How tied aid affects the cost of aid-funded projects in Ghana
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Date
2003-11
Authors
Barfour Osei
Journal Title
Journal ISSN
Volume Title
Publisher
AERC
Abstract
This case study of the Sixth Power Project in Ghana is an empirical analysis first, to
investigate whether tied foreign aid funded inputs bear additional costs on account of
price mark-up and, second, to assess the impact of the cost of tying on the concessionality
of the assistance. The excess cost of tying is estimated following the “cost–difference”
method and the impact of tying on the concessionality of aid is assessed through the
“shadow grant” element. The basic conclusion reached from the analysis is that there is
significant mark-up on the prices of funded inputs relative to the prices from alternative
sources of supply. The price mark-up reduces significantly the concession embodied in
the aid flows. On the part of donors, it is argued that there is need for action to liberalize
the market for the supply of aid exports. Finally, while the mark-up on prices of tied aid
inputs may be a price Ghana had to pay to receive the assistance, the cost to Ghana of
tying provides a case for the cancellation of aid debt of the country.
Description
HC 1060. O84 2004
Keywords
Tied - Aid - Ghana , Economic Assistance - Ghana , Economic development projects - Ghana - cost effectiveness