World Bank has recently published an academic paper written by the Vice President, Alhaji Dr. Mahamudu Bawumia on Ghana’s oil discovery and management.
The paper which is titled ‘Oil Discovery and Macroeconomic Management: The Recent Ghanaian Experience’, was precisely published by The World Bank and the United Nations University World Institute for Development Economic Research (UNU-WiDER) on 3rd October, 2017.
Salient Points in Bawumia’s Report on Ghana’s Oil
It is a 13-point paper which comprehensively covered Ghana’s oil history, starting from the years before oil discovery, to oil discovery and the effects of both on Ghana’s fiscal/monetary variables and economy at large. Other major points discussed in the paper include the following:
1. Deterioration of Public Finances
Over the period following oil discovery Ghana’s fiscal and monetary variables began to swiftly deteriorate – a usual development which is commonly known as the ‘oil curse’.
“Notwithstanding all the efforts to avoid the oil curse, Ghana’s public finances began to deteriorate following the oil discovery in 2007,” a statement in the paper reads.
2. Rise in Public Debts
The falling finances overtime, resulted in escalation of the country’s debt as a result of large-scale borrowing majorly driven by high expectations and reliability on huge oil revenues.
“By the end of 2008, Ghana’s total public debt stood at GH₵9.5 billion (some 30 per cent of GDP). With the onset of oil production, however, the public debt stock rose dramatically to GH₵76.1 billion (67.1 per cent of GDP) by the end of 2014”, the paper stated.
3. Declining Capital Expenditure
A significant and continuous fall in capital investment is another aftermath of oil discovery pointed out by Bawumia in his academic paper.
“From an average of 12 per cent of GDP between 2004 and 2008, …capital expenditure
declined to 4.8 per cent by 2014”.
Other consequences include loose monetary policy, deterioration of the external payments, decline in GDP growth and corruption.
The paper went ahead to analyse the perceived causes of this deterioration, including the very high pressure usually mounted on every government to deliver within its tenure in office – a situation that is worsened by Ghana’s dominant two-party system, as well as weak monetary institutional framework.
Bawumia finally gave recommendations on what and what could have been done to avert all the discussed negative results of oil discovery and trade in Ghana. Some of them include anchoring fiscal and monetary discipline, strict allegiance to the Bank of Ghna Act and Central Bank independence, transparency, etc. Click HERE to read full document.