The cost of aid tying to Ghana
Paper No. RP_144 |
By Dr. Barfour Osei |
Category: Research Papers | October 2004 | English
This study investigates the prices of tied foreign aid imports by estimating the
price differentials between tied aid imports and non-aid imports from bilateral
sources to Ghana. The study finds a significant mark-up on the prices of tied
aid imports relative to non-aid imports, which translates into substantial cost
to Ghana. Several reasons, both in Ghana and in the donor countries, could be
found for the estimated price differentials. Ghana needs to take steps to improve
its investment climate, as a way of reducing investment risk, which in turn will
enhance the confidence of export financiers to reduce the incentive to mark up
prices of tied commodities. On the part of donor countries, there may be need
to examine the market for the supply of aided commodities towards the liberalization
of such markets. It is suggested that although the higher costs on tied imports
may be a
necessary price Ghana had to pay to obtain aid, the associated cost provides a
case for the cancellation of the bilateral aid debt of Ghana.
