Structural adjustment in agricultural development: the case of non-traditional exports

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Since 1986, the government of Ghana in conjunction with the IMF and the World Bank has adopted series of economic reforms aimed at reversing a decade of unprecedented decline in the economic performance caused by a combination of adverse economic conditions and inappropriate domestic policies. Towards the end of 1991, the reform was hailed by the international community as a success. Although the external payments of the country improved significantly, exports remained low while the debt burden was heavy. Moreover, agricultural production was still well below the potential level. Given the importance of agriculture to trade, the need to raise productivity and savings, its role in income generation and employment, as well as food security and rural development, the stimulation of agricultural production is required at an early stage of any economic policy like the SAP to ensure its success. Outside exchange rate adjustments and downward changes in cocoa price, the agricultural sector reforms in Ghana started relatively late, about five years behind the overall adjustment programme. Among the policies designed for the sector include an upward revision of the producer price of key agricultural export crops, removal of subsidies on agricultural inputs, privatisation of agricultural extension services which were aimed at improving the sectors’ support services, input supply system and post-harvest management. While these policies have led to an increase in the supply of traditional agricultural exports, on the demand side prices have remained depressed. Since Ghana is basically an agrarian economy with abundant physical and natural resources, there is the need to diversify the export base to include the production of other products, which hitherto did not form part of the exports of the agricultural sector. This study therefore examined how far the SAP has helped in the promotion of other nontraditional agricultural exports. Data were basically obtained through the use of interviews and secondary information from the Ghana Export Promotion Council, Ministries of Food and Agriculture and Trade and Industries and International Trade and Financial Statistics. The study has revealed among other things that the number of agricultural non-traditional commodities have grown from 65 to 74 during the period 1988 to 1999. The volume of agricultural non-traditional exports also increased from 46,392 metric tonnes to 192,467 metric tonnes during the said period. In addition, the value of export receipts grew from $27.06 million to $84.50 million within the period. It was again found that although there had been an increase in the number of non-traditional agricultural exports that of manufacturing sector has grown faster as there are more prospects in other products yet to be exploited. Furthermore, the study brought into fore, the fact that unit prices offered to these exports sometimes did not determine the quantum of the products exported as against demand response. Based on the results and findings, some recommendations have been made as to how best the non-traditional agricultural exports could be increased to earn more foreign exchange. Worthy of mention are that interest rate on credit from the financial institutions particularly to the agricultural sector should be reduced since the current rate of between 45% and 50% is too high. This will increase borrower’s access to credit to enable farmers to expand their farms and also attract more people into the export of agricultural products. Again, subsidies on inputs like improved seeds; fertilizers and agro chemicals should be maintained. Such a policy will help raise productivity levels and consequently increase the quantities of agricultural products that would be exported. If these measures are put in place and sustained, it would expand the production base of the agricultural sector. This will in the long run increase foreign exchange earnings for Ghana and solve the persistent balance of payment problems facing the country.
A Thesis Submitted to Department of Economics and Industrial Management in partial fulfilment of the requirement for the award of Master of Arts (M.A.) Degree in Economics, 2001