In 2024, Ghana’s cocoa roads outstanding contracts totaled GH¢21 billion following a 2014 announcement of a $450 million road rehabilitation initiative. Significant issues, including fiscal indiscipline and low agricultural productivity, have compounded the financial burden, necessitating extensive reforms to stabilize the economy and enhance revenue collection. The Country Director for the World Bank highlighted the need for sustained effort in addressing these challenges without reverting to previous unsustainable practices.
In 2024, Ghana’s outstanding contracts for cocoa road projects reached GH¢21 billion, approximately $1.3 billion. This increase follows a 2014 initiative where a $450 million package was launched for road rehabilitation in key cocoa regions. These developments were part of the Cocoa Roads Rehabilitation Project funded by Ghana COCOBOD, with expectations of improving road networks crucial for agriculture.
In 2021, the Roads and Highways Minister, Kwasi Amoako-Atta, outlined plans for constructing 11,000 km of roads, with 6,000 km targeted for completion by 2024. Specifically, the cocoa road program included 325 networks amounting to about 5,000 km, with an estimated cost of GH¢14.5 billion. By the end of 2024, however, financial pressures led to unfulfilled contracts totaling GH¢21 billion.
The Ghana Public Finance Review, presented by Senior Economist David Elmaleh from the World Bank, highlighted issues of fiscal indiscipline contributing to the country’s economic struggles. Despite a robust agricultural growth trajectory, persistent low productivity was noted, necessitating modern infrastructure and inputs for future advancement. Elmaleh’s analysis indicated that traditional subsidy models have not effectively closed productivity gaps in agriculture.
Currently, GH¢3 billion annually allocated to agriculture has been dominated by subsidies, resulting in only a fraction of the Ministry of Food and Agriculture’s budget going towards capital investments. Moreover, COCOBOD has accrued significant annual losses and requires a comprehensive recovery strategy to mitigate ongoing fiscal risks associated with cocoa road expenditures.
Tax exemptions for VAT, personal income tax, and import duties have created substantial revenue losses, estimated at 3.9% of GDP. Over the years, domestic revenue mobilization has significantly declined, with total GDP revenue collections falling from 15.7% in 2017 to 13% in 2021. This trend highlights decreasing effectiveness in collecting major tax revenue streams, leading to unsustainable fiscal outcomes.
Further complicating matters, ineffective fiscal discipline has led to serious financial liabilities, particularly in the energy and financial sectors. The unsustainable reliance on external commercial debt exacerbated debt accumulation, particularly during the economic fallout from the COVID-19 crisis, which culminated in a full-blown debt distress scenario by 2022.
According to Robert Taliercio, the World Bank’s Country Director for Ghana, the nation is at a pivotal moment with progress made in previous years now overshadowed by recent economic downturns. Although major debt restructuring is nearly complete, Taliercio urged vigilance against reverting to previous unsustainable fiscal practices, citing the country’s historical patterns of engaging with the IMF.
The significant outstanding contracts for cocoa roads in Ghana present both challenges and opportunities for the agricultural and fiscal sectors. Addressing fiscal indiscipline, enhancing revenue collection, and investing strategically in infrastructure are critical for sustainable development. With ongoing reforms and subsequent strategies, Ghana can improve its economic prospects and stabilize its fiscal health, preventing future crises.
Original Source: www.ghanabusinessnews.com
