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2016 Budget Review: Agricultural Sector Neglected

First sectoral review of the 2016 by IMANI. Agricultural sector in focus. 

Centre For Climate Change, Agriculture And Environmental Studies  | By Roshni Rajiv

Ghana is blessed with a tropical climate which provides a conducive environment for cultivation of tropical agricultural crops (such as rice, maize, sugarcane and cocoa among others) and horticulture crops and fruits (such as palms, coconut and tomato among others). Yet, Ghana’s agricultural growth has slumped and import bill of these tropical crops has been on a rise over the years. As compared to 2008 when nearly 600 million USD was spent on food imports; in 2014, nearly 1.5 billion USD was spent for importing basic food items including tropical crops such as rice, tomato, palm oil and sugar.  In 2013, a whooping 374 million USD was spent alone on rice import. On the other hand, the declining growth rate of the crops has been alarming and it hit the negative mark this year (-1.7%). These figures blatantly point towards a retrogressing agricultural sector in Ghana.

Revival and strengthening of Ghanaian agriculture sector is not a need but a necessity now to save the nation from the clutches of massive food insecurity issues and economic paralysis. The Budget Statement and Economic Policy 2016 with the theme ‘Consolidating Progress towards a Brighter Medium Term’ promised great prospects for development. However, the commitments and policy proposals for the agriculture sector are not only regressive but further dampens the revival of the sector.


I. Decline in contribution towards GDP

During 2000-2008, the Agricultural sector used to be the largest sector of Ghana’s economy, contributing an average of about 39% of GDP compared to about 26% for the industry sector and 31% for the services sector. The sector had the potential to be the key to overall economic growth and development of Ghana. However, from 2009, contribution of agricultural sector towards GDP has steadily declined.

The 2016 budget records the lowest GDP share in the past 8 years i.e. 19% in 2015.

II. Insignificant Share in Budget

More than half of the nation’s workforce is involved in agricultural sector. This sector has the capability to attain self-sufficiency in tropical crops and in turn reduce food imports and thereby boost the economy. Ironically, this sector is the most neglected when it comes to budget allocation. The sector always gets allocated an insignificant share of the budget pie.

In 2016, out of the total budget figure of 50 billion GHS, the Ministry of Food and Agriculture was allocated GHS 501,501,708.00, which is equivalent to 1% of the entire budget.

III. Decline in Growth Rate

The growth rate of agricultural sector has cumulatively declined from 7.4% in 2008 to 0.04% in 2015. Despite some recovery made during the period 2011-2013, the improvements appear to have dissipated in the last two years.  In 2015, the agriculture sector failed to even reach a target rate (3.6%), which was lower than the outturns of previous two years. Instead, the actual outturn turned out appalling (only 0.04%), lowest in the past 8 years.

The sluggish plans and policy actions of the government for Agriculture sector is made apparent through the expectations set for the coming years. Instead of growing, the sectoral productivity is predicted to worsen and has a lower target of growth rate for 2018.   The sector is expected to record a growth of 3.5% for both 2016 and 2017, declining to 3.0% in 2018.

IV.  Increase in Allocation of ABFA

There is positive news in the allocation of the Annual Budget Funding Amount (ABFA) from the petroleum receipts. Agriculture modernization is the one of the four priority areas for allocation of ABFA. In 2015, GHS 30.57 million was allocated for agriculture modernization. Out of which GHS 27.04 million was utilised for Food and Agriculture infrastructure such as construction and rehabilitation of dams and irrigation infrastructure and fertilizer subsidy. Additionally, the budget was also utilised for constructing fisheries college and aquaculture development.

Whereas in 2016 budget, the ABFA allocation for agriculture modernization is GHS 284. 45 million, nearly 9 times more than the 2015 allocation.

V. Decline in Government Spending on Poverty Reduction Related Activities

The Government aims to eradicate poverty by spending for ‘Poverty Reduction Related Activities’ which includes poverty-focused agriculture. Major policies undertaken under this scheme include Fertilizer Subsidy programme, establishment of Agricultural Mechanisation Service Centres, among others to boost agricultural production.

Under 2015 budget, GHS 395 million was allocated for poverty focussed expenditures. Out of which only GHS 91.5 million was actually utilised as of September 2015. Compared to 2015 budget, the 2016 budget allocation for expenditure has been reduced by GHS 40 million i.e. GHS 355.14 million. The budget doesn’t provide any justifications for the reduction. Although, under-utilisation of the funds could be one of the reasons for reduction of budget allocation this year.


Absence Of Progressive Policies

The theme of the budget “Consolidating Progress towards a Brighter Medium Term” is unquestionably not targeted for the agriculture sector. The existing policies have failed miserably resulting in negative crop growth and the lowest growth of the sector in the past 8 years i.e.0.04%. In such a scenario, the least and the most vital action expected from the Government is a review and amendment of the existing agricultural policies.

However, the plans and policies for agriculture sector contained in 2016 budget is more or less similar to old plans and policies included in the previous 2015 budget. The absence of any progressive policies to revive the sector is a mockery of the whole theme of the Budget 2016.

Over-spending On Failed Policies

In 2014 and 2015, the Government spent nearly 90% of poverty-focused agricultural budget on policies such as Fertilizer Subsidy Program and Agricultural Mechanisation Service Centres among others. Likewise, 2016 agricultural budget also has allotted 85.17% of the allocation on these policies. These policies were introduced to increase food production and attain food self-sufficiency in Ghana. Despite a huge investment, these policies have proved to be inefficient, evident from the decline in the sectoral performance.

The Fertilizer Subsidy Program has proven time and again to be a counterproductive policy.  It has been critiqued that subsidised fertilizers are not reaching the target farmer groups. It gets distributed amongst affluent farmers who do not require fertilizers at subsidized prices. Second, the issue of smuggling of imported fertilizers to neighboring countries[1] is also reported.  Third, needy farmers still have to buy the fertilizers at exorbitant market prices. Hence, the current system to distribute the fertilizers is flawed. The policy of Agricultural Mechanisation Service Centres has also not produced desired results over the years.

The budget is silent about establishing an efficient delivery system of the fertilizers and other services to the target audience. Without an efficient system in place, it is futile to annually invest an exorbitant portion of the budget on failed policies. Furthermore, the Budget also fails to incorporate any progressive policies such as building a strong agri-business value chain, to overrule these ineffective policies.

Under-utilisation of Budget Allocation

Paltry allocation from the budget share is one of the issues faced by agriculture sector. Another equally or more crucial issue is the under-utilization of the allocation. As mentioned above, out of the total GHS 395 million allocated for poverty-focused agriculture expenditures in 2015, only GHS 91.5 million was utilised, constituting only 23% of the total allocated budget. The utilization of the remaining 76% of the allocation is not discussed and is kept in the dark. This also exposes the inefficient governance system which fails to manage the allocated funds effectively.

Development Of Agriculture Sector

In the current economic situation, nearly 1.5 billion USD is spent on basic food imports. The least the sector demands is to be strengthened to reduce rising import bills.  There is a dire need to encourage more farmers to take up commercial farming in order to attain self-sufficiency. Effective policies are required to keep the existing farmers from quitting this sector and also encourage youth to take up farming as occupation. However, albeit few old measures, the budget doesn’t contain any revolutionary policies to tackle these issues.

Impending Food Security Issues

Ghana is facing a serious shortage of basic food staples such as cereals, maize, cassava, yam among others which constitute a common Ghanaian’s diet.  In 2015 growth of crops were projected at 5.8%, later reviewed to 4.1%. However, crops had preposterous results marking a negative growth at -1.7%.  With nearly no output from crops sector this year, 2016 is going to be bleak for the lower strata of population. The Government finds importing basic food items at exorbitant prices as an easy solution to food shortage issue. But it is the common Ghanaian who is always at the receiving end, helpless and coerced to buy his basic staples by paying high import price.

In view of the above, with regard to agriculture sector, the budget 2016 goes against the letter and spirit of its theme ‘Consolidating Progress towards a Brighter Medium Term’, jeopardizing the agriculture sector.

Roshni Rajiv is head of the Centre For Climate Change, Agriculture And Environmental Studies at IMANI.  For speaking engagements contact us: : +233 (0) 302 972 939 or info@imanighana.org.


[1] 4th March 2014 Hansard


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