Editorial: Primary product reliance susceptible to external market shocks!

Dr. Steve Manteaw, a Co-Chair of Ghana Extractive Industries Transparency Initiative (GHEITI), posits that as the country’s main export commodities like cocoa, gold and oil prices are internationally-determined it exposes the economy to periodic market shocks, depending on direction of the fluctuation.

Indeed, the recent reduction of producer price for cocoa has again exposed this phenomenon – particularly the country’s inability to shield its key revenue earners from market shocks.

Manteaw advises that without a functioning price stabilisation mechanism, the economy remains dangerously exposed. Failure to institutionalise buffers that manage commodity volatility has been the economy’s undoing for decades on end.

Dr. Manteaw wants policymakers to replicate the discipline applied in the petroleum sector. He is advocating for the establishment of a stabilisation fund to set aside excess earnings above projected revenues during boom periods to cushion the economy in downturns.

Indeed, Ghana operates a stabilisation arrangement for petroleum revenues under the Petroleum Revenue Management framework, designed to smoothen budgetary shortfalls when oil prices fall.

But there is no comparable statutory mechanism existing for cocoa or gold – two of the country’s leading foreign exchange earners. In the absence of such buffers, commodity downturns tend to result in fiscal pressure… often leading to abrupt policy adjustments that affect producers and government spending alike.

Policymakers are grappling with shifting global commodity cycles which they have no control over and often lead to tight fiscal conditions.

Meanwhile, a Technical Advisor at the finance ministry, Dr. Theo Acheampong, believes there is a need for rigorous cost rationalisation at the Ghana Cocoa Board (COCOBOD) – including a review of compensation structures, a reduction in discretionary and non-essential expenditure and a scaling back of quasi-fiscal commitments such as cocoa road projects.

Dr. Acheampong also concurred that repeated cycles in oil, cocoa, and gold underscore a longstanding lesson: reliance on primary commodity exports offers limited insulation against external shocks.

“We cannot build a robust economy on primary commodity exports alone,” he said, stressing the need for deeper value addition, industrial expansion and productivity gains within agriculture and manufacturing.

Diversification is the panacea for heavy reliance on a few primary products if we are to improve the country’s revenue generation prospects.

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