Sixth Poverty Reduction Support Credit

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The Sixth Poverty Reduction Support Credit (PRSC) is the third in a second series of four such operations, covering the period 2006 to 2009, to support the implementation of selected reforms to promote private sector-led growth, encourage vigorous human development and strengthen governance. The PRSC will also contribute to guarding government programs aimed at protecting the consumption level of the poorest in face of the recent acceleration in food price inflation, and sharpening their focus. These efforts include: (i) refining existing targeting mechanisms and strengthening a centralized early warning system for food insecurity; (ii) targeting the most vulnerable in food insecure areas through the government's recently established conditional cash transfer program (Livelihood Empowerment Against Poverty - LEAP); and (iii) ensuring access to health care services for the poorest of the poor by continuing to provide a percentage of them with a premium exemption for registration in the National Health Insurance Scheme (NHIS). The risk to the program as been identified such as: (1) further delays in carrying out the needed reforms in the energy sector; (2) the large size of the public sector, which might compromise the sustainability of the current economic expansion by limiting private sector growth and by reducing the scope for fiscal management; (3) a possible disconnect between increased health spending and improved health outcomes; (4) delays in structural reforms aimed at raising productivity throughout the economy; and (5) remaining fiduciary weaknesses that might limit the impact of the program and lead to only partial funding from development partners. The concerns about further delays in energy sector reforms are partially mitigated by the recent increase in electricity tariffs, raising end-user tariffs by over 100 percent, and the government's decision to earmark a reserve fund in 2007 and 2008 dedicated to cover the gap between end-user electricity tariffs and the costs of power generation, transmission and distribution. The risks associated with the large size of the public sector are mitigated by the fact that Ghana is implementing a public sector reform program aimed at rightsizing public sector entities operating in non-essential areas. The risk of widening lags between increased health spending and improvements in health outcomes is mitigated by ongoing improvements in health administration, including the establishment of the national health insurance scheme.