Order Code RS22809
February 14, 2008
Ghana: Background and U.S. Relations
Nicolas Cook
Specialist in African Affairs
Foreign Affairs, Defense, and Trade Division
Summary
This short report, which will be updated as events warrant, provides background
information on current developments in Ghana and U.S. bilateral relations with Ghana.
Introduction. In mid-February 2008, President and Mrs. Bush are slated to travel
to five African countries, including the West African country of Ghana, which in 2006
signed a $547 million Millennium Challenge Corporation (MCC) Compact. They are to
“review firsthand” U.S. AIDS and healthcare assistance and to “discuss how the United
States can continue to partner with African countries to support continued democratic
reform, respect for human rights, free trade, open investment regimes, and economic
opportunity” in Africa.1 The Bushes are visiting Ghana, in part, because it is widely seen
as a key U.S. partner and as an African “success story.” Ghana has undergone a successful
transition to democracy, has enjoyed substantial economic gains in recent years, and is a
stable country in an often volatile sub-region. Ghana has helped to mediate the political
and/or military conflicts that have affected several West Africa countries over the last
quarter century. It is also praised for its willingness to contribute troops to international
peacekeeping operations, both in Africa and in other global regions.
Political Scene. President John Agyekum Kufuor is serving his second term
before general elections in 2008, in which he will be ineligible to run again for the
presidency due to constitutional term limits. Kufuor, age 70, is a former veteran
opposition figure and Oxford-trained lawyer, businessman, and former deputy foreign
minister and parliamentarian. He first won the presidency in 2000, in an election that led
to Ghana's widely praised, first-ever democratic presidential succession. He was reelected
to a second term in 2004, when he won 52% of votes in a poll that was generally calm,
peaceful, and transparent, but was reportedly marred by limited violence. His closest rival,
John Atta Mills, the National Democratic Congress (NDC) candidate, won a 44% vote
share in his second consecutive run against Kufuor (CIA Factbook 2008). In simultaneous
parliamentary elections, Kufuor's New Patriotic Party (NPP) increased its legislative
margin by 26%, winning 128 seats, while the NDC won 94. Two smaller parties and an
1 The five countries are: Liberia, Benin, Tanzania, Rwanda, and Ghana. See White House Press
Secretary, “President and Mrs. Bush to Visit Africa,” January 25, 2008.

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independent candidate won all other seats (Interparliamentary Union data). Kufuor used
the slogan "So far, so good" to assert that during his first term he had achieved a solid
record of economic stability, market-based reforms, steady growth, and general quality
of life improvements after a period of economic stagnation under the NDC.
Kufuor's reelection victory in 2004 was the product of Ghana's fourth consecutive
democratic election. It appears to have durably consolidated a transition to democratic
rule that began in 1992, when Ghana's then-military leader, Jerry Rawlings, retired from
the military to run as a civilian presidential candidate. Rawlings had first come to power
in a 1979 military coup, after which elections were held. He led a second military coup
in 1981, establishing a populist, reform-oriented ruling civil-military entity, the
Provisional National Defense Council (PNDC). The formation of the PNDC followed 15
years of coups d’etat and a string of military-dominated, often corrupt governments that
ruled after the military ousted Kwame Nkrumah, Ghana's first elected Prime Minister, in
1966. Nkrumah, a famed advocate of African unity and socialism, was toppled shortly
after he transformed Ghana into a one-party state. He led Ghana to independence from
Britain in 1957; in 2007, Ghana celebrated 50 years of independence.
2008 Election. The 2008 presidential race is expected to be hard fought, but many
expect the NPP to win it because minor opposition parties have reportedly rejected an
electoral alliance with the NDC, according to press reports. The NDC was also weakened
when a dissenting faction left to form a new splinter party. Public dissatisfaction over
electricity and water shortages, utility price hikes, and reports of corruption, however,
may mean that the NPP will have to fight to win a slim victory, in spite of its largely
positive economic performance. The opposition NDC has again nominated Atta Mills as
its presidential candidate, despite his two earlier losses as its nominee. The NDC may
face an uphill electoral battle, given recent economic growth and the NPP’s forecast of
continued economic growth funded by prospective oil revenues.
On the ruling NPP side, 18 candidates fiercely vied for their party's nomination in
the lead-up to the party congress on December 22, 2007. Former Foreign Affairs Minister
Nana Addo Dankwa Akufo-Addo secured the nomination in the first round of voting.
This surprised some observers, as former Trade Minister Alan Kwadwo Kyerematen had
reportedly been favored by President Kufuor. Akufo-Addo’s decisive win was made
possible because the remaining candidates were reportedly prepared to back his
candidacy. The NPP nomination process was seen as cash-intensive, and some critics
were concerned that it was not open to candidates who are not wealthy or could not raise
large amounts of cash to rally support. NPP contenders each had to pay a $25,000
nomination fee in a country with an average income of about $520. Several leading
contenders, dubbed the “monetocracy,” were said to have spent large amounts to court
NPP delegates. Delegates were chosen by a process of district-based election, nomination,
or selection that was reportedly open to monetary influence. Questions over the funding
sources of some losing NPP contenders reputed to have close ties to business interests
were raised in the press. President Kufuor has proposed the possibility of reforming the
political party financing system, but no pre-2008 election changes are seen as likely.2
2 Africa Confidential, "Ghana: 'Who spends, wins'," November 30, 2007, among others.

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Ghana generally enjoys inter-ethnic harmony, but regional rivalries and disparities
that are sometimes viewed in ethnicity terms play a role in politics. The NPP, which has
fielded an ethnic Akan presidential and a vice-presidential candidate from the north since
the reinstatement of multiparty politics in 1992, is viewed as predominating in the Akan
south and southeast; Kufuor is Akan. The NDC’s traditional base of support, by contrast,
is in the multi-ethnic, largely Islamic north and among Ewes in the south. Prior to the NPP
Congress, some observers had suggested that the campaign tactics of Alhaji Aliu
Mahama, the sitting Vice-President and only northern Muslim among the NPP contenders
for the 2008 nomination, might unduly politicize ethnicity and regionalism during the
2008 election. Mahama had promoted himself as the only candidate likely to draw both
broad northern and southern Akan support and as the one most likely to bring
development gains to the relatively poor north. He was criticized for this, as well as for
his alleged use of the assets of incumbency to promote his candidacy and interests.3
Kufuor Record. Kufuor's first-term agenda emphasized efforts to bolster national
unity and social equity after the somewhat divisive 2000 election; to fight reportedly
widespread corruption; to reassert the rule of law; and to revive a flagging economy, a key
challenge. Upon taking office, he faced a raft of poor economic indicators: flat economic
growth, currency deflation; poor or declining prices for key commodity exports (gold and
cocoa); high inflation, interest, and unemployment; and dependence on foreign aid.
Kufuor vowed to tackle these problems aggressively, but faced a roughly evenly
party-divided legislature and an NDC-dominated bureaucracy. He met these challenges
by taking steps to privatize state firms, diversify the economy, increase Ghana's world
market access, and pursue politically difficult fiscal austerity policies. Ghana continues
to face diverse economic challenges, but the Kufuor administration has achieved many
of its initial goals, including substantial utility deregulation and an increase in hard
currency reserves and high economic growth rates.
Economy. Ghana's export earnings have grown in recent years; they stood at about
$3.7 billion in 2006 and are projected to increase to $4.1 billion in 2007 according to the
Economist Intelligence Unit (EIU), a business risk analysis firm. In June 2007, the
reported discovery of offshore light crude oil reserves estimated in the 450-550 million
barrel range, with significant additional upside potential, has boosted prospects for future
export earnings. The economy has grown at an annual rate of 5.6% to 6.2% in recent
years, and its growth rate is forecast to rise slightly in the next two years, (EIU, December
2007 data). Current inflation, around 10%, is low by historical standards. Domestic
savings rates are rising, and a large influx of expatriate remittance investments has
boosted growth, notably in construction. The small Ghana Stock Exchange has boomed
in recent years and in 2003 Ghana received its first sovereign credit rating, which has
since been upgraded. In September 2007, it successfully and for the first time raised $750
million in international Eurobond issues. Ghana's economic progress and
macro-economic stability, including its largely successful fulfillment of its World Bank
and International Monetary Fund (IMF)-backed Ghana Poverty Reduction Strategy
(GPRS), also led the IMF to approve Ghana's attainment of its “completion point” under
the enhanced Heavily Indebted Poor Countries Initiative. Ghana received further debt
relief in 2006 under the Multilateral Debt Relief Initiative. This is leading to additional
international financial institution assistance, and has resulted in a series of actual or
3 Africa Confidential, "Ghana, "Race to the top," December 14, 2007, among others.

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planned debt write-offs by bilateral creditors estimated to total $3.5 billion. The World
Bank's 2006/07 Doing Business report ranked Ghana third among 10 global“Top
Reformers” based on gains in public service provision, contract mediation processes,
import operations, and reductions in red tape for property and business start-ups. Social
indicators have steadily improved. Ghana reportedly may become the first African country
to surpass the United Nations Millennium Development Goal of halving poverty by 2015.
The Kufuor administration has attributed its achievements to its firm fiscal
discipline, controls on state expenditures, and improved revenue collection. Rising
commodity prices, notably of key exports like cocoa and gold, have also played a major
role in stimulating growth. Liberal economic reform goals continue to define the
government’s policy agenda. President Kufuor has promoted a concept, “Ghana
Incorporated,” by which he suggests that development and public goals must be pursued
through the use of “businesslike” policy approaches, private sector-led growth, and
popular participation in governance. He has promoted good governance as a “critical
pivot” for socio-economic development and improved private sector competitiveness and
development. His government has strongly backed efforts to improve the general standard
of living through increased state investment in education, healthcare delivery,
communications, and infrastructure. The latter is fairly developed by regional standards
but in many cases is aging or inadequate to meet future demands. In 2008, a state task
force is slated to examine possible socio-economic and regulatory challenges arising from
a prospective rise in oil earnings. It will propose policies to ensure that such funds are
used for socially equitable economic diversification projects of benefit to the broad
public. The task force will also address associated legal and regulatory reform,
infrastructure, and human resource needs in the nascent oil sector. The government also
plans to create a national stabilization fund to minimize economic growth shocks and
revenue volatility associated with its dependence on cocoa, gold, timber and oil exports.
Prospects. Despite much economic success, poverty remains widespread, notably
among the rural majority. From 1997-2003, 40% of Ghanaians lived below the poverty
line, and the average income in 2006 was $520 per capita, according to the World Bank.
Joblessness also remains high. Poverty rates are slowly declining, however, and average
incomes have grown markedly from the 2003 level of $310. The economy remains highly
rural and agricultural, though Ghana's urban population, about 47% of the total, is high
by regional standards. Agriculture employs about 60% of workers, and contributes about
38% of annual gross domestic product (GDP). Services, notably the information
technology and financial sectors, have expanded rapidly and are eclipsing agriculture; they
contribute about 40% of GDP (EIU data). Ghana has established a small off-shore call
and information processing industry, and several new banks have been created. Industry,
notably the gold mining sector, has also grown substantially; it provides nearly 25% of
annual GDP. The government supports the extensive small-scale and informal sectors
through the use of micro-loans and small business-friendly policies. A key challenge is
an insufficient electricity supply, which the government is addressing by pursuing a range
of national and international regional power projects and efforts to liberalize the national
electricity sector. Other challenges include low wages and productivity rates and recent
high oil prices. Floods in 2007 also devastated towns and the farm sector in the north.
Transparency and accountability are key goals of the Kufuor administration. It
backed passage of several anti-corruption and public sector transparency laws, made
Ghana a participant in the Extractive Industries Transparency Initiative (EITI, an

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international revenue transparency effort), and signed and ratified the African Union
convention on corruption, among other actions. Corruption, nevertheless, remains a
problem. Public sector bribery is reportedly common, and there have been several high
profile corruption cases involving top officials. Some non-governmental good
governance advocacy groups contend that anti-corruption law enforcement is often weak
or ineffective. Notwithstanding the Kufuor government's private sector orientation and
social services improvement efforts, the State Department’s FY2008 Congressional
Budget Justification, mirroring the views of many observers, states that Ghana “remains
a difficult place to do business; contract sanctity, clear land title, and expeditious licensing
regimes present daunting challenges. Schools are inadequate, and quality health care is
unavailable for many, particularly, for the poor and the disenfranchised.”
International Relations. Ghana’s government has actively mediated in crises in
Liberia, Cote d'Ivoire, and Togo. Some observers believe that its relations with the late
Gnassingbe Eyadema, former president of Togo, may have caused it to take a moderate
stance vis-à-vis Togo's 2005 leadership succession and electoral crisis, which led about
12,000 Togolese to enter Ghana as refugees. Some human rights advocates also criticized
Ghana's decision to facilitate the return of Charles Taylor, former president of Liberia, to
his country from peace talks in 2003 in Ghana after he was indicted for war crimes by the
U.S.-backed Special Court for Sierra Leone.4 Ghana contributes a considerable numbers
of troops for international peacekeeping operations, notably within West Africa. It is seen
as having an increasingly professional military, following decades of military intervention
in state politics. Ghana is also active in helping to develop African peacekeeping
capacities; it hosts a regional peacekeeping training center. U.S. training and equipment
have been provided to the center, using regional peacekeeping funds and via the State
Department's Global Peace Operations Initiative and predecessor programs. Ghana was
elected to chair the African Union in 2007, and hosted the 9th African Union Summit in
July 2007. It also served as a U.N. Security Council member, 2006-2007. Like many
African countries, Ghana is pursuing greater economic cooperation and trade ties with
China, and has increased its exports to China, notably manganese and cocoa.
U.S. Relations. U.S.-Ghanaian relations are close, and a small population of
Americans, many of African-American descent, has settled permanently in Ghana. Ghana
hosts the regional headquarters of the U.S. Agency for International Development
(USAID). According to the Bush Administration's FY2008 foreign operations budget
request, Ghana is “a key African partner” due to its role in promoting international
security; its development of a "vibrant and stable" democracy; and its role as a key
market-oriented African U.S. trading partner. Ghana is a leading African buyer of U.S.
goods, though bilateral trade is small in global comparison. In 2005 and 2006, annual U.S.
exports to Ghana averaged $313 million. U.S. imports from Ghana, which averaged $175
million in the same period, have grown steadily, from $115 million in 2002 to $192
million in 2006, (Commerce Department data). Ghana is eligible for all U.S. trade
benefits offered under the African Growth and Opportunity Act (AGOA), and in
mid-2007 hosted the 6th African Growth and Opportunity Act Forum.
U.S. democratization assistance to Ghana supports greater citizen participation in
governance, notably at the local and regional level; improved parliamentary law-making
4 Human Rights Watch, "Liberian President Must Be Arrested," June 4, 2003.

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and oversight skills; better local government service capacity; and efforts to build civil
society capacities to influence government policy making. It will also help train civil
society election observers prior to the 2008 elections. U.S. health sector assistance to
Ghana focuses on preventing HIV/AIDS, malaria, and tuberculosis infections; increasing
access to improved reproductive and other health services and education; and improving
institutional healthcare planning and management capacities. Ghana will be a new
President's Malaria Initiative country in FY2008. Development Assistance (DA) programs
focus on aiding farmers in delivering their produce to local and international markets, in
part by bolstering small businesses' ability to comply with regulatory and market-driven
standards. They also support policy reforms aimed at supporting macro-economic
stability, liberalizing agricultural input markets, and supporting policy-making capacities
related to finance, labor and land regulation, energy, and information and communication
technology. A 174-member U.S. Peace Corps contingent pursues diverse projects,
broadly under the categories of secondary school education, small business capacity
development (notably in ecotourism), environmental sustainability, and health care
promotion focusing on water and sanitation access and the prevention of HIV/AIDS and
other diseases. In response to widespread flood damage in northern Ghana in September
2007, USAID's Office of U.S. Foreign Disaster Assistance (OFDA) provided $50,000 in
emergency relief supplies to 5,000 recipients in the Upper East Region, the most
flood-affected area.
In August 2006, Ghana signed a $547 million, 5-year Millennium Challenge
Corporation (MCC) Compact. It supports investments in agriculture, production and
income growth projects (e.g., increasing exports and value-added business capacity, and
improving irrigation and land tenure systems); transportation; and investment in rural
government, social, and financial services. Under the Administration's Foreign Assistance
Framework, Ghana is a “Transforming” state, i.e., one “with low or lower-middle income,
meeting MCC performance criteria, and the criterion related to political rights.” Under the
Administration's FY2008 budget request, U.S. assistance to Ghana in FY2008 would
decline to $44.29 million from the FY2007 level of $64.16 million (exclusive of MCC).
The bulk of this decrease would be under the DA and P.L. 480 (food aid) accounts, but
some might argue that the DA decline would be offset in part by the ongoing MCC
compact; DA and MCC program goals are designed to be complementary. Food aid
funding, which is allocated from a central account, often rises during the year to levels
well above requested amounts.
Limited Foreign Military Financing, International Narcotics Control and Law
Enforcement, and Nonproliferation, Antiterrorism & Demining funds support police and
law enforcement capacity and the ability of Ghana to counter growing cocaine trafficking.
Modest International Military Education and Training programs support Ghana's military
professionalism. Ghana was among the first recipients of peacekeeper training under the
African Contingency Operations Training and Assistance (ACOTA) program, and acts
as a base for periodic regional U.S military activities, such as crisis response actions or
exercises. It also participates in the National Guard State Partnership Program, which
links U.S. states (North Dakota in the case of Ghana) with partner nations in support of
U.S security cooperation and broad bilateral goals.

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