Ghana’s cocoa sector is in crisis, with a 50% production decline and COCOBOD facing GHC32 billion in debt. Urgent reforms are needed to address fiscal risks and ensure the sector’s viability. Market disparities and smuggling pose additional threats while revenue losses amount to US$840 million due to poor management and low forward contract prices.
On March 11, Ghana’s Finance Minister Dr. Cassiel Ato Forson presented the 2025 Budget and Economic Policy, themed “Resetting Ghana for the economy we want.” He outlined critical fiscal risks affecting Ghana’s cocoa sector, including substantial debts facing the Ghana Cocoa Board (COCOBOD) totaling 32 billion Cedis. Dr. Ato Forson emphasized the cocoa sector’s decline, stating, “the cocoa sector, which has long been the backbone of the Ghanaian economy, is sadly on its knees owing to gross mismanagement…”.
He reported a nearly 50% decline in cocoa production over the past three years, leading to COCOBOD’s inability to meet its contractual obligations for the 2023/2024 crop season. This resulted in a shortfall of 330,000 tonnes, which will be rolled over. The minister noted that lower forward sales contracts locked in have caused revenue losses amounting to US$840 million for COCOBOD and have severely affected farmers.
Additionally, the sector’s challenges stem from unsustainable debt and quasi-fiscal expenditures such as cocoa roads, deemed non-core operational functions. The Finance Minister outlined that COCOBOD’s liabilities include GHC32 billion in debts, with GHC11.92 billion due by 2025, alongside GHC21 billion of cocoa road contracts, only partially accounted for in financial statements.
Market price disparities and smuggling present further risks; the disparity between market prices and payments to farmers creates incentives for smuggling, compromising the cocoa industry’s sustainability. Dr. Ato Forson underscored that addressing these fiscal risks through urgent reforms is essential to ensure the sector’s viability and future vitality.
In summary, Ghana’s cocoa sector is facing severe challenges due to mismanagement, leading to a significant decline in production and unsustainable debt. The need for reforms has become critical to restore the sector’s viability and to address the associated fiscal risks effectively. The government’s emphasis on tackling these issues highlights the importance of the cocoa industry to Ghana’s economy.
Original Source: www.gbcghanaonline.com
