publication March 5, 2018

Agriculture: Ghana’s Engine of Growth for Jobs Creation

Latest Issue: 
  • March 2018
Image

Factory workers producing fresh fruit drinks at Blue Skies, in Nsawan District, Ghana on October 13, 2015.    

Photo: Dominic Chavez/World Bank


STORY HIGHLIGHTS

  • Ghana’s macroeconomic performance improved in 2017 after a difficult 2016, according to the country’s most recent economic update
  • Agriculture has the potential to be one of the leading sectors for a more diversified economy, the update notes
  • Suggested reforms include to increase the efficiency and quality of public spending in agriculture and improving the regulatory framework to attract more private investment into the sector

ACCRA, March 5, 2018­­-The Third Economic Update, Agriculture as an Engine of Growth and Jobs Creation, examines the agriculture sector’s potential to be one of the leading sectors for a more diversified economy and how the sector could be transformed to be an engine of growth and job creation.

“Agriculture is an important contributor to Ghana’s export earnings, and a major source of inputs for the manufacturing sector,” said Henry Kerali, World Bank country director for Ghana.  “It is also a major source of income for a majority of the population, but we have seen a recent reduction in growth in agriculture, which needs to be reversed through appropriate policies and increased investments.”



After a difficult 2016, Ghana’s macroeconomic performance improved in 2017, with the country’s economy expanding for the fifth successive quarter in September 2017, at a rate almost double the 3.7% in 2016, according to the update. The external position has improved as the trade balance has shifted to a surplus. The economic update notes that Ghana has also made good progress in macro-stabilization in 2017, and recommends that it sustain the fiscal consolidation efforts. Inflation is likely to fall within or be close to the Bank of Ghana’s medium-term target range of 6-10% in 2018. To sustain the fiscal consolidation efforts, the update highlights two areas which are particularly important over the medium-term—domestic resource mobilization and expenditure controls.

“The economy is again rapidly expanding,” said Michael Geiger, World Bank senior economist and co-author of the report. “Fiscal consolidation is paying off. The inflation rate is down to almost 10%. At the same time, it is still important to keep up the pace of economic stabilization, to ensure a healthy economy for the future.”

Despite the positive outlook, the update also highlights the challenges that remain, including further containing inflation and strengthening and deepening the financial sector to lower interest rates. Ghana’s economic performance over the medium term will, to a large extent, depend on the success of the economic stabilization program, according to the report. The update also notes that the agriculture sector experienced its lowest growth (0.8%) in more than two decades in 2011, the same year in which Ghana started oil production in commercial quantities. In the context of declining investment in agriculture, the report suggests that improving the efficiency and quality of sectoral spending could generate significant gains in productivity, employment, and rural poverty reduction without compromising the Government’s ongoing fiscal consolidation program.

With the right reforms, the report identifies agriculture as having the potential to be one of the leading sectors for a more diversified economy and can be transformed to be an engine of growth and job creation. For example, a large share of agricultural spending is devoted to the cocoa subsector; better targeting of public spending on agriculture could not only bring about more efficiency in this sector, but also better support for agriculture diversification beyond cocoa, according to the report.

“There is need to channel public resources into research to increase the use of technology, invest in irrigation infrastructure to increase productivity and mitigate the potential adverse effects of climate change, and leverage increased private sector investment in agriculture,” said Hardwick Tchale, World Bank senior agricultural economist and co-author of the report.

One challenge, the report notes, is the weak legal and regulatory framework for attracting private sector investment into agriculture. According to the 2017 World Bank’s Enabling the Business of Agriculture (EBA) report, reforms are needed to improve the quality and efficiency of regulatory systems that govern access to key agricultural factors such as seed, fertilizer, machinery, finance, markets, transport and information and communication technologies.  

Despite the challenges, the report cites key opportunities and policy options to transform agriculture. Ghana’s lower middle-income status, combined with the emerging oil economy, imply a growing middle-class whose demand for quality and safe foodstuff is rapidly increasing. This could provide an opportunity to spur agricultural transformation, if, the report says, it is supported by the implementation of an effective sector strategy in line with the country’s new flagship program—the Planting for Food and Jobs.