Forests Sourcebook - HCV Resource Network

Box 6.11
Conditions in Development Policy Loans on Forestry: An Example from Ghana
The fifth Poverty Reduction Support Credit (PRSC-5)
for Ghana is the second in a series of annual operations
supporting the implementation of the Ghana Growth
and Poverty Reduction Strategy (GPRS II) covering the
period 2006–09, in line with the 2004 CAS and the
2006 CAS Progress Report. This proposed operation
will focus on three broad components of the new
poverty reduction agenda organized under (i) accelerated
private sector–led growth, (ii) vigorous human
resource development, and (iii) good governance and
civic responsibility. While the PRSC-5 support would
translate primarily into funding for the implementation
of the GPRS II, the PRSC-5 also focuses on crosscutting
issues related to private sector development
and the strengthening of institutions related to governance,
public sector reform, decentralization, and public
financial management.
The first component of the proposed PRSC-5
reflects the objectives of the first pillar of the GPRS II,
focusing on actions aimed at accelerating sustainable
private sector–led growth. This first component also
supports measures to improve the performance of the
rural sector through policy actions aimed at strengthening
government support to agriculture, and at
improving the management of natural resources with a
focus on forestry resources.
A forest condition was included as a prior action for
PRSC-5. The proposed prior action was “conducting
an inventory of plantation forests and providing the
needed information for two auctions of timber utilization
contracts in 2006.” The inventory of plantation
forests was carried out in early 2006, covering an area
of 2,000 sq km, and provided the information needed
to calculate the timber right fees (TRF) that were used
to determine the value of the Timber Utilization Contracts
(TUCs). Based on this information, a competitive
bid on plantation timber resources was conducted
in April.
The introduction of new policies for managing
forestry resources, such as the conversion from timber
area leases to timber utilization contracts, has proven
to be much slower than expected. There have been
delays in carrying out the inventory of trees in areas
eligible for conversion, which are needed to calculate
the TRFs that will, in turn, be used to determine the
value of the TUCs. These inventories are time-consuming
and expensive, making them difficult to carry
out, especially given the lower-than-expected revenues
coming from internally generated funds. Most of the
internally generated funds for the Forestry Commission
(around 50 percent) are derived from the export
levy on timber, which was challenged in court by timber
exporting companies.
The inventory of plantation forests carried out in
early 2006 provided the required information for at least
one TUC auction, completed in April that year. The
inventory and auction implemented by the Forestry
Commission should not detract from the fact that the
budget execution rate of the Forestry Commission in
2006 was lower than in 2005, falling to 45 percent, down
from 69 percent. The forthcoming PRSC-6 operation,
therefore, has a trigger that supports the government’s
program to have in place a cabinet-approved financial
framework Forestry Commission in 2007. This financial
framework aims to ensure (i) that the forest revenues and
the budget of the Forestry Commission are released in
time to conduct its core functions; (ii) transparency and
accountability in financial management, including
budget execution; and (iii) the collection and distribution
of revenue to stakeholders. In doing so, it expects to
help ensure predictability of financing and allow the
budget execution rate to increase.
Source: Authors’ compilation using World Bank 2007a.
frameworks can be used flexibly to achieve different levels of
coordination, responding to country circumstances.
Customization. The accountability framework should be
consistent with the government’s expressed policy intentions
and internal accountability mechanisms. The framework
should not be used to add policy actions to the government’s
agenda. Several programs support reforms that
are politically sensitive and require the government to make
hard choices about reform. The program measures are usually
derived from a government-led process of reform and
the reform measures should be linked to an important
objective in the government strategy document.
Prioritization of critical actions. In establishing the
conditions for lending, World Bank and country staff should
choose from the agreed accountability framework policy
and institutional actions that are critical for achieving the
NOTE 6.2: PROSPECTS FOR USING POLICY LENDING TO PROACTIVELY ENABLE FOREST SECTOR REFORMS 223