS, NDPC (National Development Planning Commission) DACF, NALAG (National Association of Local Authorities in Ghana) and LOGNET (Local Governance Network). The Controller & Accountant General s Department and GAS (Ghana Audit Service) hold seats on the steering committee as ex officio members. The donors involved in financing the system also hold seats, but simply as observers. The district assessment tool, FOAT, has been in place since It defines the performance assessment criteria for district management, as well as an assessment methodology and rules for the allocation of funds, depending on the results obtained. FOAT is implemented by national consultants. The latter are selected after bid invitations. The fourth assessment of districts is scheduled to begin on October /12

10 The DDF secretariat, housed at MLGRD, is responsible for producing annual supervision reports, which present the actions conducted for both the Investment component and Capacity Building component Operating method During a year, the system for district assessments and DDF allocations takes the following steps: an assessment of the administrative, organisational and financial (management) performance is conducted by the teams of independent consultants (divided over the 10 regions in Ghana). This assessment, which is in particular based on the financial statements of the previous year and the audits conducted by GAS, is conducted using the single national assessment tool (FOAT). The incentive aspect of the DDF system is reflected in the allocation structure, which is divided into 3 components. A mission to review the allocation formula was conducted in March 2011, in order to make it more sensitive to the performance criteria and to include a needs criteria in it, as recommended by the joint Government of Ghana/donors mission on decentralisation in September The proposed formula was validated by the DDF steering committee in August 2011: 1. The Basic Grant component accounts for 20% of the allocation (against 38% previously), which is only allocated to the districts that have fulfilled the minimum conditions; 2. The Performance Grant component accounts for 68% of the allocation (against 50% previously), which is only allocated to the districts that have fulfilled the minimum conditions and with an amount that varies depending on the level of achievement for the FOAT indicators for the districts in question. It weights the Basic Grant component; 3. A Capacity Building component (maintained at 12 % of the allocation), granted to all districts in Ghana, whether or not they have fulfilled the minimum conditions. It also finances the district assessment exercise (FOAT Assessment) conducted by independent consultants. All the districts receive an investment allocation, which is partly conditional upon the rating obtained under the FOAT Assessment. Consequently, the allocation paid is increased for the most densely populated and most virtuous MMDAs in terms of management and organisation, programming and budgetary implementation, tax collection, etc., and reduced for the least populated and least effective MMDAs which are, conversely, eligible for training and upgrading actions Cost and financing plan Several donors have been replenishing the DDF since 2009: Canadian (CIDA, EUR 54m), Danish (Danida, EUR 42m), German (KfW, EUR 15m) cooperation, as well as AFD (EUR 15m). The DDF donors have also expressed their interest in renewing their financial support to the system in a new letter of intention in October 2010, which was co-signed by the Government of Ghana. KfW already signed a new EUR 21m commitment (loan) with the Government in December 2010 for Switzerland has just confirmed its commitment in the DDF starting in Through this financing, AFD is replenishing this multi-donor financing pool with an amount of EUR 21m in annual tranches for (3 tranches of EUR 7m). Financing plan Amount in EUR M % AFD (loan) 36 incl ( ) - 21 ( ) Cofinanciers - KfW (loan) 36 incl ( ) /12

11 - 21 ( ) - CIDA (grant) 54 ( ) Danida (grant) 42 ( ) 25.0 Total 168 ( ) 100 The amount of Ghana s contribution stood at the equivalent of some EUR 18m in The minimum provisional commitment for the coming years is equivalent to EUR 14m a year. Furthermore, the European Union and World Bank are formalising new financing to support decentralisation in Ghana, which is complementary to the approach developed by the DDF Type of financial product provided by AFD The conclusions of the Article IV review conducted by the IMF (International Monetary Fund) in the autumn of 2011 confirmed that a moderate risk of indebtedness was maintained, as well as the relatively optimistic prospects for the future, as the debt policy is under control. In addition, following the review of the Lagarde doctrine on 31 March 2011, this operation respects the criteria laid down by France in terms of responsibly incurring new debt. Furthermore, under the ECF (extended credit facility) concluded for , the Ghanaian authorities and IMF have agreed that sovereign loans contracted by Ghana are required to have a level of concessionality of at least 35% (as defined by the IMF). Consequently, the proposed financial product is a sovereign loan with a maximum 20-year maturity, combined with a 7-year grace period, with a leverage effect of 4.9 and a State cost consumption of EUR 4.2m. III - EVALUATION OF PROGRAMME IMPACTS Economic impacts The system provides additional resources to Ghana s 170 districts in various sectors (economic, social, environmental, etc.) in urban and rural areas and supports the structuring of their management. The amount of the additional allocation provided by the DDF to the MMDAs is estimated at 25%. The DDF funds contribute to promoting employment at local level through the investments that are financed. The first supervision elements from these achievements also show that the latter have been conducted by a number of different operators Environmental and social impacts The DDF finances pubic investments that improve living conditions for populations in the districts. The investments are divided between the territories of the districts and consequently benefit their entire population Institutional impacts The DDF supports MMDAs in the structuring of their management, so that they can optimise the use of their resources and gradually acquire their autonomy. The district assessments are both an innovative and incentive mechanism in terms of improving management: they make it possible to identify their capacity building needs. The training offered subsequently provides some answers to these needs. 11/12

12 AFD s support to the Ghanaian Government for it to commit to transferring more substantial resources to districts makes it possible to provide more general assistance for the ongoing institutional and fiscal decentralisation. The DDF will strengthen the institutional dialogue between the Ghanaian Government and donors concerning the modernisation of financial relations between the State and local governments. Finally, the coordinated donor approach to their support to Ghanaian districts will reduce transaction costs and limit the specific constraints posed by each donor on the Ghanaian counterparty (operating method, reporting, audit, etc.) Sustainability of programme impacts By participating in the DDF, French cooperation is part of a national reform process. Indeed, the DDF builds on the progress of the ongoing reforms to improve the financial management of local authorities (planning, budget preparation, public procurement and contract procurement, internal and external audits, accountancy, financial supervision and control) by integrating it and supporting it. This progress should also be reinforced by the support from the World Bank and European Union. In more structural terms, French cooperation will participate in the institutional dialogue between the Ghanaian Government and donors on the modernisation of State/local government financial relations and on extending decentralisation. This firstly involves developing in itinere the current financing mechanism (DACF) towards better practices (transparency of assessment and distribution criteria, predictability of transfers, etc.) and, secondly, eventually harmonising the Ghanaian State s entire financing system for local governments (sectoral subsidies, preearmarked tax transfers, flat-rate tax transfers, own taxation collected by districts, user fees) as part of the objective of achieving balances between incentives/equalisation, urban/rural and national/local autonomy sectoral issues that are in line with the Ghanaian authorities vision for territorial development. Finally, the increase in financing constitutes a recognition and confirmation of the role that local governments play in economic and social development. Sharing State tax revenues with districts is a confirmation of a will to establish modern public finance governance in Ghana. IV - SUPERVISION-EVALUATION MECHANISM The purpose of the DDF financing does not directly consist in a quantifiable development objective, as set out in AFD s AI aggregatable indicators in foreign countries (sectoral indicators, such as the number of people benefitting from a new service or from infrastructure, increase in the production or treatment capacity, etc.). The purpose of the DDF is to improve the management and functioning of local governments and, in a complementary manner, national authorities. No aggregatable indicator will therefore be associated with this project. However, the supervision and evaluation of the programme may use the specific mechanism of the DDF, which measures the progress achieved by Ghana s 170 districts in terms of efficiency, transparency and accountability. This districts are evaluated annually on the compliance of the exercise of their powers with regard to Ghana s policies, laws and regulations which apply to local governments. After 2 years of implementation: significant improvements have been seen in these 2 aspects. The number of districts achieving the minimum eligibility conditions has more than doubled and a large proportion of districts have improved their score (x/100) by over 20%. This is combined with the general perception that the FOAT assessments are conducted in a professional manner, with a high level of credibility. 12/12