Ghana: Poverty Past, Present and Future

The report updates previous poverty profiles by utilizing the third round of the Ghana Living Standards Survey (GLSS), conducted in 1991/92. It also summarizes the results of a participatory poverty assessment conducted in 1994. The GLSS data show that just over 31 percent of the Ghanaian population reported per capita expenditure levels below an upper poverty line in 1992 (and just under 15 percent below a lower poverty line).

Taking the upper poverty line, poverty is found to be mainly in the Rural Savannah and Rural Forest areas, which account for 60 percent of total poverty in the country. Both the incidence and depth of poverty are found to be greater in Rural Savannah than any other area. Welfare indicators such as school enrollments or availability of clean water supply are worse for the nonpoor in the Rural Savannah than they are for the poor in Accra. The participatory assessment also emphasized the fact that whole communities in the northern areas of Ghana were poor (which was not always the case elsewhere). The incidence of poverty is lowest in the capital Accra (at 23 percent of its population). Compared with earlier profiles, these results point to a much smaller gap between urban and rural poverty. If household expenditures are expressed in adult equivalents (rather than in per capita terms) the urban-rural differences in poverty incidence all but disappear.

Gender is an important dimension of poverty in Ghana, especially in the Northern Region. Women play significant roles in rural economic activities. In Rural Coastal and Rural Forest, they are responsible for 40 percent of all household agricultural activities, and they completely dominate agricultural processing activities. Women were found to bear a disproportionate share of the burden of being poor–they are obliged to spend a great deal of time not only working in family enterprises but nurturing and rearing children, and in important household tasks such as cooking, and fetching water and firewood. On average, the GLSS reports that members of rural households spend 37 minutes per day fetching water (in 1992). In Rural Savannah, they are obliged to devote 48 minutes each day to this activity. This task is borne mainly by girls and women. Females in Rural Savannah spend on average 70 minutes per day collecting water.

Incentive and Regulatory Framework

The report focuses on the impact of the Economic Recovery Program (ERP) on poverty. Ghana initiated an effective adjustment as early as 1983, and avoided many of the problems that arise from unwarranted delays. This relatively swift response to the economic crisis meant that a recovery was sustained for much of the decade. The centerpiece of the recovery program was exchange rate policy. The real exchange rate depreciated sharply between 1984 and 1987. Trade reforms were also pursued vigorously. The result was improved macroeconomic balances, export growth, and a recovery in GDP growth.

However, the ERP has three broad weaknesses.

1. The slow pace of some reforms, such as export-crop marketing and privatization has given mixed signals to the private sector.
2. Since 1992, an election-induced fiscal shock has led to fiscal imbalances and to uneven economic growth because of slippages in economic performance.
3. There has been a disappointing private sector response to the reforms, particularly in terms of investment.

Did poor households benefit from the recovery? The period covered by the GLSS data (1987-92) follows the more dramatic recovery in output during the early years of the adjustment. By the time the surveys take up the story, the major shift to sustainable macroeconomic management was largely achieved. In this sense, the survey data do not reflect the full impact of the ERP on household welfare. Suitably modified survey data indicate a significant fall in poverty–the headcount for the country as a whole fell from 37 percent in 1988 to just 31 percent in 1992, with most of this poverty reduction occurring in rural areas. Nevertheless, poverty has persisted as a major problem, especially in the capital city. Against a general setting of economic recovery and growth, this gradual decline in living standards in Accra is a source of major concern.

Public Expenditures

The report focuses on government social expenditures and assesses their effects on the poor. Based on 'benefit incidence' analysis, the report concludes that social spending is not well targeted to the poor. The bottom quintile of the population gained just 16 percent of public education spending and 12 percent of government spending on health in 1992. This contrasts with the top quintile's share of education spending (21 percent of the total subsidy) and of health (33 percent).

On average, urban residents gain more than those in rural areas. The relative disadvantage of rural residents is greater in health. Overall public sector education and health spending is distributed more equally than income/expenditures. If households were given income transfers in place of these subsidized services, income/expenditure distributions would become more equal. The participatory assessment found that the poor found public education and health services to be costly and to be of poor quality in rural areas. This is consistent with the low uptake of these services by the poor.

The report calls for a number of policy changes to improve the targeting of social spending:

First, policy reforms in the health sector must be pursued. Ghana does not spend enough on the public provision of health, and existing spending is too focused on urban-based services. Recent reforms of the financing of rural health services must be monitored carefully. Changes in health user charges should also be considered, encouraging self-selection in service use, and diverting the better-off away from and the poor towards using primary-level services.

The government should also persevere with its education sector reforms. Here the main need is to enhance the quality of schooling. The government must further improve the management of the education sector, and raise standards of teaching, mainly through greater teacher discipline. It must also increase its allocations to non-salary costs, providing more blackboards, books, stationery, desks, and chairs, and better building maintenance.

Social Fund

Based on the participatory assessment, the report finds that a social fund is likely to be more effective in improving the welfare of the poorest households and communities if its resources can be effectively targeted to the most needy. This means that its resources should be targeted geographically. For the poorest communities in the north, an essential objective would be the creation of employment and income-earning opportunities during the lean season. If these activities improve the rural infrastructure, the social fund would have a double effect on poverty, raising current incomes and improving food security today while also creating an enabling environment for future growth.

Poverty Strategy

The key to future poverty reduction in Ghana lies in accelerating growth in Ghana. Weaknesses in the reform process, notably problems with growing macroeconomic imbalances and the continued intervention of the government in export marketing, have harmed growth prospects in recent years. However, accelerated growth must be broad-based, with a greater role played by agriculture and other labor-intensive activities. Even then, without a major initiative to improve significantly the targeting of social spending to the poor, the benefits of accelerated growth will not reach poorer segments of society. The report, therefore, emphasizes the need to reform the public education and health sectors and to increase the provision of water and sanitation services to the rural poor.

Statistical System

The Ghana Statistical Service (GSS) has proven itself able to field and process a survey as complex as the GLSS. Yet, it has taken some time to process and clean the data, so that the data and report of the third round were published some three years after the fieldwork was completed. There is a clear need to strengthen poverty monitoring in Ghana and to enhance the capacity of the GSS to undertake this responsibility. Further consideration needs to be given to obtaining a consensus on the nature of poverty and on the poverty line itself. The report calls for a fourth living standards survey to be combined with developing a system of annual poverty monitoring.