VZCZCXRO3067
RR RUEHMA RUEHPA
DE RUEHAR #1236/01 1511319
ZNR UUUUU ZZH
R 311319Z MAY 06
FM AMEMBASSY ACCRA
TO RUEHC/SECSTATE WASHDC 1424
INFO RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/USDOC WASHDC 0587
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP

UNCLAS SECTION 01 OF 02 ACCRA 001236 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
COMMERCE FOR MARIA RIVERO 
TREASURY FOR LUKAS KOEHLER 
DEPARTMENT FOR BIRGGITA MATTINGLEY 
 
E.O. 12958: N/A 
TAGS: ECON EINV EAID ETRD EAIR EMIN GH
SUBJECT: GHANA ECONOMIC HIGHLIGHTS MAY 2006 
 
 
ACCRA 00001236  001.2 OF 002 
 
 
1.(U) This report covers noteworthy economic events and 
activities in Ghana for April and May 2006. The issues 
covered are: 
 
-- MCA Negotiations on Track for late July Signing 
-- ALCOA Enters Key Phase of Negotiations 
-- Fuel Price Increase to Reverse Downward Trend of Inflation 
-- Ghana International Airlines 
-- North-American Air offers direct flights to NY from Ghana 
-- Visit of OPIC Executive Vice President 
-- Visit of Mayor Anthony Williams 
 
MCA Negotiations on Track for late July Signing 
--------------------------------------------- 
2.(SBU) During a May 19 outbrief, Millennium Challenge 
Corporation (MCC) officials informed Ambassador Bridgewater 
that the MCC and Ghana MCA negotiating teams made significant 
progress over the previous two weeks ) both in Washington 
and in Accra -- and the two sides were on track for a late 
July signing in Washington, D.C., subject to MCC Board 
approval.  The two sides  resolved or are close to resolving 
the outstanding issues related to the agriculture, 
infrastructure, and financial services components, and the 
Ghana government  created (with Parliamentary approval) the 
Millennium Development Authority (MiDA) to implement the 
Ghana-MCA agreement. 
 
3.(SBU) The MCC officials briefed the Ambassador on the Ghana 
MCA Program Logic, with Program Goal of &Reduction of 
poverty through economic growth led by agricultural 
transformation.8  The Program Objectives are: 1) &Enhance 
the competitiveness of high value cash and food crops in 
local and international markets8; and 2) &Increase 
production and productivity of high value cash and food crops 
in three selected areas of Ghana.8  The targeted Program 
Outcomes are: 1) Commercialization of Agriculture (including 
increased farmer training, land tenure facilitation, 
increased irrigation, and improved post-harvest handling and 
access to credit); 2) Improved Transport Infrastructure 
(including improved access to air and sea ports); and 3) 
Delivery of Basic Community Services (including energy, water 
and sanitation, and educational services). 
 
ALCOA Enters Key Phase of Negotiations 
-------------------------------------- 
4.(SBU) Charge and EconOff met with ALCOA executives May 3 
and May 9 to discuss the current state of negotiations with 
the GoG.  ALCOA has been negotiating a plan with the GoG for 
the creation of an integrated (mine-refine-smelt) aluminum 
industry in Ghana for the past twelve months.  Total 
investment is expected to be in excess of $2 billion.  ALCOA 
Commercial Director for Ghana Russell Grant told EconOff May 
23 that both parties made good progress over the last few 
weeks, with both sides pledging their best effort to come up 
with a deal that will give the project an internal rate of 
return sufficient for ALCOA board approval. 
 
Fuel Price Increase to Reverse Downward Trend of Inflation 
--------------------------------------------- ------------- 
5.(U) Year on year inflation dipped 0.4% in April to 9.5%, 
continuing the downward trend that began in October 2005. 
This was the first time Ghana had seen single digit inflation 
since May 1999.  Bank of Ghana officials, however, expect 
May's numbers to go back above 10% because of the 10% fuel 
price increase announced May 3.  The National Petroleum 
Authority has increased fuel prices a total of 20% since 
January 1 in a series of small adjustments, thus easing 
inflationary pressure on overall prices. 
 
6.(U) The general public appears to have accepted fuel price 
increases to date despite some demonstrations from a group 
called the Committee for Joint Action (CJA).  The CJA, which 
is made up of representatives of several of Ghana's 
opposition parties, has called for the reduction of fuel 
taxes, which make up 30% of the total price. The NPA's May 
price increase introduced a new mode of pricing, which allows 
oil marketing companies to set their own prices within a 
margin of 650 cedis ($0.60), below the NPA's maximum price. 
 
7.(SBU) The Bank of Ghana is forecasting  inflation just 
above 10% by year's end, saying it expects monetary 
aggregates to provide an anchor for low inflationary 
environment, but that rising crude oil price may jeopardize 
the objective of attaining single-digit inflation in 2006. 
Post has also heard that the public utilities regulatory 
 
ACCRA 00001236  002.2 OF 002 
 
 
commission is planning to increase electricity prices by 
15-20% and water prices by 10-15%, starting August 01. This 
will also complicate the GOG's objectives of achieving single 
digit inflation. 
 
Ghana International Airlines(GIA) Dispute 
------------------------------------------- 
8.(U) GIA-USA, which represents the private investors 
controlling 30% of Ghana International Airlines, filed suit 
in the Ghanaian court April 17 against the GoG, claiming that 
the GoG controlled board of directors had acted outside its 
authority when it dismissed CEO Bryan Presbury on April 7. 
The case was suspended May 14 after both parties agreed to 
enter mediation.  The GoG, which owns 70% of the airline, is 
actively seeking a new private sector partner. 
 
North American Airlines (NAA) Adds New Flights to Accra 
--------------------------------------------- ---- 
9.(U) On May 05,2006, the Ghana Civil Aviation Authority 
(GCAA) granted permission for North American Airlines to add 
two additional weekly flights between Accra and the U.S. May 
¶5.  With these new flights North American will have two 
weekly non-stop flights from Accra to New York and one weekly 
flight to Baltimore via Banjul. NAA expects to begin service 
on the new routes June 5. 
 
Visit of OPIC Executive Vice President 
-------------------------------------- 
10.(U) OPIC Executive VP John Simon visited Ghana May 9 - 12 
for a series of meetings with GoG officials and the private 
sector, as well as visits to some of OPIC's projects in 
Ghana.  Mr. Simon, accompanied by OPIC VP for Investment 
Policy Dr. Christine Emery and EconOff, met with the Minister 
of Trade, the Minister of Works and Housing, the Deputy 
Finance Minister, the CEO of the Volta River Authority, 
USAID, AmCham members, and CAL Bank CEO Frank Adu.  OPIC is 
currently negotiating a $30-million investment project to 
provide mortgages for private homes in Ghana.  Mr. Simon 
stated his intention to work closely with USAID, Millennium 
Challenge Corporation, and other USG development agencies to 
increase the impact of USG assistance programs. 
 
Visit of Mayor Anthony Williams 
------------------------------- 
11.(U) Washington DC Mayor Anthony Williams visited Accra May 
7 - 11 with a 30-person delegation including, among other 
notables, the Mayor's wife, the wife of former DC Mayor 
Marion Barry, former AF Assistant Secretary Constance Berry 
Newman, and AGOA legislation author Charles Williams.  The 
Embassy helped kick off the visit with a country team 
briefing that received high praise from the Mayor and several 
other delegates.  Accra Mayor Blankson and Mayor Williams 
also initiated an Accra-Washington D.C. sister city program. 
Local press gave the visit extensive and positive coverage. 
BRIDGEWATER