Revamp the non-oil sector for long-term growth— IFS
The Institute for fiscal studies(IFS) has urged the government to revamp the non-oil sector of the economy to accelerate medium to long-term growth and job creation.
the institute said the oil sector alone could not drive the growth that was required in the country, hence, the need to focus on other sectors to ensure an all-inclusive growth of the economy.
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Speaking at the institute’s pre-budget forum in Accra, the Executive Director of IFS, Prof. Newman Kwadwo Kusi, also pointed out that the government’s projected revenue target of GH₵45.0 billion for 2017, which represented an increase of 33.5 percent over the 2016 figure was unattainable unless measures were put in place to grow the non-oil sector.
He said the growth of the country’s oil sector had been lagging behind recently due to the depressed commodity prices, energy shortages, effects of macroeconomic instability, low imports and fiscal retrenchment.
Prof. Kusi said the sector was, however, expected to generate an additional US$23 billion in public revenue between 2016 and 2036, with oil revenues projected to peak in 2023 and decline thereafter with production ceasing entirely by 2036.
However, he said, the revenue projections were highly subtle to developments in the global commodity markets.
“If oil prices fail to recover on the international market, the country’s oil revenue could fall by more than half,” he stated.
“Although Ghana has developed a sound oil revenue management strategy, the oil revenue projections that underpin it have repeatedly been inaccurate as the sector’s fiscal importance increases over the medium term”, he added.
Prof. Kusi also pointed out that leveraging the short-term revenue surge to promote sustainable development would pose a considerable challenge in job creation and medium to long-term growth.
That, he said, could be done through the right policies focused at revamping the agricultural and manufacturing sectors.
Adding value
The country, according to him, had long been exporting commodities in their raw forms without adding value to them.
This was the reason why though the country continually produced large quantities of commodities, such as cocoa and precious minerals, their prices kept falling.
“It is suicidal to continue to produce and export cocoa and gold mostly in their raw form, given their low values in international markets,” he said.
Achieving these gains, he said, required policies and infrastructures that would add value to exported products and diversify the tax base system such as reviewing the free zones tax concession act which exempted companies from paying tax on goods and services that were exported.
That, he said, would increase export earnings and reduce import demand.
He also said the agricultural sector should pay more attention to other commodities such us cashew, millet and wheat which fed the local industries.
He added that it would help reduce demand for imports and increase exports and help contain the exchange rate effects.
Prof. Kusi finally urged the government to outline in concrete terms, measures to transform the economy in the 2018 budget, so as to bring lasting sanity to the non-oil sector which is aimed at creating jobs and accelerating medium to long-term economic growth.
