Dutch Disease Looms In Ghana’s Economy -ACEP
By: Masahudu Ankiilu Kunateh
The Africa Centre for Energy Policy (ACEP), an African energy policy think tank has expressed worry that Ghana is experiencing the ‘Dutch disease’ effects in the infant oil and gas industry.
It noted that the oil and gas industry, which has low linkages with the economy, has now overtaken cocoa as the second largest export of the country.
These were contained in a statement issued by the Executive Director of ACEP, Mohammed Amin Adam, in Accra yesterday.
The statement explained: ‘Oil exports for the period under consideration stood at US$2.8 billion due to increased oil production as against cocoa with US$1.4 billion.
Whilst this has been attributed to the decline in global cocoa prices, we strongly believe also that the ‘Dutch disease’ effects cannot be discounted’.
The evidence that the agriculture sector has generally not performed well (a decline by 3.9% in the second quarter of 2013 against 1.1% growth during the same period in 2012) has reflected in the poor performance of cocoa, forestry and logging, all export commodities, the ACEP added.
The is further supported by the relatively lower depreciation of the cedi by 3.9% over the period in 2013 against 18% for the same period in 2012, indicating a real currency appreciation, a condition that dampens demand for the country’s export commodities and general international competitiveness, it observed.
The African energy policy think tank therefore recommended to the government to take steps to address the ‘Dutch disease’ effects especially as the Bank of Ghana plans to inject more United States Dollars into the economy to stabilize the Cedi without increase in productivity.
It was quick to add that: ‘The need to support the competitiveness of the domestic production sector cannot be overemphasized. Government should therefore work to reduce the domestic cost of production and the slow supply side response caused by energy shortfalls, higher tariffs without quality of reliable service, and higher petroleum product prices among others’.
Accordingly, the ACEP encouraged the government to revisit its proposal of passing an Industrial Competitiveness Law.
Also, the local content policy should be pursued seriously to ensure that the growing oil sector does not become an enclave and foreign exchange earner only but also compensates for the declining growth in the agriculture and manufacturing sectors through value addition.
The delay in passing the Petroleum (Local Content and Local Participation) Regulations currently before Parliament is therefore worrying, the statement said.
We wish, therefore, to caution against the violation of Section 23 of the Petroleum Revenue Management Act 2011 (Act 815) on the conditions for allocating oil revenues to the Ghana Petroleum Funds as Government’s desire to meet its fiscal targets could potentially undermine the spirit behind the creation of the Funds, it stated.
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