Trade, Exchange Rate, and Agricultural Pricing Policies in Ghana

8399 WORLDBANKI COMPARATIVE STUDIES I !ILECO>Y F The Political Economy of Agricultural Pricing Policy Trade, Exchange Rate, and Agricultural Prici...

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8399

WORLDBANKI COMPARATIVE STUDIES I

!ILECO>Y F

The Political Economy of Agricultural Pricing Policy

Trade, Exchange Rate, and Agricultural Pricing Policies in Ghana J. Dirck Stryker with the assistance of Emmanuel Dumeau, Jennifer Wohl, Peter Haymond, Andrew Cook, and Katherine Coon

A

-

i1:it

_

:_

rOF

The Political Economy of Agricultural Pricing Policy

Trade, Exchange Rate, and Agricultural Pricing Policies in Ghana J. Dirck Stryker with the assistance of Emmanuel Dumeau, Jennifer Wohl, Peter Haymond, Andrew Cook, and Katherine Coon

WORLD BANK COMPARATIVESTUDIES

The World Bank Washington, D.C.

Copyright © 1990 The International Bank for Reconstruction and Development/THE WORLD UANK 1818 H Street, N.W. Washington, D.C. 20433 All rights reserved Manufactured in the United States of America First printing February 1990 World Bank Comparative Studies are undertaken to increase the Bank's capacity to offer sound and relevant policy recommendations to its member countries. Each series of studies, of which The Political Economy of Agricultural Pricing Policy is one, comprises several empirical, multicountry reviews of key economic policies and their effects on the development of the countries in which they were implemented. A synthesis report on each series will compare the findings of the studies of individual countries to identify common patterns in the relation between policy and outcome-thus to increase understanding of development and economic policy The series The Political Economy of Agricultural Pricing Policy, under the direction of Anne 0. Krueger, Maurice Schiff, and Alberto Valdes, was undertaken to examine the reasons underlying pricing policy, to quantify the systematic and extensive intervention of developing countries in the pricing of agricultural commodities during 1960-85, and to understand the effects of such intervention over time. Each of the eighteen country studies uses a common methodology to measure the effect of sectoral and economywide price intervention on agricultural incentives and food prices, as well as their effects on output, consumption, trade, intersectoral transfers, government budgets, and income distribution. The political and economic forces behind price intervention are analyzed, as are the efforts at reform of pricing policy and their consequences. The findings, interpretations, and conclusions in this series are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to members of its Board of Executive Directors or the countries they represent. The material in this publication is copyrighted. Requests for permission to reproduce portions of it should be sent to Director, Publications Department, at the address shown in the copyright notice above. The World Bank encourages dissemination of its work and will normally give permission promptly and, when the reproduction is for noncommercial purposes, without asking a fee. Permission to photocopy portions for classroom use is not required, though notification of such use having been made will be appreciated. The complete backlist of World Bank publications is shown in the annual Index of Publications, which contains an alphabetical title list and indexes of subjects, authors, and countries and regions; it is of value principally to libraries and institutional purchasers. The latest edition is available free of charge fiom Publications Sales Unit, Department F, The World Bank, 1818 H Street, N.W., Washington, D.C. 20433, U.S.A., or from Publications, The World Bank, 66, avenue d'Iena, 75116 Paris, France. J. Dirck Stryker, an economist with Associates for International Resources & Development, is a consultant to the World Bank. Library of Congress Cataloging-in-Publication Data

Stryker, J. Dirck. Trade, exchange rate, and agricultural pricing policies in Ghana ! J. Dirck Stryker ; with the assistance of Emmanuel Dumeau [et al.]. P.

cm.

ISBN 0-8213-1443-2 1. Agricultural prices--Government policy--Ghana. 2. Coco.a trade-Government policy--Ghana. 3. Ghana--Commercial policy. I. Title. HD2146.Z775S76 1990 338.1'8--dc2O 89-77546 CIP

Abstract

At the time it achieved independence in 1957, the West African country of Ghana was the world's leading producer of cocoa and the most prosperousnation in Sub-SaharanAfrica other than South Africa. By 1984, however, per capita gross domestic product (GDP) measured in constant prices had fallen 30 percent below its level in 1950. Ghana's economic decline during the period covered by this study of agriculturalprices obviously cannot be attributed solely to government price intervention. But interventionin the workings of the cocoa sector, this study shows, contributedheavily to the country's inability to achieve prosperity and stability after 1957. More than half of Ghana's population was still employed in agriculture in 1984, and the sector provided about two-thirds of the country's export earnings, with cocoa by far the country's major export. Other important factors in Ghana's difficulties included a successionof military coups between the late 1960s and the early 1980s that were ordinarily followedby repressionand coercion of the general population, and deteriorationof the country's road system. During the decades since independence, direct interventionin Ghana's all-important cocoa sector has been in the hands of a Cocoa Marketing Board (CMB), which sets annual producer prices, purchases the crop from domestic producers, and markets it to foreign buyers. (The importance of cocoa to Ghana's economy during the study period was considerablein most years, with the product frequentlyaccounting for 20 percent or more of the government'sannual revenues, and in some years more than 50 percent.) Although the chief reason for creating the CMB was to assure Ghana's cocoa farmers a stable and decent income, the agency's direct interventionhelped to keep producer prices lower than they might have been otherwise. The problems of cocoa farmers in earning income were compoundedduring much of the study period by export taxes on cocoa and overvaluationof the domestic currency, both of which also tended to depress Ghana's earnings of foreign exchange. The government'sdirect and indirect intervention in the cocoa market, according to the study, far outweighed its incentivesto cocoa producers, including free entry of imported inputs like fertilizerand pesticides, subsidizedtractor services, and cheap credit. Moreover, most of the benefits of these incentiveswent to large producers rather than the far more numerous smallholders. Another important finding of this study (which also surveys the effects of interventionon two principal imports, rice and maize, and on the nontraded products cassava, yams, and sorghum/millet) is that governmentregulationof the cocoa sector had the serious negative longterm effect of deferring the replacementof old coffee trees with new ones.

iv

By 1982, the CMB and its subsidiarieshad 109,000 employees in a country with a population of approximately 12 million, and low producer prices were encouraging the smuggling of large amounts of cocoa to neighboring Cote d'Ivoire. Large segments of the populationhad abandoned productive economic activitiesin favor of cultivating influentialpatrons (e.g., those who had licenses to import goods in a country where imports had been sharply restricted),and the governmentwas hard at work seeking emergency assistance from the InternationalMonetary Fund (IMF). With this assistance in hand, Ghana then began to dismantle its administrative controls over the price of cocoa, rice, and maize.

v

Table

of Comtents Pa-ne

FRRT CNE: EIINIMIC I.

CWPTER I:

II.

O-PTER

II:

POLICY AND AGRICLLURE

INTRODUCTION AIQULTFE

1 IN FELATICN TO tHAN'S

Background Agricultural Resatr-ce Endrbawnent Regional Cropping Patterns Pbpulation Overall Econsmic Perfor-mance The Balance of Payments and Exchange Rate The Agricultural Sector Importance of Agriculture in the Economy Production of Specific Crops Food Cmsumptimn II.

CFRPTER III:

THE EVOLVING PCLITICPL ECONOMY

-

EIXN2Y

Disequilibrium

THE PLAYERS

Interest Groups Sole of the State Patrmns IV.

CHAPTER IV: THE EVOLVING POLITICAL ECUONOY

CHPTER

V:

-

THE PERIOD6

OEKbR%NMENT PCLICIES TOWP1DS AGRICL*TURE

Cocoa Pblicies Tradable Foxds Transportation and Nbntradable Policies Related to Agricultural Input Subsidies Fertilizer Machinery Services Improved Seeds Other Inputs Credit Research and Extension

6 6 7 9 13 17 21 21 23 30 32 32 35 3B

Liberal Regime, 1950-60 Imposition of Cbntrols, 1961-63 Breakdown of the System, 1964-66 Austerity, 1966-67 Devaluatimn and Import Liberalization, 1967-70 Collapse of Import Liberalizatim, 1971-72 Early Years of the NRC, 1972-75 Ecoromic Disintegratimn, 1976-78 Struggle for Reform, 1978-81 PNDC and the Ecrnomic Recovery Program, 1982 - Present V.

6

Foods Inputs

39 39 43 48 50 53 56 59 65 69 76 86 87 103 111 112 113 113 116 117 118 120 121

vi Page

State Prnidctian Cbnclusions FPAT VI.

Wi

124 126

EFFt TB OF PRICE INTERON0TIME

OHPPTER VI:

129 129

MEASURESOF INTERVENTION

Direct Effects Producer, Consumler, and Border Prices Relative Prices of Direct Price Interventions Measurement Indirect Effects VII.

CHWPTER VII: PM

129 129 136 142 150

EFFECTS ON OLTRJT, COELUFPrTI(N,

FCEIGNJ

EXWY*3E

156

156 157 156 164 166 167 179 184

Effects on Agricultural Production Supply Functicns Cocoa Food Crops Price Elasticities of Supply EquilibriLmn Levels of Output Effect on Consumption Effect on Net Foreign Exchange Earnings VIII.

CHAPTER VIII:

GiNVEFIIENT LEUGETAND OTH}ERFE9URCE

Effects of Price Policy Transfers of Resources of the Ecconwoy Estimates of Resource Gbvernment Investment IX.

cn the Eovermnent BEdget Between Agriculture and Transfers and Expenditure

Bias

CHAPTER IX: OTHER FRICE INTEF&ENTIONIEFFECTS Farm Income Effects Variability Effects PART THRE:

X.

THE FAILLUE CF THE POLITICPL SYSTEM

CHFrMR X: HYPOTHEEES PAD CONCLULIONS

TFW1SFERS

200 200

the

Rest 204 204 217 219 219 230 248 24B

The HypDtheses Importance of Macroeconomic Disequilibrium Loss of Real Incone Failure of the Political System Rise of Rent-Seeking Activity Neglect of Price Policy Failure to Achieve National Objectives

248 248 248 249 249 250 250

The

250

Phases

Colonial Period Nkrumah

251 251

vi i Paqe

National Liberation Ccucil (NLC) and Busia Natianal Redemption Cox,cil (NFC), Sepme Military (SM), ard Limam2 Prfvisicmal National Defence cxuricil (PNDC) Smnmary Testing of the Hypotheses Macraeccxnic Disequilibriun Loss of Real Inccwme Failure of the Political System Rent-Seeking Activity Neglect of Price Policy Failure to Achieve National Objectives Canc lusions

252 Caoncil 252 253 255 255 257 256 258 260 261 263

ANNEXES

AMEX 1: AmIOrC T

FFXCDIWI

265

System

for Data Collection Cocoa Other Crops Agricultural Production Data

265

~~~~~~~~~~~~~265 269 270

ANNEX 2: ERWILIBRIUMEXCHANGERATE

276

Purchasing Power Parity Approach The Real Exchange Rate The Equilibrium Exchange Rate Elasticities Approach Equilibrium Exchaige Rate Mbdel Import Demand Function Export Supply Functions Adjustment for Mbnopoly Power The Exchange Rate Model

276 276 282 287 294 294 295 296 298

PPRENDIXTO INNEX 2: DERIVATIONOF A FCRULLAFUR ESTIPFTING THE EaJILIBRIUM ANNEX 3:

EXCOM

RATE USING THE EATICITY

PPRAH301

DERIVATION CF PRICES PAD RRICE IMDICES

305

ANNEX4: COMA SUPLFY FUNCTICN

316

ANNEX5: :FEMTSOF INDIFECT ANDNNARICULTLUR DIFECT RICE INTEVENTIO6

329

ANNEX6: NEr AVAILABILITY OF RICE AM M%iIZE

334

ANNEX7: TONERS ANNEX8:

AM 9USLIDIES

REALELJILIRIUM

INME

335 346

viii List

of Tables Panie

Table Table Table Table

1 2 3 4

Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table

5 6(1) 6(2) 6(3) 7 8 9 10 11 12 13(l) 13(2) 13(3) 13(4) 14 15 16

Table

17

Table

18

Table

19

Table Table Table Table Table Table Table Table Table

20 21 22 23 24 25 26 27 2B

Table

29

Table

30

Table

31

Population Gross Domestic Product, 1950 - 1984 Economic Indicators Related to Inflation Current ARccountBalance, Actual and Equilibrium Exchange Rates Agricultural Sector Prouction Indices Productian Indices Indices Production and Consumption Indices Food Production Cocoa Sales, Marketing Costs, and Public Revenue Price of Cocoa Real Producer Domestic Producer Prices Domestic Consumer Prices Border Price Equivalents Indices Prevailing Relative Price Indices Prevailing Relative Price Relative Price Indices Prevailing Relative Price Indices Prevailing Producer Price Ratios Consumer Price Ratios Effect of Direct Price Interventions en Relative Producer Price Differences Price Interventicons on Effect of direct Relative Consufer Price Differences Effect of Direct and Indirect Price Interventions on Relative Prices Interventions of Direct and Indirect Price Effect on Relative Price Differences Short-fRn Direct Effect en (btput, Direct Effect en Ohtput, Long-Fiun Very Long-fRn Direct Effect en Output, Total Effect en Output, Short-Run an Output, Long-Run Total Effect Effect en Output, Very Long-fhn Total Direct Effect on Consumption Total Effect en Consumption Direct, Short-fun Effect of Price Interventions on Foreign Exchange Earnings Direct, Lcng-RufnEffect of Price Interventions an Foreign Exchange Earnings Direct, Very Long-Run Effect of Price Interventions on Foreign Exchange Earnings Total, Short-Rkn Effect of Price Interventicns on Foreign Exchange Earnings

10 14 16 18 22 24 25 26 31 89 101 133 134 135 137 138 139 140 143 144 146 147 152 153 170 171 172 173 174 175 182 183 116 188 190 192

ix Paae

Table

32

Table

33

Table Table Table

34 35 36

Table

37

Table

38

Table Table Table Table

39 40 41 42

Table Table Table Table Table Table Table Table Table Table Table Table Table

43 44 45 46 47 48 49 50 51 52 53 54 55

Total, Long-fin Effect of Price Interventions on Foreign Exchange Earnings Total, Very Long-Run Effect of Price Interventions on Foreign Exchange Earnings Effect of the Pricing Policy an the Budget Tax on Cocoa Direct and Total Nominal Short-fin Transfers Due to Ckitput Price Interventions Into (+)/ Out of (-) Agriculture Direct and Total Nominal Long-Rhn Transfer-s Due to GOitput Price Interventions Into (+)/ Out of (-) Agriculture Due Direct and Total Nominal Very Long-Run Transfers to Output Price Interventions Into (+)/ Ouitof (-) Agriculture Short-Run Transfers Into (+)/ Out of (-) Agriculture Long-fin Transfers Into (+)/ Out of C-) Agriculture Very Long-fun Transfers Into (+)/ Ouitof (-) Agriculture Gbvernmnt Investment (GIB) and Total Expenditure (GEB) Bias Real Instantaneous Income Effect of Direct Interventinu Intervention Real Short-Run Income Effect of Direct Real Long-fRun Income Effect of Direct Intervention Real Very Long-Run Income Effect of Direct Intervention Real Instantaneous Income Effect of Total Intervention Real Short-Rfn Income Effect of Total Intervention Real Long-Run Income Effect of Total Interventian Real Very Long-Run Income Effect of Total Intervention Domestic Maize Prices Under Alternative Price Scenarios Domestic Rice Prices Under Alternative Price Scenarios Domestic Cocoa Prices UkhderAlterative Price Srenarios Per Capita Production and Consumption Relative Weight of Agricultural Price Policy Objectives

194 196 202 203

209

210-

211 212 213 214 218 2721 222 223 224 225 726 227 22B 232 236 240 244 254

fnnex Tables Table Table Table Table Table Table Table

1-1 1-2(1) 1-2(2) 1-2(3) 2-1 2-2 2-3

Table

2-4

Table 2-5 Table 3-1 Table 3-2 Table 3-3(1)

Cocoa Production and Smuggling 1960-1962 Agricultural Production Agricultural Production Agricultural Production Exchange Rates, 1956-85 Balance of Payments Current Account Nominal Exchange Rates and Nominal Purchasing Power Rates Parity Equilibrium Estimation of the Equilibrium Exchange Rate Using Approach the Elasticities NorninalExchange Rate and Alternaltive Nominal Equilibrium Exchange Rates Wholesale Market Prices Official Producer Prices Structure of Domestic Prices

1.2 1.8 1.9 1.10 2.4 2.8 2.13 2.18 2.25 3.2 3.4 3.5

x

Table Table Table Table Table Table Table Table Table

3-3(2) 3-4(1) 3-4(2) 3-4(3) 3-5(1) 4-1 4-2 4-3 5-1

Table

5-2

Table 6-1 Table 7-1(1) Table 7-1(2) Table 7-2(1) Table

7-2(2)

Table 7-3(1) Table 7-3(2) Table 7-3(3) Table 7-4 Table 7-5 Table 7-6 Table Table Table Table Table Table Table Table Table

7-7 8-1(1) 8-1(2) B-2(1) 8-2(2) 8-3(1) E-3(2) 8-4(1) 8-4(2)

Structure of Domestic Prices Stucture of Rice Border Price Equivalents Structure of Maize Border Price Equivalents Structure of Border Price Equivalent for Cocoa National Consuimer Price Indices Estimation of Cocoa Planting, Traditional Varieties Estimation of bormal Cocoa Production Regression Results for the Cocoa Supply Equation Effect of Indirect and Nonagricultural Direct Price Interventions an Relative Prices Effect of Indirect and Nonagricultural Direct Price Interventions on Relative Prices Net Availability of Rice and Maize Short-Rgn Producer Price Transfer to and from Maize Production Long-fu-iProducer Price Transfer to and from Maize Production Short-Rn Producer Price Transfer to and fromn Rice Pr-oduction Lanx-flun Producer Price Transfer to and fron Rice Producticn Short-FRn Producer Price Transfer from Cocoa Production Long--Run Producer Price Transfer from Cocoa Production Very Long-Run Producer Price Transfer from Ccxoa Production Indirect Input Subsidies to Agriculture Government Expenditure Transfers to Agriculture Total, Very Long-fRn Estimation of Agricultural GDP in the Absence of Price Interventions Ciovernment Expenditures Large Cocoa Farmers, Direct Real Equilibrium Income Large Conoa Farmers, Total Real Equilibrium Income Large Rice Farmers, Direct Real Equilibrium Inca.r Large Rice Farmers, Total Real Equilibrium Income Large Maize Farmers, Direct Real Equilibrium Income Large Maize Farmers, Total Real Equilibrium Income Expenditure Shares and Dircet Equilibrium Price Indices Expenditure Shares and Total Equilibrium Price Indices

3.6 3.8 3.10 3.12 3.13 4.6 4.8 4.11 5.3 5.5 6.1 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 8.1 8.3 8.5 8.7 8.9 8.11 8.13 8.14

xi List

of Fioures PaFe

Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure

1 2 3 4 5 6 7 8 9 10

of Maize Domestic Prmducer Prices of Maize Domestic ronsumer Prices Prices of Rice Domestic Prcducer Domestic Consumer Prices of Rice Domestic Producer Prices of Cocoa Domestic Consumer Prices of Cocoa Maize Producticn and Availability Cbnsumer Price of Maize Rice Productim and Availability Consumer Price of Rice

234 235 23B 239 242 243 246 246 247 247

Annex Figures Figure 11

Log Normal and Log Actual Production

4.9

PART OlE:

ECONOMICPOLICY AND AGRICLLTIFE CHPTER I:

At the

country in

developed

exchange

reserves,

products.

independence

black

and

it

also

well

was

the

the

mDst

mDst important

world's

the accumulatian of substantial foreign

exported

timber, gold,

infrastructure

developed,

Ghana was perhaps

1957,

It

permitted

Its physical

relatively

in

Africa.

which

cocoa,

producer of

of

time

INTFUJCITIEN

and its

and

per

bauxite, and other

educaticnal establishment were

capita

incaume was the

highest

outside

of South Africa. Two and cne-half decades later, the Ghanaian eccnrmy was in ruins. Cocoa exports were less than half

their level

of the

mid-1960s, the black

rate was many times the official rate, graft and corruptimn

market exchange

Only in

were rampant, and real per capita incamnehad fallen by 30 percent. the Ghanaian

1963 did

last begin to undertake the extensive

government at

of this

eco-nomicreforms required to rise out years

a

witnessed

realignment

and that

c.ntrols

a

slcw

but

had been

Funtdamental

utilized

to

of

many

to

allocate

the dissolution price

period

was

result

of deliberate

decisimns

of

for

crops.

of

dismantling

pracess

of

the an

The succeeding four

price and exchange rate extensive ever

administrative supply

decreasing

of

resources.

available

was

steady

abyss.

true

agricultural

Official

unimportant of cereals.

in

cocoa, price relation

policy.

to

producer as well

regarding trade

the Ghanaian

To some extent

regarding example,

policy

of

policy,

especially

this

export

an

the

during this

policy

and ccnsumer

as other

foodgrains,

eccwmy

was the

prices.

This

and industrial other

restrictions

hand,

was

mn imports

The most important not

agricultural

price

macrouconaomic

situation

implemented.

Of special

last

of

half

un-dertaken

in

study

light

The analysis with

soriety

work very

resources groups,

of

special

being access

well

and outright

enhancing

these

endeavor.

As

allocation effort,

continued and people

result,

only

of

with

but

were

the

overall

fornmuilated

and

of inflation

bouts especially

and

severe

the

decades of price

recent

during reforms

and losses

because the

the

withdrew

that

from

on

So much time

total

supply

until the from

the

of

a vast

of

by these network

of

personal was devoted

over

resources

rewards

no longer

formal

sector

of

± The use of the term overvaluation in this report with to the exchange rate and to local currency (the cedi) implies low in relation to its equilibrium level.

2

Instead

favoritism,

left

effects prevented

influenced

and energy

was little

price

feedback

heard.

depend on

but

in Ghanaian

increasingly

being

depended

there

effects

graups

these

decisions

came to

and consumers.

to shape agricultural

system

policy

which

that

is

have had

of these

of different

political

through

bribery.

of producers

process

groups

Ghanaian economic

distortions

the magnitude

the analysis

to dwindle simply

three

the political

relationships a

se,

1960s before

agricultural

to goods and services

connections,

early

and the welfare

gains

allocated

relations,

periodic

past

interest

patrcn-client

were

These were

that

not

back into

did

the voices

the

impact

resulting

A major ccnclusion

policiles

and the

resources

policy.

per

these

however, was

prices,

government.

is concerned

have fed

policy

rate.'

analyzes

of

how the

not

trade which

1970s

of the

on agricultural

importance

Rawlings

an the allocation

also

in

the

by the This

history

and

of the exchange

overvaluatimn the

influence

for

to

productive

available

for

justified

the

the ecanomy.

reference both N' 1$ rate is

Finally

Jerry

Rawlings

initial

period

of

fundamental

economic

some

that

sector

general

balance

of payments. rate

the

exchange

demand

Aninex 2. relative

for

importance

of

crops,

evolved

each

from

early

mechanisms the

of

groups,

periods

of

formulation

inCome and wealth.

of

policy Later

is

of

the

It

provides

endcwrient,

performance,

a discussion

of

the

free

an econometric

are

and

most of the

described over

Ghanaian

economy,

the past

trade

model

of

in detail 30 years

quantitatively

the

II describes

to estimate

including

the

state,

the

in

at

the

production

of

3

major

the

have

by directly

successive

Chapter

it

has

analyzes

created and

of

this

economy

particular,

influence

in

patrons.

political

allocative

of

economy

players

and instituticns

would

dependence

political

and the

In

created

in ways that

the

which

policies

exertion

the

evolving

describes

mid-1980s.

which

the

the

the

independence

inhibited

process

the

eccnomy.

in Ghana during

through

the

years

an

discusses

resource

section

discuss

IV

interest

ways in

after

consumption.

chapters

to

last

exchange,

in

the

cverall economic

looks

II

of

were used

foreign

and

the

The first

agricultural

methods,

agriculture

the

that

that

and, a

on

Chapter

rest

existed

of these

1950

qualitatively the

of

III

including

IV examines

the

These

and food

The first

evolution,

methods

parts.

agriculture.

that

of Chapter

Chapters Ghana.

in

power

embarked

three

Ghana's

in

be concluded.

population,

rate.

rest

The

of specific

on

and supply

to

to the

Included

the

yet

into

patterns,

and

is

relation

regime

hesitancy,

affected

disequilibrium

decades

equilibrium

have

background

cropping

exchange

that

divided

in

regional

three

is

civilian

and

reform

study

policies

agricultural

the

varillatimn

ecorinnic This

cmsted

during

distribution

interest

groups

increased governnents

on

their on

patronage

networks

their

and

support reduced their

political

Chapter V describes agriculture, prices.

especially

exchange rate

those

agricultural

use

administrative

Policies

tradable

foods,

inputs.

also

Two

and the

of

for

and state

crops:

of

trade and

distortions

in

the

price

exchange

measurements are described, Chapter interventions The effects

VII

on output, on output

at

the

the

estimated

supply and demand functicns

estimation

proceduwres are described

detail

cocoa in Ainex 4.

for

frcom price

interventions

are

regarding

rice,

effects

of

and maize.

including

to

price

Chapter VI

both

effects

and indirect

and net earnings of

and cotsumption

and agricultural

the direct

resulting

frc

obtain

these

are discussed.

direct

consumption,

has

of cocoa,

policies

The methods used

and the results

looks

a

production.

cocoa,

rate.

as that

the prices

foods,

and the indirect

policy

paid to the

activity

of non-price

discusses the measurement of these interventions, effects

designed to

incentives

rent-seeking

quantitatively

three major

trade and

by

is also

price

and nontradable

asse

to relative

introdcijed

place

some discussion

research and extension,

interventions

or indirectly

Attention

in

resources

have affected

run couinter to policies

directly.

decisions

that

are examined as these have affected

is

Part

directly

distortions

price

transportation

There

credit,

related

grmups for

fundamental reform.

policies

government

incentives

mechanism for allocating resulted.

to unrdertake

which have often

policies,

influence of

capacity the

Emphasis is placed on

to draw upon interest

inability

effects foreign

of price exchange.

are measurnedusing economictrically for

cocoa,

summarily in in output

Changes

then used together 4

rice, this

and maize.

The

chapter and in more

and consuimption resulting w:ith border prices

in U.S.

dollars

to

estimate

the

effects

of

the

interventions

net

an

foreign

exchange earnings. Chapter government

budget

transfers price

into

and an

also

but

IX

concludes by large

extent

the

and

consmiers.

as these

The

an agriculture

these

result

of

urban

an

effects

part

Net

result

from

bias

of government

in relation

to the whole

of the

major

hypotheses

first

described

which

is

that

may

by the relative

naticnal

employed

to attain

powerful

political

each of

these

objectives. these

objectives

and economic regimes

beEn changed remains

were dwarfed

during

analyses

and then analyzed

defined

and other

prices

from

over six

the

In the end,

to be seen.

5

minor

the crops

under

that ane.

price

discussion

phases,

is

argued, in

the

resulted Whether this

in

several

These hypotheses

by successive it

of

elaborating

historical

were inadequate

until the present

of

Two by study.

major

groups

very

the effect

at

farmers.

and quantities.

priorities-given

pressures

to a

the qualitative

of Part

of

most of the period

prices

looks

price

interest

were anly

integrates

be drawn

types

consumers

chapter

study

agricultural

representative

of domestic

the quantitative

of

the relative

in

of this

an the variability Thr-ee

impact

wages that

in real changes

The last

Part

the

income of several

distortions

ccnsideratimn.

to various

real

that

One with

producers

an the

interventicns

are estimated

estimates

the effects

examines

studied

Part

of

price

expenditures.

expenditures

an the

interventions

of

assessed.

Chapter interventicns

effects

welfare

government

total

and

the

of agriculture

and

ecacnwy is also

It

the

and out

distortians

investment

examines

VIII

are

each of

governments

the instruments face of much more in

the demise of pattern

has now

CHETER II:

This Ghana s overall agricultural

chapter

describes

econouy.

The

resource

characteristics, examines

AGRICLLLUE IN FELATION TO G~V

and the

productin

first

overall

agricultural sectim

endowhent,

relative

of specific

the

economic

crops,

cropping

of food

relation

patterns, The

agriculture

levels

in

backgrmund

performance.

of

and

sector

provides

regional

importance

S EEXU'W

in

to

on the

population seccand

the

section

econcomy,

the

consumption.

Backqround APricultural

Resource Ghana

by Togo,

in

ccintry

s

generally

the

is

total

area

Ahafo,

Coast,

and

roughly sea

ten

in the

square

and

1000 feet.

-

regions Vol1ta,

Greater Upper

bordered

north

92,100

level

Ashanti,

of West Africa, by

miles,

Burkina with

east The

elevaticns is

Eastern,

UJpper West,

the

Fasso.

The ccxntry

Accra,

East,

in

divided Western,

and Northern

Map 1). Generally,

south,

is

into

Brung

on the coast

between

administratively

(see

located

West by Ivory

ranging

Central,

Endowment'

occupying

the norrth. The highest

the roughly

The forest rainfall

resource

endaowent

me-third

zone receives area

in

the

ccnsists

of the country, much nmre southwest

X

of a forest and a wooded

rainfall

averages

zone

than 1950-2125

in the

savanna in

the savanna. mm per

year.

MDre extensive discussions of the agricultural resource endowment in Ghana are cantained in Area Handbook for Ghana, prepared by Foreign Area Studies of the American LUniversity, 1971 and World Bank, Ghana: Aqricultural Sector Review, April 12, 1978, Arnex I. 6

In contrast, areas

the northern

of the southern

coast

The principal and its

interannual

averages

average

only 625-1000 mm per year.

features

of

variability.

from region

considerably

savanna

rainfall

to region.

principally

from June through

successive

rainy

received.

In

snme

seasons

one another.

second

its

during types

is

rainy

Large of

individual

seasDnality varies

may be recognized,

The first is characterizedin

a single

time

and scme

the year

May and June and

September. in

seasons,

Ghana are

Two principal

the scuth by relativelyheavy rains in around October; the

in

The distribution

though adjacenttypes grade into

season

800-1200 mm per year

a

season

variations

onset,

are

rainy

in the north, exist

duration,

rains

lesser

between

and

numerous

amounts and

well

distributed and in other years they are scatteredand infrequent. The result is high variabilityof crop production. Soils in Ghana are of generally pmor quality and easily become exhausted.

The maintenance of the topsoil organic matter is of prime

in cultivating

importance traditional

arable

these soils. farming

This is

techniques

achieved

largely

involving

extensive

through

periods

of

In some areas, howEver, growing population density necessitates

fallow.

shorteningof fallow, leading to a loss of nutrients

and the possibility

of

erosion.

ReqionalCroopinqPatterns There are five south,

the

and northwest, rivers,

forest

major geographic

uplands

the basin

further area

north,

surrounding

and the rugged, mountainous

region 7

regions:

the coastal

the high plains Lake

Volta

and

plains

in the

of the far north its

assoriated

of the Akwapim-Togo ranges.

The coastal compared to

the rest

fertility.

cassava,

section

of the

country but contains

the Arccra Plains

of

gardening

has

been

is unsafe

villages

maintained. grass

The Volta

and

vegetables Fishing

Coconuts,

is

Ashanti

Ahafo,

and

beccne

Ghana s most

palm production

least potential

densely for

and 100 feet Volta include

Basin, yams,

important

in

of

the

is

the Soils

population sorghum,

is

north are

density

of shallots.

eastern

of

section

of

Central, rainfall

Brong and have

Traditicnal rainfall

part

of

oil

areas

include

important

and northwest

generally

and

H

an

of

in

maize,

the region activity.

is The

caosiderable.

is

millet,

with

crops

The western

also

la-nd cavered and a variety

higher

Subsistence

forestry here

the

and

also

prcouction. in

to the

region.

amouts

cocoa

Market

are

Western,

Eastern,

for

the

fly

centers

palms

corn,

in

The

plain

cultivation

basin

substantial

coastal

by flat

producing

and yams.

of

of

of the tsetse

Cocanut

intensive

zone.

and

elevation.

maize,

is

of

this

production

farming

of commercial

cassava,

faund extensively

plains

and

palm,

area

populated,

The high

oil

receive

cocaiyams,

rubber

characterized

and food

uplands

part

plantains,

is

there

cocoa

Regicns

of good

soils

breeding.

The

region.

The Densu River

a rich

is also

southwesterm

cassava,

area

the

free

livestock

but a number

in

found

The forested

the

cattle,

important.

area

is nearly

Accra.

grown. Near Keta

lowlands

the coast

near

are

alluvial

rainfall

Sugar cane is grawin under irrigation.

increasing

Delta

little

by subsistence

for

palms.

also

characterized

area

fan

is

the ocean receives

popular

for

are

along

is

near

become a also

of Accra

fishing

region

and grcaxuinuts.

and has therefore

the

area

Mbst of the

maize,

west

savanna

average

more fertile

accordingly grounchnuts.

higher. Cash

between

500

than

the

in

Food crops crops

are

cottan,

tobacco,

valley fly,

and kenaf,

bottomlands. this

regimn

Largely is

Basin

characterized

by

density

Pbpulatian erosim.

Fishing

is

Finally,

poor

cansist

mainly

rocks.

The area

is covered

bit

cooler

low,

the

the

and

for

virtual

livestock

central

terrain

the

rugged complexes

of

folded

parts

though

of

forest,

tsetse

of the ccuntry annual

eastern

rainfall.

to drying

strata

part

and

of

tend

tost farming

coffee

are

the

and volcanic

and temperatures

the country.

some cocoa and

river

volta Lake regim.

in

deciduous

the

producticm.

is subject

ranges

with

in

of the

part low

and

in the

sale

absence

area for

activity

than in other

is subsistence-oriented, staple

of

the

proKuced

ccnditimns

AkwapimrTago

country

be a

of

occupies

soil

an important

the

being

s primary

regimD

quite

is

rice

because

the cauntry

The Volta and is

with

to

activity

growh along

with

craps.

Ptclatim As rapidly. crude

A high death

of increase 2.9

Table

rate in

percent,

1

crude

that

rate

year of 3.6

however,

of about 36 persons

D.C.,

birth

populatimn

estimated

percent

whole in

per square

were 91 persmns in

Wobrld Bank, 1984, p. 2 6 .

~ Ghana, Central

the Central

Bureau of

Ghana has been growing and a comparatively

1982, imply Overall

Outside

Statistics,

9

rate

growth

was aily

populatimn

density

of Accra,

Regian and 62 persons

and Program for

p.7.

a natural

low

cutmigration.m

1970 had an average

kilometer.:

Ghana: Pblicies

in

per annum.

because of substantial as a

in

of 49 per thousand

of 13 per thousand,

The ccuntry

densities

illustrates,

Adjustment,

Statistical

the highest in the

Washingtm,

Yearbook

1969-70,

Table I Population

Year

Total(a) (000)

Urbanlb) (000)

1948 1950 1960 1970 1980 1984

4118 4368 6804 8559 11100 12206

326 N/A 1585 2507 4129 3825

Concentra-RuralId) tion(c) (000) 3 N/A 39 46 N/A N/A

3793 N/A 5219 6107 7372 8380

Arabil Land LaborForce Adult perAgri UrbanasI PartRate(f) Literacy Worker (h) Total(e) II) Rate(g) (ha) 7.9 N/A 23.3 29.1 35.9 31.3

NIA N/A 42.9 39.7 37.1 N/A

N/A N/A 27 30 30 N/A

NotestoTable1: (a)1949population obtained fromGhana, Central Bureau ofStatistics, Statistical Yearbook, 1969-1970. 1950-1969 populations obtained fromWorldBank,World Tables, 1983, Vol.1. 1970-1985 population figures arefromGhana: Policies i Issues ofStructural Adjustment, March 30,1974.Missing dataareinterpolated using a growth rateof2.661.Population datafor1948and1960arebasedoncensuses conducted inthose years. (bI1948urbanpopulation isfromStatistical Yearbook, 1969-1970, andincludes allpeople incities and towns witha population ofat least 5000. 1960-1984 figures arederived fromdatain World Tables, 1983, Vol.2. (c)Source: Statistical Yearbook, 1969-1970. Theconcentration oftheurbanpopulation ismeasured by thenumber of cities inwhichthemostconcentrated 75Ioftheurbanpopulation lives. (d)Samesources as (a)and(b). le)Derived fromsamesources as (b). (If) Source: WorldTables, 1983, Vol.2. (q)Source: World Tables, 1983, Vol.2, for1960and1970; WorldBanit, Ghana: Policies andProqraes for Adjustment, 1984, p.28,for1980. (h)Arable landof14.8million ha isdefined ascurrent cultivation plusfallow fromFAD,Perspective StudyofAgriculture andDevelopment forGhana, 1976.

10

NIA N/A 7.9 7.5 6.5 N/A

Eastern

Ashanti

and

Regimns.

By 1962,

was about 50 persons

per

this

the NDrth-ern

period

Region

was in

had the

lcwest growth

The rate in rural areas

areas,

rising

higher

with

south

of

has been

increasing

The rise

Regicn at 3.4

percent

than is

demand

With for

urban

to the

attests

fact

also

restricted

to Accra and a few other

througqhut

the country.

In

1960. population rate

this

reflects

the

emigration total

formal

labor

high It

rate

also

wage sector,

rate

is

is

the

one effect age.

In

well

is not

steadily

since of

the

low mortality

result

of econcmic

of which

has been to

1980, about

With

of

distributed

stricture

and 10 percent

urban areas.'

there

of the urban

has declined

and a relatively

undoubtedly

ccuntries

in urbanization

rate

of working

in

75 percent

hut

is a

the marketing

age/sex

birth

This

population,

changing

was in agriculture mostly

urban

that

in urban

in 1980.4

increase cities,

of investment,

of persons force

larger

the

from a

and a falling

the

exceeded

residing

including

making up

participation

amoig ycLing children.

encourage

the

part

force

resulting

stagnation

of

labor

in

services,

that

the Vbota

most middle-incame

growth

the number of cities

population

The

the

years

percent

fcaind in

during

per annum.

population

in 1948 to 35.9

overall

rate

per year;

has in most

of total

density growth

percent

at 1.7 percent

percentage

the Sahara.

in

The highest

in urban areas

of urbanization

in Africa

food.

the

kilometer.

rate

of growth

from,7.9

level

square

population

average

53 percent

was employed

18 percent

of

in the

in urban population from 1990 to 1984, shown in The apparent decline from the collapse Table 1, may reflect a movement back to the land resulting in this report, or it may simply economy, as discussed elsewhere of the urban from the 1960s overestimated indicate that growth rates extrapolated growth during the 1l70s. Wbrld Bank, W

Ghana: Policies

and Prouram for 11

Adjustment,

p. 2 6 .

labor

force

were

in

since

officially

the

informal

with

The effect number

of

social

in

educating

following

independence,

likely to recent

with

has

in

Equally

substantial

arable

land

indicate under the

strring

increased,

must or at

lead

to

a

Given

spacial

much

more

social

of be

least

decline

in

m

land

the

also

were

loss

of

fertilizers,

and other inputs.

Policies

Table

resourrces,

and

Otherwise and eventually

:Lis

up

rates

situatim

is

the lack of

with

expanding

resources

in

systems

and Procram

the

associated

average

While this the

the

fact

that that

it

does is

reductimn

others.

not

falling

more intensive

productively

moreover,

of

are

This

Adjustment,

to

be

fallow

will

of the

land.

this

to distribute

for

amount of

average

to degradation

density,

12

literacy This

keep

labor

for

two decades

because of

Itunan

1 is

15 years.

in

than

first

then.

to

in a

made significant

highest

land

areas need

the

since

past

population

concerning

Ghana:

of

implies

if

yields

some

this

shcown in Table

the

population

maintained.

in

during

in agriculture.

implicaticns

IWorld Bank,

the

shown

employed

variaticns acute

over

growing

in

than

reflected

cauntries

future, moreover,

the

also

rate

African

little

is

emplcyed

is

literacy

infrastructure

pressure

influence

techniques

in the

indicator

person

workers

"unemplayed" workers

had ane

achieved

important

last

per

any

which

outmigratimn

The

the

populations

Ghana,

investment

of all

was much larger

eccromy

of which

be aggravated

population.-

and

deteriorating

their

1960,

number

sector,

most middle-income

progress

in

the

19 percent

activities.

indicators,

Whereas

Africa

sector of a

ane example.

in

In fact, formal

informal

"unemployed",

as

sector.

agricultural,

many

involved

counted

problem has

obvious

improved

p.

27

is

seeds,

.

Overall

Economic

Performance

The overall

economic

in Table 2, was very entire

period

fluctuations, per head.

poor. by

per capita

GDP

decrease

396 in

of Ghana from 1950 to 1984, shown (MP in

percent.

remained

relatively

was a reduction,

in

prices

during

the

Frnm 1950 to 1964, despite

to NW 640 in 1971.

occurred

constant

constant which

at

about N* 600

reached N

559 in 1968,

By 1975, a much sharper

per capita

GDP that

reached

some

and more

a trough

of N

1983. This

investment

and

13 percent

in

continued which

to

it

poor

overall

savings.

performance

rise

in constant

has never

decline

that

investment

was

only

7

echoed

of LIP,

1960.

the

gross

1960s,

especially

terms

value

of

GlP

and

f ran

a peak to

percentage

in

1977.

net

rose

of

of investment

and as a

after

behavior

attained

peaked again

severe

the

investment

until 1964, when it

late

percent

by

The absolute

EBth in absolute

during

became

in prices

returned.

fell

was

As a proportion

1950 to 21 percent

GDP, investment a

30

there

fol lowed by an increase sustained

Pbr capita

declined

Thereafter

performance

of

1971, and began By

investment

1982, gross was probably

negative.' The performance are estimated from year

to year,

and attained sharply

to have

early

equaled

but reached

a maximum

to only

of savings

5 percent

of 20 in

19

was even worse. percent

a trough

It

in later

This

GDP.

of 4 percent

percent

1980.

of

In 1950, gross

1972,

in

figure 1967.

but thereafter

increased

scmewhat

fluctuated It

recovered

it

declined during

19EKs.

7

WDrld Bank, Ghana: Policies

and Program for 13

Adjustment,

savings

p.4.

the

Table 2 (a) Domestic Product, 1950-84 Gross NewCedis, 1975Prices) (Million

lP per Year __

1950 1955 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1995

GDP --

--

2631 2975 3680 3986 4123 4292 4481 4580 4643 4445 4582 4599 4975 5349 5628 5488 5646 6033 5293 5097 5212 5654 5512 5538 5344 4974 4747 5158 5420

Exports/ Invt.l SavingsSavings/ Imports/ Invt. GDP(Z) (b) 6DP(2) ImportsGDP(2) ExportsGDP(2)

capita --

--

602 547 568 586 592 602 613 612 606 567 570 559 579 625 640 609 610 635 541 509 507 536 509 499 469 425 396 423 429

--

--

355 462 771 836 693 663 803 954 932 667 471 505 582 757 793 418 544 789 673 530 772 605 537 490 447 344 343 392 N/A

--

-

-

13 16 21 21 17 15 19 21 20 15 10 11 12 14 14 8 10 13 13 10 15 11 10 9 8 7 7 8 N/A

---

-- _

488 755 627 450 308 655 590 777 593 638 201 474 402 804 976 1084 904 686 722 678 595 465 525 303 317 583 360 276 N/A

------- -

--

19 25 17 11 7 15 13 17 13 14 4 10 8 15 17 20 16 11 14 13 11 8 10 5 6 12 9 5 N/A

-

-

584 687 1067 1370 1490 1305 1444 1261 1738 1279 1336 1115 1206 1181 966 668 968 1146 974 926 994 911 770 842 727 449 469 526 N/A

--

--

-

22 23 29 34 36 30 32 28 37 29 29 24 25 22 17 12 17 19 18 18 19 16 14 15 14 9 10 10 N/A

---

_--

716 979 923 984 1105 1297 1231 1084 1399 1249 1066 1084 1026 1228 1149 1334 1328 1042 1023 1074 806 771 758 655 597 688 486 410 N/A

_--------_

21 33 25 25 27 30 27 24 30 28 23 24 21 23 20 24 24 17 19 21 15 14 14 12 11 14 10 8 N/A

2: NotestoTable (a)Source: Economic Analysis andProjections Department, WorldBank, except whereotherwise noted. Source for1959a D. Walters, TheNational Accounts of Ghana, 1955-1961, U.N.Report I TAO/6HA/8, 4, 1965. February Gverneentq as a residual bysubtracting Private Consueption andGeneral (b)6rossDomestic Savings, derived Consumption fromGrossDomestic Product.

14

Imports exports

and exports

of goods and

margin.

This

deficit,

proportion

of

GDP, despite exchange

share Exports

that

GAP,

decline

behaved similarly

One reason engendered

by

was in surplus

under

Nkrumah

considerable ensuing

effort

years,

3.7

percent

the

size

the

until it

rate

this the

time fiscal

for

digit

With

budget reached

in the

rate

the

deficit

relation

a maximum of 127 percent

had reached situation

8 At the end of 1956, 366.5 million; by the end or 21 percent of the total Trade Regimes and Economic Press, 1974, p.22.

triple

after

digits.

the

of GDP in 1982.

was inflation

when rising

from

1964

to

under control

of inflation to

and as a

as shown in Table 3.

budget

coming in

terms

performance

inflation the

and foreign

of GOe in 19B4.

until the 1960s,

years

resulted

absolute

budget deficits,

to

of

total in

Again

NRC was deposed,

the

there but

A

1966.

the

to a low of NRC, however,

revenuies

1978.

The

deficits

during

dropping

power

of

Ghana experienced

mnly 9 percent

ec:onomic

as a

to 37 percent

peak,

in

imports and

of GDP

a low of 8 percent

dismal

double

(0PI) in 1970. of

both

was made to bring

which

steadily

tighten

to

equal

was in

this,

prices)

mnly 30 percent

in imports,

were being

acccwnt

constant

From this

this

reserves

Despite

a peak,

1950s,

try a ccmifortable

current

exhausted.3

government

led

were

accounted

in most

the

(in

the early

imports

exchange

attained

and reached

for

large

budget

by

they

until

During

reserves.

ternms

exports

were nearly

continuruis

of

of these

dcw

in absolute

the fact

foreign

however,

In 1965 imports

GDP.

story. exceeded

which

1957,

By

both

reserves

an almost

services

a drawing

to rise

a similar

during

increased.

requiring

continued

nonfactor

was a period

substantially

tell

increased

The inflation was an effort

to

a massive

Ghana's foreign exchange reserves totaled N* of 1964, these had declined to Nt 83.8 million, value of imports in 1965. J. Clark Leith, Foreiqn Development: Ghana, New York: Columbia Uhiversity

15

Table 3 EconoeicIndicators Relited to Inflation (millions NC)

Budget Surplus Year GovtRev(a)GovtExp(a) (Deficit) 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 i972 1973 1974 1975 1976 1977 1978 1979 1980 1991 1982 1993 1994 1985

36 42 78 96 101 161 106 99 120 134 140 167 150 165 245 284 231 254 298 332 437 451 419 391 579 910 870 1141 1392 2600 2950 3234 4903 10195 21728 38691

27 34 46 75 96 91 96 111 106 124 156 216 229 266 289 371 273 321 400 395 46B 524 543 549 754 1146 1483 2137 3165 4296 4668 7719 9530 14755 26694 45763

9 7 32 11 5 70 10 -11 15 10 -16 -49 -79 -101 -43 -87 -42 -67 -102 -63 -31 -73 -124 -157 -175 -337 -613 -996 -1773 -1696 -1718 -4495 -4726 -4570 -4966 -7072

I Shareof Surplus (Deficit) in -------------------GovtRev GDP 25.9 17.7 41.0 12.4 5.1 43.5 9.0 -11.3 12.1 7.3 -11.5 -29.7 -52.5 -61.0 -17.7 -30.7 -18.2 -26.4 -34.3 -19.1 -7.0 -16.2 -29.7 -40.2 -30.3 -41.6 -70.5 -97.3 -127.3 -65.2 -58.2 -139.7 -99.4 -44.9 -22.9 -18.3

2.4 1.6 6.8 2.1 .7 10.5 1.4 -1.5 1.9 1.1 -1.9 -5.3 -9.0 -9.2 -3.5 -5.9 -2.8 -4.5 -6.0 -3.2 -1.4 -2.9 -4.4 -4.5 -3.8 -6.4 -9.4 -8.9 -8.4 -6.0 -4.0 -6.2 -5.5 -2.5 -1.9 -1.9

Consumer Annual Nominal Price IndexIc) Rateof GDP(bl (1972lOOl Inflation (1) 3B8 473 469 505 696 668 690 726 766 1170 869 730 997 1100 1236 1466 1519 1504 1700 2001 2259 2501 215 3501 4660 5293 6526 11163 20996 28231 421353 72626 86151 194038 270561 372982

I/A 32.2 37.7 38.4 36.5 37.3 38.0 39.4 39.8 39.8 40.9 41.4 43.7 47.9 53.0 66.9 75.9 69.5 75.1 80.4 93.4 91.2 100.0 117.9 139.5 180.9 282.9 611.7 1058.9 1635.1 2454.2 5313.4 6499.0 14482.0 20212.6 22310.9

NIA N/A 17.0 1.9 -4.8 2.0 2.0 3.B .9 .0 2.6 1.3 5.7 9.5 10.6 26.4 13.3 -9.4 9.1 7.1 3.7 9.3 9.7 17.9 19.4 29.7 56.3 116.3 73.1 54.4 50.1 116.5 22.3 122.8 39.6 10.4

Notesto Table3: (a)1950-1964 dataon government revenueandexpenditures arefromO8G Statistical Yearbooks through19691 1965-1995 dataongoverneent revenue andexpenditures arefromINFInternationalFinancialStatistics. (b)Source: Economic AnalysisandProjectionsDeparteent, borld Bank. (c)Coobined NationalConsueer Price IndexfromTable3-5(1) Annex 3.

16

deficit

in

1981 led

buiget

has

been

severe

drought

was only

more

in

in

of Payments

inflatimn

in

inflows

of capital

payments

most,

overvaluatimn

Since

with

the

1982,

steadily

the

of the

exception reduced

until

it

than

in Table

has

the

exchange

4,

in surplus,

aid.

however,

Disequilibrium

in Ghana has had important

As seen

and foreign

of

Rate

situation

years

more

and,

has been

and Exchange

of payments.

deficit

inflation.

1985.

The inflatimnary

been

digit

decreased,

1983,

percent

for the balance

-totriple

progressively

year

10.4

The Balance

ance

been

persistent,

rate

resulting

account

current

reflecting

What has a

the

consequences

for

characterized

from

most

the the

and in most

has part

balance

years

import

of

growing,

and exchange

controls. This can

be seen by caciparingthe official

4, in either nominal or real terms, with value

scarcity equilibrium

of

exchange

approach,

and

rates 2.

A brief

estimated

adjust

nominal

summary of that

rate

nontradable situation

perceives to

of

the

balance

derived

to

used real

discussion

power parity that

prices

rate

estimated

demand

and

the

17

and services. in

the

absence

for

exchange

in detail

ratio

(PPP)

a simulation

equilibrium

in what

the

functicns

in Annex

follows. the

to estimating

as reflecting

equilibrium

the

presented

goods

using supply

of the

parity

power

discussed

approach

in Table

rate,

exchange

purchasing

rate

are

is

of tradable

of payments

market

to estimate rates

rate

several indicators

black

the

exchange

methods

The purchasing exchange

using

equilibrium

The

the

exchange:

econometrically

exchange. and to

rate

the

model based on foreign

foreign

any of

exchange

of

equilibrium

the Starting

of major

prices with

of a

Table 4 Account Dalance, Actual andEquilibriue Exchange Rates(ml Current

Rates (NCIIUSI Nominal Exchange

(Ib Rates(MCK/US) RealExchange

Equilibrius Actual Equilibrium Actual Current ----------------------------------------------------------Account -------------------Model Model Official Black Balante (cl Official Black lhi If) 1g9 Market (1g PPP11g SU9I (di Market (dl PPP(el Year (hillions 19S8 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1994 1985

41.2 -19.4 -94.9 -135.1 -62.7 -107.9 -74.9 -212.1 -117.5 -69.3 -42.9 -48.6 -66.0 -146.1 94.9 114.2 -285.6 -26.9 -100.9 -138.2 -104.2 43.2 -50.4 -503.7 -191.1 -246.5 -201.1 -276.3

.71 .71 .71 .71 .71 .71 .71 .71 .71 .84 1.02 1.02 1.02 1.03 1.15 1.15 1.15 1.IS 1.15 1.15 1.51 2.75 2.75 2.75 2.75 3.45 35.34 54.05

.71 .71 .71 .71 .71 .56 .59 .65 2.13 1.67 1.75 1.75 1.64 1.75 1.64 1.49 1.73 1.99 2.91 9.20 0.76 15.56 15.87 26.25 61.67 76.58 135.00 160.00

.80 .81 .82 .81 .85 .94 1.02 1.29 1.431.26 1.37 1.39 1.36 1.42 1.45 1.47 1.42 1.66 2.59 5.34 7.76 10.74 14.95 30.93 39.74 94.38 123.49 129.32

.88 .99 1.15 1.30 1.17 1.17 1.30 2.05 1.58 1.24 1.51 1.46 1.57 1.55 1.43 1.35 1.47 1.66 2.06 4.17 6.29 9.31 13.71 36.45 42.41 81.79 107.47 NIA

.71 .70 .70 .70 .67 .61 .56 .44 .40 .53 .60 .59 .60 .58 .64 .63 .65 .56 .36 .17 .16 .21 .15 .07 .06 .03 .23 .34

.71 .70 .70 .70 .67 .48 .46 .40 1.20 1.06 1.03 1.01 .97 .99 .91 .81 .98 .96 .90 1.38 .93 1.16 .86 .69 1.25 .65 .89 1.00

Notes toTable 4: (a)Allfigures aretaken orderived fromdatainAnnex 2. (b)Realexchange rates arecalculated from nominal rates bydeflating bytheratio of totheManufacturing UnitValue Ghanasnontradable CPI(inclusive ofagriculturel (MUVI index ofexports byindustrial earket economies to4e turping countries, given inTable 2-1. (ciTable 2-2. (dlTable 2-1. (elTable 2-5,column 1I1. (f1Table 2-5,column (41. (g1Thenominal equilibrium exchange ratefromTable 2-5,coluen (1),deflated asdescribed Innote(biof thistable. (hlNominal equilibrium exchange ratefromTable 2-59column (41,deflated asdescribed innote(bhof thistable.

18

.80 .80 .80 .80 .90 .80 .80 .90 .80 .J0 .80 .80 .80 .80 .80 .90 .80 .80 .90 .80 .80 .90 .90 .90 .90 .90 .80 .80

.89 .90 1.13 1.20 1.11 1.00 1.03 1.27 .89 .79 .99 .94 .92 .87 .79 .74 .83 .90 .64 .63 .65 .62 .74 .95 .96 .70 .70 N/A

distortions

in

the actual

rate

(CPI) to exports

1957-59, by

the

the ratio

estimated

using

annual

data

was estimated

exogenously

by government,

for

producer

the quantity

"normal" level last

variable

Prnex

4,

ages,

their

gold,

yields

of price.

and other

domestic

prices

of

index

ccountries'

of

the

price

of cocoa, of

given

the

and the a

was estimated exportables

relative

to the

of

the

rate

supply using

the

imports

as a

price

previcnis

stock

and an of

market year,

of cocoa trees

of new planting,

and the

for

as

independent

in

of different

an index

and GDP, each deflated

The

described

which

function

the

price

of cocoa trees. model

of

determined

functim

year's

was

import

of nontradables,

"vintage-matrix"

the number

accaunt

time,

For

level

the existing

using

Each of these

the previous

cocoa in

a cDcoa

years.

of importables

was estimated

produced

these

twenty

Cocoa supply

Finally,

exports

function.

by the price

into

over

price

demand function,

GDP deflated

was estimated takes

least

price

of prnduction

which

a function

at

supply

as a function

of food production.

maize,

for

the domestic

official

consumer of industrial

an import

noncocoa export

nontradables

current

nantradable

(MIN) index

model involves

and a

demanidfunction,

index

unit value

by multiplying

was estimated

natiuiss.9

The simulation function,

rate

of Ghana's

the manufacturing to the developing

supply

equilibrium

is

partly

of timber,

variables

the

by the price

of

nontradables.

In Annex 2, calculaticns were also made using a weighted average of the whDIlesale price index of Ghana's principal trading partners. The results were essentially the same as with the MIV index, which is more comprehensive given the multiplicity of these partners. The MNV index leaves out petroleum imports, which accounted for 10 to 15 percent of the total value of imports in most years since 1972. The greater rise in petroleum prices is partially compensated, however, by a decline in the relative prices of primary foods, which are also omitted from the MUV index. 19

It

was assumned in the

mmonpoly power

in

equate

revenue and

marginal

the world's

of

of Ghana s competitors,

canstant

time.

would have

exploited

by applying

an optimal

export

marginal

cost.

tax

demand for

and Ghana's

were based

aver

that

cocoa market

the

elasticity

twD parameters

model

Ghana

This

cocoa,

share

was

estimates

tax

to

related

lamg run supply

of the wDrld

an independent

Ghana s market

the

rate

its

to

elasticity

market.L°

The first

and were assumed to be

share was allowed

to vary

with

its

level

of cocoa expDrts. The demand model,

and supply

and the exchange rate

demanded and reasmns

supplied

discussed

determined expDrts,

by

of

in

was

remraving all

were

calculated

foreign

Arinex

a,nd by allowing

funrctimns

that

exchange,

2.

The

domestic

trade

except

prices

incorporated

equates

assuming

free

distorticns,

then

no

capital

the optimal

to equal

world

the

the quantities

equilibrium

for

into

flows

for

rate

was

tax an cocoa

prices

times

the

exchange rate. It

is

substantially evident

at

devaluation

avervalued the

end

for of

however, that

Table most

the

decreased it

that

Ghana's

of the

period

era

partial

in

exchange

studied. 1965

rate was

1966.

that

a few years.

upward course at least

by 1975 20

rate This

and

liberalizatim

somewhat for

resumed its

equilibrium exchange

Oily in

4

Nkrumah

and the

overvaluatimn

1983, the rate.

from

of the cedi

degree of suggest,

obvious

has been was first With

followed, All

the the

indicators or 1976.

In

times the official

1964 did the degree of overvaluation decline.

10 The long run elasticity was used rather than the shDrt run elasticity because it is assumed that a raticnal geverTimentwould want to its longer term position in the world market to gain avoid undercutting short-term profits.

20

Thus the was expressed the degree

not

for

primarily

of exchange

restrictics. allocatim

rate

of

growth.

Furthermore,

controls

necessary

substantial

rather

than

corruption

of the

public

behavior

that

wasted

policy

that

by

market

price

and

resources

were

created

of APriculture

half

ne

production,

sector

approximately

total percent

administrative

for

political

to the

rent-seeking

action

aimed at

the Ecoraw

the

available 50

Table

total

5

of

value total

in

1980.

of

total

declined, Preliminary

1983.

GOP is

but

share on

share of

however,

from

results

from

21

but

contributed prckucts

the

by the

make up only

sector

accounts

for

earnings.

the

The

Ghanaian ecocWXmy.

the

Agricultural

export

to year

of

is engaged in agricultural

imports,

illustrates,

1955 through force

of

sector force

in a good crop year.

of the

labor

wDrk

percent

scmiewhat from year from

meant that

contributed

opportuinities

the

Sector

the most important

two thirds

As

percent

is

of

about one-fifth

fluctuated

in

and arcud

agricultural

rate by

This

and discouraged

to economic

change.

Agriculture Over

allocated

by

implications

exchange with

exchange

signals.

The Aciricultural Importance

of

but

and exchange

detrimental rate

official

of payments

deficit

of import

were highly

the

resources

acccunt

had profound

of a market

of

the balance

the face

introcduced

replarement

sector

in

current

in

overvaluatimn

maintain

quantities

of a

distortions

the to

occurred

terms

resources

decisions

seeking

in

The price

the

that

disequilibrium

of agriculture average

remained

agricultural

67 percent

in

in

real

GDP

arLund

50

workers 1955

the 1984 centsus also

in the

to about indicate

53

Table 5 Agricultural Sector (a)

Share Agri InNoM BP (bl Year (1) 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1963 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 1990 1981 1982 1983 1994 1985

57 55 52 55 56 41 35 38 36 35 41 43 40 42 46 47 44 47 49 51 48 51 56 61 60 58 53 57 60 49 41

Share Agri Share Agri Share Agri Exports in Share Agri Share Agri Imports Exports Total Noe inReal InLabor Agri inTotal Agri inTotal Value Agri GDP(b) Force (c) leports (d) laports (d) Exports Id) Exports (dl Prodle) 2) (Million NC) 1) (Hillion NC) 1) 12) 50 52 51 51 53 N/A N/A N/A N/A N/A 47 49 50 50 50 51 50 54 51 52 48 49 45 49 52 53 54 55 53 54 52

67 66 66 65 65 64 63 63 62 62 61 60 60 59 59 58 59 57 57 56 56 55 55 54 54 53 N/A N/A N/A N/A N/A

36 37 43 38 47 50 62 51 42 46 43 46 52 65 66 95 82 85 142 186 122 166 149 225 229 313 307 303 N/A N/A N/A

20 21 22 22 21 19 22 22 16 19 13 18 20 21 19 23 19 22 27 20 13 17 12 13 10 10 9 11 N/A N/A N/A

134 107 104 129 144 140 146 147 147 149 151 121 161 220 191 338 230 336 407 548 645 608 817 1127 2056 2030 1196 N/A N/A N/A N/A

70 62 57 61 63 60 64 64 68 65 67 63 66 65 57 72 64 60 56 65 70 64 70 71 75 64 44 N/A N/A N/A N/A

Notes toTable 5: 1a)Includes forestry andfishing. (bl1955-1959 datafromD.Walters, TheNational Accounts ofGhana, U.N.Report ITA0/GHA/t, February 4,1965.1960-1978 databased onWorld Bank, World Tables, various issues. 1979-1995 datafroeNorld Dank, Ghana: Policies andIssues ofStructural Adjustment, March 30,1987. Ic)Datafor1960, 1965, 1970, and1975-1981 fromWorld Dank, World Tables, 1993, Vol.2; estimates forallother datainterpolated orextrapolated fromthese years using linear trends. Cd)Ghana, External Trade Statistics, various years. Dataforagricultural imports andexports for197S, 1979-e1 frog World Dank, Ghana: Towards Structural Adjustment, Volume 11. Datafortotal exports for1972, 1975, and1979-91; anddatafortotal imports for1975 and1979-81 froa World Dank, Ghana: Towards Structural Adjustment, Volume 11. Ce)Agricultural exports divided bythevaleofagricultural sector 6DPobtained from sources listed inNote(b),except fortheyears 1975and1979-91, which comefrom World Dank, Ghanai Towards Structural Adjustment, Volume II. 22

38 31 30 33 33 39 44 39 37 34 25 18 27 31 21 32 21 26 24 23 26 19 13 9 12 8 3 N/A N/A N/A N/A

that

the

country

Accra

Greater

from 1970

to 1964,11

suggest that

the

even

itself

reversed

pace

the

oils,

total

Agricultural the

total

of

have

in

local

market

2

There

prices. of

total

from an average

Productimn

iMre

detailed

when

a fairly

energe

tL' Wbrld Bank, Vol. 2, p-3 .

began

as a proportion

of

1955-64

total

(principally trend.

less

fish,

share

(96 percent expDrts

than 10 percent

of

because and world

Agricultural hand,

of

to decline.

rainfall)

on the other to

meat,

constant

share

exports fell

sharply

by 1978.

Crops time

series

data

on production

of specific

from this

Ghana:

crops

are

The tables are drawn from Annex 1, which

discusses in detail the sairces of the data and assesses issues

1

and may have

of cereals,

their

no consistent

shown in Tables 6(1) thrcugh 6(3).

Two major

of the

in Table

slackened,

of cocoa

production, in

earlier

overwhelmingly

ccnditions

been

rest

19EKs.

1975,

supply

of 36 percent

least

maintained

fluctuated

has

has at

imports

until

than the

presented

principally

agricultural

of Specific

figures

consist

consisting

of variations

as a share

These

imports

1960),

the

early

imports

exports, in

the

rapidly

more

of urbanization

and fats. value

grew

though

during

Agricultural sugar,

Region

discussion.

Towards

Structural

The first

Adjustment,

their reliability. is

the

extent

October

7,

to

1965,

M Ghana is a sufficiently large exporter of cocoa to the world market that these two influences are not independent. Uhtil the 1970s, the short-run elasticity of demand abroad for Ghanaian cocoa was estimated to be somewhat less (absolutely) than -1 (Leith, Foreian Trade ReFimes and Economic Development: Ghana, p.44). Consequently, a shortfall in production, for example, wculd force world prices up to the point that export earnings would actually increase in comparison with years of average yield. This situation has changed considerably in the last 15 years as a result of the erosion that has taken place in Ghana s share of the world market.

23

Table 6(1) Production Indices (a) (1972:100)

Cereals Year

Maize Rice

1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1990 1981 1982 1983 1984 1985

N/A N/A N/A N/A N/A 42 42 42 45 N/A N/A N/A 42 45 42 51 88 69 63 75 120 116 100 106 121 85 71 69 54 94 95 94 86 43 143 102

N/A N/A N/A N/A N/A 33 33 33 43 N/A 46 43 44 47 60. 46 41 60 60 86 70 78 100 88 104 101 100 155 154 133 111 138 51 57 94 .128

Staples

SarghusMillet NIA NIA N/A N/A 52 52 52 59 H/A N/A N/A 66 69 72 74 58 70 54 47 63 122 113 100 109 116 121 124 119 79 104 87 86 56 37 N/A 41

N/A N/A N/A N/A 100 100 100 114 N/A N/A N/A 81 66 69 71 58 67 79 58 91 143 132 100 110 157 124 146 127 99 151 83 121 77 41 N/A 55

Cassava N/A N/A N/A N/A 18 18 18 29 38 N/A N/A N/A 28 42 43 39 41 41 37 48 84 84 100 101 127 84 64 64 67 62 82 73 87 61 144 108

Yai CacoyamPlantain NIA N/A NIA N/A 71 71 71 71 N/A N/A N/A N/A 147 162 170 155 172 1B0 204 295 134 134 100 89 125 104 85 79 80 89 96 87 87 128 N/A 71

Notes toTable6(1):

(a)Calculated from datafound inAnnex 1,Table 1-2(1).

NIA N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 120 120 100 140 160 116 82 76 77 79 69 67 66 76 N/A 61

N/A N/A N/A NIA NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 42 98 98 100 124 121 75 75 56 56 49 44 50 45 20 N/A 40

Table 6(2) Indices (a) Production (1972:100)

Edible OilNuts& Seeds

Year 1950 1950 1951 1952 1953 1954 1955 1956 1957 1959 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1993 1934 1965

groundnuts N/A N/A N/A N/A N/A NA 49 49 46 46 N5 N/A NIA N/A 53 56 30 43 44 69 68 114 114 100 142 175 124 126 91 93 120 103 112 123 79 N/A N/A

Coco- Dilpals nuts bunches CowpeasSugar Cane N/A N/A N__ ---------N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NR/A N/A N/A N/A N/A N/A N/A N/A N/A NIA NIA N/A N/A N/A N/A N4A N/A N/A N/A NIA NIA NIA 49 NIA N/A N/A N/A N/A N/A N/A 270 N/A N/A NIA 276 NIA N/A N/A 69 NIA N/A N/A 101 NIA N/A N/A 203 N/A N/A N/A 165 N/A N/A NIA 206 102 99 116 77 102 98 116 77 100 100 100 100 103 110 81 111 104 129 119 118 105 127 119 141 77 39 133 131 51 104 121 178 54 131 B8 187 54 142 99 131 N/A N/A N/A 132 N/A N/A N/A 131 N/A N/A N/A 76 N/A N/A N/A 69 N/A N/A N/A N/A N/A N/A N/A N/A

NotestoTable 6(2): (a)Calculated froedatafoundinAnnex 1,Table1-2(2).

25

Table 6131 Indices (a) Production (1972100)

Year 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1990 1991 1982 1983 1994 1985

Seed Cocoa lb) Cocoa (c) CottonRubberTobacco 64 52 61 52 54 56 65 51 63 78 106 100 101 105 132 99 90 102 79 99 101 112 100 84 92 97 79 67 65 73 63 55 44 39 42 53

61 49 58 49 52 54 62 48 60 74 101 96 97 100 126 94 87 99 78 98 102 112 100 84 93 97 79 68 67 76 67 58 46 41 44 53

N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A NIA 15 31 100 146 192 231 692 877 346 400 231 54 38 38 N/A N/A

N/A N/A N/A N/A 25 25 25 25 33 50 50 67 25 25 25 11 N/A N/A N/A N/A 5t 83

100 108 150 175 225 225 275 275 142 56 59 42 N/A NIA

N/A N/A N/A 6 & 6 6 6 18 N/A N/A NIA 41 47 53 59 59 71 65 65 53 82 100 153 194 135 124 47 47 47 24 29 35 29 N/A N/A

Notes toTable 613): (a) Calculated fromdatafoundinAnnex 1,Table 1-2(3). (b)Based onofficial earketing data. (c)Corrected forestimates ofsauggling, as described inAnnex 1.

26

which figures are

based

on cocoa

that

it

of

may in recent This

adequately the

take

is

efforts

probably

the

Board

to show

same increase

the

1970s,

late

estimates as

of the

to suppress

during

a maximum of

as

20

since

the

late

10 percent

percent

of

does

not

it

system

Consequently,

were adjusted 1960s,

of

suggest

transportation

smuggling.

purchases

in smuggling

much

they

effects

smuggling

hcwever,

deterioration

on official

the

of cocoa

to

because

include

not

an overestimate, the

data

do

amounted

government

to obtain

the

more modestly and again

of official

during

marketings

by

L

The

second

issue

relates

to

early

1970s.

With

statistics

after

the

transport

system

and

it

budget,

therefore

played

possibilities trends by other least, functions

in

deteriorating

that

this

to

through

role in

general

gather

and

that

occurred

were so significant

information

to

such an

extent

appear for

to

be

correct.

maize and rice,

In which

that

in

were quite successful despite the poor quality

the

governrent on area

and sample variables

with all the

Nevertheless,

the

and were corroborated

efforts

described

in

data

these

of data,

the orders

addition, are

the

censuses

bias.

production

production

breakdown

accurate

movements

error

the

regarding

the collection

for

of

agricultural

concerning

implies

quality

the

difficult

judgements a greater

the

situation

and production

Informed

surveys.

the

became increasingly yields,

cultivated,

report,

have

account

of

and

alternative

years

into

Cocoa Marketing

1990.

marketings

Analysis

producktian.

or

official

an

snuggling.

productionin Ghana are underestimated

in

of magnitude, to estimate Chapter

7

at

supply of this

of data.

in Table 6(3) are each indices of cocoa production -' The alternative estimated (Annex 1) that actual production based on 1972--100, when it is exceeded reported production by about 5 percent. 7

Perhaps a general steep rice

increase

decrline and

trend,

the most significant in

during

food procduction

the

sugar cane,

maize

plantain

33

ensuing

percent,

production

falling

levels

production

of

on the other 1970s.

of off

rice

and sugar

thereafter. that

cassava

of yams did

it

steadily

experienced

less

of the cash crops

-

a

similar

by a

to

this

are

of this

decreases

were

33 percent,

and

poorly,

declining

a

few years

precipitous

decline

in

output

that

reasnm

occurred

then again

in

significant

effect

irrigatimn.

Cbtton

period

introduced

1982

of

after

on output prcduction drought, its

in 1984 and 1985, production whether this

late

severe

The last

of rice

perhaps

of revival

and rubber

in

production

drought

because in

most crops will

2E3

a

the north. revived

be sustainRed.

a

1900s.

1975

lack

and food

to 1979, and

of drought

major

peaked

suffered

of tobacco

from

two years

and

crops

1970s and early

late

decline.

production

of these

to have been less

cultivation

until the

rubber,

and sugar because of

appears

below the

Rice production,

1960s.

the mid-1950s

Each

the

1974 was

the

Cotton

decrease

and 1983.

to encourage

unclear

the

peak was well

seed cotton,

earlier.

during

for

in

1977 and 1978, with

though somewhat erratic,

-

story.

tobacco

Ohe

a peak in this

from

a sharp,

Production tells

reached

had been attained

about 1977,

still

followed

As examples

production

percent,

For sugar,

hand, grew fairly

Thereafter

tobacco

first

45

are

exceptions

irrigated.

the following

Production

1970s,

6(1)-6(3)

4 percent. Production

crops

are

sorghum

bananas 67 percent.

by only

The only

that

and 1981-B3,

shown in Tables

until the early

years.

both crops

between 1972-74

recorded:

trends

also water

for

affected

during

the

program

was

With

of

had a

improved

somewhat,

being

weather

though it

is

By the

middle

by the disintegration tires,

and

costs

addition,

the

in

this

late

of the

spare

transport

to

parts,

1970s,

system

plus

report,

in

the

production

decreased real

value

to

the

contributed

wa5 also

of transportatimn.

the deterioration

and dramatically decline

crop

Shortages

of

the

the road

of producer of

of fuel,

network,

availability

lack

influenced

raised

of vehicles.

prices,

In

discussed

incentives

for

later

cash crop

production. With decline life

cocoa,

go further

Starting in a

that

achieved

earlier.

level

not

do

they

are

planted,

have

been

due

to

a

tree

maintenance,

reduced Pnnex

and

harvests.

fairly

some

These

in 1982-64 that

period

the

after

prcduction.

by issues

insects are

of

addition, transport and

explored

for

the

a steep

to

1972 replant

system

next

decline

than half trees,

until at

declining

disease, further

fluctuations

cocoa

after 1950s

in excess

was less

that

decrease

In of the

began

of

and productive

level

this

to decline

the early

origins

of production

yields

start

much of

deterioration

infestation

fact

the

substantial

output near

seriously

failure

maintain the

reached a level

production

Given the

after

incentives

long gestation

despite

of

years

to

crop,

cash

1973, however, cocoa production

maintenance,

sufficient

the

Ghana maintained

in

resulted

important

most

having

1960, and

that

proper

After

L

to weather,

due chiefly 12 years.

in

tons

the

back in view of

of cocoa trees.

of 400,000

far

by

with

least

25

appears at

to

a rate

producer

led to decreased lower

in Chapter

yields,

and

VII and in

4.

1 Rubber has an even longer gestation period and productive life, but the dramatic decrease in production after 1979 appears to have bEen due more to an inability to cover variable costs than to a decrease in the capital stock invested in trees.

29

Food Constmntian Indices

of

from FAD Producction Table 7,

total

Yearbooks

with

alcng

data

incomplete,

availability,

which

grew steadily

food production because

after

this

considered

very

population.

in

evidence are

serve

as at

improved lack

this

after

of direct

to

from this.

guide

time. 1983,

this

if

are

presented

per

capita

19605 and early

was because population

period

in

consunmed per day

that

later

failure

growth. to

food

1970s,

of the

was unable

The with

household

1769 calories

food

was

It

of

was also

increase

from

a problem

per day in 1980

spread

differential and

uniformly

access

food

intrahousehold of severe

malnutrition. and

nutrition

There

in addition,

the

possibility

to

are

sufficiently

the

extent

food the

availability

situation

and nutrition

30

data

from the

surveys, that they

appears but the

the

do not

problem

remains.

the

ND direct

that

nutritional

of good harvests,

return

consumption

imprecise of the

across

distribution,

consumption

is,

must be

to food resulting

household

production

a reliable

the

this

of

income

strcngly

on agricultural

existed

even

family

verify

suggest

to keep up with

consumption

available to

Sheets,

gap.

low,

points

data

part

When one considers

variations

data

1972

capita

Per

(mweyer,

In

and consumption,

number of calories

during

the Ghanaian economy during

imports to fill

data

levels.

the

food production

Balance

on the average

Although

to alarming

Food

and

per capita.

declined

per capita

and

to problem

that have of

Table 7 Indices andConsumption FoodProduction (19722100)

Agricultural Food Production (a) Year 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984

Agricultural Food (b) Consumption Total PerCapitaCal/Day

Total PerCapita 68 68 71 86 73 74 83 77 82 91 101 100 101 104 104 95 89 88 93 90 91 98 85 100

N/A 73 N/A 77 79 83 87 91 95 98 101 100 106 111 104 103 106 N/A N/A 102 N/A N/A NIA N/A

89 87 89 105 87 86 94 86 89 97 104 100 99 99 96 85 77 74 76 72 71 69 64 75

N/A 93 N/A 94 94 96 99 101 103 103 104 100 103 105 96 92 92 N/A N/A 82 N/A N/A N/A N/A

N/A 2015 N/A 2033 2034 2099 2139 2177 2224 2240 2260 2166 2241 2272 2072 1986 1996 N/A N/A 1769 N/A N/A N/A N/A

NotestoTable7i (a)Source forFoodProduction dataisFAOProduction Yearbooks. percapita datausedtocalculate Forsource forpopualtion figures sitTable1. Sheets. (b)Source forFoodConsueption dataisFADFoodBalance Forsource forpopualtian datausedtocalculate percapita figures seeTable1. anaverage of 1961-1963 totals; figures represent 1962FoodConsumption totals. of1979-1981 represent anaverage figures 19M FoodConsuaption

31

CHWTER III: Phy analysis must

begin

of

these

the

products

and the

contributes

resources

to the

groups

is

however, why

estimated

certain

policies

The history characterized generally

by

of

in its

receives

This

is

in Ghana

determination. of different

revenue

The impact

have existed

investigate

changes

fabric

change must take and

into

consumers

the

role

as political

during

economy.

sociopolitical

producers

Ghana

frequent

deteriorating

in the

acted

farm sector.

policy

and consumers

that

II.

price

involved

as prcxucers

government

in Part

of

RPAYERS

frnm and

of price

insufficient

policy

an

to suggest,

and what has caused them to be

over time.

altered

policy

econcmy players

can be described

agricultural

these

political

the varicus

by ccotsidering

At one level,

TIE EVOLVINGPCLITICPL EQMNY-THE

the

The reasons

account

the

also

as

of the state

articulated

The major

are teachers

in

and professicnals

interest

deeply

by a

imbedded

any explanatim

of

grcups

as

actors.

as that

groups

distincticn

the cities, organized

of Llniversity

In the ccuntryside, and

are

and

political

recently,

not

of the

It

only

must also

brokers,

who have

Groups

interest

residential

groups

the Ghana Associatian

absentee

this

has been

intermediaries.

The best

the occupational

for

of

decades

and, until

scniety,

role

as well

Interest

occupation.

three

of govermment

of Ghanaian

but

past

there

employ sharecroppers

are is

sone of into

Lecturers are large

urban

and

rural.

variaus

formal

groups

and Among

the most politically

vocal such as

and the Ghana Bar Associatim. farmers,

or wage laborers 32

based cn residence

who

frequently

to maintain

are

and harvest

cocoa

trees,

to extend

crops.

There

these

activities

work off

are

and

also

replant

smaller farmers

themselves,

their

cocoa

own farms

though

during

of sharecroppers who are

who live

they

part

fanrs,

the

farms

food

and under-take

snme outside laborers or A third

year.

cultivate

to

on their

may employ

of

engaged by

and

larger farmers

group is ccarosed to

as caretakers

their cocoa

farms once they are planted and to undertake some extension

replanting.

Finally, there

plant

trees,

cocoa

undertake

other

are

harvest

cocoa

agricultural

During

the

wage laborers

Nkrumah

period,

the

to help

organization,

to be a nationwide

the cocoa

weed and

the day

harvest

food

and

or task to crops,

and

tasks.

Counxvcil (UGFCC) was established supposed

beans,

hired by

tend

growing areas.

United

Ghana Farmers

organize its

Althcigh

farmers.

activities

Cboperative

were

it

was to

restricted

Mbre importantly, it was an arm of the Convention

People's Party (C1P), that was designed to extend the authority of the state into

rural

structure.

areas

and

organization,

Although local

was it

agents

highly

co-opted were

represented farmers' interests.L Nkrumah

in

Cooperatives as

those

though colonial

1966.

More

centralized a

not elected The LEFOC

recently

the

the

cooperatives

agricultural period,

determination

their

achieved

power was severely

± Bjoro Eeckman, Organizing Development in Ghana, Uppsala: 1976.

and it

in its

into

its

only very imperfectly after the

Federation

fall of

of Agricultural

various discussions, such

the cocoa producer some

importance

undermined

the Farmers: Cocoa Scandinavian Institute

33

farmers

was banned

Ghana

of

bureaucratic

larger

farmers in

has represented Ghanaian involving

few

and

price, during

but, the

by the LUGFCCand their

Politics and National Studies, of African

has never

fnemtership

included

more than

a small

fractimn

of

all

Ghanaian

farmers. Aside rural

areas

farmers,

from

consist

more important

the

of traders,

of these

on their

farms

are also

vestiges

of

important

transporters,

are also

to remain

most

large

the urban

engage.

including

of

the need

In addition,

civil

in

Sone of the

who are relieved

they

elite,

groups

and shopkeepers.

farmers,

by the caretakers

occupational

servants

there

and a

few

professicnals. During

the

late

1960s

occurred

in

resulted

in a marked decline

the cocoa workers

the composition

produring instead stayed

remained

an their

professionals, with

ecanomy

renewed

rural

commercial

of wage

areas,

laborers

and

with

or

purchased

food crops,

in a variety

its rice

in

physically large

farms,

especially

of productive

the

or simply

and others formal

back

moved

tracts

These

numtiers of

workers,

wages

into

booming cncoa

significant

servants, low

migrating

the north.

with

Second,

civil

transformatim Low cocoa prices

especially

Coast

farms. and

they

areas.

work m ccumercial

food

ties

radical

urban to

of uncultivated rice.

Elsewhere,

activities

the land this

outside

the

here is

the

of the state.

binding

tie

importance, of

to

a

rural

Ivory

depressim

invested

Cutting

part

the

north

their

to grow

bourgeoisie

purview

to

In the north,

and began

the number

politicians

ecmnomic

1970s,

within

from other

subsistence

former

frustrated

countryside.

in

regicns

in the

the

of groups

emigrated

industry,

and

of in this

the country,

across

the urban

ethnicity respect, the other

and

and rural regimal

are the Ashanti Akan groups

34

groups

described

affiliatim.

Of

in the central to the south

of

particular

and west central the Ashanti,

the

Ewe of less

the

Regian

vlulta

important

groups

identification

is

which

have

Volta

Region,

along

also

lagged

bordering the

especially

ecnonmically

where

the

of Ghana by

Regions,

with

Kumzasi the Ashanti

and

strong

the

both

Vol ta

areas

of the

of the

Lake.

The

have

the main resistance

the

Northern

sides

capital,

in

of other

the

in

other

Ewe span

rest

and prcrvided

coast

behind

from the

industry

Togo, and a number

for

numerically Regicnal

north.

country,

border

and in

and Ashanti

dominated

to the erosion

of

the

cut off

and are

Brong-Ahafo years

Regions,

and Upper

the

its

cocoa

wealth.

Role of the State The role early

Nkrumah

political its

of the state in

years

as

the

in

every

area

with

CRP,

base among the new elite

power

Ghana was its

political

of

and economic

resources for

its investment

program in

the

of

economy,

confidence

and

made following

Nkrumah

Council,

economic

difficulties

narrowing

of

decisionm-aking This

purge

National

and the

cocoa

support of

Liberation

and the

the

to

its in

hands

of

continued

Redemption creation

growing

the

and

under CcLricil

of the

lack

Prime

Supreme

to increase

activity.

With

the

the

to mobilize

government

its

legitimacy

of

by the National but

confidence

increased

lost the

Efforts were

Ehsia governrent,

continued

resulted

centralization

in a of

Minister.

the military

government

(NRC), especially

after

Military

35

and its

scught

of the population.

by the

constituency

the

tred

a

ideology

continuing efforts

however,

bolster

and particularly

during the

the face of depleted reserves and

broad segments

s overthrow

and

socialist

of young and educkated,

bankruptcy of this regime brcught on by its

collapse

greatly increased

Council

of Acheampong the

(9MC),

October which

1975 became

the paramonmt

decisicar-making

authoritarian the

and was cut

population

servants. of state

the

SMC in

Only minimal

July

urban

was forced

by the

turn,

not

elite

only

from

the

of professicnals

simply

became

mass of

and civil

withdrew

increasingly

to

a

were

from areas

coercive

a

as its

One of the

alienated main

institutionalizatimn structures representative

participation.

resources.

have

held

Furthermore, they

have

to major

portians

extremely

high

would

have

A major

reasmn

for

over the

elitist

of

the but

financially

the

mobilization

extent in nature

population. without and

that and Uhder

developing politically,

36

the

Armed Forces

presidency,

of a strong

and at

allowed this

for

has and

been

not

the

administrative the

expense

of

more widespread the

monopoly

that

of scarce have

had clear-cut

an organized its

been

structures

"the

Nkrumah,

of

popilation.

distribution

representative have

base

style

in Ghana has

regime

but

political

Ghanaian

state

place.

apparatus

by the

judicial

colonial

that

to

beei

rate,

the

centralized

entire

of the of

in his

personalized

the

independence

mechanisms

structures

practically

from

lack

centralized,

characteristics

since

inherited

the

the

assumed

the

chairmanship

installed

of rule

Linann and

of

in

interlude

Hilla

resumption

was

hnwever,

brief

the

to abdicate

Akuffo

introdurced,

(AFRC),

which

military

and General

After

decision-making

supporting,

extent

of the populatim

ecornomic difficulties

led

existed,

the

in

Counicil

overwhelming

these

frnm

1976,

changes

Fevolutionary

political

a large

The state,

of decisian-making.

som

By 1976, the NRC/613 had bercame highly

dwindled. AcheampoM

of

to

segments

influence.

power base

off

also

but

Important

body.

state base

grew

links at an

capable

maintenance

of and

reproduction".state set

Sucrcessive

apparatus in

goverrments

frnm representational

became increasingly resources.

amenable

powerful segments

growth

and

that

groups, of

of

the

was exacerbated of was

in

and,

separation

of

predecessors

their

state

to

local

state

at

the

local

chiefs,

the had

traded

for

national

level

Beckman,

of

which

migrants,

of

Orcianizinm

ability

to for

to stimulate

favoritism

state.

in

This

decreased.

through

resort

of scarce

representation

and the

meantime,

control

in policies

resources

had to

communities,

dependent

output

of

power

influence

were not

the

not

disposal

the

bureaucracy's

corruption

institutions

groups,

their

of political

resulted

of those

it

in

in

the

the

process

Eventually, distribution

increasingly

to

of

the

use

of

control.

and

alien

kin

absence

maintain

that

power

resident

institutions

the

of administrative

in

groups,

at

state,

an the

increasing

magnitude

political

particularly

the this

in

resources

the

As the alternative

but

so eroded

place

in

the

pressures

depended

population,

as the

the capacity resources

the

of

to social

in office

development

distribution

2

control

institutions

Continuation

placate

force

"the

motion."~ The administrative

broad

cantinud

rather

and

landbwiiers.

local

the

decreased,

strengthened.

were

well

the

but

state

was

traders, upon

the

relied

and

civil

commercial

Farmers...,

p.239

Local

rescurces on land

production

industries,

of kin

servants.

grcwn

concerns,

of

occurred

in terms

of

on crops This

This

defined

distribution

that

was,

by the held in

by

turn,

and service

Naomi Chazan, inAnatawv of Ghanaian Politics: Managing Political Recession. 1969 - 1962, Hbulder, Colorado: Westview, 1983, p.24. Mi-ch of the discussion that follows is based on this work, which brings together the results of much of the political research on Ghana during this period.

37

establisihments,

through differ-ed

institutions their

both

and not

of values

and guiding

and collective

froun the state

representation,

political

market

apparatus

consensus,

administrative

and

with

rooted

Local

respect

were

They

and were

Accountability

of exchange.

most markedly

legitimacy.

in nature

codes.

forms

to

primarily

a common set

in

was a key feature

of

leadership

status.

Patrons As the power of the and

wealth

direct ties

weakened,

access with

into

the

state

intermediary

local

to the state

"big-men"

orbit. at

varicus

men, professionals,

officers,

union organizers, a key role

local

constituencies. Patron

in

linking

the

arose

when other

channels

closed.

In

they

favors,

voluntary, overstepping deliver relations

their

rescurces with

it

with

top

for

and

bribery. patrons

boundaries.

with

38

the

role

of

chiefs,

of

ethic

in

expected

local

with

the allocation

distribution

-

holders,

the state

entry

broker

to decisicn-makers.

or

leaders, military They specific

of goods and

became increasingly status

client to

aggrandizement,

relations perform

became increasingly

network,

With personal

access

As the state

forces

blocked,

office

Patron

through the patronage and joined

on

by deference,

were

importance.

former

assist their

status,

as a means of gaining

echelons

to

grew in

paramount

were rewarded

and outright

however,

whox took

and others

services

gifts,

importance

times

security,

increasingly

businessmen,

leaders

return,

greater

physical

networks

resources

Patrons

religious

played

to guarantee

patronage

and its

assumed

were

5tate

the patrons community

remained

and to avoid unable

broke off

leaders.

to

their

CHAPTERIV: THE EVOLVINEPOLITICAL EOIX74W This

section

analyzes

ecKormy of Ghana evolved and instituticns

inimical

creation

allocative

of

exertion

of influence

in ways

that

Furthermore, their

and

sociopolitical

ec-nomy and to set

reforms

that

the stage

decolonization

from

revenue and

exchange.

decline

in

provided

foreign production

a windfall

of the state program. The regime under the

regime

and to mobilizing

To

a very

large

was aided colonial

on policy-making

income and welfare. base dwindling,

inability

to draw upm in

an

the

long run development.

Regime.

1950-60

characterized The econroy

the

most

Ghana during at

this

important

its

period

of

time was centered

an

scurce

of govermment

High prices

mn the world market,

during

Depression

of resaurces

The Nkrumah

the

the

was

capacity

to the

inhibited

resource

resulted

led

only

would have been necKessary to strengthen

1950 to 1960. which

also

not

to

regime

the cocoa industry,

policies

inability

for

ecKnomic

political

the

that

to their

and their groups

Liberal A liberal

but

fcunud their

networks

that

populatimn

directly

the

independence

mechanisms of the

governments

m patrmage

of

development

segments

have contributed

the major

undertake

and

which

contends

years

distribution

by major

of important

It

the early

growth

as successive

dependence

support

during to

wculd

thrcugh

periods

fram 1950 to 1985.

created

were directly

the

THE PERIOD6

the

available

was the

extent,

committed

resources

to enhancing

necessary

meant capturing

by the

creation

of

the Cocoa

government

during

Warld

War II,

39

World

a

War II,

to the Ghanaian economy.

strongly

this

and

following

for

its

revenue Marketing partly

the

power

investment from cocoa. Ebard (CMH)

in response

to

pressures

exerted

price-fixing

arrangements

became the though

by cocoa farmers of

foreign

foreign

firms

firms buying

marketed

the cocoa as Licensed

a fixed

allowance per

the expense

of the

purposes

price

of

such

ton.

though

stabilization

as

research,

disease

and

prnducers,

actually

even

purchased

and

return

for

supposed to make a profit

at

surpluses

and for

to

(LBA) of the CMP in

The Board was not

producers,

paid

traders

Agents

Buying

market-sharing

cocoa in Ghana.9- The C(H

price

a few local

and

the

over

nmnoipoly buyer of cocoa at a fixed

the

industry

concerned

were

activities

to be that

control,

set aside

for

wauld benefit

credit

the

prugrams,

and

cooperatives. The maintaining restricted

foreign

a steady their

in the election the

EBard

this

latter

government.

Prior

the

of

government trend

With

between

the Ebard.

diverted

its

control.

the

foreign

one-fifth the

a Beckman, OrnanizinQ drawn from Beckman's work.

the export

and

tax

cocoa but

Che implication

of

directly

by the

had been absorbed were

revised

earnings

govemnment as

cocoa sector

for farmers,

appropriated

rates

Nkrumah brought

the

CRP.

it

of the CFP

competition

firms

in

even though

victory

led by

The

cocoa export

CPP transition

from

graduated

of

policy

of cocoa profits

1950-51,

principally

the sweeping

run by the

the bulk In

this

governnient

the government

to 1951,

interested

to

share of cocoa revenue

under

through a steeply

transitional

under

and

collected

ccntinued

increasingly

of operation.

increasingly

was an increasing

reserves

agreed

1951, the

longer

were

which

of cocoa,

supply

freedom of

revenue was no between the

firms,

and the

as duties. cocoa profits

to general

public

by

This were

investment

tax.

the Farmers...,

40

p.41.

Mich

of

this

section

is

Duiringthe next few years, the CPP struggled to maintain its place as the party leadingGhana to independence. Che of its major political opponents

was

the Naticnal

Liberatimn

Pbvement,establishedin Ashanti with

strucg support from cocoa farmers. successful appeal focal

because

of

to a naticnal point

for

cutting-out

constituency.

farmer

diverted

being

discontent

from

an

trees

to

to control

effort

to

to extend

its

Nevertheless,

it

over

producers

of cocoa In

failure

its

extend

organization

This

the

the

regional

large

never

as an important

share

of cocoa

and

the

revenues compulsory

shoot disease.

swollen

influence

in

the

rural

sector,

t&zumah negime in 1953 founded the Uhited

hanw Farnmer s CLoperative

(L1F0C).

to

Although

ostensibly

Cbunmicil s activities areas. the

It Cocoa

purchase

were

Company

Purchasing

the

the of

Board to assist

planters

of

were

these

result

loans of

subsidiary financed

three

never

the E1ard

public

capital.

By

1957,

the

and

other

"state

in

farms

repaid.

In

1957,

powers

established

41

other

its

growing

in

CQB

of

1952

to

The CPC had a also

responsible

financed

to money

the

the

operations

loans

by the

lenders.

Many

CPC was liquidated

as a

Company,

as any

could

was

and the

Purchasing

had

and

pledged

irregularities,

CFP

it

Cbunicil

cocoa

agents.

that

the

country,

the

the

by

advances

entire

commercial

licensed

redeeming

and operated

with

elections,

established

however,

Ccmoa

the to

from the

interest-free

financial

Unlike of the

with

LBA's,

in

large-scale

funicticns.

(CPC),

cover

entirely

entirely

in competition

distribution

almost

almost

decided advantage over for

confined

was financed

cocoa

supposed

very

and separatist

served

governnent

its

was

UEFCC the

LBA,

L[FOC

except

political

now be more directly

tmok over

its

was not

that

a

it

was

preeminence

in

applied

to

the

unsolved

largely the

problem

farmer

purchasing

17 percent

of the

am

all

purchases

extensive

marketing

network

middlemen

was

replaced

and bureaucrats. the

likely

to

heavy into

upper turn

In real

almost

six

expenditures time,

the

increased

2

of

of

implicaticris.

years.

an urban-based

the

times

share

traders,

the

the

the

windfall

total

over

from

cnnsolidated the

granted

a

Ghana.

The

drawn principally "...those

government

of extending

extraordinary

cocoa

grew public

decade.4

prices

dramatically expenditures

As a proportimn over

the

same

and development

from 27 to 36 percent.-

most and its

CPP control

the

Heckman, OrCcanizinc B

the Far.ers....,

Farmers*...,

p.

3,

Chapter

"The Political

42

these by

period.'

At the in were

the

same total

directed

.

p.107.

II. Economy...,"

during

of GDP, government

expenditures

72

had important

increased

expenditures

Mrbst of these

Beckman, Orhanizina

F tymer,

was

was

of clerks

central

high

expenditures

from 7 tD 18 percent of

See Table

it

organizatian

Stephen Htymer, "The Pblitical Ecanomy of the Gold in Gustav Ranis, ed., Government and Economic Development, University Press, 1971, p.173. Coisolidated expenditures the central government, Cocoa Marketing BDard, railways local government. °

officially

and other

and were

process

among

brokers,

had been

cammunity,

against

it

within

farmers

parastatal

farming

only

1959-'0,

two years

middlemen

incme`"3,

Government terms,

rose

By

base

was complete.

The capture fiscal

Within

agents,

private

the

cauntry.

from

of private

of cocoa

countryside

the

cocoa

political

was declared

crop.

organizaticns

appropriation the

cocoa

these

stratum farmer

in

of

by

Since

an organized

The 1GFCI

organization

mmnopoly

from

establishing

2 producers.`"

agricultural

recognized

of

p.131.

Coast and Ghana," New Haven: Yale include those of and harbors, and

tnwards

improving

the

transport

and providing

services,

system,

expanding

research

agricultural

health

and educational

and extension.

Imposition of Controls, 1961-63 after

Cocoa prices began to slump seriously increases in

world

supply

stimulated by

because

remained

relatively

increased

more or

were squeezed.

of

these

earlier

constant. less

high

Public

revenue

result of

producktionresulting from

prices,

Ghana's

export

and

marketing

produiction

Since

proportionately

as a

the high prices of the post World

War II period.-- Despite substantial increases in new planting

1957

with

from cocoa

the

expansion

declined

earnings costs

of output,

in nominal

profits

terms

from

W

67 millicn in 1957 to Nu 36 million in 1960 and NW 13 million in 196 5.a The governnent, swing,

was able but

Government

budget

government

revenue

government

drew

stabilize the

its

liquidity

its

its

expenditures

to sustain

reserves,

from Nt 224/tan

with

the

financial

deficits in

base

1960

in 1961 flows

of the

percent

on CMB

to N! 167/ton for

a time

its

sharply

to 61

but

a

time

program from

1964.10 at

the

and

11.5

percent

In this of

prices way it seriously

0

down

eroded. of total the

to prodLicers was able

to

depleting

CMB.

' The FOB price of cocoa fell from a high of Nk 637/ton low of W 262/ton in 1965. Annex 3, Table 3-4(3).

9

draw.ing

As a ccrseqtence, cut

cost

by

in full

was seriously

in 1963.7

reserves in

program

investment for

for

accelerated

down heavily

cash

large-scale

Table

34,

Chapter

Table

3, Chapter

VIII. II.

Table 10, Chapter VI.

43

in 1954

to a

To a ccnsiderable extent, expansim

of

produictian

Ghana acccunted Ministry output

in

Ministry the

for Finance

the

face

In the

1950s,

emphasis

recurrent

expenditures

at

time.

this

diversifying

expenditures

(N five

236

been

to

due to 1960s

exports.

world

the

Ministry

to

increase

and

the

since

to expand

of Trade production,

sustained

the

Despite

wisdom of continuing

and

launched

m

was an roads

covering

was

promoting

in 1959,

and the such

as

efforts

to

to expand

as

to

this

period

Secm d Plan

During

development. and social

increase

in

and to staff also

the

strongly

a radical goal.

Whereas

1951-59,

the

services,

requirements schools

for built

committed

industrialization.

envisaged

the

comtinued

infrastructure

the

commnitted

the

general

government

CPP

Plans,

millim),

cocoa placed

economy

development

was

and early

investment

sector

to maintain

plan,

"Consolidated"

1958

Che consequence

Development

the

of

1950s

total

measures

public from

The the

of

prices

disease.

had

educatimn.

the

however,

prices,

meantime,

especially

percent

program

diverted

were

in cocoa

during

supported

shoot

fall

cooncerning

of falling

spraying

swollen

Ghana

40

fears

Agriculture

of

resources

about

of

mass capsid

cmtrol

in

the

The increase the

had absorbed

in

First

to

Seccnd public and the

118 million

350 million to be spent in

called for

years." Although private foreign investment was to finance a major portim

of this government

plan,

public

expenditures

expenditures

the mid-1950s.'

Table

had been

Furthermore,

EBeckman,

Organizing

3, Chapter

were raised

also to

when difficulties

the

Farmers...,

II. 44

to be accelerated. a level

that

was

were experienced

p.201.

By 1960-61, twice

that

in finding

of

foreign private with

its

investment,

industrialization

mnly accentuated economy.

1959

overriding

been

importance

of

direct

state

increased

its

prices

the

and

declining

rising

program,

with

account

were

insufficient

was

a

during

the

industrial

also in

$135.1

in

in

its

and

introduced extended,

the

the

had marked

the

belief

the

in

productimn

that 1950s enterprises

as it

and

a balanced

had supported towards designed

resulted

With

clear

current

of

public

small-scale, large-scale, to

substitute

of

45

in a sharp

in 1959

to $94.9

foreign

exch,ange

strong

that

high

account.

licensing duties

export-oriented

domestic

An

was imports

m

In additimn,

investment

state-owned

measures.

Foreign exchange

import

Eeckman, Orcanizinqthe Farmers..., p.206. ETable 4, Chapter I1.

because

deficits rising rapidly, the

series

became

by the

sector,

million

conprehensive

reorientation

and

a

imports

and taxes were raised.

and

year

regime,

1961.2o

budget

for

private

imports.

§4

market

diversify

professed

from $19.4

million

sharply

to achieve

significant

infrastructure

to

which

demand

trade

deficit

was

budget

later

need

and by the

a liberal

austerity

instituted

a

to proceed

wDrld cocoa

participation

a

in 1961 resorted to

were

by

state

Nkrumah gcermnent

controls

the

perceived

replaced

investment

current

million in 1960

the

in

econc3mic philosophy

and

income coupled

in

of

deterTined

planning."'l cocoa

for

reserves

the

had

Falling

increase

of

much

remained

The problems

because

plan

comprehensive

government,

desire

1961,

government

program.

this

"By

'liberal'

of

the

away

there

from

the

agriculture agricultural productiom

and for

The expansion this

period

resulted

state/private

of public by

March

enterprises,

a

milling, few

profitable

jobs

party

cmsumer

prices.

of

mnly 9 appeared

of this

sample of

earned

only

artificially reasomable

in

relation rate

The introduction

the CPP goverrnent. broad segment

'°

of the

general

in

priced

to world

and

just to be

they were also as providing

maintaining

low

managerial

inefficiency,

on profits

and losses

and the net

well

despite

protected

fact,

that

valued

losses

the fact

were often

high

prices

in

markets.'6

profits

artificially

market

supposed

such

of YS 14 million

and inputs

in cedis

at a

of exchange. 1961

to this,

population,

and

budget

was an important

Prior

objectives,

in

to give

revenues,

were available

were

of the

restrictions

and

reveals,

outputs

equilibrium

were

in a

vegetable

manufacturing,

to public

monopolies

firms

because

tile

enterprises

in excess

virtual

as

individual

low

quantitative

were

12 joint

These were involved

to have been making any profits,

firms

operated of

ANnalysis

which data

for

enterprises,

unemployment,

this

during

was initiated

and food marketing,

and social

As a result

state

and

state

reducing

that

boards.I5

mining,

loyalists,

1964-65,

many

53

would contribute

that

out of 23 enterprises

that

the

a number of political

for

in

brick

gold

Although

ventures with

saddled

such as

paper conversion,

examples.

1966

agencies

and 23 public

wide range of activities, oil

sector

turning

Nkrumah had especially

accompanying point

in

the

been supported

in urban

areas.

taxes

and

fortuies

of

by a fairly The austerity

Killick, DtevelopmentEcoanmics..., p.217.

6 Killick, Development Economics..., pp.219-21. Although there was sDme improvement in the profitability of these firms by the end of the 1960s, partly because they had passed thrcugh their "infant" stage, net losses were still close to Ni 10 million annually.

46

policies party,

including

addition, in

face

as

imposed

This scheme

explicit

"representative budget

cocoa,

of the

and of the growing

areas,

the

implied

a

immediate source

decline pre-1961

of

government

goverTwnEnt

budget

farmers

which

was

the tax

period

deficits,

National

This which

1963,

and

the

tax

increased

Despite its financial

to

other

into

an

of the

1963

fr-m

the

helped

to

CRP. controls

the

decrease

duties,

further from

led

LEFCC as the

criticism

on cocoa

contributed

as

compulsory

converted by the

In

prices

and

when the

exchange

import

the

goods,

funds,

was

the

of payments, from

producer

by representatives

from

to

U1GFOC,which

of

was heavy

Assembly

balance

had replaced

determined to

the

supported

The result

revenues

revenue.

of

1961

readily

restrictions

in

in

in

of consumer

in

by backbenchers

import

N. 101 million in 1963.2government was

cocoa

joined

in

monopoly

intensified

farmers."

deficit

and prices

close

businessmen.

decline

misappropriatimn

was

UGFCC in the

Although alleviate

on

had been

and small

continued

purchasing

resentment

on

by the

favoritism,

that

servants,

of production

cocoa

forced

tax

many grnups

civil

incensed

costs

extortimn,

savings

junior

were

rising

by the

abuses.'"

alienated

workers,

of

cheating,

cocoa

however,

farmers

the

well

1961,

of

in imports which

exports to

in

as the the

major

growth

N% 49 million in

the

in

1961 to

difficulties, however, the

go ahead with its Seven-Year Development Plan

published in 1964.

'

These are described in more detail in the next chapter.

@

Table 3, Chapter II.

47

of

Breakdcw

With governaent

its

foreign

increased

its

System,

the

exchange

reserves

seriously

depleted,

borrowings

abroad.

By the

of the

February 1966, the external debt totaled N percent was

in the

1964-66

form of

time

805.3 million, of

long-term loans.

percent),

leakages

the

intermediate

foods

trade

whkere they inputs

productive

licensing would

in the

tax

by

an expansion half

bumper crop.

marketing

CM's

left

its in

expenses

V9 Leith,

paid

not

being

of essential

underutilization

and

official

-

prices

of

of essential

Despite

by the Nkrumah resulted

became

the

exhausted. imports

After

be paid With

the

restricted

farmers,

Regimes...., 48

to

inflation

p.2B.

the

collapsed

Africa

West

price,

1964 and deficits,

prices

how.ever, the

were covered,

UGFCC to

that

tons.

in

substantial

World cocoa

agreed

a substantial

government

in

apparent

538,000

income

cocoa

Trade

chance.

a previously

CQB and

and with

Foreimn

had a

it

history

of

at

imports

Shortages

good.

the money supply. as

were

hands

in

closings

supplies

never

frem current

resources

the

in

of the

over

liquid

to meet power

costs

most

factory

expenditures

were

in Ghana's

resulted

the

generated

of 1964

Farmers

crop

nothing

revenue

government

second

largest

of current payment

unrest. plan

rising

financed

in

to urban

The development

1965,

done

Inadequate

contributed

in

system

have

resulted

capacity.

increase

which only 20

and bank loans (6.5 percent).'9 Aside frem the debt problem,

in

allocxated

in

coup

The remainder was made up in

large part of suppliers' credits (57.9 percent), arrears (10.6

the

for

purchasing there

government and substantial

the and

was almost

government

increased

had a

and the

printing

money

purchasing to 35 percent

annually became

between Orktober 1964 and July acute

with

short-term

In the reduce its

the

cocoa

lowest

such

in years.

voluntarily however,

Ministry

of

voice

of the

farmers

In contrast of

to

the

natimnal

Assembly regarding

sharp

evidence

that

supposed

to

cushimn

them

'Instead,

the

debate

developed

as a monopoly

buyer

of Ghana's

cocoa

areas

was

hardly

a coincidence

belated

attempt

democratic policy,

farmers

and

understood

into

highlighted that

it

early

by was 1966

the

reason

and

an

farmers

agreement the

of

was raised

in

producer

Its

in

vulnerable collapse

the

Minister

to

reform

price

aside

attack

a general

was

Cabinet,

the

bodies.

The

clear

reserves

was

prices.

mn the

Farmer's

Council

Farmer's

about

Natimnal

market

in

the

It

was

who launrched

the

political

Eeing

the

general

despite

of CM

of market

the

the

world

of Finance

to be worried

basis prices.

Cbuxncil

responsible

in a more for

the government's

Beckman, Organizinci B

the Farmers

...

,

p. 2 1 6 .

Beckman, Orcianizinq

the Farmers

...

,

pp.216-17.

49

that

because

changes

the

subsidies

governmment

setting

directimn.

representative

he had particular

in the

cocoa.

headload,

and

protest

such

from

per

CMB,

to

LIFOC. --

no

that

shillings

This

the

in 1963,

reduction

1965

governnent

and other

the

emergency,

this

in

Ghana,

due.

in July

eliminated

mnly

situatimn

falling

planting.

involving

was through

that

be

cocoa

Bank of

the

to 40

payments crises

agreed

UGFOC

agreed

would

further

in meetings

Finance,

atmosphere

by 26 percent

machines

credits

the

It was also

reduce

The external

and suppliers

pressure,

price

and spraying

achieved,

sole

of

producer

level

insecticides would

face

trade

1965. °

fiscal

political

relations

agreenents

with the cocoa farmers on their

struck

The impact which

increased

those

of other

public

sector

element

in

behalf

by the

of inflation,

ckring

the

because

undermining

population.

His

first

was replaced

by the

half

of the

ccupled

with

of the

disastruLs

political

regime

support

was overthrown

National

Liberation

than what

they

loss

of civil

liberties,

economic

this

they

mirrored

discriminatory comparison standards

the

the

regular

to the

wanted "... to restore

creation

2

2

of

in

rest

1957 and

state,

Beckmnan, Organizing 13(1)

favor of

the

and 13(2),

food

twice

prices,

as fast

the

impossibility

of

budget

situation,

was the

military

in February

as

raising

amcang the

Nkrumah

last urban

1966 and

the

and widespread populatin. President's

Cwn

suffered

the

urban

population.

landscape felt

concentration

Farmers

... ,

Chapter

VI.

50

which had

corruption.

had existed been

resented

in all,

Abowe

to In

Guard Regiment

a reduction

of power

p.218.

of what they

They also

which

they

idea

they were opposed

army,

which

in

1960s almnst

In particular,

the civilian

the political

a one-party

Tables

rise

1966-67

hardship,

of

of the

Cbuncil.

were for.

of

in

similar

of independence

bulk

treatment with

the

who led the ccup had a mich clearer

were against

nature

s Council.`2O

for

by the

Austerity. The officers

Farmer'

and especially

consumer goods,23 wages

and the fictitic.is

in

living they

at

the time

eroded..."

by the

in

the

hands of an

executive

president,

erosion

reached

consequence various

out to

objectives advisory

-

authority

addition,

local

property rates

taxation

increased.

on

There

The CFP had

financially

would ease

The

and

precondition economic

for

stabilization

the

inflation

returning

with

to

was vested

about

under

control.

civilian

rule.

in a

FkRbert Pinkey, Ghana Uhder Methuen, 1972, pp.1-3.

while

production

pattern

National

which

trying

to

This

was,

on

were not projects

econouy.2 the

stabilize in

fact,

responsibility

Economic Cmnmittee,

a

for under

1966-1969, Lnndon:

Pinkney,

Ghana Lhder Military

Rile

...

,

pp.21-28.

Pinkney,

Ghana Lhder Military

Rile

...

,

pp.3 0 -3 1 .

51

of investment.

the rural

Rule.

were

with emphasis

Major

Military

'4

manufacturers,

labor-intensive

problem and bolster

In

a

of the

many of

profitable,

of

abolition

the coast,

enterprises,

NLC set

tenure.

domestic

in the

were

the restoration

through

local

along

NLC favored

the unemployment

getting

on

competing

development

Most importantly, econroy

taxes

structure

and efforts

of land

were encouraged

publically-owned

viable.

rules

was appointed

political

CPP, including

a reorientation

concentrated

inquiry

were aired,

customary

sales

imports

was also

capital-intensive,

that

businesses

A network of

attained. of

what its

determine

The traditional

the

and

tax and reductionof of

of

it

be

grievances

the NLMC

focus was that

help

committees

groups.

(stools)

clear

should

and

injuries

private

of to

how these

was consulted,

the

correct

traditional

and

lack groups

from these

the chieftaincy

made to

this

of

and the

chieftaincy,

4

commissions,

cOMMittees,

with representation -

2

interest

be

should

of the

the influence

development.

program of socialist ohe

of

the chairmanship

of E.N. Anaboe,

major rescheduling controls first

cNer

time

of short-term

public

the

external

expenditures

to a standby

debt and the

and subsidies.

arrangement

There was a

JOverNrent Statistician. imposition

of strict

and provided

The IMF agreed for the technical

assistance

to the

government. The system ensure

efficient

essential

allocating

commodities

wasteful

for

still

with proven competition

the allocation

procedure.

The results deficit

was

Inflation

of

reduced

associated

higher

cocoa

returned

2

areas.

Foreign

a The operation in more detail described

of

to larger In order to

capacity.

Nevertheless, was avoided,

the Nkrumah period

in

and inefficiency

3 this

effort

The

were enccuraging.

in 1967,

principally

good harvests,

prices

helped

because of

and only government

8.1

current

Nevertheless,

urban

Trade Regimes...,

52

in

accout

in

1968.3°

were laid

transition

unrest

for

increase

food There

off, workers

but who

because of

pp.31-33.

licensing of the import in the next chapter.

Table 3, Chapter II.

a decrease

percent

workers

to ease the

Table 4, Chapter II. *°

financial contacts.

of

to

supplies

was given

of arbitrariness

amount

unemplcyment as

producer

to rural

Leith,

with in

was an increase

years

and adequate

Preference

underutilized

to try

was altered

from $212.1 million in 1965 to $42.9 million in 1966.9

was negative

prices

resources

trade and and

substantial

a

licenses

consumers.27

although the corruption of the last there was

import

of domestic

mobilization

established firms avoid

for

system under

Nkrumah is

growing

reduced

unemplcyment, and health

educational

and

austerity. in

There

a realization balance

with

was also

over

assistance

9-

Rescheduling

relief

but was not

In the

meantime,

the NLC government

economy these

and the

was

on

expenditures

people

need

for

were

rigid the

K.A. Eiusia,

Busia

and others

long

and macroeconomic

that

the

risk

until

of changes

investment

foreign

and

Ghana corrected

medium-term

its

prcvided

debt

some

term solution. gaining

were

a return

increased

concerned

about

the

Ohe of

an outspoken

influence

rule

to civilian

liberalization.

Dr.

controls

effect

and there

precarious,

private

of

a long

for

1967-70

was unlikely

civilians

as plans

of these

declining

remained

on potential

donor

of payments.

and many

concern

was having

that

immediate

situation

dissatisfaction

rate

the exchange

and

Import Liberalization.

of payments

The balance considerable

incomes,

services.

Devaluation

was

real

were

of growth

lack

the

being

within made, in

the

influential

more

of

opponent

of Nkrumah's sncialist

Progress

Party

ideology.

activity

became

underpinning

that

rather

than as

leader,

values.

in

the He

:3

and having

Bhisia British therefore

had

provided

viewed

the

and a

the

colonial to

high

the

regard

Leith, Foreiqn Trade REciimes...,p.111. 53

as

productive presence, preservation for

civil

the

of private

a regulator

as

party

and ideological institutions

directly

bound

(PP), once

intellectual

state

the

an important,

conderned

heritage

the

They saw traditional

NLC lacked.

continuity

national steeped

the

1969,

in

for

fcundation activity

legal

who organized

role.

but

As a

he was also of colonial

liberties

and

opportu-ities equality. foreign

for

individual

Finally,

Busia

business

position

battled

was the

the

Progress

of

the

Nkrumah had capitalized,

relations

with

the

it

political

of

West,

however,

professionals,

reinforced

farmers

Movement, which the

split

but sought

to

basic

built an Akan

during

forest-coast

their

Busia

Liberation

cocoa

the

to

base,

National

Ashanti

duplicate

not

issues

appealing

because

this

to

over

close

concerned

investment. 2

rulers

successor

did

RP favored

especially

top of

CPP on behalf

Party

which

was

On

He was less

private

traditional

and

that

aid

philosophy

in society.

party

and the

interests,

This businessmen,

mDbility.

had

1950s.

of the

unite all

The

1950s

upon

Akan under

one umbrella movement.32 In July

1967, the

was raised

producer price of cocoa were increased essential imports

to 8

commodities, over

restrictive

the

next

For

the

Nevertheless, prices

that

characterized

s

3'

were the

years.

few years,

this

aid

inflows,

1950s,

remained

low

in

real

and non-cocoa

the

and

stagnant

exports

were

Politics

...

Chazan,

An Anatomw of Ghanaian

Politics

....

Trade

Reuimes...,

54

p.

111

by high sane

.

absence

face with

frustrated

pp.124-25. p.772.

of

began world

debt

in the

,

the

balance

compared

An Anatomy of Ghanaian

Foreign

in

trade

was masked

terms

lowered an some

itself to liberalizing

occurred

Chazan,

Leith,

wages and salaries

duties were

this

h:ovEver,

production still

Import

As

policies,

foreign

cocoa

percent, and

government committed

few

first

substantial

by 30

percent.34

and the

macroeconomic

deteriorate. prices,

by 5

currency was devalued by about 43 percent, the

to

cocoa relief.

of producer those

that

by excessive

and inadequate

regulations

in

incentives

face

the

of

a

overvalued

still

exchange rate.'5 The Progress

in August 1969, and Busia's

the election

Party won

Since many members of this

government of the Second Republic came to power. had

gcvernment its

economic

those

of

policies

the

important

were

marked

previous

and the

environment

an

played

more

Confrcnted

with

alter,

the This its

thrcough

ccuntry

neighboring

antagonized

Ghanaization the Ghana

Business

measure's

success.

ccmmitted

to its

retained

monopoly of

balance

Buying

resulting of

of payments

for

farmers,

the

trade,

cocoa after

the high and and

thr-wngh

inhibited was

public flooded

market

took

advantage

prices

in 1970

expenditures. markets

with

of this

ostensibly Enard

cooperatives

This

and

in 1966.

the LGFOC was discredited

world

passage

the Cocoa Marketing from

1969.

to accelerate

tried

govemment

buying

goverrnment

Busia

of some of

economy

and expertise

incentives

imports deficit

also

the

from

the

businesses

other

of capital

lack

Agents

Act in rbvember

Expulsion

though

significantly,

expansion

and

Furthernmore,

improving

Mbst cocoa profits

but

Bill,

Licensed

indigenous

rapid

trade

of small retail

the

all aliens from

by expelling

The government

economic

Shortly after coming to

and deprived

ccuntries labor.

agricultural

seasonal

Aliens

from

faced.

situation,

of policy measures.

of the

passage

increasingly

economic

power, it attempted to alleviate unemployment

change

by

was the

however,

government

deteriorating

a

a number

government undertook

the

which

constraints

than

by continuity

What did

regime.

the last years of the NLC,

during

role

of windfall to permit increased

imports

a the

purchased

exchange rate was the official suggests that : Table 4, Chapter II overvalued from 1967 to 1969 by 40 to 50 percent in comparison with the equilibrium rate. 55

primarily

by

cheaper

the

during

increased

urban

this

imports.

payments

middle

period As cocoa

deficit

became

1967, that

the the

were

market because

of timber

boards

of

deficit

budgeted further

to cover payments,

its no

third

quarter

three

quarters

-~

services longer

existed.

of that

because

of

balance

of

were

year.3

raise

same time

on

the

producer

world prices

schemes,

controlled

With

a substantial

non-

regulation. by marketing government

seemed

on prices

surplus

accoumt

that

deficit,

than

prices

the

likely

to

subsidies.

Foreign less

at

were

pressure

of

devaluation

and unnecessary

value."`Y upward

the

promoticnal

crops

and transfers

of 1971

Chazan,

trade

to

various

agricultural

at

Cocoa

by neglect

and export

taxes the

however, the

declined

was reluctant

Despite

1971-72,

import

In 1971,

liberalized.

prcmoticnal

for

away

on imports

rate

frustrated

and minor

"dubious

areas

became

1971-72

eating

ga%'ernment

needs.

remained

Exports

in 1971,

Liberalization.

inflation

the

revenue

exports

erode

Import

was being

down and

Food actually

in rural

than

dropped

exchange

regime

of its

cocoa

of

effective

import

cities

prices

accelerating

real

the

classes.

acute.`:

Collapse With

in

upper

and

as

the

On December

Anatomy of Ghanaian

Politics .,

7

Leith,

Foreign

Trade

Regimes

3X

Leith,

Foreign

Trade

Regimes...,

56

well

exchange

half

27,

p.150. p.l51.

as

reserves

trade

...

GCana had rum since

at

deficit 1971,

,

its

Prime

pp.159-61.

debt the

over

1967

service

end of the

Minister

the

first Ehsia

announced

a devaluation

the

time,

same

of the

import

cedi

surcharges

and taxes

abolished,

making

the net

devaluation

the

change

in

exchange

gross

bmurses than

were 10

minerals price

also

the

abolished,

percent

of

received

the

full

raised

by

cnly

was

substantial

benefit

the

account

The 25 percent affected

export

items

of

the

the

government

FOB

price

measured

increased

for

less

timber

cocoa

allowing

than

and tourist

Although the

were

less

acccunted

devaluation,

At

payments

points

acccunt receipts.

25 percent,

of

!K 1.82/$SE.z'

12 percentage

rate.

current

to

on current

about

thouxgh the

total

portion

frnm Ni 1.02/$tI

and

producer

to skim off in

a

domestic

currency. Despite of

real

income,

contrast

to

over

change

the

early in the

in 1966,

the

wage increases,

especially

the

an imports

some

heavy

for

1967 devaluation, the

previous

exchange

result

of

was a toppling

coup in January

devaluation

users

of

rate.

Instead, of

import

external of the

it

licensing

I.K.

more

the

of

situation

in

a sharp

Eusia being and

limitations

the

earlier

the in fall

instance,

replaced

National

loss

was in

impact

resulted

with

Acheampong

and

real

As in the

government,

1972 by Colonial

the

resembled

resources.°

This

of demand

lessened

months

a huge

implied

importables.

when suppression

12

when a tightening

availability

the

in a

REdemption

Council (NRC). In retrospect, its

much by day

it

took

own over

it

political the

appears weaknesses

government,

5" Leith, Foreicn Trade itself been devalued a few days average depreciation against all 40

Leith,

the

that

it

as

by the

faced

57

regime economic

strong

was undermined crisis.

opposition.

as

From the First,

in

had ... , p.152. Since the dollar the weighted (by trade shares) was 92 percent.

Reaimes earlier, currencies

Foreign Trade Regimes ...

Busia

,

p.154.

ethnic

terms,

excluded

its

from

access

elitist

party

This

strengthened

nonelite

base

to state

without

assured power.

strong

ties

gain

errors

access that

community, trade

the

protests

Mbst

the

system.

Opposition

out

Nevertheless,

impact.

of

proportion

demonstrations, the

TUC,

isolated

because

of

followed

had been

of

status made

the

planned

and by the

however,

what

could

in time

of economic

its

of

concerned their

more

be considered difficulty

by

by

the

reasonable than

by the

work.

58

of

benefits.

to

up

disbanded state

became than that

takeover by the Its

the

a

and of

own actions

erosion

fundamental

muslim

broke

It

of its

opposition

it

was entirely

way the

of

Third,

radically

newspapers,

ineptitude

the

encourage

inauguration

own material

which

in scope,

The military

the

groups.

the

to change

In this

Busia's

was an

military.

reaction

opposition

opposition. after

as

threat.

more because

shortly

officers

decrease

handling

of

s

by

to

small

the

oppcnents.

and ineffective,

than

based,

of

outlawed

political

such

merely

rather

it

sate.

and the

government

severity

strikes,

stridency

middle-level

possible,

the

quelled

and detained

increasingly

group

to

Busia

means by the

however,

whDo were

lower income

chief

students,

was urban

the

areas

grcups

resources

controlled

limited

service, designed,

of state

urban

controlled

important

civil

redistribution political

as

resources

were

in

of noncAkan

and other

relations to

animosity

Second,

alienated

unions,

the

to workers

patron-client

could

made policy

Akan

a small

military's success

government policy

economic

was in

measures forces

at

Early When it confronted right

with

to rule.

Uhion

of

measure

of

to

find

by the

years

repudiated.

support, people

were

the

in

specifically

a

military

pDsitive and the

ethnically

balanced and ties

balance

tried

He

4

first

with

Chazan,

in

in its

the

and

new regime

National

indicated were

that

the

more

time

NRC was to slash

some

far

more

structures had

of

been

the

needed

revalue

incurred

suppliers'

economic the

prices,

Debts

medium-term

ills

political Party

was

the

during

credits

were on

cast

the

commEnced with

network leaders

was limited,

side,

over

and

1300

on government

and attacks

civil

to

service,

the

suppress since

the launching

arguing than

ethnic

a

59

what

was needed was approach

to

the

most

creating to

promote regional

units.

Operation

An Anatomv of Ghanaian

an alliance

political,

and

Acheampong government of

that

to create

divisiveness,

independence, political

traditional

scight

Acheampong

rather

cabinet

Economically, embodied

legitimacy

elsewhere

Progress

technocratic/administrative,

development.

NRC was

the

prohibited.

On the more the

of

licensing.

of

of speech

force,

crisis.`'

country's

of

Freedom

were

of

depoliticization

ex-politicians.

between

form

arrest

the

opinion

economic

import

of

Congress

scund and that

strict

the

of

the

of the

for

Uhion

reacticns

response

the

and

Trade

of

to the

reimpose

detention

action

were

solutions

and

but

means

some degree

favor

fundamentally

Blame

politicians,

in

Students

The immediate

previous

by

Demonstrations

workable

and

power

of establishing

Many

currency,

NRC. 1972-75

to

came

popular

Republic

of the

the problem

Ghanaian

ambivalent. Second

first

Years

Politics...,

Feed

emphasized Yourself, p. 2 30.

self-reliance, which

was a

program

intended

reduce

heavy

achieve

expenditures

greater

promote set

to

of foreign

regional

up and charged

became

an

groups

of farmers,

such

Although

rather

ones.

upon

followed

in

direct 1973

emphasis Operation

farmer

response

by Operation

Feed

Some success

other

but

fluctuations

to

variations

probably

due

Furthermore, prices

efforts, more despite

abounded,

and to request

large

1972 to 1975 of very In the Busia government purchase meant

of that

substantially

2

than

in in

and

government cutting

regulatory

for

example,

depended

incentives.

through

backyard

during than

of

this

to

food at

It was

during

Haul

the

gardens

and

period

were

anything

else.

official

to subsidize

especially

and

incentives

and Operation

was compelled

grain

particular

and moral

price

weather

were This

to

as

production

shortages

high

were abandoned,

without

rather

food aid,

insecticides the

Yourself,

Corporations

north.

role

Feed

To

projects.4

on exhortaticm

amounts of

cocoa sector,

the

it

was achieved

governoent

world

in

and to

ccmnodities.

subsidies

Your Industries

these successes,

and the

rice

was

Food to the Markets. public

input

envisaged

its

largely

channeling

NFC

the

economic

development

growing

production

Development

local

as those

incentive-oriented, than

for

food

on essential

Regional

overseeing

mechanism

in

exchange

balance,

with

important

self-sufficiency

retail

food imports the

period

from

prices.

the expensive

mass spraying

and subsidies

were instead

sprayers.

High

prices

was

able

to

into

public

revenues.

Chazan, An Anatomv of Ghanaian Politics 60

campaigns

of

the

offer ed for

the

on world

increase This

.. , p.163.

markets

producer resulted

also prices

in

some

continuation

of the

following

At

the

restrictions

a

of

attempted

to

curb

essential

goods,

between

official

consisted

in

the

of

and

parallel

reform

tariff export

nontraditional

costs.

The

but

trade

self-sufficiency owned

or staffed

ceased

and import

spare

from

control

private

Corporation.44

increase

incentives,

collection rate

interest

of

to

the

The widening

of

gap

offered

however,only

prices,

prices

markets

rent-seeking activity.

for

in addition,

governmmnt, to

parts. One result

controlled.

marketeering,

market

to

and Busia

NLC

of

closely

black

incentive

all

availability

Trading

and

foreign

was also

retail

National

promoted

of

the

Ghana

strong

government

maintenance

transport

and to divert

of

increasingly

road

smuggling

outlets

the

products

the

under

Nkrumah regime.43

the

limited

rise

occurred

indigenization

time,

petroleum

marked

of

and same

had

side,

severely

Distributimn was

industrial

naticnalization

firms.

that

years

disastrous

On the by the

planting

the

an

Other policies import

ceilings,

duties,

and investment

incentives. More

between

policy in

importantly,

dependence attempted substitution

on to

to

decrease activities,

were made to reduce

the

resuscitating In

imports. the

size

of the

F*demption

to for

demand

food budget

s

gcverrment

economy

addition

especially the

the

The National

1972 and 1975.

1972 committed

was

however,

overall

Cbuncil cane

principally

by

imports producktion.

Chazan,

An Anatonm of Ghanaian

promoting In addition,

deficit.

61

Pblitics

...

,

its

controls,

Annex 4. A3 4

to power

by decreasing import

tightening

economic

pp.165-66.

it import

efforts

scrcess

Considerable the

value

favorable

extremely Ghana's

imports

of

dramatically surpluses exchange

of

reserves

increased

debt, a

of

applications

gDvernment

and

as a

these deficits wzoe increases

for

of

Ghana

to

equity

higher

deficits

that

Net foreign

beginning

of 1974. much of its

repudiated arrears

profits

and dividends

an ambitious

to public

sector

repayment

in

cocoa

of

of

$50-70

revenue

about

$85

of about at

million

program

in October,

March,

1973.

Net

credit

and

II.

World Bank, Current Economic..., 1974, p. 1.

1

Table

II.

62

to

be

and

of

large 1974.

debt which fell

was largely financed through

1973-74,

causes

1973 and March,

in domestic

200 million

to

in absolute

investment

4'

3, Chapter

1975 both The major

World Bank, Current Economic Position Ik October 18, 1974, Table 39, Statistical Appendix. Table 4, Chapter

to

continued

and GUP.48

government employees

there

prices,

from 1971

rose

of government

share were

despite

borrowing, especially after

k6

1973.46

the

obligations

1971 to

in

credit

remit

capital

improved

million

in

had

and timber,

situation

$146

at

trade

gold,

cocoa, payments

millimn

still

The budget deficit, along with N due

deficit

With

1974.-'

Furthermore, substantial

of

that

were

and government

the end of March,

fact

the

for

balance

$210

there

backlog

$60 million,

terns

to

market

dollars,

by 43 percent.4*

and $114 million

in 1972

despite

mediue-term

account

In canstant

achieved. 1971 to 1972

world

the

exports,

$95 million

Nevertheless,

millimn,

on the

from a current

first

from

declined

prices

traditicnal

was at

central

bank

the government

Prospects of Ghana,

during

the

credit

following

to

the

enterprises

agreement

of

m

in

all

Despite

deposits

Ghana

23

percent.49

53 percent

by

the

payments

of increased the

import General not

Western

its

the balance

exceeded

instructed

and

of

this,

outstanding

In 1974,

and that

to state

import

License

program.

deteriorated

and because issuance

In September,

was reduced

credit

an

dcue n Ghana s medium-term

prices

system

to increase

reached

of payments situation

petroleum

licenses

creditors

was

across

the board

terminated.

to finance

1974, the by 50

Cnmmercial

imports,

and import

were required. As the

balance the

to structure

toaards food

far

and the Open

banks were

tried

1974,

rescheduling

licenses

of

percent

by

rose

govemment

1974 because

import

value

March,

debt.

sharply

central

months increased

by 61 percent. In

external

twelve

industrial

that

these

importables.'° by the

contributed

to inflatian

two

9

lack

of

equipment.

and

maize,

dampened

availability

and undermined

in food

in production

towards

output

industrial of

continued inputs.

imported

increases

on

in increases

resulted by shifts

Restrictions

in wages,

producer

to All

be this

prices,

incentives. Political

inspired

rice

the governaient

away from consumer goods and

increasingly

Furthermore,

constrained

wrsened,

and producers

partially

were only

and other

bill

raw materials

prices

situatin

payments

import

especially

imports,

first

of

years.

favoritism.

support The

for ethnic

Patrons

World Bank, Current See Table 9, Chapter

the

regime

issue

associated

Economic...., V. 63

remained

fairly

was suppressed with

strcrig

by lack

for

of ethnically

the PP who were of Ashanti

1974, pp. 3,4.

its

and

Brcng-Ihafo

origin

was Ashanti. state

dependence

less

There was also

civil

servants,

students

were

and

to

mid-1l74.

the

terms.

A series

from the -

came to officers

1975,

of

the

Busia

farmers,

groups.

more

Even the

power

to its

concerned

anutmj in

per

Formal

1975.n=

the

border

was

with

Togo.

(SMC),

made up

further

regime,

In

narrower

original

principally

with

base

that

base power

in

it it

the

the

of middle

when it

of their

interest.

M.

Chazan,

am

Table

An Anatowv

of Ghanaian

3, Chapter II.

64

Politics

... ,

pp.

23

hands

from

generation

and protection

NFC and

of

isolated,

retreated

had forged

with

of military

increasingly

effect,

and PP

CRP

entirely

itself

in real

conflict

of

purge

concentrated

feeling

political

the

was in serious

a

wages,

sector

of

rose

1972,

eroded

that

iridertook

unrest

increasing

became progressively

group

authoritarian.

populist

to

emanated from vestiges

Council

and the

led

percent in

Acheampong

Military

himself,

somewhat

was 9.7

mne ethnic

Decision-making

more and

broader,

by the

support ancig workers,

however,

percent

The Ewe along

Supreme

conuanders. Acheampong

relations

occupational

of 1973 and 1974,

In Ortober

became

which

of coup attempts

or

the

of distribution

elite-client

state-based

other

mismanagement,

increases

the government

created

the

equaility

widespread

1974 and 29.7

in

despite

opposition

upon

fairly

Inflation,

percent

18.4

of greater

Acheamponghimself

supportive.-L

Macroeconomic after

but, at the same time,

There was a feeling

and

period.

were detained,

6- 3 7 .

the

first

military material

Economic The year prices

were

high

1975 was the

an

commercial

imports

needs,

macroeccnomic

the

control, Thereafter,

however,

transportation

revenue

and

civil

servants

the

losing

deteriorated,

1976,

but

inflation

Corruption

even

was clear

were

reasons

account

deficits,

53

Table

3 Chapter

'4

Chazan,

35

Mike Oquaye,

for

together

of

was

benefitting controls

power. fell,

percent

of

116 percent

per

in check

the

only

were

total annum

by rigid

rampant,

and

were without access

the

mDst casual

the

economy,

rudimcntary

there

by administrative

The economic

to even

heights

most

time,

same

military

created

the

127

policy

out of

not

and the macroeconomy

and patronage

on economic

the

still

prices

held

by

consumption

cocoa

to

were

most

political

to

accelerated

supplementd

of

rose,

rose

deficits

of advising

the

measure

prices

deficit

of payments

of

the

opportunities

current

budget

from commanding

At

WDrsening

food

controls.

far

satisfy

doKnwards,

".w. By 1975 it

supervision."'4 of

was

to

spiraled

capable

state,

adequate

then, cocoa

Uhtil

production

production

in

ccntrol

mosebers

was

food

a

exchange

decision-makers.

aid

point.

retained

in 1977,53 and balance trade

market,

situation

The gDvernmEnt

government

that

wDrld

turning

rulers

system

cDllapsed.

1976-78

a critical

and fool

state

and

Disintegration,

enormously

observers was rapidly

aspects

widespread

to

of

econamic

evidence

from the

that

profitable

and regulations.40

this

deterioration

with

sharply

are apparent.

rising

capital

...

p. 169.

Large

expenditures,

II.

An InataiW Politics

of Ghanaian Politics

in Ghana (1972-1979),

65

,

Accra:

Tornado,

1980.

forced

the

revenue

govermnment

side,

the

and as this

that

of cocoa

because

the

increasing

exanple,

was less

government

accounted

for

of the exchange

rate.-'

reduced

the

revenue.A9 that

profits

the

were

specific,

or

and collection

15.1 to 7.8

to 1977-78,

to

currency of the

ad valorem

to

on controlled

as a

tax revenue

in

percentage

1974,

Cocoa

1979,

to

levies of

it

because

Marketing

tended

for

overvalued

the

of a number

statutory

FEB price

negative at

prices,

Chapter

by

contribute

equivalent

for

the

revenue;

local

public

(see

from cocoa

was actually

available

cedi

divide

it

costs

frnm cocoa, so did

the

governnent

performance

important

resulting

administrative

of

FRvenue

in

rising

based

incentives,

an the

Ebard

government of to

indirect be eroded

deteriorated.

GDP declined

from

percent.09

Equally expenditures

measured

were

additimn,

From 1973-74

of health,

were such

from

control

expenditures

capital

that

farmer.

of total

Furthermore,

of

currency

1930 and 1981

cocoa

In

by inflation,

provision

for

lack

Ghana.O&

an proceeds

overvaluatian

and the

and in

low FOB price

of

Bank of

dePendent

domestic

46 percent

23 percent,

was only

from the

was heavily

declined

there

between

heavily

system

In addition,

2) implied

taxes

tax

sector

revenue.

to borrow

rising

public

procedures,

education, constituted

factors

and

and

other

a growing

World Bank, Ghana: Economic Position Exports of Processed Products: Financial Approach, June 29, 1977, p. 1 1 . -5I6i

57

Table 8, Chapter

5a

See Chapter

V for

I9 Wbrld Bank,

Ghana: Economic

as

the growth

sector the

employment,

high

social

in gonerrnent

priority

given

services.

share of

inadequate

In addition,

the claim

and Prospects:Structure - A

an government

Prosperts for Flaw of Funds

V. further

details. Memorandum, 66

April

24,

to the

1979, p.15.

resources.

Despite

efforts

development projects, the availability

to

contracts

of

reduce

expenditure

low

an

were awarded or amended without

funrds and in

the

absence

of

priority

reference

effective

to

expenditure

controls.w° Although

scoe

external

financing

was

rescheduling

agreement in March 1974, most of the

financed

borrowing

by

from the central

bank.

available deficit

after

continued

The result

to the government and a growth rate of the money supply

averaged

34

per

arnnum fram

percent per annum in the following annual rate

of inflation

This was the highest public

sector

wage rates

To check prices

in

very scarce. adjusted substantial Traders,

access to goods at margins

well

benefitted

increased

° 6

to

and

far

exceeded

the government relied

frnm

were ineffective, where supplies

in the

increases

in

however, except

private

in the cost of living,

public

inflation

mainly an its

at these prices

restraints,

official

changes

between

officially

and private

controlled

prices.

In

that

wages

resulting

sector

the extent

to

sector

were

in

wage rates. they could get

any

case, trading

drastically.,1

Low reserves substantial

was an increase

in 1972 to 116.3 percent in 1977.

Price controls

Furthernmore, despite

disparities too,

in prices,

establisthmEnts,

reasanably

The result

West Africa

the rise

few formal-sector

year.

and in cocoa producer prices.

and inctomes policy.

in a

(MI) that

June 1973 through June 1976, and 45

from 9.7 percent

rate

to be

was a quadrupling

of credit

percent

the debt

balance

World Bank,

and lack

of payments

of access deficits

Ghana - Economic

World Bank, Ghana: Ecconmic

to external

were

not

possible

Memorandum, April Position...., 67

credit

1977,

24,

implied during

1979,

pp.4-9.

that

the mid

p. 1 4 .

and

late

1970s

and

early

1980s.

vagaries of West African together

with

exported

because

by

were

other

Ghana

had

followed

the

cocoa market,

of cocoa

reached

and an

annual

increase

and

produced

and unemployment

taxes

on foreign

were

cocoa).2

The

smuggling

of

cocoa

in producer

prices

Ghana

between

of any sort

was

handicapped

severely

due to shortages

system

of

exports

increased

as the

market

exchange

Nevertheless, by

fuel

and export

traditional

black

the

marketing

breakdown

and spare

of 50

as exchange

increased,

the

neighNDrs.

and its

rampant

for

at

levels,

money supply

exports

measured

cocoa

the

were

travel percent

for

triple-digit

in

(20

parts,

of the

and lack

of

maintenance. All

of

served

this

in

Ghanaian

opposition,

and

their

politicized.

They

were

Religious

those

to

opposed

Ewe were joined north.

to

the

Kumasi,

World Bank,

soon

joined

leaders

were

Ashanti,

capital

Ghana:

Economic

of

proliferated

Brong,

Akim,

Ashanti,

pressure of the

forefront became unions,

trade

Pbmorandum, April 68

the

particularly

opposition

the

at

and

individual

women,

and

Ethnic

Ga, Fante,

by

political

every

flourished

associations

ErC.

by the

nearly

alienate

The professicnals

society.

and students.

the

the quantities

in

thus

international

percent

transportation

group

the

in

shortages,

raised

heightened

and trade

and

imports

of

to 30

than

disparity

road

shortages

tightened,

were

subsidies

rate

inflation

Corruption,

controls

reduc:tion

level

of the aging stock of trees.

food

percent.

weather

an overall

By 1977, fueled

The

highly

teachers,

traders,

joined

as well,

as the

and some

groups in

became

the

hotbed

24,

1979 p.

18.

of

anti-governmEnt

In

to

contrast

relatively

narrow in focus,

quarter.

Although this

populist

dimension

it nevertheless regime. 1978.

Food

that

of June 1978 the

clear

withhold for

violent

whether

with

Jerry

Rawlings'

ascent

withdrew

to power,

of the existing

from "In

so complete

the

between May and June

localities.

was

and lacked

elitist

continuation

Patrons

which was from every

with opponents

the country

in self-reliant

regime,

fusia

somewhat

permit

immobilized

that

it

the state

and

the waning days became abundantly

The only questionswere whether the masses would

support

for the

for civilian

regime,

rule,

whether

whether

coup would take

a civilian would erupt."-',

uprising

to

became acute.

the 1979 date

intervene,

characterized

fragmentation

all

was

formidable

the SMC was doomed.

simply wait

later

themselves

reestablished

the

the NFC/SMCwas faced

of strikes

shortages

during

opposition

opposition

was too

A series

of ten overlapping

was widespread.'6

dissatisfaction,

ethnic

discontent,

Regional

organization.

the electorate

the

military

would itself

or whether

place,

would

an all-out

The next month, Acheampongwas deposed by

his fellow officers and Lt. General Fred W. K. Akuffo became head of state.

Struggle for Reform. 197E-81 Akuffo government

The

right track in preparation

set about putting the economy back on the

for the return to civilian rule in the

summer of

Under prompting from the IMF, the cedi was devalued in Pugust 1978 to

1979.

increased.

A

currency

introduced, and

budget was

an Austerity

Ni 2.75/$U6,

reform

instituted

was

in

interest

Chazan, An Anatomv

of Ghanaian Pblitics ... 69

,

were

March 1979 to rid the

Chazan, An Anatoyw of Ghanaian Politics..., p.242. 4

rates

p.269.

ecmnomy of some of its

mniey

the currency

black

price

controls

on essential

these

policies,

market.

inflation

than

however,

a

1979.

of

political

parties

reach the

radicalized

the state. 1978.

Many

continued Fueled

by

resulted

strike

of

into

these

1979 and

the austerity in early

in downtown Accra. government

(PFRC),

by

composed of junior moral

outrage

6

Table

were

spontaneous,

were

met

at

return

firing

to

alienated

on

rule

the This

in

ban on

failed

to

the entire

themselves

from

intense.

They

and harassmnmts. urban unrest

of student

another

be more

August and November

arrests,

a group

for

lift

and

reform,

to

from

between

volatile,

currency

of

on these

to civilian

assembly.

raids,

with

a result

through

had disengaged

were recorded

and

thought

decided

that

collectivities

police

a

increased

military

finally

dem nstrators takeover

of the

1979.4e

previous

headed

to

and

in 1979.4°

was never

beaome

The moment was ripe

on June 4, Unlike

had

program and

May in

It

smuggling

As

to follow

constituent

who

was

strengthEned.

Akuffo

convene a

actions

price

governnent

pressure,

sabotage

54.4 percent

limited.

workers,

those local

to

commnitted

heavy

and to

Eighty

were

Akuffo

govermrnt

As a result

and

of the

and to

cocoa prorucer

ccmnodities

was severely

caretaker

system,

The

was reduced

The capacity measures,

in circulation

regimes,

Jerry

the

Rawlings,

Armed had

and non-ccmnissioned the

3, Chapter

crimes

and

Forces

strong

officers corruption

Revolutionary populist

with that

a

roots. strong

70

It

..., pp.

27 6 6 0

-

.

was

sense of

had characterized

II.

Chazan, An Anatomy of Ghanaian Politics

Counlcil

the

military

previous

were

Akuffo,

that

in

tried

others

dismissed; hardly

were

A major

campaign

black

harassed

and the

and

Prices

controls. must

public

the community above

the

their

Board

awn personal

in high

prices

Another

was

outraged

over elite

accentuated. dominated

and a

lack

and

to OFRC actions

Ashanti,

an Ewe, Ewe. were

Market

women

in Arcra supervised, price

adninister

people

dealing

and must

put

with the

the

good of

of

the

to

believed

populist

from the

urban

economy,

resulting

and other

consumer

goods.

food

masses.

by

and

this

was perceived

Reactions

moral

of

antagonism,

of

to

that

consequences

class

exploitation

Rawlings, by Ga

of

interests.

well-being.69

of availability

fueling

reactivated

of traders

Che was a withdrawal

outburst.

personal

were closely

of probity

notions

thought to be

Makola market

the

commodities

instilled

unscathed.

condemned.

were and

was

was

idea

some adverse

were

hoarding

basic

by fundamental

abide

There

Incomes

all,

Above

for

their

were

was so extensive

those

against

further

and vigilantes, prices

Controlled

directed to

and

marketeering,

was left

apparatus

also

was situation

by soldiers

was razed.

state

and

bureaucrats

Sme

The PFFC sweep

and convicted.

of the

the economic

Smiggling, were

tried

Acheampcng

including

and executed.

courts

special

any component

manipulating

leaders,

goverTnnent.-.' 5MC

with Ethnic

wtrkers

and

be ethnically

were also

cleavages

as heading

Akan,

and students

an PFRC that

particularly inspired.

was

by the 9

needed example, that "...66% of all licenses 6'- It was reported, for the central bank and that was negotiated through exchange to deal in foreign Currency Yearbook, 1977-79, of 107.". Pick's took a kickback the Colonel p.259. dE

9

Chazan,

An Anatomy of Ghanaian

Politics

...

,

p. 262.

Chazan,

An Anatomw of Ghanaian

Politics

...

,

pp. 2 8 2-8 3 .

71

Uhdoubtedly, emergence of

was the

true

and the for

the most significant

of its

The

patriot.

military

intervention

leader.-"7C` to the

adherence

CPP organizatim cells

of

Egala

put

the CPP

opportunism

came

frnm

Party,

the

since

nephew, Dr. the party

clerks,

were

distinguish

71

the

Hilla

the

and

strcng

with

the remnants

Party

dispossessed."

bases in

the north

from it

office

(LtC),

ethnically

it

leaders, was Party

and west.

to

which

in that

himself,

The party

demmstrating

PNP's major

successor

the old

presidential

and even Rawlings,

(PFP),

was

clandestine

trade-union

patrons,

The

July, of

as the party's

"urban

Cmvention

National

in early

public

for

Popularity

the PFRC's rigid

fron

survivability.

Front

by

place

Limann,

distaste

the

took

stand

Akuffo,

Acheampong,

Popular

to

highlighted

who had financed

were wealthy

and political

with

was

Uhable

1966.

his

ccmpetition

&ksia

s Progress

was similar

to the

constituted

a Ga -

some Akan representation.'-

The major offered

which

a northerner

but differed

Ewe alliance

electim,

Egala,

and the Lhited

PFP socially

electims.

by Imoru

had supported

their

civilian

the reformist

a peculiar

enhanced

constructed

heterogeneous,

activists

was strongly

(PNP),

students,

ethnically

these

of that

Supporting

farmers,

for

as it

Party

forward

candidate.

image

timetable

Naticnal

fostered

intercession

FRC

AFFC interventim

embodiment of

as "...the

at the same time

This

The winner the People's

Rawlings

Jerry

outcome of the

characteristic

of these

reemergence

patrons

with

between

of recognized

strcng party

ethnic

and

platforms,

politicians local

ties.

despite

the

Ghanaian Politics

Chazan,

An Anatcmv of

Chazan,

An Anatomy of Ghanaian 72

and the

parties

Politics

candidates

they All

of the

past.

There

was little

ideological 28 4

.

-,

p.

.,..

pp.2Bt6-7.

differences

of to

that

had characterized

reach

to

out

the

society

and had

plagued

it

rejection their

in

their radicalized

little

1979.

disengagement

from

state

of

percent

near

total

of total

shDrtages

of

percent

all

of their

resources

and

hostile

imported level

the

purges

years

of

state. the

and the

Despite

world

in

agricultural would be

trouble. program

PFRC yield watches

inprovements

Table 3,

major

in

II

in

inflation,

that

were

RNP had

public

that

to about

severe

less

than

was cynical were

75

and

in disarray in

the

wings:

You are

you.

65

few political

was Rawlings to

of

was in a

annually,

The

the the

in

the

by

any

campaign

An Pnatomy of Ghanaian Chapter

president

equal

percent

stage

and

at

the

your performance."'4

announcement

A

first

institutions

the

as a

level.-'

deficit

exports

there

that

middle-class

The econcmy

54

Ghanaian

was unaccompanied

implemented.

Chazan, 7'

The

cocoa

Finally,

PfhL

good harvests, and some decrease itself

a

state

1979 as the

at

Government

significant

the

earlier.--

with

and I on the

"My colleagues of it

a few

the

running

to

tensions

of the

budget

a

and

social

situation.

with

goods,

was confronted

vis-a-vis

following

ambiguous

failed

could be construed

hegemony

power in

inflation

and

at

campaign

communities of Ghanaian

tumnout

scene

came to

collapse,

revenue,

the

political

in a highly

poverty voter

of

the

and local

the

small

voters

Limamn

Republic

with the

the

Aboveall

elements

do

Indeed,

Dr. Hilla

center

to

by many Ghanaian

the Third

predecessors.

for

Politics

import

licensing quickly

government

spring

fcund

of 1980 of a bwo-year

indication reviving

...

system,

as the

,

gold

to

how this

industry

and

p.299.

and Pnnex 1.

I Jerry Rawlings, "Address Republic: 24 September 1979."

Before Parliament -

73

Inauguration of Third

local

rescurces.

New taxes

the tax prices

base had of

that

expenditures

they

system were

aid.

loan

cigarettes,

gasoline,

had already

suffered

was

to control

When this

devaluation.

Limann

past

that

this

failed

yield

the

forced

who induced who wanted

led

the

licensing

and malpractice

seek larger

to

sufficient

which

IMF, increased

balked had

to

allocations

public

revenue,

set

as

producer

price

at

to

of Ghanaian

fall

the

a $1 billion

preconditions

particularly the

amounts of

for

idea

various

cocoa,

of

and

devaluatimn, in

governmEnts

the

.7

lowest

Gbvernment since

the

producer 1981

consumers

to reduce

of

the

of the cedi. was

an

Cocoa production its

and water,

administration

but

raised

from workers,

discretionary

government

from

measures,

in the

overvaluation

the

stabilization

protesting

government

Efforts

met resistance

Improvements

increasing

requested

budget

encugh.

was tightened,

the minimum wage, and f rom cocoa farmers,

prices.

As a result foreign

as beer,

inadequate

by the

and tax col]ection When the

the

investment

of how to mDbilize

eroded

to raise

producer

induced

been severely

and balance

the government higher

were introduced

such items

complained

the problem

ran up against

manufacturing

level

and

world

'

from cocoa at

marketing

with

steeply

were

actually

official

costs.'*

a

was

in

1980 and 1981.

At the same time,

the

goverunnent

Faced

Chazan,

1958.

price

plus

the

repayments.

since

revenues

price

declined

growing

negative exchange

Total

$400

debt

million

fiscal

An Anatomv of Ghanaian

Table 8, Chapter V. 74

world

in

in

plummeted.

1980

and 1981

was less

reached

$1.4

arrears

...

prices

rate

and debt

Politics

Output was at

billion

on short-term

crisis,

,

than

p.312.

the in debt

the government

resorted

to

increased

revenue in 1961. percent.''

deficit

spending,

which

shortages

from

its

With short-term

import

flows

and higher

prices.

Confronted

with

identification

were

these with

drastically

the

rescuirce

major

base

segments

political

towards

that

of society.

Given its

implied

the

rate of 116

severity

of the

the

a further

centralized control,

resulting

regime

It was also

elite.

Ewe.

a patronage

payment

Limann

from the

a tripling

The

system

arrears in

more

suffered alienated

inadequacy of

was unable

to

reach

--

position,

averting

the

middle-class

the

trade

reduced,

difficulties,

from grcnps in the core Akan regions and its

an annual

of total

real value of public sector wages eroded despite

The

up,

139 percent

Inflation rose in the same year to

of the minimxm wage in November 1990. piling

equalled

economic

government's

collapse

situation

energies

of

the

and

were

formal

the

directed

economy.

In its

weakness

of

principally quest

for

however, the regime proved to be weak and often inept.

Its well-intentioned, but superficial, actions were completely inadequate to deal

with

the

overwhelming

The

failure

magnitude of

provoked expressions of however,

refrained, Urban

gruaps

mn

seeking the

to

from

immediate

AFRC other

the

the

hand,

government

was

3, Chapter

II.

Table Chazan,

,nAnatowy

changes

were

The

unable

to

of Ghanaian 75

in the ruling coalition.

mollify

excluded

mutch more

struck,

Politics

opposition, which

organized

largely

Students demonstrated, iorkers

`'

the

and

opposition. Limann

problems.

govermment to handle the crisis effectively

discontent

from

tied

decision-making,

the

of

vocal

and these

... ,

farmers highly

p.310.

from in

PNP their

agitated. politicized

Heavy-handed

groups.

were forcefully harassed,

quelled,

and Jerry

to disintegrate

strikes

Rawlings

as it

was disavowed.

Early

in

the

clear morning

demonstrations

ex-members of

Finally, that of

the

the PFRC were

PNP itself

the center December

of

began

the Ghanaian

31,

1981, Flight

Defense Council (PNDC) to run the government.7

PNDC and the Economic Recovery

of the (FRC in

intervention bloodshed,

exclusively

the

military,

assumed control

Program,

by the PNDC in early

The takeover

violent

Student

Jerry Rawlings ance more assumed power and formed the Provisional

National

the

emplioyed.

were repressed,

was increasingly

state had collapsed. Lieutenant

began to be

tactics

former

1979.

of the state

for

was in

Whereas the

was relatively

the PNDC

1962

1982 - Present

latter

quiescent.

incorporated

civilians.

a delimited

period

marked contrast

to

was accompanied

by

While

the AFR2 was

Finally, of

time,

but

with

a

the (FRC the PNDC

was there to stay..° The economic the

situation,

lowest

huge foreign lack

of

curtail the

new

includinrg

export

earnings

debt.

To top

payment. current

currency

tighten

government

The

spending, in

foreign

was massive in

it

off,

exchange

no foreign

Nigeria

government's

close

O

Chazan,

exchange off

land

borders

inflation,

An Anatomy of Ghanaian Politics

76

and a

shipments response

demonetize

,

... ,

pp. 314-21. p.321.

for

was to much of

to stem smuggling,

controls.

...

disastrcus

reserves,

fuel

immediate

of money,

Chazan, An Anatcov of Ghenaian Politics

79

spiraling

had ,cut

the printing

circulation,

immediately

budget deficits,

years,

Rawliings halt

faced

and

Nagotiations Limann govemmnent, strategy

up

to

At first

regulate

of

goods

Defence Cbmmittees villages

to

corruption

Review Committee

with

formulating

with

establishing

short

formerly

a

budget

for

was issued. regime

Economic ND. 2, 1962. 3>

the

it

to free People' s

in

emphasis

was

began in

an effort

work

towns and

on rooting

To link

committee

also

kinds

set

up

of policies

out

the PNDC and

was established

the

that

governments.9-

Naticnal

with

get economic

recovery

program.

way for

the

fiscal

that

at

the

a welcome was charged

underway

and its

of Kwesi Botchway,

base

Planning.

end of May in the

which

Quarterly

77

recovery

appointment

listed

the data

Unit,

find

of Ghana and member of the NERC,

year,

but

would

which

The NERC completed

and Economic

appeared

Economic

opinions,

The Committee

to

statement

Intelligence

of

the

and members of the PDCs.

The budget argued

government

In addition,

particular

of Finance

1981-B2

prices. plac es

at the Uhiversity

s report

in

under

what economic

since

powered body open to varicus

term the

tightly

participation.

term policies

of Minister

The ccumittee'

on

PNPC

traders

coordinating

creditor

paving

at

with

the PNDC

the

law lecturer

key post

previous

hand,

a medium

May 1982,

the

up

people's

national

western

work by

report

market

the

seriously

IMF and

revised

to depress

(NERC), a high

began to consider

to the

to harass

management,

other

going

the

rather

1979,

composed of students

On the

the

and

an interim

representatives

been

that

activity

(PDC' s) were set

oversee

had

appeared

market

and ensuring

the PDC s,

in

it

1982, as the AFRC had in hoards

which

the 1F,

suspEnded until the new regime decided

were

to pursue.

determined early

with

ended

in for

form of a

one month after

detail planning

Economic

the

failings

the of

was so eroded

Review:

Ghana,

that

as the situation

rapidly but

fairly

plight

innrcruius,

or

the

goals

in

were

more

in

was

devaluation

line

roles

in

was not

broad,

of either

in

the

fact,

an option. views

six

the

foreign IMF.

Any

by Rawlings

Instead

on

the

was made of

particular

out,

ruled

Rawlings'

with

mention

potential

the

as

be undertaken

went on to list No

institutions,

direction

that

April

objectives.

economy or of

multilateral

could not

The statement

ecanomic

immediate change in this assertion

the economy

debanded.

of the external

capital

of

restructuring

fundamental

the policy

desirability

of

self-reliance and self-sufficiency.ODuring with

the

building

and

emerging

massive

price

were also

forged

economic

of petroleum was

contact

the price

of needed aid was

a change

products.

in

with

the eastern

was

industry,

greater the

role

primary

block.

of a three

and major

and a decrease state means

year

program, increased

increased

use of

the consumption

in

control of

indication

to imply

foods,

with

the economy.

The anly

but seemed

for

than

in

existed

an outline

details

institution

decision-making that

in cotton

A as

was mcre concemned with

distortions

lacked

in domestic

envisaged

in Ghana maintained

workers

strategy

self-sufficiency

raw materials

trade

by

by Hbtchway, which

self-reliance,

but

officials

and the government

participation

links

presented

local

rate,

the

correcting

of an

few mnnths,

next

IMF and the major donors,

in the exchange

Stronger

the

over

industry

accomplishing

and these

objectives.Os

am

Economic

Intelligence

Uinit,

Quarterly

Economic

Review:

Ghana, Nb.3,

1982. 3 Economic Nb. 4, 1982.

Intelligence

Unit,

78

Quarterly

Economic

Review:

Ghana,

By

late

1982,

whether

the costs

by IMF

lending to

Botchway

at

also torn

this

the

government

of restructuring warrant

point

the

between its

pledge

the

to to

remained

econmWy would

accepting

appeared

still

favor help

be sufficiently

canditions

a modest the

devaluation.

overburdened

exchange rate.

FOB price.

This

inflation.

Thus

while

it tried

price

cut

risk

the

or to devalue

cocoa

the

on the

workers were

closing

forced

to

further

weeks

local currency at

an

start to

already of

the

high buying

force

farmers

and the

first

of

1982

Approximately

Nigeria

shortfall estimated

rate of campaign

to accept

and return

part

a

in early

of 1983,

one million

to Ghana.

Ghanaian

This

enormous burden on the econcmy and its food supplies, especially the maize

and the

-

tightened. leave

to

the

on whether

currency.

government

farmer

1.8 billion just to pay farmers the

delayed

a decision the

The PNPC was

price annouxced by Limann and the expected

adding

govermeent

to reach

During pressures

the producer

would

eased

If the existing rate were to be retained, the

CMB would have to borrow an estimated N difference between

as to

would be imposed.

that

dilemma created by converting the FOB price of cocoa into the official

undecided

placed

an

in view of

1963 at 378,000 tons following the

poor rains of 1982. As food prices rose in urban areas, BDtchway rehabilitate the on

reducing

econamy over the next four years.

foreign

exchange

leakages,

achieving moderate increases in production.

04 Economic 1982.

Intelligence

Uhit,

improving

79

tax

collection,

Figures for the

Quarterly

plan to

The emphasis was plared

1982, however, showed that the goverrnent was operating

No.4,

anncuriceda

at a

Economic

last large

and

quarter of deficit,

Review: Ghana,

with

three

absence

quarters of

unlikely

but also

because

strengthEn

inflows

for

the state.

1985-64 most

than toyed

opted

on exports,

for

was

Ghana's

economic

the

and to insure

that

Such inflows

activity.

the

on

The plan

the

Ghana

need to

called,

National

for

Trading

of officials

involved accrued

to

coup attempt

in

and profits

ccamissions

19E3, Rawlings

a

year.

with

an intricate to

called

domestically

for

there

the

of

system

of surcharges

a

dual exchange

increases

goDds,

with

its

rate,

on imports

in

the

and

rice

expressed

continued

IMF

on current

devaluation

substantial

but the T11Cquickly

In June

with

possibility

de facto

produced

the fourth

put down

Negotiaticns

the

between wage and price

prices

official

being

about

of

notable

the disparity

increases.cwas

another

coup

attempt.

Students

rule, and clashed with workers who supported Rawlings. back the government but pressed

Economic 1983.

Intelligence

a6 Economic Nob.2, 1983.

Intelligence

E°

but it

The new

account.

maize

concern

as the

and subsidies

protested

austerity budget and lack of civil liberties, deiwandeda return

No.1,

the cedi

to devalue

emphasis

of

functions

In the

as to how any

achieved.

refusal

continued

s

unclear

put an end to the corruption

to

amounting

budget

exceptions,

it

costs.

5

more

instead

over

of

In February

government

abroad,

of

government'

expansion

licensing

recurrent

because

control

order

on

of the economy was to be

of the

in

spending

from

not only

state

Corporation

little

total

rehabilitation

appeared

in import

its

capital

substantial

example,

of

hard for

Lhion,

Unit,

60

a substantial

the

to civilian

The TIC continued to wage increase.

Quarterly

Economic

Review:

Ghana,

QuarterlY

Economic

Review:

Ghana,

Finally, in August 1963, the IMF approvedstandby and compensatory financingfacility arrangementstotalling $382 million. Once the Fund had granted

its seal of approval,other donors

of further

grants

embodied

in

and

the Ecanomic

The main

Phase

one of

eliminating

was

to

to rehabilitate sectors;

3.

to repair ecanomy;

4.

to use sound fiscal sustain reasonable thereafter.

improved Phase

(ERP) amorunced

distortions the

in the

industrial,

and restore

termed

by

by the government.

ecnanmy; agricultural,

the

the

and mining

infrastructural

Stabilizatimn

base

of the

capacity

in

the

utilization of existing

to diminish

restrictions,

ecncmry.

During

of

industries

local

assets.

government

thus setting

on

concentrated

Phase,

distortimns

rehabilitation

trade

adjustment

and and monetary policies to achieve economic growth over the years

the

was supposed

relaxing

the

Finally,

interventimn

the in the

economuy on a sounid

the

path.

established

the

Ghana pursued

was

the

Phase,

of structural

the ERP were:

2.

ERP,

a process

Program

to remove

Rehabilitation

by

began

1.

On October

90/$4S

of

some of

Liberalization

growth

Recovery

reducing

be

economy

This

objectives

the or

succeeding

loans.

fell in line quickly with offers

by

established

petroleum,

and

1983,

1966. for official

the

April

previous

a policy

early

10,

multiple

adjustment,

In September,

debt

1966,

transactions

with a

except

service,

with

81

rates

that

at NW 30/$U6.

were unified

of periodic

most

exchange

the

the

second those rate

Subsequently,

rate

tier

had been

rising exchange

involving determined

to Nf market cocoa,

at public

auction.

On February

were unified

20,

at the auction

An effort and salaries, raised

was also

67 percent

their

domestic producers to

reflect

costs.

the

increased controls

were

by the Prices guidelines and trade 1985.

maintained

Prices

consumers

under a "reference"

price

but

consumer Special goods

on imports. goods

paid

Import License were

addition simplified

removed

to

the

of the cedi,

Almost for

all

with

scheme. through

easing

in wages and other

and these

nurtmer of prices

were

equivalents.

Where determined

prodxcers/traders of government,

reduced

subject

and

periodically

were jointly

by

upward

to 8

under employers,

items

by July,

plus a profit

to

official

margin

surveill lance

system.

With the depreciation restriction

prices

allowed full--cost

were

were

Importers

renmoved an a

prices

committee

was progressively items

rate.

produced

and

wages

were adjusted

and sugar,

(PIB)

rates,

in May, 1984, and by 87

their

were

items,

tripartite

of noncontrolled on to

markets

Cocoa prices

and increases

domestically

Board

list

alter

rice,

23 other

by a

This

to

ceilings

of

on

levels.

the new exchange

imports

maize,

and Incentives

unions.

of

price

the prices

established

to be passed

cost

including

to equal

at

permitted

1983,

products,

realistic

tariff

for major utilities

structures

higher

prices,

1983, by 50 percent

rates

were also

In December

imported

rates at

Tariff

cost

and auction exchange

made to establish

in April,

in May, 1985.

to reflect

the official

rate.

and interest

by

percent

1987,

of

the government

controls

importers In

addition,

access

to

quantitative

and lowered. E2

were

was able

lifted

own foreign restrictions

on

to ease

imports

exchange

of

under the

on most produicer

the foreign

exchange

controls,

import

auction. tariffs

In were

A number 1983, to offset was to levels

partially

reduce the of public

were raised in 1985

lending

rate

slightly

was

recciurse

Over

the

resource and

be

to the

an increase

in

was

in

level

interest

fcur

rates

became positive 1966

as inflation

years of

the maximum

earlier.°'

the

stabilization

short run by curtailing

the

and through

large

objectives

included

larger

outlays

an

to

support

investment to a

committed

tyy reducing

March 1987, with

policy

public

also

mining

reforms

were

reforms

as

part

were essential

of

designed

management, and to provide

inport

system

to support

interest

component

banking fiscal

of

policy

the

expenditure increased

operations the

phased reduction

and

recovery of

its

payments arrears.

timber, and

sectors

major in

mobilization

The government

a

its

budget

1983, all

again

in

achieved

medium-term,

Rehabilitation

These

double

about was

to

zero

again

on the

10,

Real rates

below

in May,

starting

The gcvernment's

increases

On October

raised

discipline

This

maintenance

were

effect

inflation.

the wage

points.

of 26 percent,

govemrment's

program.

of

of

employment.

Rates

program.

domestic

impact

declined

but

were put into

the effects

sector

Fiscal

cuts.

increases

3-5 percentage

accelerated.

external

of wage

allowed to

inputs retain

raw materials,

were drawn up for

transport,

the

1984-86

to

goverrnent's assure

and part spare

°' World Bank, Ghana: Policies March 30, 1987, pp.2-3.

adequate

replacement of their parts,

E13

recovery

incentives,

capital.

foreign

cocoa, program.

to improve The key export

exchange earmings

to

and equipment.aO

and Issues

aI Wbrld Bank, Ghana: Managing the pp.5-7; Wbrld Bank, Ghana: Towards Structural pp.1-3.

energy,

of Structural

Transition, Adjustment,

Adjustment,

Nbvember October

7, 1984, 7, 1985,

These policy drought addition, of

the

and slow

managing

reforms

related

decrease

response

on the

Ghana's

were seriously in

part

foreign

decreasing

the

following

good

harvests.

Furthermore,

long-term

loans

and grants

rose

greater

of inflation,

availability

products. to

rate

of

The fact

40

percent

scarcity

that

in

devaluations,

is

values

than

in

budget

deficit

1963

became almost Food

and lower 19B4-65

prices to

of

226,000

that

revival 5.1

in

decreased

in

cocoa

Wbrld W Bank, Ghana: Pblicies 90

Table 3, Chapter II.

9

See Pnnex 1, Table 1-2(3).

in

to

in

as farmers

and

as real 5.3

rose

in

percent from

1985.5°

5.5 The

on bank financing

to the

percent

in

bumper harvests 169,000

responded

pp.3-4.

rate.

activity

of GDP in 19B4 and 0.8

fran

1963

1964 reflected

olf GDP also

rose

in

petroleum

exchange

percent

and

substantial

despite

1985,

response

prices

resulting

-frcn123 percent

and re]liance

and Issues...,

64

food

and

of economic

production

19E5-61-'

1965,

parts,

and 10.4

19E5 in

fiscal

of medium-

official

percent

problem

19B4 and 1965,

lower

prior

proportion

percent

by

1965,

the

reduced

at 0.9

tons

in

at

19B4,

substantially

1964, but

spare

prices

prices

in

the

in

and

fell

percent

as a

revenues

insignificant production

10

aided

In

strict

supply

1964

inflation

in 1964,

to 8.0 percent was

of

increased

disbursements

in

was a significant

Government

percent

gross

goods,

border

by 8.6 percent

in 19B6. 9

1985.

and

money

was also

sharply

rate

production.

Nevertheless, the

which

evidence

strong

rather

of

consumer

the

1964

The result GDP increased

growth

in 1913 by severe

energy

greatly

exchange.

helped

the

domestic

of donors

discipline

curb

handicapped

tons

in

to the sharp

producrer price percent

increase

Although

the

in achieving

most

1986,

process

the

rehabilitation as

goods

the

to raising

as

incentives

the Cocoa

Marketing

mining.

Equally

batteries, roads,

and railroads,

prices,

proiducer to

cocoa

Board.

vehicle

sectors, of

likelihood

had been

largely

objectives

by

supplies

important

were

spare

parts,

and reducing programs the along

with

of the

of

inputs

the

=World Bank,

Ghana:

Policies

and 85

operating

Issues...,

for

rebuilding

and ports.

p.11.

end of The was seen This

ERP.

and ccnsumer

availability the

the begun.

were underway

increased

successful

cocoa,

success

continued

farmers,

just

had particularly

increasing

Similar

to a 12

1985..2

adjustment

export

contributed

This

stabilization

structural

of traditional

critical

included

initial

of

1985.

Recowvery Program

Economic

of its

in

earnings

of export

expansion

in May

anncuinced

costs timber of

of and

tires,

of Ghana's

CPd TrER V: G(NOE*EwWPCRLICIESTOWWFRS AGRICL1TURE The system of government consists

of the

imports,

as

credit

tariffs,

taxes,

as

the officially

well

research

policies,

established played

by

the central

an important the

delivered, made an

in

so doing

individual the

state

the

subsidies

for

their

farms and other

publicly

in

the previous

distortions which

influencing

the

by

to Equally

decisions allocation

crucial

versus of

price

resources.

it

has

In addition, and pragrams

of credit there

towards

importance

policies

had

faced

by

have been

agriculture

has

economy in Ghana described

regarding

policies

it

enterprises.

policies

political

particular

run counter

incentives.

administrative

Of

chapter.

services

Finally,

oweed agricultural

of government

Board has also

and the claims

and canditions

by the evolving

introduced

have often

agricultural of

influenced

infrastructure

projects

specific

and

and inputs,

subsectar.

cocoa

and inputs.

autputs

The implementation been heavily

the

the prices

have affected

farmers

by

marketing

farmers,

administered

have

agencies

and

has offered

generated

and general

The Cocoa Marketing

extension it

of outputs

prices

services,

government.1-

in

resources

the

semi-autonomous aid

role

input

regulated

agriculture

an exports

restrictians

and quantitative

and extension

Ghanaian

affecting

incentives

trade

designed

have

and foreign to

has been the incentives

been

directly relative as

Where scarcities

the price exchange, influence importance

mechanisms for have developed

± Mhch of this discussion of government policies towards agriculture is taken from J. Dirck Stryker, "World Bank Western Africa Regional Project: Ghana, Part II, Economic Incentives and Costs in Agriculture," is based on World Bank reports and an Nbvember 1964, which in turn and other experts in Ghana during 1974 interviews with Ghanaian officials and other studies have been used to and 1975. Various Wbrld Bank reports before and after examine the changes that have taken place in these policies this period.

86

because

price

of

rise

given This of

has

than

rather

administratively

bribery,

to

of

the

for

allocated this

aid

a transfer

efficiency,

policy

influencing

an

and

influential,

and

has

behavior.

of rent-seeking

kinds

powerful

the

be

to

signals,

market

in economic

losses

mechanisms

political

to

and other

towards

tended

have

response

extortion,

wealth

and

undermining

in

in substantial

resulted

income

goods

distortions,

choices.

cocoa Pblicies prices

Producer been

historically

and

the

controlled

Daard, or CMB, thrcughout

surpluses

both

year

it

shea nuts

Uhtil was also

the Ibard

as

for

"Licensed

Biying

local

trade.

purchase

Agents"

palm

produckts,

copra

(LBAs).

After

the

Board,

while

and

Ccxoa its

that

but in

oil,

and coconut

and bananas.

firms

war,

the

the

that

Among the reasons

was

.nopoly

firms

continued

as

cocoa for

had previously

export

foreign of

collection

a public

established

government

the foreign

replacing

the Cocoa Marketing

the

to

the colonial

Wbrld War II,

cocoa,

activities

grouncdnuts,

coffee,

the

of government

and as a source

its

limited

have

has used

which

history),

purposes

made responsible

the export

organize

monopoly

1963,

cocoa exports,

for

controlled retained

stabilization

and butter, During

miopoly

for

cocoa

(designated

Board

most of its

of

marketing

and

Coroa

the

by

Marketing

revenue.

purchasing

the

establishing

to

Ebard's the CMB

were:

concern over (1) trading the foreign

and

market-sharing and firms,

(2) a desire to stabilize in world sharp fluctuations

price-fixing

domestic prices market prices.

87

arrangements

to producers

in

among

the face

of

Uhder the CMB arrangement, gpvernnent fixed

and

anuniciced per ton,

allcwuance

point

to

the

Surpluses

generated

finance surpluses cocoa

could

during

in

were also

used for

diseased in

trees.

1950-51,

began,

the

in

Local

replaced

with

a graduated

revenue

received

2

with

be used to

In addition,

of general

these

benefit

research,

the provision

a

the price.

were to

low.

purposes

to the

cantrol

of crop

amenities and

of other

from

to 1953-54.3 in

world

of high

and extension

including

however,

draw

and to

a

ad valorum

tax

1948-49,

this

tax

It

in

increased rose

was also

1951, which enabled

in

and

dramatically

by over

duties

share

previously

two and

Beckman, Organizina

the Farmers...,

pp.40-42.

Eeckman, Organizing

the Farmers...,

pp.193-94,

effect

the

was

amount of

as the average ane-half

to claim

279.

and

of cocoa

because of an upward revision the gavernment

of

Beginning

export

muich larger duty

the control

small.

its

specific

The surpluses

the destructian

were quite

because the

to prevent

pay for for

substantially off

order

prices.

market

mDst of

surpluses, in

coffpensation

increased to

large

securities

governnent

per ton of Ghana' s cocoa

rates

varied

CQB accumulated

the

government

was partly

ad valor-un

were

received

cocoa from huying

prices

including

expenditures,

as shown in Table 8,

1948-49

high world prices

haidling that

margin

and

disease,

This

from

of

expenses

of

cocoa research

the

price

all

industry',

a time

revenue.

selling

The LAs

other

British

Ghana at

shoot

swollen

seasm.

wDrld

begiming,

invested

inflation

of

each buying

by the

producers"'.2

to the

were

was determined

profit

cooperatives,

From the which

price

periods

when

and

credits,

facilities

a

"... be used for

producers

diseases,

plus

deficits

CMB

before to cover

ports,

prcducer

an official

almost

times in

the

one-

Table 8 CKOASales, narketing Costs, andPublic Revenue

ShareofSalesMi) ClP Total Current Total Cne Public Current Producer NarketingPayeents Paysents CHO Public Narketing Revenue (d1 Producer to6oYt(c) Surplus (b) Costs Sales(a)Income Revenue NC)Income (bJ Costs toGovtSurplus NC) (sill NC) lmill NCI lmill NC) msill NC) loill Yearlmill 3.9 30.2 1947148 93.0 65.2 6.6 1949149 75.0 6.0 41.2 1949150 90.2 66.2 7.4 1950151 140.6 60.0 6.8 1951/52 103.2 0.6 60.8 1952153 114.2 52.0 7.2 1953154 149.4 7.6 54.4 1954/55 155.0 9.0 64.8 1955/56 104.6 10.4 77.4 1956/57 101.4 52.0 9.2 1957/58 125.9 61.4 11.0 1958159 141.8 13.4 65.4 1959/60 139.9 21.9 83.8 1960161 143.2 20.0 83.6 1961/62 138.0 20.6 81.4 1962/63 139.2 22.4 91.6 1963/64 153.9 37.6 1964/65 142.4 115.0 75.0 17.2 1965/66 105.1 83.3 17.5 1966/67 147.3 19.5 1967/68 237.7 107.4 94.6 16.3 1968/69 253.4 1969/70 342.7 122.8 19.9 34.3 1970/71 279.1 127.2 42.0 1971/72 329.2 139.9 62.3 1972173 351.8 156.3 75.3 1973/74 462.0 156.7 1974/75 666.0 193.2 124.0 1975/76 634.8 243.4 165.2 1976/77 980.0 248.1 113.9 1977/78 1,143.2 386.6 310.6 1978/79 2,973.3 762.9 426.7 1979/80 2,945.8 1,292.0 694.8 1990/81 1,799.2 1,136.0 1,014.7 1981/82 1,240.0 2,976.0 1,209.6 1982/83 6,050.5 2,376.0 2,178.0 199831410,380.03,460.0 4,671.0 1984/8515,749.05,670.08,320.5 1995/8627,342.212,791.612,524.0

.9 3.4 7.0 26.8 29.4 32.0 69.0 76.0 29.2 24.0 52.6 52.4 52.6 49.4 54.8 55.2 43.6 35.6 N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

48.2 -.2 36.0 40.2 7.0 12.8 22.2 16.2 1.6 -10.4 13.0 17.0 8.4

-11.9 -20.4 -19.0 6.2 -45.9 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A, N/A N/A N/A N/A N/A

89

49.0 3.2 43.0 67.0 36.4 44.0 90.2 93.0 30.8 13.6 65.6 69.4 61.0 37.6 34.4 36.2 49.9 -10.2 12.8 46.5 110.9 142.5 201.1 117.6 146.4 133.2 229.9 349.6 226.3 519.0 446.0 1,793.8 969.0 -361.5 -3,025.6 1,496.5 2,249.0 1,757.5 2,026.5

.36 .97 .46 .47 .59 .53 .35 .35 .62 .76 .41 .43 .47 .59 .61 .59 .53 .81 .71 .57 .45 .37 .36 .46 .43 .44 .34 .29 .38 .28 .34 .26 .44 .63 2.40 .39 .33 .36 .47

.05 .09 .07 .05 .07 .08 .05 .05 .09 .10 .07 .08 .10 .15 .14 .15 .15 .26 .16 .12 .08 .06 .06 .12 .13 .18 .16 .19 .26 .13 .27 .14 .23 .57 1.04 .36 .45 .53 .46

.01 .05 .08 .19 .28 .28 .46 .50 .29 .24 .42 .37 .39 .34 .40 .40 .29 .25 N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A N/A

.58 .00 .40 .29 .07 .11 .15 .10 .02 -.10 .10 .12 .06 -.08 -.15 -.14 .04 -.32 N/A NIA NIA NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A

.59 .04 .48 .49 .35 .39 .60 .60 .29 .13 .52 .49 .44 .26 .25 .26 .32 -.07 .12 .32 .47 .56 .59 .42 .45 .39 .50 .52 .36 .59 .39 .60 .33 -.20 -2.44 .25 .22 .11 .07

Notes to TableSt Sources:1947148 through1964/65 froe Bjorn Becktan, Organizing the Farmers, Institute of African Studies, 1976, pp 279-80. Uppsilta Scandinavian rate .5NC/L. Dataareconvertedfron IC to L using the exchange 1965/66 through1995/86fromTables3-312) and3-413)multiplied by cocoaproductionadjustedfor smugglingin Table1-23). Notes: (a)Measured as the FOBprice convertedto local currencyat the official exchange rate. (b1 1947/48through1964/65,Salesminus(MarketingCostsplus Total Public Revenue);1965/66through1985/8b,ProducerPrice from and 3-413)multiplied bycocoaproduction(adjustedfor Table3-3(2) smuggling)from Table1-213). kc)Exportand local duty, voluntary contributions, compulsory savings/ farsers' income tax. Loansandgrants against reservesnot included. (d)1947/48 through1964/65, CurrentCNMPayments to 6overneentplus C.iNetSurplus; 1965/66through1985/86,Salesminus(MarketingCosts plusProducerIncome).

90

half

of the total

reserves other

in

hand, was only 32 percent

elections, four

of the

the

prices

years

the

were

The

a reliable

IGFOC.4

The Coroa Ashanti

was

party

Liberation

Mbvement.

the

that

shouldered

fact

received

they

little

public

investment

in

capital

type

the

rather

than

the

on the

large

of

most

payments outside

farmers

three

in

and

the

incensed

by

burden

but

for

rehabilitation Ashanti

to

platform joined

were

south,

an

of the

favor

fiscal

in the

times

partially

the

the

as

for

a powerful

particular,

share

was trying

time

UGFOC

for

g=vernmlent

pressing

were

abandoned

part

the

expressed

the

in

June 1954

level

two or

provided

was concentrated

in general

and and

region, and especially

of Qccra.

dcudnaince

of origin. just

Beckman,

Liberation of the

that

of government

the region

by

by

CPP at the

left

the

by the

they

but later

The Ashanti,

since

return

The Naticnal reduce

the

who

a

were collected

compensation

the

in

terms

of 1954 therefore

National

year,

existing

agitation,

which

opponents,

that

regarding

off

by 1951

political

organization

Ordinance

and other

sipthed real

in

its

passive

reasonably being

Congress,

in this

following

pegged to

was

increased

result

share

increased

Wbrld War II,

Ghana Farmers'

mold into

the

sales

follcawing

share.

increased

had been

of cocoa

value

long as producer

price

same time

the

8).

was further

tax

farmers

Whereas

total

through

export

at

The farmers

(Table

the prcducer

while

years.

during

1953-54,

of the CMB were increased.

The cocoa

for

value

sales

its

Mbvement used

CPP by advocating

would redirect This

emphasis

policies,

Organizing

the

on changing

the Farmers 91

portion

p.193.

the

issue

UGFCC to

to

of a federal

of cocoa revenue

the structure

enabled

... ,

price

the establishment

a greater

however,

cocoa

to

of government take

up the

issue

of

raising

opponents

of the

political

struggle,

and increased Despite

the

decline

CMB reserves

6),

to

as the

surplus,

dropped

CRP

to

politically

being the

1956-57

used

with

the

going to

the

1954-55

of first

introduction

of the

was to

Second

The

Development

Plan

of the

cocoa

farmers

accept

a

cocoa

price

from

their

"voluntary

licenses time

was

necessary

Ccru.ncil

-

the

fragmented to

reverse

Beckman,

the

contribution"

from all

issue

of the

the and to

restore

secord step,

LGhOC to aninunce on behalf

the

price

in 1956-57

sector

this

5

inclusive

strengthened

rural

time,

to demmstrate price.

13 percent

headlload.

CM1

(Table

capacity

of

penetrate

it

the

share

of

the public sector by reducing the producer price to

the

thereafter,

the

the cocoa

sales,

step

1954 level of 72 shillings per load.

in

at

producer

to

the

its

reduction

place

ensuing

stability

per

in an effort

1957 greatly

The

UGFOC.

shillings

taking

season

from the

policy of price

80

of cocoa

in

resources

issue

of depoliticizing

share

in March

the

this

to

to support

from 60 percent

tap

72 prices

governsnent

victory

cocoa revenue

from

the

being identified with the

abandcned its

cocoa

govermment's

but political

the

world

thrciugh

The cost was high,

price

without

to dismiss

gcpermwent

in

were

price

Anxics

producer

was maintained

that

producer

government.

the

the

price

the

foreign and these

to

was

the

rewarded trading

they

development as

of

that

the

Farmers

Eeckman, Organizinq B

the

Farmers ...

92

,

the

were

prepared

to

per

as

CMB withdrew Farmer

generating

... ,

the

was for

effort.

the

pp.1'96-98. pp. 198-204.

load Shortly

cocoa-buying

opposition

policies.^

Orcoanizina

1959,

72 to 60 shillings

companies.

incapable

in March

which follo.wed

political

by this support

The governnent from the ability the it

CM1, drastically to

stabilize

Board

into

an

Partly from

revenues,

a compulsory

were required

to

Council

scheme, as to renounce compulsory flat

the

rate

it

role

their savings

savings

the in

six

1951-54

of

their

spoke

for

later

their

previous

savings

ccntributians

LGFCC in

1961 created charge

from

deduction.

the

local

falling

1961.

public

Cocoa

years.

COtce again,

the

in

farmers years

to such a

agreeing purportedly

hence.

inccme

agreed

In 1963,

the

tax charged

at a

0

for

biying

farmers for

confined

to its

role

in

to the

the Secretary-Receivers,

centers,

7

Beckman,

Oruanizina

the Farmers

...

,

pp.204-06.

9

Beckman, Organizing

the Farmers

...

,

pp. 2 0 7 - 1 1 .

93

financial

The monKopoly granted

enormous opportunities of

severe

1960-63

in exchange

the L[FCC was not

the cocoa sector.

in

of

earnings

farmers

ten

that

production

restore in

illusim

tans

creating

by a farmers'

savings

towards

400,000

when the

scheme was replaced

to the

over

to

of

price.

Ghanaian

ten

the

the

of

gross

after

transformatim

producer

effort

loans and its

reserves

the

was introduced

redeemable

to

to

with soft

liquid

the

plummeted, an

time

and ended

expansiam

scheme

months

claims

fixing

In

10 percent

did

finance

in

prices

Ebnds,

mobilizing

in

of

supposedly

also

equal

clerks

of public

tans

Farmer hostility

the

canfirmed

c(.2'V

pay

Development

Farmers'

This

world

for

Naticnal

income.

as a result

difficulties

this

BDard's

independent

(Amnex Table 1-2(3)),

at

the

instrument

about 220,000

subsidized

decreasing

farmer

had an important

cocoa

was also

to

exploit

their

positions.

The list

manipulation

of

scales

misappropriation

of

and extortion. superior

were

thus

occasicnally

made with

payment was delayed Another

farmers

a

refuse

perfectly

good.

was no longer

subsidized

took 1963,

back

to

up to created of

accept

cocoa did

four

in

levies,

of farm

than

selling

with

their

In addition, because

the

were

also

Payments

posts.

inputs,

to pay off

of corruption.

cash,

and ultimate

months.

high

CMB, and the

quality

position

the

farmer

to do with

of

without offering

Secretary-Receivers

though

know what

mcnopoly

standards

incentive.

not

They included

unofficial

required

delays

the

even

of

turn,

rather

by

price

Farmers

respect

to

demand

clearly

distribution

mismanagement

considerable

times

notes

application

prices.

were aver

their

problem

to

effective

inputs

not

long.9

would

cansidered grade

it

to

I! cocoa,

be

which

accepted.

With that

with

corresponding

sometimes

in

an pyramid

promissory

at

UGFCC, was the

were,

at

very

distributicn

on the

confronted

were

was

imposition

profiteering

creating

frequently

Secretary-Receivers

the

weights,

and

funds,

grievances

Secretary-Receivers

officers,

farmers

of farmer

public the Ministry

inputs was

The in

such

as spraying

substantially

greater

Secretary-Receivers a position

to

of insecticides resulted pressure,

of Agriculture,

but the

the

handled

the Ministry

After

of the

at

these LUGCC

of Agriculture

in

Because

distribution

LUFCC continued

was

supply

most

in scme areas. for

problem

available

handsomely.

shortages

responsibility

than

who

profit from

in severe

machines,

of

wes handed to

play

a role

9 Many of these grievances were aired to the Committee of Enquiry on the Local Purchasing of Cocoa, chaired by John Colemen de Graft-Johnson, which was established after the NLC came to power. The problems cited here are taken from the discussion of the report of this committee in Beckman, Oroanizino the Farmers...

94

in

"legitimate

identifying

such

as

machetes,

Trading

at

Corporation

National

at

buying

the

bribery,

cash,

of

the

With frozen

in

loans

its

payments

the

second

producer

during

price

of for

its

should insecticides

be

early

reduced and

The

these

the

1960s.

large

crop,

export

duty

after

and

beyond

the

of shortages

to

should

the

collapse

had

already

there

be

Council per be

the these

of

to

the

paid

by

July

95

reserves in meeting

of cocoa been

was nothing

prices

paid

the

left

to

and marketing

1965,

agreed,

that

load,

the the

government

discontinued,

Farmers delegates

and its

difficulty

purchasing In

shillings

reduced

had great

CM

±0 In 1965, and as a result of strong market price of machetes was quoted as being (Beckman, OrCanizinothe Farmers ... , p.1 1 7 ).

aJ Beckman, Organizina utndemocratic process by which

Delays

contributed

price

seriously

the

covered.

Farmers'

sprayers

the

these

extortion been

same was true

as

With

very

40

for

also

for

common.

may have

deposits

revenue

farmers

to

was

by

away.

after

and the

was authorized

Acccountability

delays

cammn

cocoa

LUFCC had been

requested,

inputs,

Ghana National

opportunities

the

government,

1964, a

cocoa

and the

CM

the

of

of sales

the

1962.11

staff.

also

to haul

share to

half

governnent

Board

its

other

state-owned

and expenses

abundant for

lending was

in order

purchase

and misappropriation

reasons

marketing

Extortion

in

offered

also

local

through

UGFCC al lowances

however,

though rn-the-side

transporters

prices

Conference

absent,

though

the

shortages.

the

local

centers

even

ccntrol

of

be allowed to

0

Delegates

funds was totally

to

subsidized

stares."

Dedurtimn the

farmers"

and

in

agreed pay the

costs

of

Cocoa Marketing producer

price

subsidies farmers

on

should

import controls, the free six times the official price

...

were

describes chosen.

,

the

very

voluntarily

restrict

exempt

inccae

from

from imposing

further tax,

levies

Farmers raised

against

Assembly attack had

on the been

cocoa to

Farmers

true

farmers

producer

and its

the

cocoa

prices, fiscal

growing areas it

was

implicaticns

who belatedly democratic

prices

tried

in

harvest about

late in

in

in

to change This

the

structure

with

of

political

the by

the

collapse

Minister

of

Finance,

relaticos

push

with

CoLzlcil

the

the

in

earlier,

system

of of

of

than

the

price

political

the

UGFCC in

world

worried

the

As

to which

issue base

a general

years

degree

the

Natimnal

cocoa."'-a

of

the

linked

governfent's to

the

the into

Mbvement nine

illustrated

were

1966

Eeckman, Be

cocoa

were

1965-66

percent

decrease

the

1965

of 1964-65, 60

of Gbana's

in

market

about

cocoa

the

farmers,

directimn

of more

representation.

incomes

production

buyer

was highlighted

The 26 percent reduced

as a monopoly Liberation

be

"No voice was

but

developed

vulnerability

the

agreement,

debate

National

to

approval.

the

ultimately of

this

the

Instead,

prices.

The

and

in

their

were

were prohibited

price

administration

representatic.

bodies

and other

to

farmers

producer

motimn.

the

In return,

without

reduction

were more concerned

influence

policy

caoucils

opposed

Crunrcil

with

planting.

farmers

strcngly

sharp

on the

debate

and local

an cocoa

were

the

cocoa

Orcanizina

producer

about

30

to more normal

income

from

in

1964-65.

the

price

especially

at

returning

level

the

sectors,

rising

producer of its

in

Farmers 96

cocoa

in

view

percent levels decreased

Yet salaries

... ,

of cocoa

p.218.

of the per

seriously fact

that

year.

following in real

With

the

bumper

terms

of UGFCC staff

by were

increasedin 1965, and CM bEnus.

cne mnnth salary

1

With the

fall of

LFGOC was dissolved companies

that

licenced

to

agents

could

cocoa

judged

in

and marketing

at from

for

I cocoa

Grade

public

sales

5.00)

through

the

Marketing

Board. 4

marketing

cocoa

the

deteriorated

became

As shown

27 percent.

value

Comnittee 3/67.

local in

Table

of sales,

Producers,

Bateman,

1967

Oroanizina

currency 8, these

the

greater

the

by

other

1977 the

Cocoa Farmers

...

harvesting

increased were

paid

sold.

through

for

45

resumed, Cocoa

purchasing

and

in general of

accounted for s share

a bonus

the

overvalued

CB

to 50

Finally,

were

proportion

total

F(B

exchange 8 percent

had risen

percent

to

of total

pp.218-22.

P4Republic of Ghana, "Government Statement on Appointed to Enquire into the Lncal Purchasing

97

cocoa

conditions

received

,

CMB to

prices

1967-68

hand,

the

was

increasingly in

of

system

an

ever

Produce

later

economic

of buying the

being

and

were

however,

farmers

down as

costs

whereas on the

price

and

crop

number

encourage

at subsidized

to 1977,

at

main cocoa

the

quality

the

of Agriculture

from

the

subsidiary

producer

and sprayers

CMB costs to

a

In addition,

broke

and

total

period

as

cooperatives,

the crop,

To further the

progressively

converted

rate.

1966

to upgrade

Ministry

of

Because

handle

headload.

of insecticides

initially

CMB. to

new system,

per

partnerships,

5000 tons

of cocoa.

in order

During

the

in

purchase

under the

(NX

least

insufficient

the

shillings

the

handle

individuals,

Company was established

participate

sales

Nkrumah and the coming to power of the NLC, the

and African

purchase

was

Buying

of

employees were granted a

the Report of the of Cocoa," W.P. ND.

sales

in 1967-68

47 percent

in

and 34 percent

1967-68

aspects

cocoa

while the

in

1977-78.

CMB ordinance

of

1947 specified

as reserves

CMB should be retained finance

1977-71,

and 39 percent

The initial

to

in

purchases,

of production.

to and

be used to

however, required

the

central

governeent,

the

distinction

the

between

enacted

CMB to

including

all

CMB payments

that

stabilize

by the

transfer

all

reserves to

the

s share

surpluses

to

the

prices,

farmers

in all

Nkrumah goverrnenet operating

held

was

of

producer

prmsvide assistance

New legislation

March 1965,

to

government

at

gvernment

in

surpluses

the

time.-"

and its

net

to Thus

surpluses

was erased. As the block

allowance

increasingly

had

abolition

of

the

requirement began

almost

in

did

from

the

the Ltd.

not

the

the

By 1975, all

system

buying Buying

was

the

being

Eastern

in cash.

since

increased

acting

of Ashanti

98

ReFion

-

statutory

Buying

share

of the

the

Cocoa

crop,

and

Marketing

as sub-agents."

of road

Ghana,

LBAs

Produce its

of

the

the

Ghana Cooperative

Region Cocoa Project

IWorld Bank, ADmpraisal Nbvember 18, 1975, p. 1 2 .

the

and the

lack

smaller

following with

twor-thirds

the

became

the

Censequently,

campaign,

by the

1970s,

(LEs)

purchases

cooperatives

however,

Agents

replacement

about

bought

farmer

problem,

cocoa

for

the

Further-more,

Company)

PEA was purchasing

(GCMA) from

Wbrld Bank,

costs.

be paid

cocoa

during

Buying

1973 and its

Produce

rest

solve

Licensed

financing

all purchases

(formerly

Associatimn This

chit

deteriorated

their

to cover in

that

market.

the

difficulty

to withdraw

Agency

to

provided

inadequate

companies

situatimn

macroeconomic

maintenance

Arnex Project

and

1, p. 3 . -

Ghana,

a shortage than

of spare

the

share

Division

with

of cocoa the

of

CMB,

the

because

Buying operating

a moiopoly

of the

buying

LBQs to

centers,

the Produce Euying on cocoa purchases,

settle

outstanding

and corruption

however,

the

each

with

four

debts

associated

PBD (later

organization,

costly

more rapidly

CMB.

granted

was

very

to rise

merged into

In practice, a

the

because of favoritism

and

became

4300

to

costs

GEMQwere

inability

activities.."

Ccmpany)

the

which

the

transportation

allocated

PBA and

million

N65

their

of

caused

sales

In 1977,

ostensibly totalling

parts

the

which

Produce

by 196l

full-time,

was

year-rcxund

employees.1of burgeoning

The problem At the

time

of its

establishment Marketing workers,

in

20,000 working

that,

with

the

Ebard.

declining

sales

equilibrium

rate

equal

FOB sales

of at

the price the

over

paid

official

13,000

paying

fixed

to 15

times

producer

exchange

rate.

the actually

largest

of

have died of

or

the

PHC.

In

1981-82,

official

rate,

exceeded

Even in 1985-86,

1E FAD, Ghana - Third Cocoa Project, Draft Report of Bank Cooperative Programme, Investment Centre, 29 August 1986,

105,000 to be no

CMB implied

overvalued

1 Kwesi Ahwoi and Pn-andan Nar-ayanan, "Restructuring Marketing System in Ghana - Some Application of the Malaysian World Bank, July 1 - August 15, 19b6, p.5.

99

the

commercial

salaries

costs

to rise.

to

By 1982, the Cocoa

the

to

and an increasingly continued

limited

people.

determined

The large

to the

was not

LUFCC was the

were

production total

exchange

the

were later

share of the Ebard in

exclusive

1966,

subsidiaries

of which for

in

Ghana, employing and its

Ebard

longer

dissolution

employment

cedi,

the

with

the

CMB costs

the value after

of

the cedi

the Cocoa Experience,"

the FAO/World p.15.

had

moved

percent

Ng

frm

of the

value

total

Although Joh-ism

report

involved

in cocoa

that

PBC's

the

1981-82 cocoa

crop

from

costs

farmer

inccae

percent

Table

frcxn 1965

9 J. Dirck Nbte," Technical October 22, 1986.

I?

Eccnomic

the

cocoa

of

the

CMB

declined.

the

to

28

paid

by check.

growing

who

had

of weak management

of cash. in

travel,

resulted

this

This

in

Corruption,

1982-83,

For

areas. to

By the

of unshipped

backlog

lieu

to suggest

problems.

moreover,

credit,

problems

evidence

because

ICUs in

de Graft-

the

a system

purpose, posed

14

severe

in many cases,

lang

checks.

Nkrumah's overthrow 9,

is

was so commnm that,

farmers

their

As the

following

effort seen

cash

in

year

of

were

as

administrative

was a cumulative

issued

farmers

for

accounted for

has had similar

Lack

of cash

the there

of that

harvest

being

and diversim

to

of

the

years,

there

and farmers

established

still

such

document

purchases

example,

in which

CMB costs

studies,

in recent

transportation.7-0

however,

distances

to

ULFCC,

to me-half

was instituted

share

for

NW 90/$,

no detailed

oxnopoly m cocoa

embezzlement,

problems,

are

purchasing

payment

were

to of sales.'

the

cn

and inadequate

banks

there

year,

equal

delayed

2.75/$

real

1968.

Stryker, prepared

increased

relative

At first,

however,

there

produicer

prices.21

to

prockacer It

then

fell

raise price

increased,

by 16 percent

to

total

sales,

was a concerted As

as a result, from

the

1968 to

can

be

by 35 1971

"Determination of the Cocoa Producer Price: A of Ghana and the World Bank, for the Gcvernment

Intelligence

the initial 21 Following in 1966, the producer price 1968, and NV 8.00 7.00 in Annex 1, p.31.

Uhit,

Quarterly

Economic

Review,

1982.

price hike by the NLC to NV 5 per headload for cocoa was increased to NV 6.50 in 1967, NV Easter Reoion Cccoa.... in 1969 (World Bank,

100

Table9 PriceofCocoa RealProducer INC/at)

Year 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Real Nominal Producer Rural Producer Price la) CPI lb) Price (c) (in1972NC) INC/et) (1972=100) (3) (21 (1) 269 287 299 280 269 239 224 224 224 220 202 197 187 224 254 284 293 293 293 366 439 499 585 732 1333 2667 4000 4000 12000 12000 20000 30000 56600

39 37 37 38 40 40 40 41 42 44 48 53 67 76 70 76 81 84 92 100 117 138, 176 279 606 1058 1685 2714 5683 6962 15985 22119 24064

698 792 799 733 679 599 560 546 539 501 420 351 279 294 364 376 363 349 320 366 374 354 333 263 220 252 237 147 211 172 125 136 235

Notesto Table9: (a)FromTable3-3(2). (bi1953-1966 figuresare linked to the nationalcombined UI fromTable3-5(1). Shana: and1971-1972 is lorld lank, Sourcefor 1967-1969 PositionandProspects,vol. 1,June29,1977, Economic Table6. Is Shana Policies and Sourcefor1970and1973-1982 June,1913, Table7.3. Worldlank, Program for Adjustment, Is Ghana Towards StructuralAdjusteunt, Sourcefor1993-1994 7, 1995,p. 80. Worldlank,vol. 11. October Letter, Statistical Sourcefor1985is Statistical News Service,August18, 1996,vol. 11. lc)Column 11) dividedby coluen12) multipliedby 100. 101

under

Bisia'

s

years

under

the

out

until

bottcm its

level

was

the

in

prices

rise

real

price.

1964-65

but

recovered.

Their

commodity

boom.

26 and 47 percent

except

As produicer encouraged

comutries, at

the

smuggle

market

are

presented

of the

crop

may

have

because

of

poor

transport

more reasonable

attempts

resources

and

contributed

through

bribery

and other

36

percent

value

in

1980-81

declined

real

in

terms,

of exchange.

Estimates

of

in Annex 1.

They suggest

is at

about its

control

to

the

forms

10

102

in

a

follced

a 81

world

result

in

of the oscillated prices

when world

and middlemen

with

neighboring

were

quite

the

extent

recent

favorable of

years,

government

percent.

of corruption.

to cause

this

as much as 20 percent

that

periodic

undermining

slowed,

earned

share

frontiers

of Ghana

resulted

of

after

farmers

prices

and

34 percent

negative.

where

conditions

a

farmers

Coast,

out

not

to 44 percent

as

Ivory

smuggled

did

farmers

and 1981-62,

was actually

which

1969-70

1974-75 the

two

sales

increased

Thereafter for

of

in

subsequently

next

seriously

prices,

the

estimate

and

total

the

sufficient

across

been

smuggling

price

market

percent

was only

cocoa

the rate

the

1974,

had been

world

only

revenue

prices

particularly

black

smuggling

to

low

share

to 29

and government

in

in

price

producer

income

declined

was depressed

inflation

the

of

and then

after

nominal

Because in

produkcer

the

course.

plunge

real

in

during

by 17 percent

prolonged

when the

of farmer

international

were

a

The share

had

between

increased

Only in 19B5,

in

of sales

1972-73

1983

increase

different

regime,

NRC, and began

1972.

significant

percent

civilian

The

effort

though

crackdwnis going

a into

in

a substantial

waste

of

governmental

authority

of

Tradable Imported a variety

of controls

domestic During

agricultural

price the

general

colonial

The

after

houses

for

independence,

establishing favored

public

small

given

was

(GNTC)

commodities, were

sold,

the

such in

in

urban

varied

over

time

cost

these were be

Sector

food

imported

depots

of

ccmmodities generally higher.23

to

in

government

importers,

Nkrumah public

were respected

ffonopoly

To

As

the

CIF

transport, supposed retail

sugar,

inflationary

a number

licensing

as in

the

place

shares

by

policies

departmental

Trading of

that trade,

was

the

added

pressures

"Marketing and Input &'World Bank, 15, Review Background Paper 5, January

oils.

an import 10-25

built

These

duty

percent,

Retail

controlled. in

food

GNTC's own retail

capital.

but prices

Corporation

"essential"

and vegetable

but averaged

to be officially

These the

up,

market

plus of

controls were apt

nmreover,

Supply," Ghana: 1985, pp.151-2.

that

prices

these

Agricultural

= R.N. Ghosh, "Price Build-ups of a Few Imported Food Commodities Ghana," Technical Publication Series No. 32, Institute of Statistical, Legon, 1972. Social and Econonic RPesearch,

103

of

throughaut

market

or thraugh

and working

stores,

margins.

remained

their

imports

price

commodities,

the

served

networks

Ghana National on

maize,

caused

systems.~

wholesalers

licensed

in

the

to

branches

government

distribution

rice,

Ghana by

and import

subject

relevant

capitals

reduced

era,

have

plus

into

these

exclusive

been

gener-al,

regional

monopolies

years

and buying

Although

the

across

handling,

the

the

CIF price

wholesale

food.

areas. and

was

this

as wheat,

turn,

outlets

the

a

in

the

of nonccommercial

During

that,

over

to exceed

with

trading

Ghanaian

and subsidization

to

period,

main

outlets

have

and regulations

import/export

principal

products

to consumners

the country.

Foods

in

differences the

were accentuated

state-coned

required

retail

to sell

at

the

widespread for

at controlled

for

amoumt of

discretion

The result

was not

substantial were

clearance

purposes, to

at

had neither allocation

and

came into

importance

were

the

value

with

these

stores

the

cost

the

Nkrumah period,

of

the

were

import

licenses,

the

license

were

assure

in charge

for

of the

of

or of

issuance a certain

implementation.

officials

but also

example,

arrived

the

Trade

allciied

these

to

of

inevitably

to

of acquiring

Ministers

to

already

had

to

the

controls

prevent that

grcuth

under official

imported

nor

import

and

licenses

were

bypassed of

any

imported of sales

outlets,

license,

the

data

Instead,

profit-taking.

distributors' own retail

awaiting

the

to

government

influence

a number

their

of mechanisms

effort

towards

public

regulation

goods,

including

food.

Of particular

by large than

distributor

firms,

to ccnsumers directly

which

tended

to

including through

be

of

more

the

tightly

Since large open sales to individual wholesalers would attract

attention, these were frequently

WDrld Bank, "Marketing 2

granting

officials

goods

rather

controlled.

to

the

of income

wholesalers

GNTC,

and

In some instances,

marketing

was

that

during

of

but

a transfer

administrative

existence sector

other

in

in

port. goods

the

as

were evolved

government

imported

the

scarce

led,

contact

had personal

only

after

After

the

In

'

10 percent

inefficiencies.

revoked

private

of 5 to

priority

increasingly

price

rate

Cumbersome procedures

licenses

well

market

exchange

importers

Industries.

free

behavior.

bribes

norm unless

as

became

prices.

the

official

rent-seeking

example,

cammodities

outlets,

The gap between imports

and

disguised

as

retail

sales,

and Input Supply," p.156. 104

with people

to

hired

stand

very

limited

rice

wwld

be sold

rest

of

at

holders

to

Of the

or stores

Since

the

and

district

for

often

sold

were

and the

made,

customers

to selected

the

were

using

the

passbook

system,

which

Wbrld

War.

or

were of

holders

much

the

at

operated

be an

passbook

few used

very

which

them

to

known

sales. goods

were cost,

actual

received

substantial

on

cw4nbehalf.

for

managers

since

their

then

distributors

by sales

to

sub-wholesale,

prices

higher

proved

1964,

in

sawe cases

and yet

and would

well

were

system,

hauses

system

control

had passbooks

issued

This

sector.

that

in

the

trading

large

price

clients

was legal

they

the

this

Under

their

the

release

of goods

separately. outright on

and other

days,

his

sugar,

as milk,

sales

prices

outlets

so passbook

managers

allocated

to

official

retail

informal

the

retail,

"chits"

Even where frequently

by the

used

visible

at

from

the

or

consumers

sales

First

to

20,000

system

to

the

In addition,

outside

the

only

In some cases

kickbacks.

such

transferred

supply

subvert

their

passbook sold

eventually

also

at

public

token

quantities

within

sold

generally

shops

visits

scarce

on credit

goods

on commission

personally.

student

in

larger

much

mechanism

excellent

items

be clandestinely

were

receive

retail

restricted

Once the

in Ghana following

women would

were

of

sales

retail

discouraging

a time.

Q^Eues were

purchases.

prices.

in

originated

sell

of

wculd

Goods that sold

cash

quantities

goods

the

at much higher

often

for

line

as a means

distributors since

in

person

office,

graft the

and other

involved,

basis

of family

ties, This

of favoritism.

types able

not

was

to

authorize wasted

the

resources.

105

scarce friendships

often

release

of

In many

required gccds, cases,

were

goods formed

in

repeated long

waits

the goods

were never sold

actually

to waiting

acquired

dealers

Although graft

and

price

structures,

this

effort

activity best

was

this

goods

increased

ratio

the

official with

profits

to

2

1.2

maize,

the

for

incentives to

this

the

ratio

under the

of the

8.0

in

black

of

rent-s

eeking

are

perhaps exchange

reached

its

first

remained

at

SMC the macroeconomic the

to

market

of 22.2 in

incentives

the private

1977, then

through

impact

official

Thereafter, network

ratio of

the

incentives

market

official

to

the

falling

public

market official

to

1983 before

to

5.9

in

a series

auctions

reduced

19B6. these foods

CIF price milk,

from access

4, Chapter

when

adjustment

of

sugar,

were

up the

controls,

resources,

these

clean

tD

had fallen to 1.7, and it

distribution

by late

tradable

the

sharply.

the

Nkrumah

of

Nkrtunah era,

to a new high

consequences

be gained

Table

black

ultimately,

between rice,

of the

a peak

but the chits

and exchange

as

sector,

1975,

increasing

regarding

differences

to

long

ratio

until

rising

to about

policies

the

deteriorate

and,

The

import

goods

the

to

finally

of devaluations

of

end of

dramatically,

and

price

ratio

level

from

of exchange

1978,

the

as

By 1969,

began

divert

rate

at

after

allocaticn

traded

by the

3.0.A5

approximately

the

In the

In 1966,

situation

with

short-lived

exemplified

peak of

was a major effort

associated

involved,

the office.

and administrative

existed.

rate.

an leaving

there

corruption

by the individuals

in

distortions

relating

were

predictable.

local

currency

to govermnEnt With

and

the

increasing

domestic

and most

other

importable

products,

to

goods

at official

prices

scarce

II. 106

market the became

immense. This gave rise Frequently

involved

that

then

they

marketing Colonel

turned

flour,

or

and other

for

at

least

in

formal

increases effort

was devoted

continued

through

who potentially of

directly on

time

smuggling

effort

early

to scarce

1980s that

kalabule

system

a large and

the

to the

signed

in green import

on the

and less

pr-ivate

sugar, private

in

chits

ink

by

licenses,

time

gvernmnent,

rice, market

was spent which wage

and an increasing

about into

goods through to acquire

Furthermore, only

amount of

and It

its

was at

19EKs, was that

themselves

the

cost

in rent-seeking during

dissociated simply

the

107

people

spent

a great

of rent-seeking

imported activity late

themselves to

The system of profiteering took on the name probably from the Hausa expression "kere kabure", which quiet". A detailed description of this system in contained Politics in Ghana (l972-1979), Accra - Tema: Tornado, 1980. -6

it

gcPvernment crackdowns

to deteriorate,

point

number of Ehanaians committed

as

level.

spent this

system,

the system

periodic

continued time

the

this

the goods at the expense of

increased

reducing

situaticn

scarce,

productive.

Less

disturbing

profiteering

became increasingly

price.

inflation,

attempting

economic

way sold

gpvernnts

without substantially

privately

of

access

By 1976,

this

scale.2

rent-seeking.

activity.

and

As the

less

rate

particularly

had access

productive

activity

the

successive

and

in

massive

the necessary

exchange,

desired.

including

to informal

was

bearer

the controlled

match

if

to foreign

the

a

who obtained

especially

acquired

employment,

not

What

deal

times

sector did

else

coimmodities

five

chits, access

whatever

an

Ghmnaian women with

right

provided

behavior

officers,

over to The

Acheampong, grain,

rent-seeking

were military

network.

bags of

to

informal

goods became

1970s and from the sector

of "kalabule", means "keep it in Mike Oquaye,

activities

in the

tradable 10,000

foods, tons

domestic and

or,

in many cases,

such as rice

per year,

grain

were

cities

when

were

largely

prices

determined

instead

the coutryside.

had by this

and maize,

except

in

aid

food

time

could

divorced

fallen

be

from those

principally

by

local

Imports to

less

obtained,

then

so that

on the world demand

of

and

market supply

conditicns. This

situaticn

ance more under the Economic

were increased

of the

the mnxropoly essential buying

foods,

35

percent

margin

on

overhead, was

GNPA

was broken

In an effort

to increase

agencies. Developnent and

palm

Division Corporation foodstuffs

the

of this

late

in

an

agency

which

(GFDC), on which

IWobrld Bank,

was

it

difficulties

early for

over

handled

buying

to stabilize taken

by

the

"Marketing

substantial

and Input 106

Supply",

cover

because of

food

by

imports

for

storing

and

many years

public

the Grains

and

prices.

had been established

experienced

for

1970s,

to

and profit,

the government

being

a

suppliers.27

production

oatput

1960s and

effort

financial

as of

Despite

designed

"ca..ission",

produciers,

of

was

fod.

a

local

of bulk

were authorized

from overseas

(GDB) was responsible

Board oil

severe

local

share

which

costs,

purchasing

for

the

During

in

advantage

exchange to import

capital

of

Agency (GNPA) on imports

traders

price,

to substitute

prices

stabilize

tried

time

and inefficient

mismanagement

to

working

this

at

CIF

In additian,

Program.

1976 to take

as private

own foreign the

Recovery

in

when food imports

recently,

Procurement

had been initiated

which

1985 to use their

administrative the

Ghana National

opportunities,

the end of

until very

continued

trading

and Legumfes maize,

rice,

In 1975, the Marketing Ghana

Food Distribution

in 1971 to market losses.

p.156.

At

perishable

the same time,

the Rice

Mills

autciomxis

Uhit

body under The

oriented This

marketing

the minimum

basis

guaranteed market

resources

activities

to

of maize,

have

in

marketings.

reasms, competing

a

with

fell, the

never for

the floor

to support suffered private

of

the

a

of Agriculture of

the

neither

rice

was made an

influence.

when

facilities price.30

an Agricultural

In most years price,

but

nor

the

facilities for

the

buying

The anuual

purchases

of the

percent

there

of

was

of finance Uhit,

price

total

estimated

a substantial

The Rice Mills

for

surplus

prevented

the

additian

to

in

paddy for

costs

that

prevented

resulting

in

substantial

milling

maize.2

sufficient

and lack

millers,

for

and university-based

storage

12

were chiefly

belaw the market

GDBJGFDC were

exceeded

price

producticn.29

was well

maize

high

GDB/GFDC

Committee

the minimum guaranteed from

the GDB,

guaranteed

by

costs

example,

of storage

shortages

also

for

significant

In 1974/75,

unable

minimum

foodcrops

price

of

fact,

GMB from supporting being

the

of estimated

price

financial

GE1/GFDC,

of

composed of Ministry

on the

officials,

part

activities

for

was established

had been

of Agriculture.

implementing

Conmmodity Prices,

the

the Ministry

grain

towards

price

when

(FRIU), which

similar it

from excess

capacity.

3 In 1984, maize accounted for 54 percent of total GFDC purchases and imported rice for another 27 percent. Other purchases were divided and imported "rural trade" items among starchy staples, legumes, charcoal, and Input Supply," pp.160-62. such as machetes. World Bank, "Marketing

Wbrld Bank, "Agricultural Pricing and Draft Working Paper ND. 9 for the Ghana Agricultural April 1986, p.22. Project, by Lynn Salinger,

Trade Policy Framework," Sector Rehabilitatim

-C0 Whrld Bank, Ghana: Agricultural Vol.II, Annex 5, p.1 1 .

Review,

--

109

Sector

April

12, 1976,

The influence

of

food

was thus

detrimental

higher.

to sell

In

frequent

government

franm about

from

high

resulted

tons

1973 to a also

was

GFDC

As

markups in

order

time

this

created

was

reduced

to cover

part

these of

opportunities

when

for

devaluation

when market

difficulties

a result,

buying

mere 6,000

tons

to purchase on the

private

losses

in

brought

need for

maize was reduced

1933.:3-

imported

rice

market

on domestic

border

fact

low allowable

and the

prices

and other

at substantial

purchases.

and favoritism,

bribery

were in

with

of

had a

Developnent

prices

coupled

financial

its

marketing

domestic

and Agricultural

costs

allowed

the GNPA and to sell

on

though they occasionally

prices

in severe

in

agencies

producers

operating

subsidies.

30,000 The

large

at official

addition,

margins

trading

importance,

little

by obliging

marketing

foods

of

effect

Bank borrowers

of the state

For a

-

but the windfall more

in

line

with

domestic market prices. In designed

the

face

ensure

to

of Agriculture

manages the

foreign

The Ministry

of Finance

nor the

is

-'

As a or

harvests,

food security.

is

budget

there with

to inform

In reality,

donors has a very

shortages,

Estimates

and coordinates

then supposed

be imported.

result,

Ghana

are years

of

in which

corresponding

price

neither

there

and Input

Supply,"

p.159.

Bank,

"Marketing

and Input

Supply,"

p.161-62.

Wobrld Bank,

"Agricultural

Pricing 110

...

,"

pp.2-29.

food aid.

concessional

are significant

fluctuaticns

"Marketing

which

the governent

expected

L Wbrld Bank, 32World

made by

of Trade how

the Ministry

idea

procedures

of Finance,

concessional

however,

clear

has

of shortfalls

are passed on to the Ministry

exchange

international

imports.:' surpluses

to

fluctuating

adequate

the Ministry

much food

of

that

the

goernment buying

is

unable

and selling

to

control

thrcugh

1961 to

1966,

effect

markedly

operation

declined

ccnditimis improved

major

in

almost

38 percent

1970

to

domestic

or its

foreign

road

of the

the

trucks

mid-1970s

of vehicle

spare

1975.

Althtgh

parts

;54 World Bank, Current V: Agriculture, C3ctober 26,

It

is

in

1956

were the

spare

but

and the

and resulted

tons

and

estimated 4,442

more than

situatim

the

tons

on

Position Ecnomic 1970, p.8.

the

Ccnditions farmers

years

percent total

and were

charges,

total in

in

RcNad

of vehicles

capacity

1968.

of

In 1968

old.2

had deteriorated by 40

declined

statistics

six

number

transportation that

trucks

parts.

of

scarcity

in high

to

the

4

a survey

From

of

age

maintenance.

years,

canditicns

average and

tires

agencies

system.

imports,

inadequate

a few

roads.~

the on

of

marketing

transportation

gDvernment,

with

that

the grain

of

restrictions

for

Foods

on the

of shortages

from 8,271

declined

By

of

on marketing feeder

trucks

Imports

because

1970 ftirid

on

Nkrumah

thereafter

constraints

especially

policy

deteriorated

somewhat

traders

the

because

also

activities

of gavernment

during

increased

and Ncntradable

than the

Motre important the

its

operations.

Transnortation

has been

either

in truck

and Prospects

even

terms

real fleet

of

further.

were

Dhana,

from not

Vol.

"Sane Development and G.J. van Apeldomrn, ;so V.K. Nyanteng Implications of Farmers' Problems in Marketing Their Foodcrops," in Growth in West Africa, Institute of I.M.Ufori (ed.), Factors of Paricultural Research, Iniversity of Ghana, Legon, Statistical, Social, and Economic 1973, pp.26E,69.

Prices, in the

Kadwo and the Sixties,"

in Local Food Ewusi, "The Rate of Inf lation, Variation in Ghana of Transport Facilities on Local Food Prices Effect in Ofori (ed), Factors of Agricultural Growth ... , p.2B4.

111

maintained

after

the total

1970, figures

number of trucks

fram 1971

percent tires

of

the

for

the marketing

and sorghum,

to weight.

products

Since

directly,

its

Policies In contrast

the early inputs

taxes

by

and 16 percent that

1977

70 percent

19Y83, approximately 70

By

because of

its

staples,

crops

lack

of

influence

policy,

government

sectors

Most of these

the prices

that

public

historically

intervened,

through

research

the

since

of subsidized and through

areas and crops.

economy,

interventions

has tended

services,

specific

of the

of

sector

especially

provision

and extension in

low value

affected the

and

Inputs which

has

such as cassava

transportation.

to Agricultural price

system was

have relatively

policies

concerning

agencies

to other

the transportatimi

these

production

specialized

in agriculture.

since

Related

the

through

in contrast

of

of starchy

policies

to encourage

and credit,

addition,

in

of service

no government

to output

agriculture,

1970s,

interventions

was out

the most important

has had has been through

to discourage

1960 to 1970

to market.10

of the deterioration

yams, and of millet

these

from

suggest that

parts.39

severe

in relation

of new trucks

it was estimated

vehicle fleet

The impact especially

29 percent

headload crops

road

and spare

fell

As a result,

to 1975.57

of farmers had to

on registration

there

In

are no direct

have favored

larger,

more

modern farmers.

-'7 Wbrld Bank, Annex 5, p.15.

Ghana: APricultural

as Inception Report, Research Programme", 1977. Wobrld Bank.

Building

Ghana: Policies

and

Sector

Review,

12, 1978,

Road Research Institute, " Highway

and Program for 112

April

Adjustment,

1984, p.63.

Input Subsidies. There

are no

import

agricultural

machinery

agriculture,

such as trucks,

inputs, policy

however,

favoring

mn fertilizers,

and equipment,

though

are subject

have been influenced

and practice

the cedi

tariffs

in

relation

to input

has had an especially

important

capital-intensive,

mechanized

some inputs

to duty.

less

insecticides,

not used solely in

Domestic

by trade

taxes

distribution. effect

prices

of most

than by government

The overvaluation of

on the pricing

techniques

and

aver

those

inputs

that

of -

absorb

more labor.

Fertilizer. distributed at subsidy for

Numerous

subsidized

agricultural prices

by

inputs

the

have

Ministry

wver of

the years been

Agriculture.

The

fertilizers, for example, was initiated in 1968 and has evolved

as shown in the following table,

Fertilizer Cost, Price, and Subsidy (Nf/mt) (a)

Ccwnxouid

Year 1970 1971 1972 1973 1974 1975 1976 1977

AmmoniumnSulphate

Sales Sub% SubCost(b) Price(c) sidvyd) sidy(e)

110.6 122.3 163.9 183.2 353.7 408.6 297.5 306.0 N/A 1984 2E000.0

56.0 56.0 56.0 56.0 56.0 56.0 56.0 130.0 N/A 9000.0

54.6 66.3 107.9 127.2 297.7 352.6 241.5 176.0 N/A 19000.0

49% 547. 667. 697. 847. 86. 81% 567. N/A 6EMX.

Sales SubPrice(c) sidy(d)

Cost(b) 81.4 85.6 110.7 155.2 293.1 275.6 227.5 296.0 N/A 20,100.0

113

40.0 40.0 40.0 40.0 40.0 40.0 40.0 100.0 N/A 7000.0

41.4 46.5 70.7 115.2 253.1 235.6 187.5 196.0 N/A 13100.0

% Sub sidy (e) 517. 54% 647. 74%. 867. 85% E8Z. 66% N/A 65%

NOTES:

(a)

Source is WDrld Bank, Ghana: Aciricultural Sector Feview, April 12, 1978, Vol. III, Annex 7, Appendix Table I, and calculaticns for World Ebank, Ghana: Agricultural Sector Review, Background Paper Nb.l: Incentives and Comparative Advantage, January 15, 1985. Cost ex-warehouse Tamale, Upper Region. W2.80 per bag of 50 kg for compound fertilizer and N&2.O0 per bag of 50 kg for ammonium sulphate from 1970 to 1976. In 1977, the prices per bag were raised to NW6.50 and NW5.00 respectively, By 1984 these prices had attained !S450 and N350. Cost minus Sales Price. Subsidy as a percent of cost.

(b) (c)

(d) (e)

It is clear

from the table

of fertilizer subsidy

that

to remain

fixed

became increasingly

Over the years

there for

was a tendency a number of years,

important

as

for which we have data,

percent.

This does not include,

resulting

from overvaluation

a

of course,

of Agriculture.4"

foreign

aid

imports

rose

increased into

the

tied

less

19/7.

*° Prior responsible for

rapidly, Small

delivered

ranged

additional

cost.

from 49 to 86

indirect

of fertilizer,

subsidy

to fertilizer

end of fertilizer.

1976,

the

by

by the Ministry

tons

foreign imports,

obtained Ministry

exchange. however,

in 1976.4-

and 17,900 tons were carried particularly,

imported

1970s the problem was largely

to adequate

in 1971 to 69,630

however,

to the importing

access

increasingly

farmers,

of

Agency (GNRA) and distributed

to gain

from 9980 tons

during which time the

rate

supplies

During the 1960s and early

was

price

of the cedi.

Procurement

mne of the GNPA s inability

the official

percentage

the subsidy

A major problem was inadequate the Ghana Natimnal

for

As those

Utilization over from 1976

timely

of Agriculture

access

to

was also

4L Fertilizer imports were only 2900 tons in 1962 and 6340 tons in 1969, indicating the absence of any concerted effort to develop agriculture other than cocoa bef-re the 1970s. Wirld Bank, Ghana: Agricultural Sector Review, August 12, 1978, Vol.III, Amnex 7, Appendix Table 5.

114

fertilizerwith difficultybecause of late arrivals,complex administrative procedures,and heavy competition from large farmers at the subsidized prices.

There

a result,

the

was also village

some smuggling market

March 1977 was NP9.00 per By 1984, late

for

planting

finance

the

points

at

As a result, Farmers' Volta

because

of

slow partly

pricing

by

the

mobilization because the

of

CAmpanies

official

price with

of

the for

borders.

As

fertilizer

was Ni2.00., shipments

Agriculture's

in

4

arriving

too

inability

to

of

transport

to inland

distribution

low

official

transport

rates,

government's

new desubsidization

was

(FPSCOM)

across

small farmers

Ministry

distribution

Services

fertilizer

was no better, the

under

fertilizer

paid

while

situation

imports,

an

bag,

the

least

indecision

price

of

transferred

in

the

and

policy.43

to government-uwned

Lpper

East,

Upper

allocatimn

and

West, and

Regions."4 Aside

distribution,

from inefficiency

the

fertilizer

Government

expense. million

in

1976.

current

budget

Although

the

subsidy

outlays In

for

government

the

was

Wobrld Bank, and Input

IWorld Bank,

4

be an important millimn

amounted

to

phasing

had not

the subsidy

Review,

Ghana: Auricultural Sector Review, Supply,

January

15,

Ghana: Agricultural

W9.2 of

the

cocoa.

'

percent

excluding

in

sector

1970 to

25

been accomplished

Sector

delays

public

in

to

development,

42 World Bank, Ghana: Agricultural Vol.Il, Annex 5, p.21.

5: Marketing

to

subsidy

conunitted still

in

from NW0.4

agricultural

from 1976 to 1990, this

period

grew

increased

1976/77, all

and inequity

out over

the

by 1984.

April

12,

1978,

BackgrouxJd Paper

1985, p. 1 5 3 . Sector

Review,

August

6, 1985,

p. 4 2 . 0 Vol.III,

Wobrld Bank, Ghana: Agricultural Amnex 7, pp.8-9. 115

Sector

Review,

April

12,

1978,

Machirery machinery were

for

Services.

in

Ghana is

imany years

Transport included

Division

early

1970s

the

large

farmers

the

equipment

to

private

those

of

about

40

the

was so

only

12

prepare

that

to

poor the

of

provided

by the

depending

on

subsidies

were

irrelevant

services

were

available

90 percent

6 October

the

service

of

the

As a tractors

in

result,

land

by

of

of the

because fram

the

for very

1976

used

116

in

relative

in excess

land

that

that

the

of only and

averaged able

were goverrwnmt

to

owied

of estimated

limited

for

services

and harvesting

a -few favored

Econcmic Position pp.14-15.

of Agriculture, Price Policy

so

were

in Ghana.4`

M1O, though

tractors

services

in contrast,

preparation

Except

of

estimated

1977 from 3 to 74 percent

WDrld k Bank, The Current 26, 1970, Vol 5: Agriculture,

4' Ghana Ministry "Agricultural Service, April 1976, p. 9 .

an area naiers,

was

were serviceable

and harvesters

rendered.

crawler

was

it

The candition

considerably it

during

Again,

importance

tractors

prepare tractor

mechanized

MtA varied

example, wheel

to

Private

an

Subsidies

about

able

wheel

of all

for

of the

and

services

of subsidy

services.

rates

services

These

costs.

in

farm

Mechanization

aouint

sector

all

tractor

(MEY).

declined

who charged

up to 240 hectares.46

3 percent

by the

inefficiencies

govermEnt's

hectares.

rates

and the

rapidly

In 1969, the

addition,

from these

the

government

operators,

In

of private

most

and

mechanization,

of Agriculture

50 percent

was annually 18

Ministry

and harvesting,

governmeit.

percent

of these

the

farm

free.

subsidized

who benefitted

tractor

each

only

of

was about

however,

duty

at

tillage,

the

to encourage

imported

provided

clearing,

great,

In order

farmers,

extent

to

the govermEnt clearing

costs,

at

Economic Research Ghana, " by Frederick

which did

the

operate

subsidy

and Prospects

these

rates

of Ghana,

and Planning D. Kerfker,

of 0 to 17 percent.49

Far

services,

mechanized

Improved Seeds.

producers maize

of maize

seed

was

operator

and rice.

and three-fourths

in

the

influence

of Agriculture

and import

program,

Farmers in

1974 paid

of

cost

the

of

reduced to nil for paddy and 50 percent

for

varying grain prices.

policy

while

the

the market price

consequently

for

was unable Because

established in

4

October eC)

ane-third

the

of

lower

the

the mid-1970s

of

had been

to

flexibility Mills

in

1976,

than

for planting.

grawers N!55/bag of maize seed

difficulties Ghana fou,dation

Sector

Economic Position

Agriculture,

with

in many cases in

seed. 8 9

to produce

cope

Uhit

the certified

World Bank, Ghana: Agricultural Amex 7, p.11.

Ghana, Ministry

10 to 20

rate

was about N80,

state-owned

World Bank, The Current 18, 1974, p. 1 6 .

cost of

only

quality

administrative the

benefitted

of the

subsidy

by the Rice

registered seed seed of

the early

primarily

consumption rather

to buy any of

program from the Ministry,

Vol.III,

adequate

lacked

for direct

MOh offered

of

maize."Q

Paddy seed was sold

the seed being purchased Similarly,

which

during

for mnly one-half the market price, resulting

for example,

prices

Ghana's overvalued

paddy, though

By 1976,

price

of

the

operated

percent of all farmers were reached.49

Seed

determining

costs.

The Ministry

multiplication

seed

important

hwever-,

exchange rate an private

1970s a

more

of Seed

and the M0A

running

Company

seed from

Review,

(GSC) was

the breeder'

April

and Prospects

"Agricultural

a seed

12,

s

1978,

of Ghana,

Price Policy...,"

p.9. 51 World Bank, Ghana: Agricultural Vol.III, Annex 7, p.7. 117

Sector

Review,

April 12, 1976,

seed

made available

by

was then

issued

ccntract.

This

seed

proved

to

The G5C

to

the

registered was

in

be no

Fsearch

Crps

private turn

more adept

severe

stocks.

time, there

At

the same

farmers

cleaned,

and by 1984 it was in

Institute.

The fotundaticnseed

to

produce

processed,

at

seed

finamcial

pricing

trouble,

was a

and sold than with

by the

GEE.

MEA, however,

the large

unsold

in seed

sharp decline

on

seed

certified

seed

producticn

because of financial problems, unavailability of inputs and spare parts, and a decline in the number and acreage of participating growers.3-

Other Inputs.

The

MOA also

maintained subsidies cn insecticides and

hand tools, but quantities supplied were insufficient at

the

subsidized price,

official

levels.

Ghana,

Despite

farmers

difficulty

by

the

the

establishment

end

of

basic

the tool

relation

to demand

by market prices two or three times

as evidenced

this

purchasing

in

of

1970s at

two

machete

factories

were continuing

the official

in

to experience

price.

Smuggling

to

neighboring countries also appeared to be a major problem.53 Cocoa provided

farmers

by the Cocoa Marketing

1965, as

noted

CMB sold

Gammalin,

equal V12B.00

benefitted

to

earlier,

about

in

Board.

These were

but were later

turn,

and seedlings

of for

its

used on costs.

e3O.0O and

Bank,

suspended

In 1974, the

cocoa farms,

Sprayers

that

were repaired

in

cost free

at a price the Board of charge.

were also sold at subsidized prices, estimated at

Om World Bank, Ghana: Aaricultural No.5: Marketing and Input Supply, January 53 World pp.10E-09.

temporarily

subsidies

resumed under the NLC.

main insecticide

one-quarter

were sold,

Cocoa pods

the

fr-om a number of additional

Ghana: Restorina

118

Sector Review, 15, 1965, p.167. Economic

Growth,

Background

October

22,

Paper

1981,

about

50 percent of cost.

and repair

of feeder

In

addition,

the

CMB financed areas.

By 1977, in

the

inflation,

subsidy

rates

in cocoa growing

roads

constant

official

official

exchange rate had increased to 81-95 percent.s4

input

supplies

Input were

inadequate.

available

prices

to

and

1970

only

150,000

million

hectares

in cocoa.

annual

production

capacity only

gcvernment

subsidy,

which

smuggl1ing.

It

government

sprayers W3,400.-7 prices,

54

54

of

these

that

multiplicatian

financial

the

to 1.8

1.2

had a total

in 1976, which was

for

announ,ced

this for

intention Program,

apiece

ostensibly

of inputs

for

levels

sprayers

Recovery

smuggling

supplies

problems

the subsidy

and W to

eliminate

Sector

Review,

Vol.Ill,

TM World Bank, Ghana: Agricultural Ann-ex7, p.10.

Vol.1,

M' World Bank, p.48.

for input

1985 imported

offset

policy

Ghana: Agricultural

all

them to

was to help

annually

15.9 million

the CMB in

and resold

was the

the CMB and led to

under this

World Bank, Ghana: Agricultural Annex 7, p.9. World Bank, Amex 2, pp.9-

at the

by the CMB

farms

cocoa pods

insufficient

of W14,000 for

incentives

of

insecticides were

compared with

at 1976 import

the Economic

The reason

sufficient

hectares,

million

the

at a landed cost

but the

Vol.III,

Vol.Il,

as part

1975,

furnished

face

ha per year.55

posed

NV- 2.4

Despite

and

services

1.65 million

for

was estimated

insecticides.-~ subsidies

of

20,000

reason

the

support

Ghanaian seed

The major

cost

local

Between spray

enough to replant

and rising

the constructian

farwers

for

low producer

were enormous.

April

12,

1978,

Sector

Review,

April

12, 1978,

Sector

Review,

April

12, 1976,

Ghana: Towards Structural Adjustment, October 7, 1985,

119

Credit. In addition Ghana is banks,

formally

the

Bank

Agricultural In

it

commercial

addition,

banks

gone

loans have gone instead to percent

of farmers

loans

of

been almDst

exclusively

for

1972 granted

70 percent

of its

s-hort-term,

and

generally

Interest

loans

hand,

guaranteed

provided

inflation

at

of interest

to

In

WE

H. Mettrick, of Reading, p.60. -

at

time

this

credit at

less

10

than

loans

of

five

of

loans,

at

The ADB in

bank

credit

rate

on medium-term

agriculture

about 10 percent

as

18 percent

an interest

The NIB

NIB have

the

years.

Commercial time

bank

Most ccunercial

the

was charged

to

and agroindustrial

markedly.

long-term. at

by

credit.>9

medium-term

as

granted

by commercial

Loans

Overall,

excess

Bank of Ghana.

was ruming

agriculture

in

loans

to the ADB, but most of its

whereas

11 percent

by the

subsidized the

as

percent to agriculture

available

14 percent. bank

12

varied

credit

Investment

farmers

institutional

periods

National

of

farnms.0

have

conmner-ial

borrowers.

larger

middle-size

credit

in

including the

value

been limited

or medium- term,

been short-

have

the

to

in Ghana receive

Conditions

of

primarily

credit

of Ghana initiated a scheme in 1969

to small

farmers have

Small

agricultural

(ADB), and

Bank

twr-thirds

network,

of institutions,

Bank

the

development

banks and the NIB have enterprises.

credit

Developmnnt

guaranteed or

informal

by a number

provided

(NIB).

whereby

to the

and ADB,

was

of about ccmmercial

on the

at

6

percent.

per

annum,

other Since

real

rates

were negative.

1968, the average loan Policies and Institutions Department of Agricultural

of the ADB was for in Ghanaian Pariculture, Economics and Management,

World Bank, Ghana: Aaricultural Sector

p.l. 120

Review,

Ni 11,000. LUiiversity June 1971,

Val.III,

Anmex 6,

Repayment had problems

The

Scheme in

in order

loan

to

guaranteed

to reach

the

food cultivation.

which in by

reached

the all

in

6.6

the scheme.

particular

apply

group.

for

a loan

commodity. The scheme

the expansion

percent

1969 a

in

a particular

the

to assist only

would

of of

ADB in

Bank initiated

of farmers

members and

but the

the

production

however, by

time,

result,

a group

small farmer

By 1975,

in Ghana had been

over

As a

invest

was

designed

varied

loans.

recovering

Commcdity Credit in co,m,n

have

rates

of all

Loan recovery

was

of staple small

rates

farmers

were

about

K0-90 percent.4° The major rates

of

inflation

especially

lowered

on

private

rural

vol.III,

rates

of

to

triple

difficult

result

for

financial

on local

This

credit

that

high

levels, encouraged

institutions

cessation

to

of the

flow

and greater

institutions

Bank of Ghana

by the

been

negative

digits.

was a virtual

national

dependent

interest

reached

established

research

of Agriculture

and of several

vol.III,

real

in Ghana has

beginning

in

1976

savings.62

and Extension.

Faculty

Industrial

of

banks

Agricultural the

credit

The

out

institutions

Research

rural

extremely

viable.

resources

reliance as

and made it

financially

of credit

with

1977 when inflation

after

misuse of credit remain

problem

research

Research

IbWorld Bank, Annex 6, p.

and the

Ghana: .

tb World Bank, Ghana: Annex 6, p.16.

been the

traditionally Economics

institutions

(ORIS).

12

has

Department

under

Research

the

activities

APricultural

Agricultural

121

Sector

Sector

responsibility

at

Council related

the

for

universities

S&ientific

to cocoa

Review,

Review,

of

April

April

and

and cotton

12,

1976,

12,

1978,

come

under

the

respectively.

Cocoa In

Marketing

addition, certain

Agriculture has

and

Board

the

Crop

Cotton

Development

Production Division

responsibilities

with

of the

respect

Bcard

Ministry

of

field trials.

to

Eecause of this fragmentation and lack of coordination of research activity, thowever,the Ministry of Agriculture has

tended to

ignore the

work of the

universities and research institutes as not being very relevant and has gone to

the other extreme

crop

varieties

"of relying

without

adequate

very heavily attention

to

hoc introductions of

on ad the

need for local, adaptive

research. The situation service.

During

the

in agricultural 1950s,

Ghana

this

within

marketing

of

cocoa.

As Tony Killick

Party

that

Other

lack

of

the

British

as

these

1962

were

primarily

extension interested

to cocoa. with

and transferred the

staff

been

were

range

The Nkrimnah it

farmers'

only

By the

a broader

of Agriculture.

had previously

has described

effective

concerned

(1UGFC),

extension

an

related

Ministry

in

Cnoncil

by

service the

service

Farmers'Cooperative

Convention People's

farms.

extension

developed

uprooted

period

and extension

a national

had been

gavernment

exacerbated

colonial

research

however,

of crops

is

to

the

wing concerned

transferred

Uhited of

the

with

the

to state

it,

The results were disastrnLxs . The UIGFC lacked the expertise, administrative capabilities and motivation to operate an extension service. Its officials used their positions to cheat the farmers, who became increasingly hostile to the organization which was supposed to help them. Extension work was further hamstrung by sericus shortages of imported supplies such as machetes, fertilizers and seed. The result was that such extension service

(ktober

World Bank, The Current Economic Position 26, 1970, Vol.V: Agriculture, p.11. 122

and Prospnets

of Ghana,

as had existed drastically..3 After

at

the

the

back

to

Agriculture,

which

was also

and

their

tech-iology.

In

transport

and

research

embarked

on

seed

agents focus

partly

the

of

the

Grains

with

of

of seeds

and

work of extension on

agents

agricultural

by inadequate

activities.

means of

To bridge

the

and Legumes Development

such as

cverlapped

was

Ministry

the

farmers

advising

their

extension

distributicn

the

for

deteriorated

for

were handicapped

of activities,

that

demn:stration

those

of the

gap

Board

and foundaticn Ministry,

creating

confusion. During

research

and

rotation

1960s

late took

the

and

extension

Ashanti,

Central in

Agricultural

Development

Project

involving

Killick,

research

Development

the context

Fertilizer

Program

in

cotton,

increasing

amount of

of particular

project

began

fertilizer

cassava,

utilization. the

Nbrthern

financed and

Economics

an

important

extension.

...

,

p.

Agricultural

123

Sector

which

led to

Ghanaian/German

undertook project

While

and

groundnuts, and

The Region

research

in the

Uipper

these

and other

and Prospects

of Ghana,

191.

64 World Bank, The Current Economic Position October 26, 1970, Vol, V: Agriculture, p. 1 2 . is World Bank, Ghana: Vb1.III, Annex1X, p.3.23

an

and Erung Ahafo Regions,

fertilizer

World Bank

applied

within

volta,

increases

and the

1970s,

an maize,

substantial

on rice,-5

and early

place

In 1969, the FAO trials

ccwpeas in

the

extension

organizations.

Region

for

from

extension,

a number

prcduction,

additional

addition,

sixties

Divisimn

considerably

away

of a clear

the

respansibility

responsible

comnplicated

and

of

Producrtian

attention

lack

between

Crop

the

This

took

era,

Nkrumah

transferred

fertilizers..4

beginning

Review,

April

12,

1978,

projects

were

ccncentrating shortages

more extension

and

insufficient

have

countries.

incentives,

the

At the

has

operate

budgetary

research

on Ghanaian

This,

extension,

farming

has

of

industrialization, Ghanaian

agriculture

general Nkrumah away

the

number

of its

was managing demonstration

105 farms,

In

addition,

co-operative

farms,

and

pp.

enterprises

,1 World Bank, 35 - . e'

the

the

impact

costs,

research to

other

lower levels,

money required usual

to

problems

of agricultural

of

research

Production

Ghana:

public

Farms farms half

was

U[FCC

Workers'

very

Sector

Killick, Development Eccnomics....,p.19 2 .

124

new, by

responsible

Brigade a

Agricultural

marnaged

small

Review,

which

holdings. the

the for

operated

to shift

created,

land

were

and

small-scale,

was

total

of which

stations

affected

its

effort -

form

Corporation and

ownership

a major

predcminant

about

the the

toaards under-took

its

and experiment

Agriculture.

34

from State

1965 it

"These

at

of

with

the

government

The

increased

farms. ^'

staff

orientation

farms.

rapidly

former

its

the

cwnaer-operated

research

expense

by

personnel.

of trained

overstaffing

in

techniques.4-

State As part

of project

and

coupled

limited

currency

income

the

and

plagued

real

been

funds at

programs.

and

has

also

local

turnover

exodus

research

were

high

declining

large

they

inputs, rapid

same time, there

consumed

coordination

a

adaptive

goals,

and

mid-1970s,

induced

instituting

of

delivery

farmer

facilities

in

particular

on

late

Since

which

successful

10

proportion

August

rest

By being

Ministry

of

mechanized mec-hanized of

6,

the

1985,

population total

in

agricultural

anmunts the

engaged

production

of capital

smalIholder

sector

Despite

agricultural inputs

of

during

the

farms, the

officers than

and accounted

and diverted

The state 1963-65.

agriculture

manpower

small

example, cost that

they

1966

between

farmers,

and

1971

the

in 1969

has continued with

in

existence,

agriculture,

Limited,

such

Ghana Sugar

Volta

River

Estates

Authority.

gavernment

development

nevertheless

constitute

a disproportionate

along as

share

the

away from

great.

as

a

Corporation still

the today

efforts

in

the

State

government

Tobacco

Fishing

they

are

of

on the

Farms

averaged NY Corporation

Estates

Corporation,

and

the

focus

of

the

major

these public

involved

Ghana Rubber

not

agriculture,

drain

result

parastatals

Cbmpany,

State

labor

state farms was cut to 33.

then,

other

MIA s

their

of the

Although

of management

and

Partly

in

and intermediate

of

Ghana

a continuing

in subsidies

number

with

Limited,

yields

treasury

enterprises and absorb

time.

tb World Bank, The Current Economic Position October 26, 1970, Vol.V: Agriculture, p.13. 9

of large

of many of the

to capital

their

Since

and 1970. 9

million

services

access

both

Nevertheless, the financial deficits 1.4 million

absorbed

and facilities

Ng 19.8

had the

productivity were only about one-fifth as this,

they

1 percent

economy".19

and had much better

did

about

only

but

period,

resources,

for

fact

the

for

and Prospects

Killick, Development Economics..., p.1 93 -9 4 .

125

of Ghana,

Conclusions This leads

to

general

deterioration

in

1970s

digits

twenty.

and the

restrictions rise

steeply

exchange.

corruption

responsible efforts

control

distribution

the

overvalued which both

led

rate

penetration

of

regime

to a system

led

the

the

hand,

led the

this

confusion foreign

to a

transmission

for

the

at

the

intervene

and

marketing that the

higher

least

from

the

from

the

domestic official

opportunities

part

of officials

governent's

to

of of

frequent in

the

food

disincentives. accompanied

transportation prices

to

the system,

farmers

for

foods.

disenfranchisement

LEFOC into

the

exchange

collapse

their

abundant

on

addition, and

caused

last

between

revenue

converted

created

of at

benefitted

which

behavior

prices

of

and nontradable

Second,

CIF prices

to

scarcity

disrupted

tradable

to

In

domestic

exchange

severely

imports,

on

was in

struggle

extract

agriculture

food

imports.

system

Furthermore,

side,

the

inflation

by a factor

to

impact

during

of

hopeless

exports.

rent-seeking

food

rate

the

by rising

profound

evident

when the

of cocoa

other

importance,

had a

especially

BDard

in Ghana

until recently

currency,

Cocoa

other

the

Oh

of greatest

increasingly

in relation

and other for

to

and

and

interventions

was overvalued

substitution

grain

un

to

import

rate

policy

accompanied

19E0s,

the

value

of

became

an

and

currency

On the

for

was

farmers, local

early

exchange

result

Cne

plunging

of

This

and the

government,

rate

economy, overvalued

incentives.

of the

prices

history First,

the

and an increasingly

agricultural

triple

of the

a numrber of conclusions.

inflation

part

discussimn

the allocating

of

cocoa

Ghana s cocoa

growing resources

126

areas that

farmers urnder

depended

and the

the Nkrumah on favoritism

and bribery

rather

Suaceeding

regimes

political a

basis

reversion

than on the

the

Ccmpany's

at

The main

difference

the

former

to

neutralize

neutral

attempted

and their to

first

old

cocoa

influence

sector,

productive

activity. Third,

price,

and exchange

input

development

projects

abetted

many cases

in

to develop levels

that

increased

end,

input

farmers

the

in

responsible

The other agricultural

and cheap for

alternative

parastatals

to

strong

The projects

sector,

however,

established

127

than

the

interests,

a weak base they

price

reached

s agricultural -

Nkrumah

the -

by rural

state proved

on

required

distortions In the

macroeccnoimy.

effectively nation

trade,

offset

vested were

to

of the

under

rather

through

because

vulnerable

farmers

import

from

channeled

on

the

extent

minor

donors.

small

As in

resulting

developed

of the

based

allocation

rent-seeking

collapse

CFP

was ideologically

process.

often

most

of the

revenue.

were

never

desire

share

resource

credit

PBC was that

of sales

a very

the

purchases.

its

to

and were

with

the

to

of cocoa

was only

officials

led

supplies

wasteful

These

soon

dwindling

agriculture

agricultural

intensity

-

of the

latter

tradable

credit.

skill

ever

narrow

on cocoa

that

the

their

Produce Buying

of the

to

an political

was

by foreign

subsidies

who were

than

in which

and

maintain

same

policies

of managerial

high

the

against

rate

the

to

result

bias

auspices

whereas

but

incompetence

related

to keep

rather

and cheap

subsidies

which

was

the

the

overtones

and influence.

this,

de jure, monopoly

farmers,

however,

competing

under the

wrestled

and corruption

managerial

later

simply

pressure

to correct

the LUFOC mrnopoly

political

government

The end result,

and

between

the

first

system

de facto,

had strong

the

at

of political

macroeconomic

and was designed

moving as

exertion

the

smaller

output. farms

and

to

be a

disaster.

Productivity

public sector managerial

was lower than

activities

continued

and financial

resources

With the advent to improve

the incentive

significantly to improve of input it

was

agricultural

in the

real

clear sector

terms

for

farms,

first

system years

be fully

in 1986.

and to alleviate of neglect

revived.

128

yet these claim

on

Nkrumah.

time

time

and

a disproportionate

The cocoa pr-oducer

the

considerable could

exert

even after

structure.

Nevertheless, that

to

private

of the Economic RecoverY Program,

transportation

supply.

on

would

steps

price

was increased

Efforts

were

some of the

had exacted be

were taken

necessary

their

made

problems toll,

and

before

the

EFFEC`TS OF PRIC

PART 11T:

OHPTER VI: fEfFES

In order governwent pertain

both

policy

related

effects

of

to

used

results.

an

production,

indicators

effects

agricultural in

the

the

official the

and consumer

that

exchange

rate.

indicators

welfare,

examine

trade,

subsidies

on

policies.

Import

relation

to

domestic

prices

has

also

effect

wDrld

relative

been

to

important,

to

in a

This

the

indirect

deviation

chapter

of

discusses

distortions

and

of these

effects

occurs

act

the the

presents

distortions

f low3s, gcverrnent

the

especially

result

revenue,

to increase taxes

of

taxes

and domestic

restrictions,

border. for

a

as

export

market; at

and

result

and price

trade

incoom.

import

thDse

of

These

Effects

and restrictions

an the

inputs

of

on incentives calculated.

prices

exchange

policy

quantitative

taxes

those

of

been

the

and producer

Direct The direct

have

of price

foreign

consumption,

effects

and

economy

chapters

Subsequent

the

an relative

outputs

in calculating

the

measure

of

direct

the

from

producer

number

distortions

equilibrium methods

a

to

OF INTEFENTION

to quantitatively

policy,

INTERVENTIONS

domestic

cocoa,

in

price

prices

and restrictions In addition,

and

in

depress price

determining

policy farmer

incentives.

Producer,

Consumer,

and Border

To measure and

border

presented

prices and

the

these of

six

Prices

incentives, major

adjustments

data

agricultural made to 129

were

gathered

on

ccomsodities.

them are

detailed

the These

in

domestic data

Annex 3.

are Of

these

six

crops,

tradable

crops,

and its

fortunes

been

major

the

production.

the

also

with

nontradables

of

are

not

included

in

analysis

crops,

millet and sorghum,

north.

These

and sorghum

alcne is are

and yams, price

two cereals

series

somewhat,

important

are

Domestic sorghum, markets

cassava, in

observed relatively the

basis

Accra, rather

of

for

and

yams

Kumasi,

and other

wholesale

market.

most

of are

and

data

the

Tamale.

to

arrive

obtained

at

involved

in

The 1975

figures

were

130

then

have

on

they

naitradable

has

-

are

producer

been these

in

the

cassava

relatively

As such

long differed

maize,

rice,

of wholesale those they

prices

to other

actually fluctuate

were made on

transport,

aommodities

adjusted

in

crops,

surveys

prices

moving

rot

shown

1975

mEvements

and consumption,

crops

or maxima.

are

however,

which

m monthly

for

costs

for these

The

foods

and consumed

the

crops

based

minima

Adjustments

handling,

crops

In

Of the

produced

with

analysis.

official

detailed

food

rice.

Since policy,

south,

local and

maize,

in production

In the

the

-

and

chapters.

foods

experience

prices

rice

by governoent

here.

in

extent

nontradables.

related

nontradable

retained

the

major

closely

Since

than

freely.

the

included

exist.

both

are

nontradable

has

smaller

for

major

of subsequent

are

are

crap

Rice

exceeding

than

to what

Of the

export

economy.

imports

but

foods,

influenced

of the many years

to see

for

the major

important

three

tradable

directly the

more

chapter

movements

price

in

food,

crops,

the

rest

imports

much

of this

is by far

the

an imported

tradable

price

correlated

and three are ncontradable.

with

with

are

analysis

domestic

not

is

these

in

linked

food,

imported

to

included

are

closely

are

and consumptim

additim

tradable

cocoa was chosen because it

Maize

production

the

three are

storage,

from years

farm

to

using

overall

the

fragmentary

data

estimated

available For

To this

were

delivery

to

at

the

these

on

by adjusting

markups

added the

markedly

the

port

often

fairly have

Board. costs

It

is

from the

what

Border calculated

from

extrapolations are were price

missing

at

it

equivalent

the

cn

average

was used

to obtain

the

percentage

chapter,

and forth

the

it

on changes

some

in world

in error. years

of the

over

the

Retail

price.

government

has

and research and the marketing

purely

is

the

hasis

in

overestimated

actual

marketing of

costs.

unit

values and

interpolations,

prices

where

charges

CPI in order

CM.

Cbnsequently,

years

the

handling

the

within

time

and

increased

ministries

budget.

only

level.

of cocoa

costs

extension,

corrections,

market

Pbrt

using

border

on

estimated

price

central

the

farm

collection

employment

most

included

with

data,

in

border

of

these

between

CMB's

the

domestic

delivery,

input

at

costs

the cMB and the

be if

were

trade

to other

data

of swelling

in

wculd

or clearly

adjusted

back

elements

prices

based

Retail prices

however, to dissociate

of cocoa

with

were

L

Board

previous

as

shifted

other

the

between

impossible,

domestic price comparison

in

arbitrary

been

with

years.

price

Cocoa Marketing

as a result

years

the distinction

activities

for

producer

of Tema in order

In addition, been

prices

official

puiblished

the

over

other

well

a few years.

As discussed

border.

in

fairly

matched

This

costs

wholesale

for

cocoa,

Index-

Price

CcLnumer

available

to obtain

margins

unit value

similar

the to

for

data 1975

whDlesale those

used

± Although transpDrt costs tended to rise somewhat relative to the CPI, for reasons explained earlier in Chapter V, the cost of services, In addition, including those involved in marketing, had a tendency to fall. that food purchased in urban areas is heavily weighted in the CPI, implying any increases in the cost of transport and marketing were largely reflerted in the CPI.

131

for

domestic

prices

consumers.

prices

producer

food

prices relative

to point

to

the

marketing, of the

relation

of

percent Maize

because,

the the

in

negative

the high

overvalued

official

exchange

were

to

costs

price

used

equivalents

later

marketing exchange

in excess

of

they

to

of costs rate.

but

of

the

FEO price

rate.

132

and ccrnsumer

prices

discussed

were

less

costs

period

low border is

also

converted

true

are

important

important

in

rereived

70

percent

price

producer

in a

are

result

of

measured

of cocoa to cedis

price 12,

Table

as prices

1984.

in

1953 and 60

in

that

shown

studied

the

especially

This

56

is

in

to competitive

example,

retail

and maize,

frnm This

useful

costs for

it

1975.

is

subject

crly

the

rising

rice

now

nonetheless.

1953

these for

the

were

increases

since

was

margin

Yam producers,

percent

years

this

transpDrtaticn

in

for

which

significant

of

but

cocoa, in

sharp

especially

producer

cocoa,

69

prices

Ghana,

between

increases

to consumers

show the

later,

is

of output.

border

subtracting

CMB costs

margin

example

One result

of in

the

for which

received

1984.

equivalents

value

price

producers

percent

discussed

were

staples

in

are

unlike

increases

starchy

to

in

The best

these

equivalents

distribution

from PInnex 3,

occurred

Although

crops

and

price

frcmN the wholesale

derived

prices

previcouschapter. for other

retail

procressing,

have

growth

has occurred.

estimate

equivalents.

that

in

true

to

subtracted

10 and 11,

Mbvements

that

were

price

Tables in

applied

The same collection,

for donestic obtain

were

in at

at

1981,

the

the when

official

Table 10 Domestic Producer Prices INCperMetric Ton)

Year Maize(a) Rice(a) Sorghum (a) Cassava (b) Yam(bl Cocoa Ib) 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

46 37 34 44 25 39 29 28 47 44 50 66 86 85 37 73 119 87 87 137 142 151 185 469 970 834 1134 3261 5845 5659 31537 16118 11819

130 118 99 100 101 100 86 69 63 54 137 97 135 128 125 116 160 185 186 275 332 355 497 1109 1355 1611 1399 5777 6545 15530 45165 61571 28453

61 72 48

49 59 70 70 38 55 79 85 99 114 113 83 83 134 133 138 159 235 243' 230 659 1477 1430 1558 5654 7035 10038 31239 37872 N/A

Notes toTable 10: (a)DatafromAnnex 3,Table 3-3(1). (b)DatafroaAnnex 3,Table 3-3(2).

133

N/A 54 N/A 49 N/4 52 N/A 56 N/A 52 N/A 58 N/A 54 NIA 54 N/A 53 N/A 57 15 50 14 52 29 63 23 70 15 60 14 63 22 71 20 72 31 89 38 95 34 117 41 154 72 213 181 302 486 622 319 1007 261 1160 848 1735 2274 2791 2423 4148 10935 11436 3721 11716 1742 62104 …----

269 287 299 280 269 239 224 224 224 220 202 187 187 224 254 284 293 293 293 366 439 489 585 732 1333 2667 4000 4000 12000 12000 20000 30000 56600

Table 11 Domestic Consumer Prices (NCperMetric Ton)

Year Maize (a) Rice(a) Sorghum (a) Cassava (b) Ya (Ib) CNoa (bI 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

67 57 54 66 44 61 49 49 71 70 77 98 126 129 71 115 170 135 138 199 212 231 287 656 1368 1396 1979 4763 8914 9190 42245 26885 22790

190 176 155 158 159 158 143 124 121 115 211 174 233 236 224 221 278 310 320 433 519 571 782 1604 2269 3083 3509 9495 13701 25409 68767 94313 58617

09 102 74 77 89 101 101 65 86 115 124 143 169 172 134 136 198 198 209 238 334 356 t3 912 2032 2223 2685 7842 10992 15092 43833 54600 N/A

Notes toTable 11: (a)DatafromAnnex 3,Table 3-3(1). Ib)DatafromAnnex 3,Table 3-3(2).

134

N/A 77 301 N/A 70 320 N/A 75 335 N/A s0 317 N/A 75 306 N/A 82 277 N/A 77 260 N/A 78 259 N/A 78 259 N/A 83 259 34 76 245 35 80 229 58 97 230 53 109 271 41 95 300 42 101 333 53 112 338 52 114 372 67 137 281 79 147 512 90 190 650 95 231 603 14 315 982 311 456 1068 796 949 2404 733 1559 4159 854 1934 6120 1931 2895 7573 4489 5109 17200 5060 7131 23000 17920 18520 47000 11167 20761 74024 9474 91908 112016

Table12 BorderPriceEquivalents (NCPerMetricTon)

Maize(b)

Rice(a)

Year 1954 1955 1956 1957 1959

1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Producer Retail Price Price EquivalentEquivalent 131 106 94 101 100 85 76 70 63 67 47 59 62 90 153 140 112 88 111 218 411 209 237 -118 -305 -475 -931 -3488 -4762 -12081 -3639 -749

191 164 151 160 159 143 133 128 125 132 116 146 159 184 264 255 225 206 244 388 634 450 600 575 890 1354 1781 2163 2074 2933 19322 25034

Producer Retail Price Price EquivalentEquivalent 67 103 97 114 90 66 93 103 80 24 69 29 24 29 113 115 18 50 367 42 131 119 104 234 384 1014 312 -321 -881 -2331 4415 6266

Notesto Table12: (a)DatafromAnnex3, Table3-4(1). (b)DatafromAnnex3, Table3-4(2). (c)DatafromAnnex3, Table3-4(3). isthe Retail PriceEquivalent FOBpriceforcocoa.

135

92 133 127 146 119 92 123 135 111 47 102 61 59 62 161 166 55 95 463 97 208 212 236 521 879 1841 1372 1823 1669 3296 13427 16404

Cocoa(c) Producer Retail Price Price EquivalentEquivalent 604 400 354 595 512 403 307 293 298 314 236 219 349 516 712 773 598 600 678 1083 1374 1129 2260 2871 8904 7000 2727 -200 19558 33000 39299 65567

637 436 391 632 550 439 342 318 337 357 278 262 396 562 761 819 643 688 824 1294 168B 1526 2596 3942 10396 9120 6300 5000 30558 60000 83323 120983

Relative

Prices Domestic

producer 12.

and conruiier

In addition

the

price

also

price

to

ratios

in

to

Anex

prices

fron

with

the

these

crops

the

It

both

the

GDP

index

is

the

deflator,

prices,

is

explained

and

which

index

measures

10, 11, and

price in

consumer

at the

the

consumer

mDst relevant

producer

calculateJ

in Tables

prodcit

nonagricultural

of this

3.

were

presented

of agricultural

The derivation

3-5(1)

comparison

of

fron the prices

product

calculated.

agricultural

levels the

of each

to Table

ratios

the

ratios

of

index

was

footnotes

to compare

with

perspectives,

in

in value

added

changes

prices. The price of

indices

both

of producer It

is

evident goods

1974.

during

the

Cocoa late

of

their

modest

improvement,

to

prices,

Looking to

an

the

at

the

base

- 13(4)

yar.

series.

The

tables

that,

foodcrop

prices

increase the

and early

average

me-half

approximately

various

and services,

1950s

percent

relative

from

shown a tendency

about

a

13(1)

in

the

This

facilitates

indices

are

form the

presented

and consumer levels.

nonagricultural and have

the

in Tables

as

1972

between

trends

presented

with

calculated

comparison at

are

ratios

over

hand,

fell

in

1953-55.

followed

by

fluctuaticns

experienced

the

price

prices

of

rice,

of ncntradable

year

to year

but no clear

overall

rice

imports

have been sufficiently

This

important

136

the

there

a

farmers

dropped

by 56

there

was a

level

that

was

1950s.

principal are

of

ly since to

this

early

suggests that

especial

prices

price

markedly

markedly

arcound

the

foods,

trend.

fluctuated

Following

during

to the

time,

when producer

level

that

have

somewhat

other 1960s,

relative

tradable marked

that

crop,

changes

from

restricticns

on

the overvalued

exchange

Table13(l) Prevailing Relative PriceIndices (a) (1972100)

Maize/Non-Ag

Date 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1990 1981 1982 1983 1984 1985

ProducerRetail Price Price 81 69 62 79 42 67 49 47 78 69 68 83 94 84 36 66 101 73 69 100 92 79 76 143 203 97 87 172 140 119 338 96 55

81 73 67 81 52 71 58 56 81 74 72 84 96 88 48 71 100 78 75 100 94 84 82 137 197 112 105 173 147 133 312 111 73

Rice/Nan-Ag ProducerRetail Price Price 114 109 90 89 86 84 73 57 52 42 92 60 73 63 60 52 68 77 74 100 106 93 102 168 141 93 54 152 78 162 240 183 65

106 103 89 89 87 85 77 65 63 56 91 68 81 74 69 63 75 82 80 100 106 94 102 154 150 114 85 158 104 169 233 178 86

Sorghum/Non-Ag ProducerRetail Price Price 93 115 75 75 88 102 102 54 78 105 99 105 107 96 70 64 98 95 94 100 130 109 81 172 264 143 103 256 145 181 287 194 N/A

90 109 78 79 88 99 99 62 81 103 96 102 106 98 75 71 97 95 95 100 124 107 86 159 244 149 119 238 151 182 269 187 N/A

NotestoTable13(1): (a)Basedon croppricesfromTables10and11andtheNon-Agricultural Consuser PriceIndexfromAnnex3, Table3-S11).

137

Table13(2) la) PriceIndices Relative Prevailing (1972100)

Cassava/Non-Ag

Date

ProducerRetail Price Price

Yam/Non-Ag iroducerRetail Price Price

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 73 63 115 e1 51 46 66 60 89

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 79 75 109 90 69 66 78 74 92

136 131 137 144 129 142 132 129 1Z6 128 98 93 99 99 54 53 88 87 102

1972

100

100

100

1973 1974 1975 1976 1977 1978 1979 1990 1991 1982 1913 1914 191

79 76 106 196 362 133 72 160 195 182 419 79 29

89 86 104 163 283 148 114 167 186 184 331 IS 76

109 116 126 132 187 169 129 132 96 126 176 101 414

126 121 126 132 119 130 122 120 119 120 95 92 99 100 86 85 89 89 101

0oo 109 112 121 129 184 169 139 142 114 139 184 115 352

Cocoa/Non-Ag ProducerRetail Price Price 179 199 203 187 173 152 143 139 137 129 102 97 77 83 92 96 93 91 87

142 159 163 151 141 126 119 115 113 107 89 76 67 72 78 s0 77 83 60

100

1oo

106 96 90 83 104 116 115 79 108 94 80 67 98

112 112 108 87 134 130 126 107 110 129 134 118 138

NotestoTable13(2): 10and11 andtheNon-Agricultural fromTables (a)Basedon cropprices PriceIndexfromAnnex3,Table3-5(l). Consumer

138

Table 13(3) Prevailing Relative Price Indices (al (1972:100

Date 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 1980 1991 1992 1983 1984 1985

Rice/Cassava

Rice/Sorghum

ProducerRetail Price Price

Producer Retail Price Price

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 126 95 64 79 119 114 103 129 84 100 134 122 9b 85 39 70 75 95 40 89 58 230 227

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 115 91 74 82 101 96 96 110 97 100 119 110 99 94 53 77 75 95 56 92 70 155 113

123 95 120 119 99 93 71 105 66 40 93 57 68 66 87 81 69 91 78 100 82 85 125 98 53 65 52 59 54 90 84 94 N/A

128 100 115 112 98 56 73 91 64 41 95 59 69 65 81 74 70 81 77 100 86 87 119 105 59 63 45 64 52 89 89 98 N/A

Notes toTable 13(3). (a)Based oncropprices tramTables 10and11.

139

Rice/Yams ProducerRetail Price Price 83 83 66 62 67 59 55 44 41 33 94 65 74 64 72 63 78 89 72 100 98 90 81 127 75 55 42 115 81 129 136 181 16

91 90 71 67 72 65 59 47 43 35 97 65 74 63 70 61 76 87 73 100 99 82 84 130 76 55 39 107 69 116 130 159 19

Table 13(4) Prevailing Relative Price Indices (a) (1972=100)

Date 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1914 1995

Rice/Maize

Rice/Cocoa (a)

Producer Retail Price Price

ProducerRetail Price Price

140 159 145 113 204 126 147 120 66 61 135 73 78 75 167 79 67 105 106 100 116 117 134 117 69 96 61 s8 56 136 71 190 120

131 142 133 110 167 120 134 117 77 76 125 a1 84 84 144 88 75 105 106 100 112 113 125 112 76 101 81 91 70 127 75 161 118

64 55 44 48 50 55 51 41 38 33 90 69 96 76 65 54 73 84 84 100 101 97 113 202 135 80 47 192 73 172 301 273 67

75 65 55 59 62 68 65 57 55 52 102 90 120 103 88 79 97 98 135 100 94 84 94 178 112 88 68 148 94 131 173 151 62

Notes toTable 13(4): 10and11. frosTables oncropprices (a)Based

140

Yams/Cocoa (a) Producer Retail Price Price 77 66 67 77 74 93 92 93 92 100 96 107 129 120 91 86 94 95 117 100 103 121 140 159 190 146 112 167 90 133 221 151 423

89 76 77 87 85 103 103 104 105 112 107 121 147 140 110 106 116 107 169 100 96 100 112 149 137 131 110 133 103 108 137 98 255

rate

has

for

not

resulted

any sustained

shorter the

during

increase price

The

series

in

at

least

1965.

This,

is

What

the

domestic

is

pressures the

to the

production

year

in

1968-74.

which

caused

the

the

black

but that

these

were

or

to

did

also

years

increase

to

prockicticn

of these

the

harvests.

of rice

rose

Again,

this

since

net

in

of relatively

foods

to

decline

rate

the

of tradables

price

imports

response

to

sharply

in

quite

was not

due to of rice

to

70 tons

good in

and

the

per

harvests,

real,

the difference

exchange

crops

food

availability

years

which

may have

regime.

in

1964-67

rise

Nkrumah

regarding

and poor

during

sharp

which

for

any

but the

and 1966,

change

years

indicate

years,

not

price

per were

equilibrium

tended

it

foods.

tans

low in relation

was fromu 1964 until

policy

ccnstraints

of 56

been

was a fairly

in

government

of nontradable

They

there

market

have

previouis

period

by inflation

Rather

market which

critical

or import

prices

over

decline

of nentradable

there

(Annex 6) do not

in 1965

the

been

of these

especially

time

the Ghanaian

hand,

has

that

few years,

an average

terms.

decreased,

next

shortfalls fram

of rice

11 suggest

that

created

prices

increased

nominal,

this

other

imports

was a not

at

During

price

due to a moderate

important

relation

10 and

of ccurse,

changed drastically

the

On

or

prices,

partly

flooding

availability

production

and cassava

imports

The first

rice

an

in Tables

in sorghum

the

foods.

data

in dcmestic

food

time.

which

of ncntradable

about 1967.

been

periods of

periods

prices

in cheap

if

not

between

official rate

relative

to

that

of nontradables. The succeeding price

movements.

overvalued

exchange

decade With

rate,

was characterized

generally the

poor

domestic

141

price

by harvests of

a and

rice

reversal an fell

in these increasingly not

mnly in

relatim

to

In fact,

nianyof the

millet

the

and

prices

of sorghum

movements

This

is

Ghana

only

in

elasticity

because maize

increased

the

with

price to

had

other

substantially

of

to that

a

of the

of

of rice

high

and

four

by

cross-price

After

next

those

internationally

relatively

the

to

prices

grains.

over

of maize.

relative

traded

coarse

and

rice

recently

and

the

but also

muvements

was until

quantities

small

of demand

imports

in

been similar

sarghum have

maize.

and cassava

1981 maize

years

equaled

20

percent or more of total availability (Annex 6). The relationship of

yams

has

been

fluctuations, rice

apparent recent

yams.

years the

productim

What

is

clear to

1974. rise

is the

the

Since

extent

greater

Ptasurement

Tables producer

that

the

prices

of of

14

Price

ratios,

those

used

measured to construct

and

rice

these

have

in

especially

nmtradable prices

so

risen

are

not

in

clear

of yams.

risen

stroigly

have

fallen

of

been

evident

foods have

not

output

the

to

price

have

and yams have

is

cocoa

the

this

price

been year

have

might for

the

after tended

to

to

an even

crops.

Interventims. a series domestic

for

in cedis the

the

and yams, with

increase

This

and 15 present

and ccnsumer levels,

price

maize

rice

The reascns

of

there

to

and maize

of

strcng

prices

rice

in comparism

price

relative

characterized

cassava,

cocoa.

of

rice

have

of yams.

show no

of Direct

that

the

that

price

of

Although

sorghtum,

data

to those

relative

of

to

price

different.

If anything

relative

since

the

movements

that

to

with

relative

scnewhat

broader

the

relative

between

per

indexes

metric of Table

142

of

ratios,

and border ton, 13,

are

measured prices. essentially

and there

is

at

both

the

The dcnestic the no need

same as to

Table14 la) Ratios Price Producer

RicelNon-Aq

cKoa/Non-Ag

Raise/Non-Ag

Rice/Sorghum

Cocoalflaize

Cocoa/Rite

Ricelmtaize

Rice/Yam

(ci Border(d) (ci Border(di Domestic (ci Border(di Domestic(ci Border(di Domestic (c) Border(di Domestic (a) Border(bi Domestic (a)Border(bi DOmestic (lii Domestic (a) Border Domestic 1954 1955 1956 195 195 1959 MO6 196 2962 196 196 1965 1966 2967 1969 1969 1970 1972 1972 1973 1974 1975 p. 1976 1977 1979 1979 19910 1991 1992 1993 1994 1995

2.99 2.46 2.44 2.36 2.32 2.00 1.56 1.42 1.15 2.53 1.66 2.02 1.74 1.66 1.44 1.97 2.12 2.02 2.75 2.92 2.55 2.90 4.61 3.97 2.57 1.47 4.17 2.15 4.46 6.61 5.03 1.90

3.32 2.64 2.29 2.39 2.34 1.9 1.73 1.57 1.34 1.25 .92 .99 .93 1.20 1.90 1.64 1.29 .95 1.11 1.92 2.94 1.17 .9B -.34 -.49 -.50 -.67 -1.14 -1.37 -1.77 -.30 -.05

7.29 7.45 6.94 6.33 5.57 5.22 5.09 5.02 4.67 3.75 3.19 2.90 3.03 3.39 3.51 3.42 3.35 3.19 3.66 3.87 3.50 3.29 3.04 3.90 4.26 4.21 2.99 3.94 3.45 2.93 2.45 3.59

15.34 9.96 9.64 14.00 11.94 9.39 6.99 6.35 6.32 5.93 4.01 3.29 4.72 6.97 9.90 9.02 6.93 6.53 6.79 9.54 9.94 6.36 9.39 9.19 14.21 7.37 1.97 -.07 5.62 4.93 3.21 4.15

.93 .94 1.07 .59 .91 .67 .65 1.06 .94 .93 1.13 1.29 1.25 .49 .90 1.39 1.00 .95 1.37 1.25 1.09 1.04 1.95 2.77 1.3.3 1.19 2.35 1.9 1.63 4.62 1.32 .75

1.71 2.57 2.36 2.67 2.09 1.55 2.12 2.31 1.70 .44 1.19 .44 .33 .39 1.40 1.34 .20 .54 3.67 .37 .94 .67 .43 .67 .61 1.07 .23 -.11 -.25 -.34 .36 .40

1.63 2.07 2.02 1.69 1.43 1.23 1.91 1.14 .69 1.60 99 1.19 1.13 1.50 1.40 1.29 1.39 1.34 1.73 1.41 1.46 2.16 1.69 .92 1.13 .90 1.02 .93 1.55 1.45 1.63 N/A

Notesto Table14: 3, Table3-3(11for rice andmaizeandfromTable3-3i2i price lrom Annex (a)Domestic 3-5(1). fromTable Indexr by theNonagricultural deflated forcocoa, formaize, 3-4(2) Table forrice, 3-4(1) Table from (DER) Equivalent Price (hiProducer 3-5M1. fromTable Index by theNonagricultural deflated forcocoa, 3-4(3) andTable 3-3(21. andTable 3-3(1) Table from prices ofproducer (c)Ratio 3-4(3), andTable 3-4(21, Table 3-4(2), Table from Equivalents Price ofProducer (d)Ratio and 3-3(1) fromTable prices theproducer andyamsforwhich forsorghum except areused. Table 3-3(2)

1.91 2.22 1.90 1.71 1.44 1.23 2.00 1.26 .90 .79 .40 .52 .55 1.09 1.95 1.05 .84 .63 .69 .93 1.69 .91 .36 -.09 -.21 -.30 -.16 -. 50 -. 47 -.39 -. 10 N/A

2.42 1.99 1.79 1.94 1.72 1.60 1.27 1.19 .95 2.73 1.99 2.15 1.94 2.09 1.93 2.25 2.57 2.10 2.90 2.93 2.31 2.34 3.67 2.19 1.60 1.21 3.33 2.35 3.74 3.95 5.26 .46

2.69 2.03 1.67 1.95 1.73 1.59 1.41 1.31 1.11 1.35 .92 .94 .89 1.50 2.42 1.97 1.55 .99 1.17 1.96 2.67 .99 .79 -.19 -.30 -.41 -54 -1.25 -1.15 -1.06 -.31 -.01

3.20 2.93 2.29 4.10 2.54 2.97 2.41 1.34 1.22 2.71 1.47 1.57 1.52 3.36 1.60 1.35 2.12 2.14 2.01 2.33 2.35 2.69 2.37 1.40 1.93 1.23 1.77 1.12 2.74 1.43 3.92 2.41

1.94 1.03 .97 .99 1.12 1.29 .91 .69 .79 2.95 .69 2.03 2.55 3.14 1.35 1.22 6.35 1.75 .30 5.20 3.13 1.75 2.29 -.50 -.79 47 -. -2.99 10.95 5.40 5.19 -.92 -.12

2.44 3.03 2.90 2.69 2.40 2.61 3.27 3.54 4.07 1.49 1.92 1.39 1.74 2.04 7.45 1.93 1.59 2.59 1.33 1.32 1.39 1.19 .66 .9 1.66 2.96 .69 1.93 .77 .44 .49 1.99

4.62. 3.77 3.79 5.97 5.10 4.72 4.04 4.05 4.72 4.65 4.IM 3.70 5.65 5.75 4.64 5.51 5.34 6.95 6.13 4.97 3.35 5.43 9.56 -24.33 -29.23 -24.74 -2.93 .06 -4.11 -2.73 -10.90 -97.51

7.90 9.99 6.40 10.97 6.10 7.75 7.99 4.73 4.97 4.01 2.92 2.19 2.64 6.95 3.99 2.47 3.36 3.37 2.69 3.09 3.23 3.16 1.56 1.37 3.20 3.53 1.23 2.05 2.12 .63 1.96 4.79

9.9 3.99 3.66 5.23 5.71 6.06 3.29 2.75 3.72 13.29 3.41 7.51 14.42 19.04 6.29 6.71 33.93 12.03 1.95 25.93 10.47 .9.41 21.92 12.29 23.19 6.90 9.74 .62 -22.20 -14.16 9.90 10.46

Table15 ConsuwrPrice Ratios

Rice/Non-Ag

Cocoa/Non-Ag

Rice/Sorqhus

Naize/Non-Ag

Cocoa/Naize

Cocoa/Rice

Rice/Kaize

Rice/Yam

(c) Border(dl Domestic (c) Border(dl (c) Border(d) Domestic (c) Border(d) Domestic (a) BorderbI) Domesticla) Border(b) Domestic(c) Borderid) Domestic Dmestic (a) Border(bI Domestic 1954 1I55 1956 1957 195 1959 1960 Itl 1962 196.3 1964 1965 196 1967 1968 196 H Xs 1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 IS90 1981 1982 1983 1984 1985

4.47 3.87 3.86 3.75 3.69 3.34 2.82 2.71 2.43 3.92 2.95 3.49 3.19 2.99 2.73 3.25 3.54 3.48 4.33 4.57 4.09 4.41 6.67 6.47 4.92 3.70 6.86 4.49 7.30 10.07 7.71 3.71

4.05 4.07 3.69 3.77 3.71 3.33 3.01 2.89 2.65 2.45 1.99 2.19 2.16 2.45 3.26 2.99 2.5B 2.25 2.44 3.42 4.54 2.53 2.50 1.64 1.40 1.43 1.29 .71 .60 .43 1.58 1.59

9.13 8.34 7.74 7.20 6.46 6.06 5.88 5.81 5.50 4.55 3.B9 3.45 3.66 3.99 4.12 3.95 4.25 4.14 5.12 5.73 5.75 5.53 4.44 6.86 6.64 6.45 5.47 5.64 6.61 6.88 6.05 7.08

16.19 10.86 9.55 14.87 12.82 10.23 7.77 7.13 7.15 6.62 4.72 3.93 5.35 7.49 9.40 9.55 7.35 7.48 8.24 11.40 12.09 8.59 10.79 11.25 16.59 9.61 4.55 1.64 8.78 8.78 6.81 7.65

1.44 1.33 1.60 1.03 1.41 1.15 1.11 1.60 1.49 1.43 1.67 1.90 1.74 .95 1.42 1.99 1.54 1.50 1.98 1.87 1.66 1.62 2.73 3.90 2.23 2.08 3.44 2.92 2.64 6.1B 2.20 1.44

2.33 3.32 3.09 3.44 2.77 2.15 2.91 3.04 2.35 .96 1.73 .92 .80 .82 2.00 1.94 .62 1.03 4.63 .85 1.49 1.19 .98 1.49 1.40 1.94 .99 .60 .4B .48 1.10 1.04

15: Notesto Table Port andthe Rendered 3, Table3-3(11for rice andmaize fromAnnex (alDomsticprice Indexfrom 3-3(21for cocoa,deflatedby the Nonagricultural Table Price from from Table3-5M11. for maize, fromTable3-4(11for rice, Table3-4(2) (bIRetail Price Equivalent(DER) Index from Table3-413)for cocoadeflatedby the Nonagricultural madFOBprice from Table3-5(1M. Table3-3(1) andTable3-3(2). Cc)Ratioof retail prices from and Table3-4(31, (d) Ratio ofRttail PriceEquivalentsfroo Table3-4(11,Table3-4(2). andyamsfor whichthe retail pricesfromTable3-3(1)and exceptforsorghum Table3-3(2) areused.

1.73 2.09 2.05 1.79 1.57 1.42 1.91 1.40 .99 1.71 1.22 1.39 1.38 1.68 1.62 1.40 1.56 1.53 1.82 1.55 1.60 2.15 1.76 1.12 1.39 1.31 1.21 1.25 1.68 1.57 1.73 N/A

1.87 2.20 1.96 1.90 1.59 1.41 2.04 1.49 1.09 1.07 .82 .87 .93 1.39 1.94 1.29 1.14 .99 1.02 1.16 1.78 1.24 .66 .28 .40 .50 .23 .20 .14 .07 .35 N/A

2.52 2.09 I.99 2.13 1.93 1.96 1.60 1.55 1.37 2.90 2.19 2.39 2.17 2.37 2.19 2.48 2.71 2.34 2.94 2.99 2.47 2.48 3.52 2.39 1.98 1t81 3.28 2.68 3.56 3.71 4.54 .72

2.73 2.19 1.90 2.15 1.94 1.85 1.71 1.65 1.50 1.75 1.46 1.50 1.46 1.94 2.61 2.27 1.98 1.51 1.66 2.16 2.75 1.43 1.32 .61 .56 J7 .62 .42 .29 .16 .93 .31

3.10 2.90 2.41 3.64 2.61 2.92 2.54 1.69 1.65 2.74 1.77 1.94 1.93 3.14 1.93 1.64 2.30 2.32 2.18 2.44 2.47 2.72 2.45 1.66 2.21 1L77 1.99 1.54 2.76 1.63 3.51 2.57

2.09 1.23 1.19 1.10 1.34 1.55 1.07 .95 1.13 2.84 1.15 2.39 2.69 2.9 1.64 1.54 4.13 2.17 .53 4.00 3.04 2.13 2.55 1.10 1.00 .74 1.30 1.19 1.24 .89 1.44 1.53

1.82 2.16 2.00 1.92 1.75 1.91 2.09 2.15 2.26 1.16 1.32

.n 1.15 1.34 1.51 1.22 1.20 1.19 1.18 1.25 1.41 1.26 .67 1.06 1.35 1.74 .80 1.26 .91 .68 .78 1.91

3.33 2.67 2.59 3.95 3.46 3.07 2.58 2.48 2.69 2.70 2.39 1.79 2.48 3.05 2.88 3.21 2.85 3.33 3.39 3.34 2.66 3.39 4.32 6.95 11.81 6.74 3.54 2.31 14.73 20.46 4.31 4.83

5,63 6.26 4.92 7.00 4.57 5.29 5.31 3.63 3.72 3.17 2.33 1.82 2.10 4.20 2.90 1.99 2.76 2.77 2.59 3.06 3.47 3.42 1.63 1.76 2.99 3.09 1.5S 1.93 2.50 1.11 2.75 4.92

6.94 3.27 3.09 4.32 4.64 4.75 2.77 2.35 3.05 7.67 2.74 4.28 6.69 9.11 4.71 4.93 11.79 7.25 1.78 13.35 8.10 7.21 11.01 7.56 11.83 4.95 4.59 2.74 18.31 18.20 6.21 7.38

discuss

them further

concerning the bDrder First

It

here.

it

is

tradable products have declined the domestic the

overvaluation

equivalents costs

of

from

are greater

the official

rate

the

that,

price

trend

in

of rice

recent

year

of

fluctuations, maize.

local

currency

negative

as well.

to

the

there

by wide price

and marketing

tradable

is no

There is

crops,

it

trend

in

clear also

at

no obviaus thowgh any

cereals,

fluctuaticns,

particularly

between

the dcmestic

in

years. 16 and

the border

and

price

the border of

protection

index

as presented. ratio,

17,

This

(NRP)

difference

the

ratio,

price

ratio.

rates

price

prices

bDrder price

transport

converted

of

CPI and to

producer

between cocoa and the traded

be overwhelmed

might

Where

are of course

border

of

prices

This is principally because of

border

that

the border

that

because high

ratios

compared with

In Tables ratio

the

to year

the terms of trade

such trend

at the

relative

despite

a few comments

the nonagricultural

rate.

12 are negative

of exchange, at

to

relative

exchange

than prices

Looking appears

the

Table

evident

very

nontradable foods.

prices of

to offer

however,

ratios.

price all,

of

is useful,

shown in Tables

is

to

equivalent

Where the nonagricultural

however,

the

figure

14 and 15, is divided the

ratio

or of

tWiDproducts

of the

the

CPI is the

shown

is

price

simply

by

of the nominal and the

product

of the

denominator

the NRP of the crop

indicated. Table principally

trade

price

established

price

to the

16 suggests

that

direct

price

and exchange controls for

procnier

cocoa,

have

to be less

in than

for most its

145

interventions, rice

this

case

and maize and the producer

instances

border

in

price

caused equivalent.

the domestic While

Table16 on ofDirect PriceInterventions Effect (a) Producer PriceDifferences Relative ----- ------…--------- ------ -----

Maize/Non-AgRice/MaizeCocoa/RiceCocoa/Maize Cocoa/Non-Ag Rice/Non-Ag 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

-.10 -.07 .07 -.01 -.01 .00 -.10 -.09 -.14 1.02 1.05 1.28 1.08 .39 -.24 .14 .65 1.12 1.48 .52 -.13 1.39 3.69 -12.48 -6.29 -3.95 -7.21 -2.88 -4.26 -4.74 -17.92 -38.97

-.52 -.25 -.21 -.55 -.53 -.44 -.27 -.21 -.26 -.36 -.21 -.15 -.36 -.51 -.60 -.62 -. 51 -.51 -.46 -.59 -.64 -.48 -.68 -.54 -.70 -.43 .47 -61.00 -.39 -.39 -.24 -.14

-.45 -.67 -.55 -.78 -.56 -.57 -.70 -.54 -.45 1.13 -.04 1.94 2.50 .30 -.36 .03 3.95 .74 -.63 2.39 .15 .55 3.53 3.15 1.17 .12 9.45 -19.19 -7.42 -14.53 2.65 .89

.65 1.85 1.36 3.60 1.27 1.31 1.96 .97 .55 -.05 1.14 -.23 -.41 .07 .18 .11 -.67 .22 5.68 -.55 -.25 .54 .04 -3.77 -3.44 -3.64 -1.59 -.90 -.49 -.72 -5.64 -21.13

-.47 -.20 -.26 -.54 -.53 -.45 -.19 -.13 -.14 -.68 -.61 -.62 -.69 -.65 -.47 -.67 -.70 -.77 -.78 -.73 -.59 -.78 -.93 -1.04 -1.06 -1.19 -1.24 30.97 -1.19 -1.16 -1.05 -1.02

NotestoTable 16: (a)(Domestic PriceRatio- Border PriceRatio)/Border PriceRatio, froeTable14.

146

-.13 1.29 .75 1.10 .07 .28 1.40 .72 .33 -.70 -.17 -.71 -.82 -.62 -.38 -.63 -.90 -.72 .45 -.88 -.69 -.67 -.93 -.89 -.86 -.49 -.86 2.30 -1.10 -1.04 -.79 -.54

Table17 Effect ofDirect PriceInterventions on Relative Consumer PriceDifferences (a)

Rice/Non-Ag Cocoa/Non-Ag Naize/Non-AgRice/Maize Cocoa/RiceCocoa/Maize 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

-.08 -.05 .05 -.01 -.01 .00 -. 06 -.06 -.08 .60 .49 .59 .48 .22 -.16 .09 .37 .55 .77 .34 -.10 .74 1.67 2.95 2.50 1.59 4.33 5.33 11.25 22.44 3.88 1.34

-.50 -.23 -.19 -.52 -. 50 -.41 -. 24 -. 19 -.23 -.31 -.18 -.12 -.32 -.47 -.56 -.59 -.42 -.45 -.38 -.50 -.52 -.36 -.59 -.39 -.60 -.33 .20 2.44 -.25 -.22 -.11 -.07

-.38 -.60 -.48 -.70 -.4? -.47 -.60 -.47 -.37 .66 -.03 1.06 1.17 .16 -.29 .02 1.47 .45 -.57 1.19 .11 .36 1.78 1.62 .59 .07 2.47 3.89 4.51 11.82 1.00 .39

.49 1.37 1.02 2.33 .95 .88 1.37 .78 .46 -.04 .54 -.23 -.32 .05 .18 .06 -.44 .07 3.14 -.39 -.19 .28 -.04 .50 1.21 1.41 .54 .30 1.22 .83 1.44 .69

-.45 -.19 -.23 -.51 -.49 -.41 -.19 -.13 -.16 -.57 -.45 -.45 -.54 -.56 -.48 -.62 -.58 -.64 -.65 -.62 -.47 -.63 -.85 -.85 -.89 -.74 -.77 -.46 -.94 -.97 -.82 -.60

NotestoTable17: (a)(Doeestic PriceRatio- Border PriceRatio)/Border Price Ratio, fromTable15.

147

-.19 .91 .56 .62 -.01 .11 .92 .54 .22 -.59 -.15 -.57 -.69 -.54 -.38 -.60 -.77 -.62 .45 -.77 -.57 -.53 -.85 -.77 -.75 -.38 -.65 -.30 -.86 -.94 -.56 -.33

this

has

been

maize,

which

reason

for

true

have the

equivalent

for

during the

for cocoa, been

the

apparent these

because

has not

subject

paradox

crops

at

of is

generally

severe

that

the

the

been

true

import

producer

leve-l

rice

and The

of a border

yields high

of the highly overvalued exchange

for

restrictions.

estimation

19EKs because of

and early

late 1970s

especially

it

price

negative

transport

rate.

signs

costs

and

The results are

therefore misleading. Turming

to

Table

and early

1960s,

the

than

border

price

its

minor

quality

restrictions

were

Rice

felt

imports

1963,

during

1974 (see

price

the

imports

1980

through

demand, given period.

1985.

the rise

Anm-nex6)

Protection

decreased

risen

however,

in

lower

that

and perhaps of

import

60 percent. then

but

These

tightened

again

Protection

zero.

cedi

to an average

food prices

substantially

to

the

were sporadic

was low,

slightly

impact

and

when

1950s

trade

were c{lose to

except

in domestic

free the

1960s

of rice

to 1983

This

largely

late

During the

was just

however,

between 1975 and 1979, and then increased from

of rice

NRP had

the

emerges.

picture

reflecting

and

In 1975,

increased markedly fram 1979.

consumer

By

relaxed

1970s..2

a clearer

equivalent,

being

was

the

domestic

differences.

restrictions

during

17,

was devalued generally

very

of about 43,000

in

relation

occurred

1984 and again

low tons

to pent-up during

in

in

this

1985 as the

exchange rate was successively devalued. The overall of

rice,

extent

but

because

the

pattern degree

the domestic

of maize protection of

protection

market

is

less

has been

has fluctuated integrated

with

similar

to that

to a muichgreater import

trade

and

I The apparent relaxation suggested by the figures in 1973 and 1974 was due to very high prices on international markets rather than to any significant increase in imports during those years. 148

maize

less then

were

most years

demand and

supply,

of imports.

Over

in relatimn

to

prices

years

it

greater

local

greater

was rapidly

protecticn

for

maize

Rates

of

year

but have

and

with

period

protection

in

the

world

prices

plummeted and

the

extent.

Thereafter,

world

prices

increased

sharply,

dcmestic and

in

with

1980

rice.

regime rates but

inflation. and 1981

the

during

of

In

producer

failed

prices

producer 1979,

the exchange

149

prices

phases can

was a

world rate

prices

world

as

steadily to

prices

duwnward

price

upwards

keep once

up again

was so overvalued

be the

during

exports

1960s

increased

taxation

every

Following this, there

early

the

adjusted

rice.

market

SevLral

of cocoa

taxation

1982 as

in almost

world

in

imports

in for

that

negative

fluctuaticns prodcLcer

domestic

taxation

Nkrumah

lesser

accelerating

bee

have

were relatively high.

low

of relatively

cocoa,

maize

1979,

to

relative

was one of heavy

The first

when

on

substantially

changes

identified.

substantially

decreased

to

in many

and

production

of domestic

low

very relative

increased

After

rice.

24 percent

to almost

varied

for

CIF price

remained

was positive

most years

in that

than

prices

but domestic

protection

below the

of maize

imports

Maize

by domestic

influenced well

they

rice

6-1).

(Aninex Table

price

a local

for

whereas

was

price

years,

twenty

absolute

but its

rice,

production

its

productiin,

so that

increased

1950s

next

the

for

production

established

which

1950s and early 1960s, nominal

than for rice because imports of maize

local

and

revealed by

term movements

was

it

domestic

than

a nantradable,

was essentially

border

of

1 percent

equalled in

for maize

much greater

was

magnitude

as

negative,

was

late

During the

the data that are important. protection for

also longer

There are

variations in rainfall.

due to

domestic price, fluctuatims

and therefore

large supply,

there are

to a as with fell

and the

world

price

exports,

was so

though

CM1 costs.

once

room for

cocoa as the

the government

most of this

The

protection left

low that

following again

rate

year

were

increases tax

subsidy

in

was necessary world

the

its

exchange

resulting

been

dwarfed

of policy

on the agricultural

agriculture

and elsewhere this

and quantitative

has also

import

cedi

takes

the

restrictions

been influenced

to cause the by

of

thereafter

devaluations

and government

rates

revenue

from

Effects

In most countries

rate

has tended

in

both

from tariffs

the exchange This

effects

impact rate.

and

was once more increased.

The indirect of

prices

cocoa

because of inflated

recovered,

Successive

both producer

by subsidizing

only

prices

negative.

Indirect

a result

ended up

by the

in

restrictions,

the

as

ecormWy on

on imports. taxation

In Ghana

of cocoa exports.

but this

have worked in

which

occur

form of overvaluation

be undervalued,

to

sector

effect

has

the opposite

direction. Indirect prices

for

maize,

and cocoa

He-re the

exchange

prices

domestic

prices,

presented

rate

are

disequilibria.

effect

is

by the

direct by

ratio

measured This

also

of

by

the

and indirect

model described

4.

150

in

domestic

is made for

methodology price

border

the equilibrium used

adjusting

adjustment

describes

multiplying

exchange rate

from the simulation in Table

of

measured

The equilibrium

obtained

interventions

in An,nex 5, which

combined

relative

rate.

price

employed.

interventions

prices,

rather

to the official

these

in Chapter

with

an than

exchange

calculations II,

rice,

is the

that

results

These adjusted

border

nmagricultural

CPI

disequilibria.

The details

Pninex

5

and

in

ratio,

P* / P* i NA Large

the

seems fairly

that

occurred

at both

world

market

prices. not

share

extent

for

rice

the widening

rise

domestic

distorted in Table

and the

in

19

shcw.s price

as did

the

ratios

there

is

to draw

me tendency

producer

prices

relative

because of

after

the general

the fall

in the

true

is

to a of the

deterioratim

agricultural of the

price

1972, hoever,

The same tendency

those

in

the resulting

in the

level

revived

cotained

up by the Cocoa Marketing

decline

of private

costs

marketing

did

betwen

the

CM.

relative

price

differences

in Tables

14 and 15 and the adjusted

ratios

18:

P,

P.,*

P,*

Phw

P*

p

For rice

and maize the net effect

exchange

rate

for

maize

that

emerge.

is negative.

w

of

varies

disequilibria

are scane patterns effect

in cocoa

producer

and maize because of though

decline taken

rate

difficult

but

improvement.

this

presents

trends,

margin

exchange

are

make it

to year

by the

divided

adjustments

was a severe

the same extent

to nearly Table

there

are

and for

18, which

is the

That

border

system,

transportation

to Table

When cocoa prices

did

producer lesser

the

these

18 regarding

pronounced.

crop

distortions

from year

From 195B to 1964,

of cocoa

direct

footnotes

because of

each

for

ccerning

from Table

that

Bard.

for

fluctuatims

many inferences

not

adjusted

prices

dirert

price

from year

cmsiderably In most

years,

Durwing the early 151

and indirect

distorticns

for

years

to year,

exanple, of the

but

there

the overall

period

under

Table18 Effect ofDirect andIndirect Price Interventions onRelative Prices

haize

Rice

Cocoa

Year Producer la) Consueer (b) Producer (a) Consuser (b) Producer la) Consumer (b) _--

1958 1959 1960 1961 1962 1963 1164 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

--

-

--

-

-

2.56 2.10 3.22 3.83 2.67 .79 2.17 1.46 .94 .67 2.18 2.06 .41 .92 4.60 .47 1.23 1.06 1.02 3.27 3.93 4.02 2.50 3.05 1.82 2.33 1.91 N/A

--

-

--

-

-

3.29 2.76 4.03 4.74 3.43 1.24 2.84 2.04 1.48 1.16 2.90 2.76 .85 1.47 5.70 .97 1.82 1.64 1.69 4.44 5.12 5.34 3.55 4.17 2.79 3.48 2.91 N/A

--

-

--

-

-

--

3.00 2.92 3.00 3.14 2.54 2.41 2.05 3.80 2.87 2.22 3.25 2.79 2.39 1.90 1.60 2.41 3.93 2.11 2.77 2.98 3.13 1.81 3.12 4.70 3.99 3.47 2.39 N/A

-

--

-

-

4.44 4.34 4.38 4.54 3.94 3.71 3.34 5.39 4.42 3.64 4.82 4.33 3.82 3.33 3.01 3.97 5.65 3.61 4.62 5.36 5.62 4.09 5.51 7.26 6.53 6.24 4.74 N/A

------------ _--_-_-_-_-_

9.99 8.54 6.81 6.47 6.06 5.69 3.51 4.82 4.69 4.93 5.55 7.91 5.00 3.58 2.86 6.15 5.82 3.24 6.32 4.35 13.69 9.39 7.18 5.74 6.52 7.70 5.97 N/A

Notesto Table 18: (a)Calculated astheProducer PriceEquivalent attheequilibrium exchange rate(Table 3-4(1) forrice,Table 3-4(2) formaize, and Table 3-4(3) forcocoa), divided by theNonagricultural CPIfrom Table3-5(1), adjusted asdescribed inAnnex5. (b)Calculated thesamewayas (a)usingtheRetail PriceEquivalent from Table3-4(1forrice, Table3-4(2) formaize, andtheOptimum Domestic Priceattheborder, valued attheequilibrium exchange rate,from Table3-4(3) forcocoa.

152

-

10.85 9.32 7.53 7.15 6.82 6.43 4.17 5.39 5.29 5.55 6.16 8.44 5.50 4.53 4.32 8.00 8.01 5.47 7.78 7.26 16.13 11.64 9.58 7.31 9.34 11.32 9.70 N/A

Table19 andIndirect PriceInterventions Effect of Direct Price Differences onRelative

Cocoa

Rice

maize

(a) Consumer lb) (b) Producer (a) Consumer (b) Producer Year Producer (a) Consuser 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 1980 1981 1982 1983 1994 1985

-.643 -.679 -.799 -.723 -.648 .189 -.479 -.121 .212 -.263 -.588 -.326 1.422 .025 -.703 1.664 -.121 -.020 .901 -.153 -.652 -.703 -.057 -.371 -.109 .964 -.311 N/A

-.571 -.586 -.725 -.662 -.569 .160 -.412 -.073 .173 -.180 -.511 -.283 .800 .020 -.652 .934 -.088 -.014 .615 -.121 -.565 -.610 -.032 -.298 -.052 .779 -.244 NIA

-.228 -.316 -.481 -.548 -.549 .051 -.191 -.469 -.394 -.252 -.558 -.330 -.114 .066 .715 .213 -.351 .326 .662 .297 -.179 -.184 .335 -.543 .118 .907 1.108 NIA

-.170 -.230 -.356 -.405 -.382 .058 -.114 -.352 -.277 -.181 -.433 -.250 -.074 .045 .440 .151 -.276 .221 .442 .208 -.124 -.097 .245 -.381 .118 .613 .627 N/A

-.442 -.388 -.253 -.223 -.230 -.342 -.094 -.419 -.354 -.314 -.368 -.567 -.331 -.110 .278 -.372 -.398 .016 -.518 -.126 -.689 -.551 -.598 -.315 -.471 -.620 -.589 N/A

NotestoTable19: andfromTable3-3(2) PricefromTable 3-3M1) forriceandmaize (a)Producer 3-5(1) sinusthe by theNonagricultural CPIfroeTable forcocoadivided by theeffect effect onproducer prices fromTable19,alldivided on producer prices fromTable18. Ib)Retail PricefromTable 3-311) forriceandmaizeandRendered bytheNonagricultural PartPricefromTable 3-3(2) forcocoadivided prices fromTable 18,alldivided by the CPIminustheeffect onconsumer effect onconsumer prices fromTable18.

153

-.405 -.350 -.219 -.188 -.194 -.293 -.068 -.360 -.307 -.281 -.332 -.533 -.228 -.086 .185 -.284 -.282 .011 -.429 -.055 -.589 -.446 -.429 -.228 -.293 -.392 -.377 N/A

consideration,

this

operated

same direction.

in the

years

caused

influences

was

the

on

relative distortions

the fact

that,

until

quantities

and

price

did

substantial

local

trade

following

14 years,

that

overall

the

of rice

show that

the

on

controls, for

of

rice

This were

the

This

is

with

domestic

19E)s,

prices

with

in only an its

early

the

consistent

by Giana

the

twD

small

dcmestic moreover,

from rising

very

1963.

other

hand,

were

after

were

of trade

was negative. of

kept

especially

example,

effect

imports

year

price,

of an influence

During

in most

directions,

was imported

imports

the

border

dominant.

and supply.

drought

the

distortions

restrictions

opposite

had less

in maize

imports,

restrictive

price

demand

during

Rice

maize

and indirect

when trade

in

being

restrictions

direcft

exceed

worked

recently,

increases

much, except

to

generally

trade

the 1964,

price

prices

rate

both After

domestic

exchange

than

because

import

subject

1970.

In

to only

restrictions rate

is

by the

data

rise

nearly

not

allowed

to

of

direct

and

4 out

of

the

sufficiently

and exchange confirmed

much more

policies

on the in

lax domestic

Prnex

6,

which

as much as

those

of maize. The combined even

more

below

its

two over

striking

in

optimal the

producer relatively the

years,

the

at

case the

studied.

was

low,

though

the

level

period

price

influence

producer difference

the

price

those

rate

was below

its

was less

exchange

rate

two years

-

significantly,

exchange

than

at

154

interventions

The prcokdcer

equilibrium During

increased

and

of cocoa.

indirect

price in

border

but

1972 and 1975 -

the

the

optimal

rate

every

cocoa

highly

price

was depressed year

world was not

is

prices

were

overvalued.

equivalent of export

Even in

those

taxation.

other

In every years

heavily,

very

It

is

price

distortions

cocoa

prices

until 1971,

are

high

prices

its

any

not

in of

during

optimal

level.

fairly in Table

world

a period

year

cocoa

which

the

in

impact of

because

year

before

Nkrumah

a sharp

increase

in the

in

cocoa

lessened

to

increase

the

high

producer

prices

19 because

price

155

an

policy

cocoa

was highly

was of

prices.

price.

of the

ensued, distorted

failure

There

under Acheampong,

there

world

falling

to be penalized

1973 and 1974 were

Finally,

market.

of

producer

impact

producer

of

fell,

continued the

the degre

overvaluation

in

increase

1966,

prices

cocoa

changes

adverse

years

corresponding

market

that

evident

on the

of

government

when low world

a few years

these

1984,

without in

the

however, result

change

the

Nkrumah

the

during

the

as well,

note,

By and large,

as a

Busia regime

the

followed

to

rate

the

to

time.

In 1965,

and in most

was to penalize,

policy

of

sector.

cocoa

decreased

exchange

Despite

of

over

penalized

heavily the

the

impact

total

interesting

prices.

market

the

year,

thEn

though

years

of very

from

1976

in relation

to

CHlTER

VII:

EFFECT

Trade, not only

price,

relative

prices,

changes

is

assessed

foreign

exchange

run,

as

these

of

price

time.

stock

INt only

the

in this

is

prices

on

considered inputs.

indicating of

consists

agricultural

the of

for

labor

of

less

10 percent

of protection

the impact

of these

This

but also relative

the

price

consumption,

output,

lack

mechanized

embodied

on these

in

particularly

important

and

that

the

the

value

inputs

was

of

lcng

In

period

age of trees to

to be explored policy.

changes

influencing in

output

census or survey hoever,

inputs,

used

labor of

traditional,

on the

and less

not

from

far

prices

are

use of

and capital the capital manual

farm acccunt

of cocoa output very

relative

data an

and most For

farms.

inputs

156

the

been sufficient issue

policy

cultivation,

cocoa

for

Production

Only

production

a

the average

A major

run,

period.

has been due to price

effects

rice

for

has not

stock.

of reliable

in

but

replanting

this

the short

has a long gestation

been falling,

intermediate of

are examined

has been declining

production.

production,

is

on Aqricultural

most important

techniques than

chapter,

investmLent

to which

examines

because of the

are by far

run.

the capital

the extent

section

Except

previous

interventions

long

Effects This

in Ghana have affected

influenced

of cocoa trees

depreciation

study

have

has production

has been increasing, offset

policies

the

chapter

capital

in which

Ghana the capital of

in

FOFEIGN EXCH*M

i1n

flwas.

and the very

cocoa sector,

rate

as shlwn In this

The effects long

IWNfPTION,

and exchange

of resources.

al location

the

ON Oa RJT,

for

than 5 percent

unity,

the error

introduced

by

not al lowing for direct

subsidies

does not appear

to be very

great. Mbre important the

overvalued

tractors, at

cedi,

and other

the

may have been the indirect which

inputs

official

the

made

artificially

CIF

price

Imports

of

few producers had access to them at these

developed

in

officially

authorized.

considerably

which

the

overall

inputs Finally,

absence

of these

at

delivery of the

inputs.

consideration seriously

bias

distortions of

the

estimating

prices

time-series is

it

the

the

results.

Instead,

nuch higher than those

were

cammnn, decreasing

information impossible

on the relative to

estimate

indirect government

show.nin

supply

cultivators

effects

The

production

tradable

of

Consequently,

of

Supply Funictions. agricultural

low prices.

inputs.

factors,

majority

vast

intermediate

that only a

their

on produjction. It is clear, hawever, that only a few larger

impact

the

currency

were severely

however, so

delays

farmers benefitted from either direct or that

fertilizer,

local

inputs

artificially

sold

of detailed

various

to

from

by these shortages as seccndary markets

were

effectiveness

In the importance

created

resulting

imported

these

constrained because of foreign exchange shortages,

middlemen captured the rents

of

low when converted

rate.

exchange

subsidies

of

impact may be

Tables

crops elasticities

used few, if any, nontraditional

limitation in

policies

affecting

using

estimated

16 and 19 and included

in is

of

distortions

of

that

the

output

table.

analysis

prices

output

the relative

the elasticity

relatively

157

subsidies and

of Although

straight-forward,

does

prices

producer

the

on

each

method for

not

price for

supply

to

for

annual

crops, case

such of cocoa.

Cocoa Perhaps

These

the

best

that

to

and maize, methods

0.87,

to 1.2B.-

of

to

in

later

estimates

for

a period,

of

a longer this

elasticities

for

Long-term

elasticities

countries.

x Model, 2

Rrssonse: p.404.

4

Bank

to

period

estimated

The production

those

from

in the

to

the

cocoa. These

range

of

elasticities

were

which

cocoa

production

and

price

incentives,

in

Subsequent 1969/70.:

generally for

were

positive

1932/33

for

of Bateman.1-

1949 to 1962

during

much

example,

ranged

Price laher.

from 0.77

analysis

by

elasticity Short-term

from 0.14 to 0.21.

given.

Ccmmodity supply

Studies

and

elasticities

decision,

in

Merrill J. Bateman, Cocoa in Amsterdam: NorthHbl land, 1968. Hossein Askari and A Survey of the

were

in

below.

elasticities

production.

regions,

the

described

supply

strong

were

were not

more complicated

are

long-run

however,

period

Mbre recently, World

and

declining

different

of

from

respanse

years

results

many years

on region,

contrast

covered

for

depending

increased

Bateman

these

was

considerably

exist

elasticities

This

is

and their

short-run

acreage

the

it

A number of estimates

suggested 0.39

as rice

the

these

Projections for

analyses,

Ghanaian

a number

Division

of

of producier

was viewed

as a

Econcmwv: An Econometric

John Thomas Cummings, Aaricultural Eccrometric Evidence, New York: Praeger,

SuWplv 1976,

Merrill J. Bateman, "An Ecorxmetric Analysis of Ghanaian Cocoa Supply," in R.A. Kotey, C. Okali, and B.E. Rburke, (eds.), Eccnomics of Cocoa Production and Marketincq, Institute of Statistical, Social and Economic Research, Liniversityof Ghana, Legon, 1974, pp.28E&-326. Takamara Akiyama and Ronald C. Duncan, Analysis of the World Cocoa Market, Wbrld Bank Staff Commodity Working Paper ND. 8, 1982; T. Akiyama and A. Bowers, SuPplY Response of Cocoa in Major Produking Coaxtries, Division Wbrking Paper Nb. 1984-3, Commodity Studies and Projections Division,Economic Analysis and Projections Department, Wbrld Bank, April 19B4. 158

two-stage

process

of production

involving

given

planted,

new

capacity,

which

(1)

a particular

area

stock.

planted,

was an

input

the stock

of cocoa trees

Time series

and

yields

along

with

and (2)

data on

into

the

level

initial

were used to estimate prices

the

area

production

supply

function.

Short-run elasticities in Brazil, Ivory Coast, and Malaysia ranged fron 0.21 to

0.30.

Long-run,

acreage response

steady-state

elasticities,

including

feedback fron

over a period of 10 years, were 0.8 for Brazil and 1.8 for

the Ivory Coast. supply elasticities

For Ghana, the most recent estimates of cocoa are

contained

in

Commodity Studies with

the

1970s by

a

by

findings

estimates of

trees

estimated 1963/84 short-term

The

classified

0

Coroa

the Akiyama study

supply,

such as the

Takamara Akiyama,

to

yield.

price.

results

in

of

0.24

"Cocoa Supply

other

short-run and

with

Projections"

in

during

matrix

approach

This

approach

fram

variables

elasticities respect

Prriex

the

a Wbrld Bank

equation

production

and

out

of estimated

A regression

producer

price

analyzed

(IC02).

actual

are consistent

carried

based on a matrix

production

analysis

respect

and

Organization

to explain

in normal

Survey

are based on the vintage

by age and average

by variations

with

estimates

the World Bank

These estimates

Division

cocoa production

The Akiyama production

by Akiyama for

Division.25

Cocoa Services

International

"normal"

in

prepared

of the Cocoa Land Intensive

the Ghana

the

annex

and Projections

background paper., used

draft

acreage is

then

1968/69

to

affecting

of cocoa

to insecticide

C draft,

July

30,

1985. World ' Bank, Ghana: The Cocoa Sector, Backgrcoind Paper Nb. 1 of 4 prepared for the Ghana: Policies and Program for Adjustment Report, October 14, 1983.

159

sales

to farmers

of 0.29.

prices

lagged

two and

impact

of

producer

the

production

thrcugh

an unweighted of new short

average

run and 1.5

for

constrained

of

much of the large

determinant

projects

The

over to

1945/46

not

1968/69,

is

directly

related

varieties

is

multiplied

by the

Production

from

to production

new New

estimated

carried

of

variable

at 0.5

for

the

has been

not

take

into

Furthermore,

the context was

elasticity

is

however,

which

materials.

price

on

Elasticities

does

within

producer

and

of

not

of

of two a

major

new plantings

of the

hybrid

the

over

and hybrid earlier

varieties

garden

new

vintage

parameters

planted

than 1945/46,

began in and is not

hectarage model,

since with

of bDth

where

it

of the

trees.

1945/46 an

by

the period

which

the age distribution trees

developed

deliveries

planting matrix

in Annex 4,

over

varieties,

of seed year's

in detail

explained

traditional of

of yields

planted

years.

estimated

plant:

and some

Each

through

saoe effect

sales

and

of

any immediate

are calculated,

gardens

The

here,

planting

traditional trees

the

mn the basis

profile

also

average

reliable.

planting

to price.

for

show

three

was undertaken

very

allow

by the government,

schedule.

used

procedure

to 1985/86.7

are

seed

which

planting

estimate

previous

own traditional

for

weighted

does

but

New plantings

of its

time

a

The insecticide

price

emplcyying the methodology

Bateman to

the

lang run.

at this

are therefore

harvesting

maintenance.

their

is

does not

seed distribution

use of

of the

estimates

' planting and his

the

variable This

an

respect

hybrid

planting

cocoa

involves

price

tyy the capacity

account farmers

price

years.

of sales

with

basis

three

improved

plantings

an the

The

is

is added

adjustment

to

Bateman s estimates are for the period 1932/33 to 1969/70, but of traditional varieties decreased rapidly to zero after the 1960s, model, as modified here, predicts this quite well. 160

take

into

acccunt

the

rate

at which

these trees

in them revealed

to reach the area planted

productimn

must have been going by the surveys

out

of

of

the

1970s. The resulting with

actual

adjustments normal

production

as

of

allowance

corresponds

being

made for

As a

final

production

and

by

of

official

parameters,

reasonably

actual

is

with

influence

producticn,

current

and

prices,

-~ co

co 2

due

and prices.

of weather is

Same

in Annex 4, until

actual

production past

then compared

marketings.3

as described

well

the short-term

step,

production

"normal"

estimated

are made to Bateman's

production

normal

time-series

estimated

as a function the

using

of

following

specification:

lnQt

where producer

the year this

is

QF°

of cocoa,

in which

In

of the price

B 1 lnNt

actual

price

equation

prices.

Bo +

=

represents the usual the

cocoa sector, the main harvest

production,

farmer

however,

+

N'°

B31r7Pt

takes

the effect

place.

formulation,

expects

to receive

the

producer

season so there

price

price

B4 lnPe + et

... (1)

P--

production,

of

production these in

the

for

current

the

in

years'

are determinants

is annxouced well

is no unmcertainty

the

variable

of previous

prices

is

and t is

food crops,

The lagged dependent

on current

Nerlavian

+

normal

is

the producer

Fr is

production

cof

BElnQ*-,L

+

year. in

farmer.

In the advance of Previous

Actual production differs from official marketings by the quantity This quantity is judged (see countries. to neighboring of cocoa smuggled Annex 1) to have been about 10 percent of production in recent years, but it the year to year accuracy, with any degree of to estimate, is impossible in the degree to which because of marked shifts in smuggling variatimns the approach used here is Instead, laws have been enforced. anti-smuggling and to assume that smuggling is marketings as production official to treat ane aspect of producers' supply response to price incentives. E

161

prices

do influence

current

production,

pruning,

spraying,

canopy

weeding,

the full impact

of which

this

term

is included

the

long

run

may not

however, repair,

be

felt

to distinguish

elasticity

EB/(1-8a=),

their

effects

cn

and other

types

of maintenance,

several

years.

Cbnsequently,

for

the

because of

short

run price

where

B6

is

BR from

elasticity the

coefficient

of

adjustment. The which

tends

the other

price

of

to be closely major

lagged price

food

since during

intensively

to harvest

with

the

cocoa

staples.

long-run elasticity

1nQt =

-

current

this being

estimated

given for

equation

three

All

in

parentheses

slope

are significantly

.01 level significantly elasticity

of

prices

past in

of

than the

sufficiently

decisions food crop

as to how prices

the autoregressive

(1),

using

data

for

also term,

1944/45-

+ .223 ln P* -. 143 lnP*

(5.123)

(2.953)

R = 0.824

coefficients.

prices

by BE/(1-E6).

1.480 + .498 lnN4 + .643 lnQ]_

figures

crop their

that

the

is used rather

focd

captured

is

with

of maize,

by:

(-1.344)(2.644)

where the

price

to influence

To the extent

here by that

earlier,

to predict

seasm

cocoa.

represented

as noted

are able

production,

are given

is

The

the growing

The parameters 1985/86,

crops

correlated,

farmers

in advance

influence

food

significance.

are

coefficients different The

H

the

-

(1.787)

0.547

t-statistics

for

have the expected from zero,

using

coefficient

of

different

from

zero

of output with

respect

to

at

the

the

price

162

... (2)

signs

a two-tailed

.10

the

price

level.

of'cocoa

is

the

regression

and the first test, of

at the maize is

The

short-run

.22,

which

is

consistent

with

countries.

The short-run

-. 14.

The

trees,

is

the

previous

lngr-rum

of

elasticity

respect

maize.

assuming

that

The latter especially

for

describes

in detail

takes

place

new

difference

between

which

planting

function, undertake capital, the

the

to focus is

particularly

changing replant

producer

stock

of trees

changes

be

that

this

real

for

the

Bateman price

unprofitable,

(2)

absorptive

capacity

to the

size

variables.

depends

could

on the

time

and age distribution of

the

single

prices

of this

parameter

important

The

trees. price -

the

has not capacity

been

has

nonlinear

of

the

period the

the

trees.

163

Briefly on

the

below effort

sector

to

populaticn, the supply of the

relationship

over existing

response

that

tree

relative response

stock,

model

and

is able

without

the of

This years

recent

but rather

to

having

of supply. in

aging

between the

which

elasticity

with

(1)

level

agricultural

mechanism

new planting

decreased

new planting

planting

matrix

response long-run

Annex 4

production.

a

vintage

in Ghana, where

which

be established,

of

price.

reasons.

at

to

to calculate,

and a threshold

Even if

price

to

fornmulation,

of the

of cOCoa

steady-state

difficult

rate

is

respect

long-rrn,

several

maize

stock

-. 40 with

has on subsequent in

the

producing

of

in response

quite

the

producer

linked

complexity

as praductive

fact,

influencing

depends,

also

profile

on a

the

and produrer

the size

the

from

constraining

response

incorporate

different

factors

the

rate of planting

yield

is

price,

the

and other

is measured,

and

major

price

given

cocoa

in

impact

the

of

changes

new investment

production

This

price

in

planting

(3)

the

to

output,

cocoa

is,

would

and

to

and other

Ghana respect

parameter

the

summarized,

with of

the

large

and the

for

elasticity

elasticity

.62 with

price

estimates

failure

to to

the existing

The distortions

have

steps.

The

taken

thrcugh

the

equilibrium

with

in

Anex

vintage

series

matrix

for

The final

distortions

is

such

compensate,

to

a

Consequently,

supply

results

assessed

that

were have

been

that

step

is

large

(3.434)(2.535)

the

the

prices

carried under

errors

rxunusing

the

existing

in

production of

time

could

the

data.

data,

with

in comparison

(2)

magnitude

ever

the

other

and the estimates

of Ghana.

regression

was estimated

equation

for

maize:

m

4.304 + .142 lnQD_± + .794 lnPt.m_-.267 lnPt

=

the

prices.

of

for

reasonableness

then

that

Qt from equation

quality

in

using

production

on undistorted

variations

were

normal

the

several trees

is

series

Nevertheless,

extent,

functions

involves

prices

to calculate

and data

m

m

derive

poor.

considerable

for

to

policy

price

of traditicnal

planting

in Annex 1,

very

made outside

The following

lnt*,

is

crops

that

equilibrium

This

production

As discussed

food

replanting

unrdistorted 4.

impact

in Ghana therefore

the

model

on normal

Food Crops data

place

conditions.

this

prnduction

to calculate

described

procedure

using

is

the

estimating

had on cocoa

first

have

would

for

pracedure

(1.771)

(2.519)

-

...

.440 lnP-±L

(3)

(1.802)

-2 R = .32

H = 0.981

maize (m),

where the superscripts designate

cocoa (co),

and cassava (ca).

All coefficients have the predicted signs and those for the lagged values of On and Pm are statistically significant for

the

the

.10

cross-price level.

The

elasticities short-rmu

for price

at the

cocoa elasticity

164

.05 level.

The estimators

and cassava are significant for

maize

of

at

.79 seems

somewhat but it and

high is

in

within

relatimn the

groauxnduts,

Furthermore, implying

to most

range

annual

the

long-run

is

mnly .93,

which

does

in

production

with

cocoa

for cereals

of elasticities crops

the coefficient that

estimates

estimated

that

of

the

be

of maize

food

crops

Nigeria

substitutes

such

is

respect

given

for for

term

with

seem unreasonable

and other

in

autoregressive

elasticity not

may

of Africa,v

outside

maize. fairly

to its

high

cottan -

low,

own price

substitutability

as cassava,

yams,

millet,

and sor-ghum. In cmntrast river

with

of the

valleys

major

crops. cocoa,

to maize, north,

rice,

does

Nevertheless, which

period.

With

following

regression

competes

both

with

rice

and

equation

a

not

which use is

rice

for

coefficients

that

is

suitable

cocoa

migrant prices

labor

in

for in

during

as explanatory

the

other production the

harvest

variables,

the

was run, co

r-

(2.773)

principally

grown

some substitutability

,-

inP*

lnP*-1 - .391 (2.340)

(2.273)

-2 R = .467

Al1

land

there

lnQG = 3.006 + .242 1nQG.- + .427 (2.424)

is

...

(4)

the

.05

H = 2.644

have

the

expected

signs

and are

however,

since

the

significant

at

level. This presence

9

of

Askari

is

misleading,

positive

serial

and Cummings,

correlation,

implying

SuPPly

Agricultural

H statistic that

Response

suggests

the

standard

... ,

the errors

pp.390-96.

in Sub-Saharan 20 Marian E. Bond, "Agricultural Responses to Prices African Comtries," IMF Staff Papers, 30 (4), December 1963. pp. 710-11. food crop elasticities for There are no reliable existing estimates of neighboring countries in West Africa. 165

of the

regression

redress

this

decrease

in

from

coefficients

situation the

.43 to

are

using

the

short-run

The coefficients

of the

not

statistically

significant.

the

prices

rice

in the

price

rejected.

Nevertheless,

be used

to predict

the

as the

have

continued

regime. the

Price of

same omitted

the

of

short-run

have

no

it

owu-price

Elasticities

of Supply it

is

useful

the

same period

"

in

were

the

null

on

rice

mean that

resulted

the

oaw price .56

in

hypothesis

that

output

cannot (4)

short-run

as

would

different of

be

cannot

prices

correlation the

.33. case

of different

with

to

this

equation

in serial

to a

price

.43

and in

be unreasonable.

As a way of verifying to

construct

the

the

reasonableness

following

matrix

of

Supply Elasticities Price

Output

statistic either

that

not

from

led

elasticities: Short-Run

Cocoa Maize Rice

to its

however,

that

to

respect

under a regime

elasticities

appear

This

elasticity

influence

does

of rice

during

.56 do not

estimates,

implies

was made to

procedure. with

and cocoa,

This

variables

to operate

The implied

long-run

output

rice

long-run

of rice

and cocoa

reliably

long

of

An attempt

L

Cochrane-Orcutt

elasticity

.17 and a decrease

of

uiderestimated.

Cocoa

Maize

Cassava

+.22 -. 27 -. 39

-. 14 +.79

-. 44

Rice

+.43

The H statistic, which is more appropriate in the presence of an auto-regressive term, the cocoa or the maize supply equations. 166

than the Durbin-Watson is not significant for-

Only

those

coefficients

that

are

significant

at

the

.10

level or greater

are

show. With respect

to

the

its

to

the

with

synmnetry

conditim

to the

of

price,

discussed

earlier,

with

of cocoa

tWo crops

exceptim

own

and consistent respect

possible

price

of cocoa,

respect

to the

of cocoa

of

with

surprising Finally,

the

than

maize

of

cocoa

view

greater

for

=

is

of

the

much

cocoa

is

of maize

results

is

about

which the

of

maize

the

elasticity

rice

but that

is

greater

of

not

relative

with

the

of output

were calculated

the

respect

significant

of

cmsistent

of

elasticity is

importance

production

the

with the

not

of cocoa.

maize

relative

with

with

importance

of

with

reasmable

consistent

relative

elasticity

rice

in

double is

output

appear

elasticity

significant

substitutability

and

the

statistically pr-ice

cross

and

that

the

the

maize,

dg=/dPm)

to

elasticity

example,

of

The fact

respect in

The

price

(dg(/dP-

in production. price

another.

mne

the

and cassava

magnitude

of

these

two cross-elasticities.

Equilibrium

Levels

of Output

Equilibrium through run,

real

(4)

for

the

short

equilibrium

the

equilibrium

the

nmagricultural

in

estimating

variable

levels

prices

prices

these in

were

were

price

were used

run,

lamg run, and very substituted

obtained

deflator

equations. this

for

unity

Actual

calculation,

167

lang run.

In the

actual

14 and in

lagged

and the

equatic-s

real

from Tables equals

using

1963, values

residuals

prices,

18 adjusted the

base of the

were

(2) short where

so that year

used

dependent

added

to

the

predicted

values

in rainfall,

assuming stochasticvariation,

to be the same in equilibrium The equilibrium

the

same

dependent actual

way

as

The

output

of output,

which

Attempts production of

the

in

influence

of farmers greater that

of

to

largely

is

basis

of maintenance this

process

returns

can

must set In

variables

in

that

on production

affects

in

turn

result

year,

is

it

autput

in output

through

log of

of a historical face

of

be.

in as the

approach

the

very

affect through

trees long

output their

run, in

The the

the

problem

effect

is

prices.

their

cocoa

high

on planting.

the

previous

of cocoa

levels

that

at

least

ability is

much

partially

is

resulting While

because

the

maintenance

be unlimited,

estimated from lack

some reversal

of

and diminishing

maxinum yield.

output run,

its

in

term

in output

than

directly

level

autoregressive

would not

long

tree

the

output.

implies

improved

low producer it

to very

of

prices

by influencing

This

decline

be anticipated,

output

in

distorted

equilibrium

term.

value

rather

frcm

on current

rising

predicted

lagged

predicted

indirectly

long-rum

the

the

affects

the

to

that

situation.12

run is

prices

an impact

fact

long

its

have

production

the

except

autoregressive

of

the

run

First,

it

kncwn in

in

of equilibrium

predict

the

coefficient

on the

first

ways.

way

increase

than it the

to

this

short

deviation

Second,

as in the distorted

of output

the

in twD

year.

levels

the

after

value.

current

in

variable,

influences

level

due to fluctuations

largely

but

is prices

influenced also

by the have

Whereas normal

same

an impact production

2t This deals with the problem raised in A.0. Krueger, M. & hiff, and A. Valdes, "Note 7. On Measure.ent of Quantitative Effects and Regressicn Residuals," Memo No. 27, July 11, 1986. Use of the original equations, rather than just estimated elasticities, to calculate equilibrium levels of autput is very important for Ghana because of the large distorticns involved. These can lead to very biased results if changes conforming to the elasticities are calculated using a single base point.

168

in equation runs, for

(2) is based on estimated the very

the plantings These

icng run is derived,

that

would

plantings

equilibrium

are

prices

output level

in

maize

The results direct

effect

of price

total

effects.

From

distortions

positive,

maize appears to production imports.

was usually year

fluctuations rate

became

most

areas

continued

Table

later, than

its

were

less

the

country

to be marketed

high

transport

for

these

in

maize

imports

were

level,

were sharp

price

of maize

the major

urban

prices

Tables

to urban

very

at

and

reached

the This

gives

20-22.

In

markets

for

the

on

by the cost maize

of

production

variations policy

from than

the

of

exchange

rice

to

producers

in

if

these

cereals

had

earlier,

exchange rise

rate

to very

fact,

as producer

effect

low in relation

As noted

official

23-25

1970s,

zero

centers,

the

the

trade

end of the

for

almost

of

in

20-22

run has been

influenced

of changes

long run.

price

in which

were

there

with

of direct

level

the

the

Tables

equilibrium

and marketing.5

would have ceased to sell

as in

short

scarcely

have

in

plantings,

effect

years

from

in equilibrium.

in Tables the

the

early

would

low border

years

in

Towards the

and

model,

The equilibrium

shown in

that

the

a result

that

been

of course,

output,

and rice

actual

matrix

prices.

appears

when the

so overvalued

of

it

of maize

supply.

of

on

20

in domestic

of the

of output

are

prices

was because cost

exercise

and domestic

which

distorted

of

negative,

higher

of

same,

distortions

the vintage

same way as actual

the

been

have

the

is

this

for the short and Iong

had prices

and rice

during

Even

to year,

in

since

to

planting

using

occurred

place

on production

uniformly

these

have

estimated

used

for

actual

fell,

and the

low levels

of course,

prices

this

farmers and

3 In estimating the output of maize and rice for Tables 20-22, the negative prices for these later years shown in Table 14 were set equal to unity because of the logarithmic nature of the supply function. 169

Table20 Direct Effect on Output, Short-Run (000at)

maize Year

0 la)

01 (b)

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

169 169 169 183 N/A N/A N/A 169 183 170 206 353 278 253 300 482 465 402 427 486 343 286 274 218 380 382 378 346 173 574 411

N/A 363 238 475 392 N/A N/A NIA 238 82 15B 102 72 131 260 307 84 166 530 94 162 83 31 17 45 83 36 2 1 1 10

Rice AD/0 Ic)

NIA -.534 -.289 -.615 N/A N/A N/A N/A -.232 1.076 .306 2.472 2.861 .934 .154 .570 4.568 1.416 -.194 4.176 1.116 2.432 7.863 12.059 7.423 3.595 9.390 209.524 190.515 529.637 40.514

O (a)

01 (b)

23 23 23 30 N/A 32 30 31 33 42 32 29 42 42 60 49 55 70 62 73 71 70 109 108 93 78 97 36 40 66 90

NIA 22 16 23 32 N/A 29 28 29 28 20 15 23 25 47 35 34 40 30 41 59 31 42 9 12 19 B1 5 4 7 10

Cocoa Q/0O tc) N/A .033 .396 .287 N/A N/A .038 .110 .141 .476 .574 .883 .824 .696 .282 .380 .633 .747 1.087 .783 .208 1.242 1.598 10.693 6.836 3.128 .199 5.875 8.174 8.389 7.856

0 (a) 229 264 205 256 317 430 409 413 428 538 401 372 423 333 419 434 477 427 357 395

416 339 290 286 323 284 248 198 173 189 226

NotestoTable 20: (a)Actual output froeAnne% 1,Table1-2(1) formaize andrice,andTable1-2(31) orcocoa. (b)Short-Run Equilibrium outpttromequations (2)-(41 asdescribed intext. Ic)Relative change inoutputX. 0/Aobtained bydividing CO-OR) by01.

170

0t lb) A 0/0kc) 221 259 211 280 340 410 416 436 563 589 534 545 537 401 529 639 608 428 524 511 514 539 413 408 357 341 137 355 349 224 248

.035 .018 -.027 -.095 -.067 .050 -.016 -.052 -.240 -.087 -.250 -.317 -.213 -.169 -.208 -.321 -.215 -.001 -.318 -.227 -. 191 -.371 -.298 -.300 -.096 -.166 .805 -.442 -.505 -.157 -.090

Table 21 Direct Effect onOutput, Long-Run (000at)

Year

a(a)

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

169 169 169 183 N/A N/A N/A 169 183 170 206 353 278 253 300 482 465 402 427 486 343 286 274 218 380 382 378 346 173 574 411

01 (b) N/A 363 265 506 453 373 462 631 287 87 144 97 60 105 229 296 78 129 451 95 129 72 25 12 30 58 28 1 .4 .5 4

Cocoa

Rice

Maize '4 0/9(c) N/A -.534 -.362 -.639 N/A N/A N/A -.732 -.363 .947 .435 2.655 3.641 1.405 .307 .631 4.968 2.113 -.053 4.136 1.669 2.946 9.771 17.302 11.727 5.594 12.581 303.915 430.476 1,254.9178 113.352

0 (a)

Ot 1(b)

23 23 23 30 N/A 32 30 31 33 42 32 29 42 42 60 49 55 70 62 73 71 70 109 108 93 78 97 36 40 66 90

N/A 22 16 21 30 64 34 29 28 27 18 13 19 20 39 32 30 35 25 33 48 28 34 7 6 10 49 4 3 4 5

A

/0 (c) N/A .033 .407 .397 N/A -.503 -.124 .075 .161 .531 .745 1.154 1.197 1.052 .525 .529 .808 1.015 1.474 1.220 .466 1.460 2.231 14.530 14.219 6.977 .982 7.112 14.225 17.147 16.859

Q

(a) 229 264 205 256 317 430 409 413 428 538 401 372 423 333 419 434 477 427 357 395 416 339 290 286 323 284 248 198 173 189 226

21: Notesto Table forcocoa. formaize andrice,andTable1-2(3) frooAnnex1,Table1-2(1) (a)Actual output fromequations (2)-(4) asdescribed intext. (b)Long-Run Equilibrius output by01. change inoutput Ai Q/ obtained bydividing (Q-O1) (c)Relative

171

1(b) 221 254 205 279 359 444 424 446 592 726 648 742 843 632 815 1006 1077 745 772 866 880 900 804 822 739 614 240 370 553 504 496

A.0/a(c) .035 .041 -.002 -.084 -.118 -.032 -.036 -.074 -.277 -.258 -.381 -.498 -.490 -.473 -.406 -.569 -.557 -.427 -.538 -.544 -.527 -.623 -.639 -.652 -.563 -.537 .034 -.465 -.687 -.625 -.544

Table22 Direct Effect on Output, VeryLong-Run (000It)

maize Year

Q (a)

0Q(b)

1955 1956 1957 1958 1959 1?60

169 169 169 183 N/A N/A

1961

N/A

1962 1?63 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1?74 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

169 183 170 206 353 278 253 300 482 465 402 427 486 343 296 274 218 380 382 378 346 173 574 411

N/A 363 265 506 453 373 462 631 287 67 144 97 60 105 229 296 78 129 451 95 129 72 25 12 30 58 28 1 .40 .46 4

Rice AO/0 (c) N/A -.534 -.362 -.639 NIA N/A N/A -.732 -.363 .947 .435 2.655 3.641 1.405 .307 .631 4.968 2.113 -.053 4.136 1.669 2.946 9.771 17.302 11.727 5.594 12.581 303.915 430.476 1,254.918 113.352

0 (a) 23 23 23 30 N/A 32 30 31 33 42 32 29 42 42 60 49 55 70 62 73 71 70 109 1o8 93 78 97 36 40 66 90

f l(b) N/A 22 16 21 30 64 34 29 28 27 18 13 19 20 39 32 30 35 25 33 48 28 34 7 6 10 49 4 3 4 5

Cocoa Q/QCc) N/A .033 .407 .397 N/A -.503 -. 124 .075 .161 .531 .745 1.154 1.197 1.052 .525 .529 .808 1.015 1.474 1.220 .466 1.460 2.231 14.530 14.219 6.977 .982 7.112 14.225 17.147 16.859

0 (a) 229 264 205 256 317 430 409 413 428 538 401 372 423 333 419 434 477 427 357 395 416 339 290 286 323 284 248 198 173 189 226

Notes toTable22: (a)Actual output fromAnnex1,Table1-2(1) forsaize andrice,andTable 1-2(3) forcocoa. (b)VeryLong-Run Equilibrium output fromequations (2)-(4) asdescribed in text. (c)Relative change inoutput A Q/Qobtained bydividing (0-02) byQl.

172

0Q(b) A Q/Q(c) 221 253 205 279 360 444 424 446 592 726 648 742 845 637 828 1034 1130 806 865 1013 1084 1179 1124 1227 1177 1037 429 694 1086 1031 1055

.036 .042 -.002 -.084 -.119 -.032 -.036 -.074 -.277 -.259 -.381 -.499 -.500 -.477 -.494 -.580 -.578 -.470 -.587 -.610 -.616 -.713 -.742 -.767 -.726 -.726 -.421 -.715 -.841 -.817 -.786

Table 23 onOutput, Short-Run TotalEffect (000It)

Year

0 (a)

1955 1956 1957 1958 1959 1960

169 169 169 183 N/A N/A N/A 169 183 170 206 353 278 253 300 482 465 402 427 486 343 286 274 218 380 382 378 346 173 574 411

1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

as (b) a 0/0(c) N/A 406 261 494 476 N/A N/A N/A 363 141 235 292 193 229 384 457 177 320 714 131 245 136 69 62 178 165 66 55 18 23 N/A

Cocoa

Rice

Maize

N/A -.584 -.352 -.629 N/A N/A N/A N/A -.496 .209 -.124 .209 .442 .104 -.218 .056 1.634 .255 -.402 2.718 .400 1.106 2.958 2.499 1.136 1.321 4.747 5.260 8.565 23.830 N/A

0 (a)

0 (b) A 0/0(c) N/A 26 19 25 37 N/A 36 39 39 40 25 30 46 38 62 49 56 75 41 55 87 48 80 63 73 59 74 39 27 37 N/A

23 23 23 30 N/A 32 30 31 33 42 32 29 42 42 60 49 55 70 62 73 71 70 109 108 93 78 97 36 40 66 90

N/A -.124 .219 .215 N/A N/A -.165 -.206 -.149 .053 .261 -.025 -.084 .093 -.038 -.007 -.021 -.072 .503 .327 -.187 .462 .356 .702 .278 .324 .309 -.079 .503 .763 N/A

0 (a) 229 264 205 256 317 430 409 413 428 538 401 372 423 333 419 434 477 427 357 395 416 339 290 286 323 284 248 198 173 189 226

Notes toTable23: forcecoa. Annex1,Table1-2(1) formaize andrice,andTable1-2(3) (a)Actual output from (b)Short-Run Equilibrium output fromequations (2)-(4) asdescribed in text. (clRelative chanqe inoutput.J9/0 obtained by dividing (0-0*) by0*.

173

01 (b) A Q/gIcl 203 235 194 262 320 387 393 408 519 526 498 470 450 338 482 538 490 339 406 436 412 432 285 311 312 329 239 214 223 203 N/A

.128 .124 .054 -.022 -.009 .110 .040 .013 -.175 .022 -.195 -.209 -.077 -.014 -.131 -.193 -.027 .261 -.121 -.094 .010 -.215 .016 -.080 .034 -.135 .037 -.076 -.223 -.070 N/A

Table24 TotalEffect onOutput, Long-Run (000at)

Maize Year

0 (a)

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

169 169 169 183 N/A N/A N/A 169 183 170 206 353 278 253 300 482 465 402 427 486 343 286 274 218 380 382 378 346 173 574 411

Rice

Os (b) A i0/(c) N/A 406 295 535 554 504 697 1100 473 161 233 297 180 217 375 471 176 279 678 140 205 126 62 50 144 143 57 42 13 16 N/A

N/A -.584 -.428 -.658 N/A N/A N/A -.846 -.613 .057 -.117 .188 .478 .167 -.201 .023 1.642 .441 -.370 2.482 .671 1.266 3.445 3.325 1.630 1.662 5.604 7.185 11.893 34.699 N/A

9 (a) 23 23 23 30 N/A 32 30 31 33 42 32 29 42 42 60 49 55 70 62 73 71 70 109 108 93 78 97 36 40 66 90

Cocoa

as (b) A 0/0(c) N/A 26 19 24 35 79 45 43 42 42 25 28 46 39 61 50 56 76 42 50 80 49 74 58 63 54 68 36 27 34 N/A

N/A -.124 .181 .265 N/A -.593 -.328 -.279 -.214 -.006 .259 .031 -.078 .072 -.022 -.012 -.025 -.078 .474 .457 -.109 .422 .476 .871 .487 .458 .433 .004 .505 .946 N/A

0 (a) 233 264 205 256 317 430 409 413 428 538 401 372 423 333 419 434 477 427 357 395 416 339 290 286 323 284 248 198 173 189 226

NotestoTable 24: (a)Actual output fromAnnex1,Table1-2(1) formaize andrice, andTable1-213) forcocoa. (b)Lonq-Run Equilibrius output fromequations (2)-(4) asdescribed in text. (c)Relative change inoutput, il/9obtained bydividing (0-01) by01.

174

01 (b) A/0/3(ci 203 217 172 233 301 375 360 376 488 573 518 555 596 427 576 677 674 453 513 606 609 631 442 426 424 414 324 271 289 301 N/A

.147 .214 .194 .100 .054 .148 .137 .100 -.123 -.061 -.226 -.329 -.291 -.219 -.273 -.359 -.292 -.058 -.304 -.348 -.317 -.463 -.344 -.328 -.238 -.314 -.234 -.269 -.401 N/A N/A

Table 25 Total Effect onOutput, VeryLong-Run (000It)

maize Year

Q (a)

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

169 169 169 183 N/A N/A N/A 169 £83 170 206 353 278 253 300 482 465 402 427 486 343 286 274 218 380 382 378 346 173 574 411

t

Rice

I(b) A 0/Q(c) N/A 406 295 535 554 504 697 1100 473 161 233 297 188 217 375 471 176 279 678 140 205 126 62 50 144 143 57 42 13 16 N/A

N/A -.584 -.428 -.658 N/A N/A N/A -.846 -.613 .057 -.117 .188 .478 .167 -.201 .023 1.642 .441 -.370 2.482 .671 1.266 3.445 3.325 1.630 1.662 5.604 7.185 11.893 34.699 N/A

Q (a)

Cocoa

Ot (b) A 0/0 lc)

23 23 23 30 N/A 32 30 31 33 42 32 29 42 42 60 49 55 70 62 73 71 70 109 108 93 78 97 36 40 66 90

N/A 26 19 24 35 79 45 43 42 42 25 28 46 39 61 50 56 76 42 50 80 49 74 58 63 54 68 36 27 34 N/A

N/A -.124 .181 .265 N/A -.593 -.328 -.279 -.214 -.006 .259 .031 -.078 .072 -.022 -.012 -.025 -.078 .474 .457 -.109 .422 .476 .871 .487 .458 .433 .004 .505 .946 N/A

0 (a,) 229 264 205 256 317

430 409 413 428 538 401 372 423 333 419 434 477 427 357 395 416 339 290 286 323 284 248 198 173 189 226

NotestoTable25: 1-2(1) formaizeandrice,andTable1-2(3) forcocoa. (a)Actual output fromAnnex1,Table Equilibrium output fromequations (2)-(4) asdescribed intext. (b)VeryLong-Run bya1. (c)Relative change inoutputAO 9/ obtained bydividing (0-02)

175

Of (b) 203 217 172 233 301 375 360 376 488 573 519 555 598 430 587 704 723 491 570 693 715 761 616 666 729 769 641 563 627 680 N/A

0/0Cc) N/A N/A N/A N/A -.040 .070 .103 .070 -.143 -.096 -.240 -.332 -.305 -.238 -.297 -.379 -.340 -.135 -.381 -.435 -.426 -.569 -.556 -.597 -.584 -.652 -.635 -.667 -.744 -.739 NIA

marketing

costs

positive

wculd have

levels

for

sales

The positive and rice

occurred

restrictions their

border

producer

price

local

price

of cocoa

rural

on producition

domestic

cnwards,

producer

years.

in most

prices

at

area.9*

from 1963

in

encouraged

producer

distortions

First,

resulted

equivalents

The figures

of cocoa this

Second,

production

of maize

inflation prices

and

exceeding

distortions

of alternative

than

price

distortions

its

combination for

coupled

border

in

price.

on cocoa

During

the period

in

crops

that

was higher

below

taxatimn

the

equilibrium

21

and 22,

long

and very

which long

than

in every

show the run,

of maize

to year.

its led

year

direct

confirm

of

the

such

as

but effect

these

the domestic border that

price,

was much

the effect

in

border to a

regarding

After

resulted

exports,

level

its

direction

restrictions

of cocoa

than

from year

in most years

hypothesis

up to 1962,

price

the

varied

import

maize

continued

result,

this

lower

by a domestic

output

and

the

substantially

As a

inflation

Tables output

confirm

in some cases

of

with

production

production

was in some years

was offset

lower

price

on cocoa

of resources.

allocation

price but

of

maintaining

and rice.

maize

the

the

two reasons.

imports

price

lowered,

within effect

for

on

been

1963, a

a domestic

price.

decline

of

This, in cocoa

one.-s' of distortions tendencies

on

in more

±4 Subtracting all transport and marketing costs from the CIF price of cereals imports implicitly assumes that consumption takes place in Accra. In fact, most maize production and a substantial share of the output of rice are consumed in the interior so that transport costs would have to be added to, rather than subtracted from, the border price in order to obtain its producer price equivalent. Existing data do not permit, however, estimation of the quantities involved.

Lf

when the that the

The only year in which there was an exception wDrld price for cocoa was so low, at the official export tax was actually negative. 176

to

this was 1981, exchange rate,

exaggerated official

form.

They suggest

of exchange,

rate

ceased by

the early

plantings,

to almost

hoever,

on

1980s, five

well

estimated.

deal

Expansion

year,

for

example,

both

the

effect

availability that

would

Despite

higher

relative

into

shows the

to the actual The

importance

rice,

a

cedi

impact of

comparison

in a consistently

to its

actual

level

because of level

of

the

own-price

cereals

output

the exchange rate difference

when all

is

between

currency

tends

equi l ibrium

level

than when

23

higher

level

level

compared with

the

the equilibrium

177

producer

into

however,

of price

the is

taken on the

For maize and that

these

accat.

price

relative This

is

the equilibrium

in which

price

in

prices

output

increase

effects

impact

during

is not

effects.

the situation

and equilibrium

and the

an output

producer

depends,

of

considerable.

distortion

tend to

the actual

While

of

per

is clear

overvalued

are taken

which

prices

distortions

this

tons in terms

very

of equilibrium

The cross-price

to raise

price

(2)-

a great

however, it

Table 20 suggests

distortions

effects,

1 million

has been

and cross-price with

with

market

caveats,

has on production

ignored.

hand, are more complicated.

wDrld

new

equations

which

constraints

was always

the

Table

result

of

in Ghana

this

effects

these

effect

the own-price of

on

with

are based,

be treated

severe

at the

have virtually

results

to over

on output

total

consideratio,

accoLmt.

relative

of distortions

the

These

range over

have encountered

land.

Since

level.

of cocoa production

had

permitted

have expanded,

They must therefore

of suitable

the short-run.

had bee

and maize wold

beyond the

have

Table 23,

under

actual

would

effect

trade

of cocoa wsuld

this

the direct

period

its

free of rice

and that

times

extrapolation

caution.

if

prcducticn

(4) were originally of

that

the change in

resulting of cocoa,

from the on the other

overvaluation of cocoa in

of the relation

to

its

actual

level,

purpose

of

price.

Mbving

always

the

fron

the

in an

of cereals

for

when

cocoa

level

of

cocoa

overvaluation level

of would

the

been

equivalents.

Not only

lower

because

of the

optimal

would

have

increased

the

which

actual

cocoa

total

cocoa

true were

export

to

tax

for

the

lower

the

equilibrium

does

not,

therefore,

distortion,

its

and

influence

subsidized

and the

would

export

effect

price

of

its

effect

into

optimal

export

equilibrium

tax

but

equilibrium

also

the

producer

a result,

was greater

taxed,

the

acconmt

both

the

was less

than

tax,

are

have

been

effects

of maize,

drawing

of years

a number

than equilibrium

border

rate

exchange

price

there

their

of cocoa

price

output.

than

equalled

had

the

on cocoa

rather

taking

prices

producer

As

output

tends

production, rate

away from cocoa.

optimun

to year.

also

if

price

resources

the

exports

exchange

have

the

from year

of course

an

effect, to

in

1981,

equilibrium

its

direct

varies

of

total

increase

The same is Except

introduction

calculating

result

on output

the

output

in

the

in

short

run.

This of tree

pattern

maintenance

as shown in Tables Ghana might cocoa

have

prices,

especially

the in

on planting. level level.

changes

of

the

(long

With

rice

After

of cocoa

effect

very

long Ghana

in and

made for

the

run had

because

of

optimally

the

the

decreased

run) to until

been

hold

level

effect cocoa 3.5 of

prices,

1963,

was uniformly

disastrous

have

responsiveness

so as to

restricted

would

178

up

output policy

the long

period

price

mid-19E8s

maize,

(very

an initial

from restricting

benefitted total

is

run) and new planting

24 and 25.

Even if production

as allowance

up wDrld negative, of

exports,

times

when

its

equilibrium,

policy the actual in

cmnparison price

with

actual,

response

output

than of farmers

in being

Effect Goverrvint consumption incorporating

have existed made,

in

functions

assumed that

Estimates for

from Haessel. Haessel

with

1970, using

the

levels

short-

import,

the Theil-Goldberger

least-squares

regression

rice

-1.25,

under alternative hand, was

predict

very

total

and

long-rum

response

obtained

high,

but

be

The

statistically

was highly elasticity

since

within of

is

and rice

was combined by data

The price

from 1953 to and two-stage

elasticity

significant

insignificant.

it

Ghanaian demand

cocyyams/yams,

for

would

one year.

tecrhnique, X

by

18 into

that

elasticities

and production

was performed.

estimated

ND distinction

income elasticities

price,

affects

15 and

in Tables

would occur

cassava,

by Haessel,

specifications.

can

elasticities

on

also

distortion.

mixed estimation

analysis

of cwn

cocoa prices.

of consumption

and

sorghum/mi llet,

net

a functian

prices

influence used

information

annual

of about

This

of own-and cross-prices

Prior

-

relative

prices

consumption

maize,

less

by higher

consumer to

between

the entire

are available

influenced

the absence of direct

however,

is

run

on Consumptimn

foods.

equilibrium

demand

long

influencing

tradable

the

estimated

is

policy

of

the

for

and robust

maize,

on the other

This

is partly

1 Walter Haessel, "The Demand for Agricultural Commodities in Ghana: An Application of Nonlinear Two-Stage Least Squares with Prior Information," American Journal of Agricultural Economics, 58(2), May 1976, pp. 341-45. It is reasonable to base the estimated demand function on the period from 1953 to 1970, rather then the whole period under consideration, because by the mid-1970s the quantity consumed of rice and maize was highly constrained by quantative restrictions on imports, with price the endogenc/us dependent variable and quantity consumed the exogenous independent variable. t'

179

because maize

and the

substitutable

for

together. the

This

maize

together, with

price the

grain

it

of

the

root

of the that

of

crops,

cross-price

~

P

the

following

of

the

term

r

is

is

elasticities

capita and

standard

coefficients

the

0.01

significant in

at this

levels

of

were

used

180

(5)

(6)

and

the

of

level the

0.10

tubers

(t),

and

errors

of

the

is

the

The coefficient

so.

at

income,

roots

in equation

significant

simulate

per

the

...

lnYt

(0.49)

(c),

are

almost

the

lnY*. ... (5)

lnPr + 0.874

the

with

as follows:

t

Y

though are

combined

lnPt - 1.256

cereals

significant

is to

lumped

significant,

lnPr + 0.917 (0.54)

coefficients

level, terms

elasticities

almost

(0.41)

grain

parentheses

is

were

+ 0.427 (0.59)

price,

in

0.10

was

and yams, were

~~c

is

coarse

income

In order prices,

cassava

ln Pf - 0.746 (0.58)

the

cereals

of

1.58.

- 0.362 (0.62)

of rice

the

-2.323

lnPt

income

price

grain

- 0.823 (0.92)

None

capita

influence

lnPf

Figures

and per

separate

- 1.689 (0.99)

rice

at

the

were obtained

designate

are

to move closely

coarse of

sorghum,

tend

results

superscripts

significant

the

and

prices

best

consumption,

coefficients.

their

to distinguish

elasticity

.

(r).

millet

the

cereals,

= 1.90 (.933)

C is

cereals,

that

When

price

error

(.14)

where

so

variable.

lnC* = 2.960

lnct

grain

difficult

resulting

When

coarse

nme another

makes

a standard

coarse

other

in

statistically cereals

price

of the

logarithm

equatim

(6)

level.

None of the

equaticns. consumption

from

under equilibrium

the original

and

equation:

Demand Elasticities Consumption

Own-Price

Maize

-1.689

40.917

Rice

-1.256

+0.874

The

con-price

income

and

consumption were used maize

because

grains cereals

of

and the

place

high

more

correlation

together.

Equation for

the (7)

which

estimated

,.lnP,,

Annex Table

are

data

5-1.

3-4(1)

and 3-4(2)

direct

and total

were

fluctuate

relatively

high

and the maize,

price indirect

the

for

each

prices

at

inserted

of different

for coarse

with

all

incorporated

these

into

price

from

elasticities

the

are

In the

absence

of cross-price

the

is

entire

the

level

into

retain

this

equation

the

residual.

period

(1955-85)

availability

in

from Amiex Tables to

determine

the

on consumption.

year

26 and 27. to

have with

earlier,

fairly

181

been local

this

of total

effects,

Equilibrium partly

year,

relatively are

ut

as net

a small share

production

on consumption

over

varies

As explained

...(7)

and

that

of distortions

market.

0o + u.

estimated

shown in Tables

widely

on

food

consumption,

imports

effects

were

cereals

directly

obtained

coefficient

which

distortions

pr-ices

were

mlnY+.=

of distortions are

magnitude

world

on

then

effects

consumption

-

for

Equilibrium

The results

because

the

that

grain

estimated

elasticities

intercept

was estimated

there

coarse

equation:

regression

is

results

Income

total

elasticities between

These

InC*.where

of

of the

reasonable

aggregated

following

elasticities

in

the

Per Capita

of

of

the

because

estimated

and partly

production

conditions

is

particularly

true

of

consumption. which

make the

complicated, clear.

levels

their

In most years,

influence direct especially

of and

Table 26 Direct Effect onConsumption (000*t)

Maize Year

C (a)

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

144 145 145 156 N/A N/A N/A 144 156 148 176 305 244 215 257 415 399 342 364 413 292 254 233 185 323 337 348 376 259 617 449

Rice

Ct (b) I C/C(c) 31 48 19 50 N/A N/A N/A 66 366 140 602 1133 313 121 267 1909 749 81 1370 494 490 1432 1186 405 364 2762 5061 6701 19251 1997 781

3.69 2.04 6.67 2.12 N/A N/A N/A 1.18 -. 57 .06 -. 71 -. 73 -. 22 .78 -. 04 -. 78 -. 47 3.20 -. 73 -. 16 -. 41 -. 82 -. 80 -. 54 -. 11 -. 88 -. 93 -. 94 -. 99 -. 69 -. 43

C (a) 17 21 31 31 N/A 46 62 88 45 61 47 62 63 53 61 80 65 63 87 78 40 43 69 105 52 109 85 36 55 87 110

CS (b 16 22 31 31 N/A 42 58 79 81 101 84 101 81 42 68 119 113 130 126 68 80 134 386 507 172 893 862 837 2897 637 321

A C/C(d) .07 -. 04 .01 -. 01 N/A .10 .08 .11 -. 45 -. 39 -. 44 -. 38 -. 23 .26 -. 11 -. 33 -. 42 -. 52 -. 31 .15 -.51 -. 68 -. 82 -. 79 -. 70 -. 88 -.90 -. 96 -. 98 -. 86 -. 66

Notesto Table 26: (a)Actual consueption C estiaated asnetavailability fromAnnex6,Table6-1. (b)Equilibrium consueption CS obtained from equation (7) as described in text. (c) Relative change inconsumption A C/Cobtained bysubtracting equilibrius consumption from actual consumption anddividing byequilibrium consumption.

182

Table27 Effect onConsumption Total It) (000

Rice

Maize 1-14--

---

C (a)

CS(b) A C/C(c)

C (a)

Year

Ct(b) 6 C/C(c) _

N/A

17

N/A

/-

N/A N/A

17 21

N/A N/A

N/A N/A

1955 1956

145 145

N/A N/A

1957

145

N/4

N/A

31

N/A

N/A

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

156 N/A N/A N/A 144 156 148 176 305 244 215 257 415 399 342 364 413 292 254 233 185 323 337 348 376 259 617 449

37 N/A N/A N/A 35 200 60 156 399 175 64 146 1122 414 57 1109 354 285 572 187 45 66 319 191 343 685 385 N/A

3.19 N/A N/A N/A 3.14 -.22 1.45 .13 -.24 .39 2.34 .76 -.63 -.04 4.97 -. 67 .17 .02 -.56 .25 3.08 3.92 .06 .83 .10 -.62 .60 N/A

31 N/A 46 62 88 45 61 47 62 63 53 61 B0 65 63 87 78 40 43 69 105 52 109 95 36 55 87 110

25 N/A 26 32 48 48 52 27 41 49 26 43 73 69 100 104 52 51 62 87 89 46 144 46 41 100 160 N/A

.24 N/A .76 .92 .83 -. 09 .17 .73 .52 .27 1.06 .43 .10 -.06 -.37 -.16 .51 -.23 31 -. -. 21 .18 .13 -. 24 .84 -. 12 45 -. -.46 N/A

--

--

--

---

--

--

--

--

---

--

--

--

--

---

--

--

--

--

---

-- _

_-

--

-

--

--

--

--

27: Notes toTable 6-1. from Annex 6,Table asnetavailability consueption C estimated (a)Actual (b)Equilibrius consumption Ctobtained from equation (7)asdescribed intext. lc)Relative change inconsumption A C/Cobtained bysubtracting equilibrium consumption. byequilibrium anddividing actual consumption from consueption

183

after

1962, import

that

was

substantially

overvalued (see

exchange

Table

made, the

27).

actual

maize that

it

imports

the

other

7 out

of

The situation

did

equilibrium

in

there

10

1960s to the early

that

rice

consumption

that

are

policy

as

An adjustment of

on net

in output

also

cocoa

the existing

made for

the

on

world

world

its price

93 Scott R. Pearson, Rice in West Africa: Policy Press, 1961.

the

of

all

picture

is

can be

have cansumed so little had a surplus

is somewhat different,

especially

consumed more

Furthermore,

the

growth

consistent

admitted

have been greater

would have

with

rice

that

it

fact

that

in

in consumption the general

in West Africa

for

from

perception

structural

reasonis

*

Exchanae Earninis foreign

exchange

and consumption

shown in Table 20-27,

is

or

substantial

on Net Foreign

the changes

distortions,

(exports)

of

freely

at the

comparisons

would

Ghana would

policy.

occurred

impact

which

consumption

years.

1980s is

of economic

The effect by multiplying

14

have

had been

for

and rice

maize

exchange,

would have

has been growing

Effect

of

24 years

rice

of

considering

self-sufficient

of

the early

foods

rate

regarding

out

would

the

years,

would have been a

independent

these

of maize

In other

consumption

that

hand,

1970 when Ghana in equilibrium

actually

times

levels

of the

level

level.

in

overvalued

would have bEen

export.

after

In

the

if

the

equilibrium

than its

for

On

including

(Table

resulted

below rate

26).

distortions, mixed

restrictims

times

impact market

and dividing

the

that

relevant

price

by multiplying price

Charles Stanford:

from price

FOB or CIF price.

change in

by the

is estimated

result

of the

J. Dirck Stryker, and Economics,

164

earnings

Ghan' s output

elasticity

that

change of world

P. Ftunphreys, et al, Stanford University

demand

for

cocoa

In addition, occurs

in

cultivation.

the

of the

tradable

component

one-half

of

account changes of

foreign

this

in

of

value

that

inputs

would

these

inputs

inputs

is

in domestic

are rice

only

about

prices.

for

only

necessary

minimal

by the

mechanized

accounts

a

that

induced

for

adjustment

have

earnings

intermediate

of

2B-33).

Tables

inputs

measured

the

to

exchange

except

nmreaver,

inputs,

imported

here

output

so

foreign

however,

the

rice

notes

to

The perhaps

take

influence

into

on flows

exchange.

in the

price

short

of

value,

The results effects

earlier, considered

of these total

net

(see

of intermediate

instance,

value

their

on

in imports

crops

Even in

consumption

effect

As discussed

for

10 percent

world

of changes

output.

unimportant

total

may be an

there

because

changes

times

are

short,

long,

run when only as

length

taken

into

effects

are

foreign

excnange

these

effects

that

lower

direct

the

foreign

Ghanaian

For

least

cocoa

however,

and especially

earnings

from cocoa is negative.. As expected,

greater

is

and indirect

effects,

this response.

than in

cocoa

the total

earnings

the

in output

are

the

on cocoa

earmings

effect

the case of cocoa,

185

despite operate

the

net

increases

the

fact

in

the

on

negative,

positive

the

the

as direct,

of distortions

however,

Somewhat surprisingly,

in

increasingly

had on world

mid-1970s,

effects

positive

are usually

have

net

as well

effects

by

and total

the

and become

offset

would

after

effect

direct

and as indirect,

partially

exports

for

In general

considered

due to changes

balance,

effect

are

acccunt.

26-33

runs.

exchange

effects

tend to be at

of supply

long

of run increases

earnings

the period

in Tables

and very on

interventions

negative

presented

that

but

effects

prices.

On

effect

the

on

longer

the direct both direct

same direction.

Table28 Direct, Short-RunEffect of Price Interventions on ForeignExchange Earnings

Effect an Export CropRevenue Dueto: ------------------------------------Change in Change in Quantity World Total Exported(a) Prices (b) Change (c) (bill USS1) (ill US$) (sill USS) Year (11) (2) (3)

00

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1904 1985

N/A N/A N/A -18 -14 10 -3 -11 -68 -20 -49 -96 -76 -51 -89 -129 -87 0 -187 -171 -131 -451 -423 -843 -113 -130 201 -1745 -3069 -83 -50

N/A N/A N/A 20 16 -13 3 13 83 29 44 99 81 42 101 132 94 0 161 157 117 340 303 534 82 75 -105 705 1228 35 20

N/A N/A N/A 2 2 -4 0 2 15 9 -5 2 4 -9 12 2 6 0 -26 -14 -14 -111 -120 -309 -32 -54 96 -1040 -1841 -47 -30

Incremental Increaental PropofEffect Change in Change in on ExportCrop maize Maize in Valueof Tot Prod (e) Cons(f) Exports (%I(d) (000at) (000at) (4) (5) (6) N/A N/A N/A 1 1 -1 0 1 5 3 -2 1 1 -3 3 1 2 0 -4 -2 -2 -14 -13 -35 -3 -5 14 -171 -418 -8 -5

N/A -194 -69 -292 N/A N/A N/A N/A -55 8B 48 251 206 122 40 175 381 236 -103 392 18 203 243 201 335 299 342 344 172 573 431

113 97 126 106 N/A N/A N/A 78 -210 8 -425 -828 -69 94 -10 -1495 -350 260 -1005 -81 -199 -1179 -953 -219 -41 -2424 -4713 -6325 -18992 -1380 -332

Prop of Total Incremental Incremental Propof Effect Effect on Foreign Change in Change in Effect on on FoodCropin Exchange Earnings Rice Rice Imported Valueof Total in ValueofTotal Prod(g) Cons(h)FoodCrops(i) Exports (I) Exports (ZI (000at) (000at) (sill US) li) (kI) (7) (B) (9) . (10) (11) N/A 0 4 4 N/A N/A I 2 3 9 8 9 12 11 9 9 14 19 21 21 8 25 44 64 53 38 10 20 23 38 52

1 -1 0 0 N/A 4 5 9 -37 -40 -37 -39 -18 11 -7 -39 -48 -67 -39 10 -41 -91 -317 -401 -121 -784 -777 -800 -2842 -550 -211

N/A N/A N/A -54 N/A N/A N/A N/A 14 16 37 71 20 4 10 68 60 7 70 72 69 250 529 398 256 1264 2012 1764 6204 750 257

N/A N/A N/A -18 N/A N/A N/A N/A 4 5 12 25 7 1 3 16 19 2 12 11 9 32 59 43 24 115 283 291 1410 133 41

N/A N/A N/A -17 N/A N/A N/A N/A 9 8 10 26 9 -2 6 16 20 2 8 B 7 18 46 9 21 110 297 119 992 124 36

NotestoTable28: of cocoa output andequilibrius output actual between (a)Difference Table3-4(3)), by theFOBpriceofcocoa(from 20)eultiplied (fromTable rate(fromTable4). exchange by theofficial divided in its by thechange Table20)*ultiplied ofcocoa(from output (b)Actual rate.Thisprice exchange inUS$attheofficial expressed in itsFOBprice, of cocoa worldexports by0.3tieestotal (1)divided coluen equals pricechange April1981). CocoaStatistics, Sill& Duffus, (froa (21. (1)pluscolumn (c)Column Table2-2). FOB(from by Exports (31divided (d)Coluen Table20). ofmaize(from output andequilibrium output actual between (elDifference Table26). of maize(from consumption andequilibrium consumption actual between (f)Difference Table20)multiplied of rice(from output andequilibrium output actual between lg)Difference paddyintorice. by .65toconvert 26). Table ofrice(from consueption andequilibrium consumption actual between (hIDifference toUSHusingtheOER) CIFsaizelconverted (6)times (5)- column Ii)Column toUS,usingtheOER). (1)timesCIFrice(converted (7)- column pluscoluen Table2-2). FOB(from byExports (9)divided (jIColumn (4)and(10). Ik)Thesueof coluens

187

Table 29 Direct, Long-Run Effect ofPriceInterventions onForeign Exchange Earnings

Effect onExport CropRevenue Dueto: Propof Total --------------------------------Incremental IncrementalIncrementalIncresental PropofEffect Eftect onForeign Change in Change in PropofEffect Change in Change in Change in Change in Effect on onFoodCropin Exchange Earnings Quantity World Total onExport Crop Haile Naize Rice Rice ImportedValueofTotal inValue of Total Exported (a) Prices(b) Change (c) inValue of Tot Prod(e) Cons(f) Prod(g) Cons(h)FoodCrops(i) Exports (Z) Exports (2) (till UBS) (sillUS$) (mill US$) Exports (%)(d) (000 Mt) (000at) (000at) (000Mt) (mill USS) (i (k) Year (1) (2) (3) (4) (5) (6) (7) (9) (9 (10) (11)

OD

00

1955 1956 1957

N/A N/A N/A

1959

-19

1959 1960 1961 1962 1963 1964 1965 1966 1967

-26 -7 -7 -J6 -92 -73 -91 -206 -201 -223 -319 -360 -401 -228 -469 -692 -616 -1267 -1761 -3699 -1381 -755 15 -1910 -6615-742 -604

1969 1969 -1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 1990 1991 1992 1993V 1994 1985

N/A N/A N/A 20 30 9 9 19 101 109 91 211 296 195 361 367 430 207 402 635 550 954 1262 2335 994 438 -9 772 2647 317 243

N/A N/A N/A 2 4 3 I 3 19 34 -10 4 15 -39 43 7 29 -21 -66 -57 -65 -312) -499 -1353 -397 -317 7 -1139 -3969 -425 -361

N/A N/A N/A 1 1 1 0 1 6 11 -3 2 5 -13 12 2 9 -5 -11. -9 -9 -40 -56 -152 -36 -29 1 -195 -902 -75 -57

N/A -194 -96 -323 N/A N/A N/A -462 -104 93 62 256 219 149 71

186 387 2173 -24 391 214 214 249 206 350 324 350 345 173 574 437

113 97

126 106 N/A N/A N/A 79 -210 9 -425 -928 -69 94 -10 -1495 -350 260 -1005 -81 -199 -1179 -953 -219 -41 -2424 -4713 -6325 -19992 -1390 -332

NIA .5 4 6 N/A -21 -3 1 3 9 9 10 15 14 13 11 16 23 24 26 Is 27 49 66 56 44 31 21 24 41 55

I -1 .2 -.3 N/A 4 5 9 -37 -40 -37 -39 -19 It -7 -39 -49 -67 -39 10 -41, -91 -317 -401 -121 -794 -777 -900 -2842 -550 -211

N/A NIA

N/A -59 N/A NIA N/A -70 11 15 38 72 21 9 15 69 61 20 76 74 75 253 533 391 265 1275 2026 1764 6204 751 260

N/A N/A N/A

N/A N/A N/A

-19

-19

NIA N/A N/A -22 4 5 12 26 7 2 4 16 19 5 13 11 9 32 60 44 25 116 295 291 1410 133 41

N/A N/A NIA -21 10 15 9 27 13 -10 17 19 27 0 2 3 1

-e 4 -109 -11 97 296 103 508 59 -16

NotestoTable29: (a)Difference between actual output andequilibrium output of cocoa (froe Table21)eultiplied bytheFORprice of cocoa(from Table3-4(3)), divided bytheofficial exchange rate(froeTable4). (b)Actual output of cocoa(froe Table21)multiplied bythechange inits exchange rate.Thisprice expressed inUS$at theofficial initsFOBprice, ofcocoa by0.3timestotalworldexports pricechange equals column(1)divided ffrom Bill& Duffus, CocoaStatistics, April1981). (c) Column(1)plus column(2). (d) Column(3) divided by Exports FOB(from Table2-2). (e)Difference between actual output andequilibrium output of maize(fromTable21). (f)Difference between actual consumption andequilibrium consumption ofmaize(from Table26). output of rice(from Table21)multiplied between actual output andequilibrium (g)Difference by .65toconvert paddyintorice. (h)Difference between actual consumption andequilibrium consumption of rice(from Table26). li) Coluen(5)- coluen (6)times CIFmaize(converted toUS$usingtheOER) pluscolumn(7)- coluen (8)times CIFrice(converted toUSSusingtheOER). FOB(from Table2-2). (j)Column (9)divided byExports (k)Thesumof columns (4)and(10).

189

Table 30 Direct, Very Long-Run Effect ofPrice Interventions onForeign Exchange Earnings

Effect onExport Crop Revenue Dueto: PropofTotal --------------------------------Incremental Incremental Incremental Incremental PropofEffectEffect on Foreign Change in Change in Prop ofEffect Change in Change in Change in Change in Effect on onFoodCropin Exchange Earnings Quantity World Total onExport Crop flaize Naize Rice Rice Imported Value ofTotal inValue ofTotal Exported (a) Prices (b) Change (c) inValue ofTot Prod(e) Cons(f) Prod(g) Cons(h)FoodCrops (i) Exports (Z) Exports (ii (mill USS) (sill US$) (sill US$) ExportsCX)(d) (000Mt) (000at) (000Mt) (000it) (mill US$1 (i (k) Year (1) (2) (3) (4) (5) (6) (7) (B) (9) (10) (11) 1955 1956 1957 1959 1959 1960 1961 1962 J 1963 CD1964 1965 1966 1967 1968 1969 1970 1971 197 1973 1974 1975 1976 1977 197 1979 1990 1991 1982 1993

N/A N/A N/A -19 -26 -7

~~-7 -16 -82 -73 -91 -206 -292 -227 -329 -378 -436 -271 -572 -909 -997 -1997 -2960 -6490 -2932 -1726 -328 -5513 -15979

1984

-1996

1995

-1956

N/A N/A N/A 20

N/A N/A N/A 2

N/A NIA N/A 1

N/A -194 -96 -323

113 97 126 106

N/A .5 4 6

I -1 .2 -.3

*/A NIA N/A -59

N/A N/A N/A -19

N/A N/A N/A -19

31

4

1

N/A

NIA

N/A

N/A

N/A

N/A

N/A

9 9 19 101 109 82 211 298 189 373 395

3 I 3 19 34 -10 4 15 -39 44 7

1 0 1 6 11 -3 2 5 -13 13 2

N/A N/A -462 -104 93 62 256 219 149 71 196

N/A N/A 78 -210 9 -425 -028 -69 94 -10 -1495

-21 -3 1 3 9 9 10 15 14 13 11

469 246 492 833 793 1429 2049 4102 2039 1001 171 2227 6355 949 747

31 -25 -90 -74 -94 -468 -910 -2378 -794 -725 -157 -3296 -1525 -1139 -1109

4 5 9 -37 -40 -37 -39 -19 11 -7 -39 -49 -67

N/A N/A -70 it 1s 39 72 21 9 15 69 61 20

NIA N/A -22 4 5 12 26 7 2 4 16 19 5

N/A N/A -21 10 15 9 27 13 -10 17 le 27

76 74 75 253

13 11 9 32

533

60

391 265 1275 2026 1764 6204 751 260

44 25 116 295 291 1410 133 41

9 -6 -14 -11 -12 -60 -91 -266 -74 -66 -22 -541 -2165 -201 -175

387 273 -24 391 214 214 249 206 350 324 350 345 173 574 437

-350 260 -1005 -91 -199 -1179 -953 -219 -41 -2424 -4713 -6325 -18992 -1390 -332

lb

23 24 26 15 27 49 66 56 44 31 21 24 41 55

-39 10 -41 -91 -317 -401 -121 -794 -777 -900 -2942 -550 -211

-1 -1 0 -2 -29

-31 -223 -50 50 263 -251 -755 -69 -134

NotestoTable30: (a)Difference betweenactualoutputandequilibrium outputof cocoa (fromTable22) eultiplied by theFOB priceof cocoa(froeTable3-4(3)), divided by theofficial exchange rate (fromTable4). (b) ctualoutputof cocoa(fromTable22)multiplied by thechangein its in itsFOB price,expressed in USf at the official exchange rate. Thisprice pricechangeequalscolumn(1)divided by 0.3 timestotalworldexports of cocoa (fromSillI Duffus, CocoaStatistics, April1991). kc1 Column(1)pluscolumn(2). (d)Coluen(3)dividedby Exports FOB (fromTable2-2). (e)Difference between actualoutputand equilibrium outputof maize(fromTable22). (f)Difference between actualconsumption and equilibrium consumption of maize(fromTable26). (I)Difference between actualoutputand equilibrius outputof rice (frosTable22)multiplied by .65to convertpaddyto rice. (h)Difference between actualconsueption and equilibriua consumption of rice (fromTable26). (i)Column(5)- coluen(6)timesCIFmaize(converted to USHusingtheOER) plus column(7)- coluen(8)timesCIF rice(converted to USSusinqthe OER). (j)Coluen(1)divided by Exports FOB (fromTable2-2). (k)The sumof columns(4)and (10).

191

Table 31 Total,Short-RunEffect of Price Interventions on ForeignExchange Earnings

Dueto: Effect on ExportCropRevenue ------------------------------------in Change in Change World Total Quantity Exported(a) Prices (bi Change (c) (mill USS) Imill USS) (mill USSI Year (1) (2) (3)

vo

1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 -1980 1981 1982 1983 I984 1985

NIA NIA N/A -4 -2 21 7 2 -46 5 -36 -55 -23 -4 -51 -66 -9 63 -55 -60 6 -210 15 -171 35 -102 16 -190 -866 -34 N/A

N/A N/A N/A 5 2 -28 -8 -3 56 -7 32 56 25 3 57 67 9 -57 47 55 -5 159 -11 108 -25 59 -e 73 347 14 N/A

N/A N/A NIA 0 0 -8 -1 -1 10 -2 -4 1 1 -1 7 1 1 6 -8 -5 1 -52 4 -63 10 -43 9 -107 -519 -19 N/A

. Incremntal Incremental in Propof Effect Change in Change Ibize on ExportCrop Naize in ValueofTot Prod(e) Cons(fI Exports (XI (di (000Mt) 1000at) (4) (5) (6) N/A N/A N/A 0 0 -2 0 0 3 -1 -1 0 0 0 2 0 0 2 -1 -1 0 -7 0 -7 1 -4 1 -19 -118 -3 NIA

N/A -237 -92 -311 NIA N/A N/A N/A -180 29 -29 61 85 24 -84 25 288 82 -297 355 98 150 205 156 202 217 312 291 155 551 N/A

N/A N/A N/A 11S N/A N/A N/A 109 -44 87 21 -94 69 151 111 -707 -15 294 -745 59 6 -319 46 140 257 19 157 33 -426 231 N/A

Increwntal Change in Rice Prod(gi (000at) (7) N/A -2 3 3 N/A N/A -4 -5 -4 1 4 0 -3 2 -2 0 -1 -4 13 12 -11 14 19 29 13 12 15 -2 9 19 N/A

Prop ofTotal Incremental Propof Effect Effect on Foreign Earnings Change in Effect on on FoodCrop in Exchange Rice lported Valueof Total in Yalueof Total Exports (X) Cons(hiFoodCropslil Exports (1i (000*tl (mill US$) (ij (kI (11) (9) (9) (10) N/A N/A N/A 6 N/A 20 30 40 -4 9 20 21 13 27 19 7 -4 -37 -17 26 -12 -19 -19 16 6 -35 39 -5 -46 -73 N/A

NIA NIA N/A -60 N/A N/A N/A N/A -7 -8 -6 5 -2 -22 -30 24 21 -63 36 35 13 82 66 12 -25 86 34 54 172 121 N/A

N/A N/A N/A -20 N/A N/A N/A N/A -2 -2 -2 2 -1 -7 -9 6 6 -i6 6 5 2 11 7 1 -2 8 5 9 39 21 N/A

NIA N/A N/A -20 N/A N/A N/A N/A 1 -3 -3 2 0 -7 -7 6 7 -i5 5 4 2 4 9. -6 -1 4 6 -9 -79 1l N/A

Notes toTible 31: (a)Difference between actual output andequilibrium output ofcocoa (fromTable 23)sultiplied by theFOBpriceofcocoa(fromTable3-4(3)), divided by theofficial exchange rate(from Table4). (blctualoutput of cocoa(from Table23)multiplied bythechange in its initsFOIprice, expressed inUS5at theofficial exchange rate.Thisprice pricechange equals column (1)divided by0.3tieestotal worldexports of (fromSillI Duffus, CocoaStatistics, April1981). Ic)Coluen(1)pluscolumn (2). (d)Coluen(3)divided byExports FOB(from Table2-2). (elDifference between actual output andequilibrium output of maize(from Table23). (ftDifference between actual consumption andequilibrium consumption of maize(fromTable 27). (g)Difference between actual output andequilibrium output ofrice(from Table231*ultiplied by b5 toconvert padddy torice. (h)Difference between actual consumption andequilibrium consueption of rice(from Table27). (itColuen (5)- coluen (6)times CIFmaize(converted toUS$usingtheGER) pluscolumn (7)- column (8)timesCIFrice(converted toUSSusingtheOER). (jtColumn (9)divided byExports FOB(from Table2-2). (k)Thesumofcolumns (4)and(10).

193

Table 32 Total, Log-Run Effect afPrice Interventions anForeign Exchange Earnings

Effect onExport CropRevenue Dueto: PropofTotal --------------------------------Incrementil Incre,ental Incremental Incremental PropofEffectEffect onForeign Change in Change in Prop ofEffect Change in Change in Change in Change in Effect on onFoodCropin Exchange Earnings guantity World Total onExport Crop Maize maize Rice Rice Imported Value ofTotal inValue ofTotal Exported (a) Prices (b) Change (c) inYalue ofTot Prod(e) Cons(fi Prod(gI Cons(h)Food Crops (i) Exports (Z) Exports (ZI (mill US$1 (mill US$) (mill US1) Exports (ZI(d) (000 St) (000 at) (000 at) (000 at) (gill US$) (il (k) Year (1) (2) (3) (4) (5) (6) (7) (B) (9) (10) (11) -- -- -- -- ---- --- --- --- -- - - - - -…-- - - - - - - -- --- -- - - -- -- - -- - -- -- - -- 1955 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 1956 N/A N/A N/A N/A -237 N/A -2 N/A N/A N/A N/A 1957 N/A N/A N/A N/A -126 N/A 2 N/A N/A N/A N/A 1958 1959 1960 1961 1962 1963 ~* 1964 1965 1966 1967 19b9 1969 1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 1990 1991 1982 1913 1994 1995

19 10 27 22 le -30 -14 -43 -102 -116 -70 -126 -153 -131 -19 -175 -310 -256 -659 -520 -961 -334 -297 -139 -909 -2011 -264 N/A

-20 -12 -37 -26 -22 37 20 39 104 122 59 143 156 141 17 151 284 229 497 373 609 240 172 72 327 905 113 N/A

-2 -2 -10 -3 -4 7 6 -5 2 6 -12 17 3 9 -2 -25 -25 -27 -163 -147 -353 -94 -125 -66 -482 -1206 -151 N/A

-1 0 -3 -1 -1 2 2 -1 1 2 -4 5 1 3 0 -4 -4 -3 -21 -17 -40 -9 -11 -9 -79 -274 -27 N/A

-352 N/A N/A N/A -931 -290 9 -27 56 90 36 -75 11 259 123 -251 346 139 -160 212 169 236 239 321 304 160 556 N/A

119 N/A N/A N/A 109 -44 97 21 -94 69 151 III -707 -15 254 -745 59 6 -319 46 140 257 19 157 33 -426 231 N/A

4 N/A -30 -10 -B -6 0 4 1 -2 2 -1 0 -1 -4 13 15 -6 14 23 33 20 16 19 0 9 21 N/A

6 N/A 20 30 40 -4 9 20 21 13 27 1e 7 -4 -37 -17 26 -12 -19 -19 16 6 -35 39 -5 -46 -73 N/A

-65 N/A N/A N/A -139 -12 -10 -6 5 -2 -20 -21 24 21 -49 39 35 20 93 70 19 -5 94 39 57 174 124 N/A

-22 N/A N/A N/A -43 -4 -3 -2 2 -1 -7 -9 6 6 -13 6 5 3 11 9 2 -1 9 6 9 39 22 N/A

-22 NIA N/A NIA -45 -2 -1 -3 2 2 -11 -3 6 9 -13 2 1 -1 -10 -9 -37 -9 -3 -4 -70 -235 -5 N/A

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - -…-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

NotestoTable32: (a)Difference betweenactualoutputandequilibrium outputof cocoa (frooTable24)eultiplied by theFOB priceof cocoa(fromTable3-4(3)), dividedby theofficial exchange rate (fromTable4). fb)Actualoutputof cocoa(fromTable24)multiplied by thechangein its in its FOB price,expressed in USSat theofficial exchange rate. Thisprice pricechangeequalscolumn(1)dividedby 0.3 timestotalworldexports of cocoa (fromBill& Dulfus, CocoaStatistics, April19B1). (c)Column(1 pluscolumn(2). Cd)Coluen(3)dividedby Exports FOB (fromTable2-2). le)Difference between actualoutputandequilibrium outputof maize(frogTable24). actualconsueption andequilibrium consumption of maize(fromTable27). (f)Difference between (g)Difference betweenactualoutputandequilibrium outputof rice(fromTable24)multiplied by .65to convert paddyto rice. (h)Difference betweenactualconsumption andequilibrium consumption of rice(fromTable27). ti)Coluen(5)- column(6) timesCIF maize(converted to US$usingtheOER) to USt usingtheOER). pluscoluen(7)- column(8)timesCIF rice (converted 1;)Column(9)dividedby Exports FOB (fromTable2-2). (k)The sum of columns(4)and (10).

195

Table33 Total, VeryLong-Run Effect ofPriceInterventionts onForeign Exchange Earnings

Effect onExport CropRevenue Dueto: PropofTotal --------------------------------Incremental IncrementalIncrementalIncremental Propof Effect Effect onForeign Change in Change in Propof Effect Change ini Change in Change in Change in Effect on onFoodCrapin Exchange Earnings guantity World Total onExport Crop Maize Maize Rice Rice ImportedValue of Total inValueof Total Exported (a) Prices(b) Change (c) inValue ofTot Prod(e) Cons(f) Prod(g) Cons(h)FoodCrops(i) Exports (Z) Exports (2) (mill US$1 (mill US$1 (mill USf) Exports (21(d) (000at) (000at) (000St) (000 at) (mill US$1 (i)( Year (1) (2) (3) (4) (5) (6) (7) (B) (9) (10) (1 1955 -------N/A-----------------N/A---N---AN---AN/A---N/A----------A---------1955 N/A N/A N/A N/A -237 N/A -2A N/A N/A N/A N/A 1957 N/A N/A N/A N/A -1267 N/A -2 N/A NIA N/A N/A 1959 1959 1960 1961 1962 1963 a' 164 1965 1966 1967 1969 1969 1970 1971 1972 1973 1974 1975 1976 1977 1979 1979 1980 1991 1992 19B3 1994 1995

19 10 27 22 19 -30 -14 -43 -102 -117 -72 -135 -170 -164 -46 -240 -437 -397 -953 -1117 -2617 -1345 -1111 -715 -4057 -7999 -1157 N/A

~

20 -11 -37 -26 -22 37 20 39 104 123 60 153 173 176 42 206 401 355 718 800 1657 968 644 372 1639 3157 494 N/A

-2 -2 -10 -3 -4 7 6 -5 2 6 -12 19 3 12 -4 -34 -36 -42 -235 -317 -960 -377 -467 -342 -2418 -4732 -663 N/A

-I

-352

119

0 -3 -1 -1 2 2 -1 1 2 -4 5 1 4 -i -6 -5 -5 -30 -36 -108 -35 -42 -49 -399 -1075 -117 N/A

N/A N/A N/A -931 -290 9 -27 56 90 36 -75 11 289 123 -251 346 138 160 212 168 236 239 321 304 160 559 N/A

N/A N/A N/A 109 -44 87 21 -94 *69 151 III -707 -15 294 -745 59 6 -319 46 140 257 18 157 33 -426 231 N/A

4 N/A -30 -10 -9 -6 -.2 4 1 -2 2 -1 -.4 -1 -4 13 15 -6 14 23 33 20 16 19 .1 9 21 N/A

6 N/A 20 30 40 -4 9 20 21 13 27 18 7 -4 -37 -17 26 -12 -19 -19 16 6 -35 39 -5 -46 -73 N/A

-65 N/A N/A N/A -139 -12 -10 -6 5 -2 -20 -29 24 21 -49 39 35 20 93 70 19

-s 94 39 57 174 124 N/A

-22 N/A NIA N/A -43 -4 -3 -2 2 -1 -7 -9 6 6 -13 6 5 3 11 9 2 -1 9 6 9 39 22 N/A

-22 N/A N/A N/A -45 -2 -1 -3 2 2 -11 -3 6 10 -14 1 0 -3 -19 -29 -105 -36 -34 -43 -389 -1036 -95 N/A

MotestoTable33: output of cocoa andequilibrium actual output between (a)Difference Table3-4(3)), by theFOBpriceofcocoa(from Table25)multiplied (from Table4). rate(from exchange bytheofficial divided in its bythechange Table25)*ultiplied of cocoa(from output (b)Actual exchange rate.Thisprice expressed inUSSat theofficial initsFOBprice, of cocoa by0.3timestotalworldexports (1)divided column equals change price April1981). CocoaStatistics, (from Billi Duffus, (clColumn (1)pluscolumn(2). Table2-2). FOB(from byExports (3)divided ld)Column output ofmaize(fromTable25). output andequilibrium actual between (e)Difference Table27). of maize(from consumption andequilibrium actual consumption between (t)Difference 25)multiplied of rice(fromTable output andequilibrium actual output between 19)Difference paddyto rice. by .65toconvert Table27). of rice(from consumption andequilibrium actual consumption between (h)Difference toUSHusingtheOER) (6)timesCIFmaize(converted (5)- column lilColumn toUS$usingtheOER). CIFrice(converted (8)times (7)- column pluscolumn Table2-2). FOB(from by Exports (9)divided Ii)Column (4)and(10). lk)Thesumof columns

197

That to

is,

both

rechce

ananly

are

price

the

that

being

with

absence

alone to

food

crops

restrictions, to

domestic

had tended

is

border

rate

also

at

this

that

takes

assumes

that

cocoa

the

other

hand,

official

for

output

When

the

with

the

direct

effect

of

distortions exchange

are rate

in

from year of

the

the

ard

ard

an impact

to year,

effect

in

later

on foreign

and is

it

of

consumption. years.

indirect

thouqh

earnings

has generally

reduce in

direct

period,

exchange

rate,

especially

hc3wever,

end

exchange

production

exchange,

foreign

The direct

overvalued

increase

in direction

on net

complicated.

resulting

the

price

intervention

somewhat

considered,

tcwards

cocoa

on the

tended

The reascn

olf

rate.

rate

exchange

tax.19

foreign

directions,

varies

positive

the

prices,

to save

effect

opposite that

also

exchange

optimal

the

cot:oa..

level

calculated,

of policy

coupled

raise

total

is

the is

of any export The impact

from

at

the

of

frtm

equilibrium in

taxed

respect

earnings

the

distortions

interventicons

measured

and overvaluation

exchange is

account

exports

taxation

foreign

apparent into

export

When the

exchange

on balance

been This

effects

becomes

import

work in earnings

increasingly

relatively

smal 1

in magnitude. This foreign

implies

exchange

effects

are

becomes

increasingly

on cocoa

'-'

marginal tax rate. considered

earnings

ccnsidered.

productions

This is revenue Eht here,

that

the

overall

impact

is

dominated

by

It

thus

negative

as

assume

greater

tends the

to length

of food

be positive of

importance.

interventions crops in

rixi increases The

total

when only the

short and the

effects,

because the notion of optimality implies equating and social marginal cost to detLermine the optimum this equaticn is only meaningful, in the first-best at the equilibrium exchange rate. 198

on net direct rmun but effects on the

social export world

other

hand, are more quickly

lengthens, becomes

dominated

by

impact

of policy

and the detrimental more immediately

obvious.

199

cocoa

as

the

on foreign

supply exchange

respmse earnings

CHAPTER VIII:

In addition of

foreign

to affecting

exchange,

transfers

of

ccnsumers. agricultural

next

price

the impact

of

agriculture

welfare

The

major

the

revenue

there

estimated

by

is

of marketed

time

as

that

and quality

included

research, times

these

Agriculture or other revenue

to

of

the

respcnsible for

Board.

on

these

lists

a

budgetary

is

followed

transfers

resulted

in

producers,

and

consequences

of

by an analysis

of

of these

extension,

rescurces

of

between

have agencies, was

in Ghana an the goverTnent

costs,

CMB plus

net

revenu.e

CMB

costs

from

have

Board have changed.

performed

by

when

the

can be the FoB

varied

aver

various

to times

and processing. the

which case CMB costs than

are

In addition

have at

management,

been

higher

receipts

fiscal

and

responsibilities

in

the operations

income to producers

earlier-, the

through

data on actual

plantatimn

functions public

policy

an cocoa exports

As discussed

control,

At

Ministry

of

were lower

and

CMB

was directly

activities.

The schedule 50 percent

on

costs

Data on taxes and marketing unavailable.

This

Although

informatimn

government these

the

price

is earned

responsibilities

the

also

eamnings

cn the GEbverrnoentazdcqet

Policy

effect

cocoa.

marketing

other

Ghana.

have

the grvernmnmt,

with

policies

of Price

subtracting

value

between

and net

of the ecaomwny.

Coroa Marketing

unavailable,

in

TRASERS

cansumption,

interventions

deals

and other

and the rest

is

of the

and sectimn

Effects

budget

policy

policies

these

production,

price

rescurces The

TELDGET PM OTHER FESORE

GIER%JE

of custcms

ad valorum

duty

profits

for

rice

and maize

and excise tariffs an 200

imports

of maize

imports

are

published for 1973 and a Nf 0.025/lb

specific is

tax

there

1

maize of

have

imports

imports

and tax

series

on rice,

of minor

separate

total

has

part

it

food

apply

to

tax

receipts

million.2

Ni 1.18 exports.

nor

from maize is

less

low level

the

decreased

of government

aid,

This

Given

rapidly

sources

of

total

export

tax

revenue

as a proportion

is

impossible

public

share

it

to

put has

transfers

the

real

of

value

revenue

appears

to

Subsidies

exist,

as

therefore

been

from

Its

cocoa

time made to

share -63

has been

revenue

percent

and +69

between

between

+20 and +50 percent.

of most African

deficit

has

an

of total

trend,

standards

budget

consistent

revenue

inflows.

been

together

and expenditures.

government

has

the

tariffs.

effort

Nb

clear

by the of

from

resource

any

years

a high

exempt

34,

without

but in most

are

government

in Table

fluctuated,

percent,

at

inflation

amount.

from other

As seen important

not Actual

from cocoa

these

inputs but

their them

do

importance.

earlier, on

estimated

that

fact

taxes imports.

revenue

Agricultural described

on cereals

the the

These

-

1972 are

of

import

been

tax

in

percent

the

imports.

any sales

and rice than

on rice

This

is

Cocoa

ccuintries. exceeded

100

has increased

in

in many years

percent. The per nominal exports. whereas

terms

more rapidly

In 1983, total

tax

the

revenue

widely,

±

Republic

2

Data

than

per

As a percentage fluctuated

on cocoa,

unit tax

obtained

total

tax

Table

35,

as a result

of

unit tax

was 129 times

its

nominal

from cocoa

was 98 times

its

value

of

but there

of Ghana,

the

shown in

the

FOB price,

are

several

Customs

frnm the

the movements

and Excise

Tariff.

of Finance.

Ministry 201

per

unit

the value in

tax

of importance

1973

decline in

in 1955,

1955. cocoa

an

that

has

Table 34 Effect ofthePricing Policy antheBudget (million NC)

NetRevenue asa Proportion of (I) Total(Net) Revenue (a) Year (1) 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Total Budget Budget (b) Deficit (c) (2) (3)

23 20 67 70 57 36 24 32 48 26 13 47 111 143 201 118 146 133 230 350 226 518 446 1,784 969 -362 -3,026 1,496 2,249 1,758 2,027

22 20 56 52 40 21 16 20 20 9 6 18 37 43 46 26 35 34 40 43 26 45 32 69 33 -11 -63 15 10 5 N/A

-231 ;L78 -4|46 -699 355 73 31 32 111 30 31 69 109 226 649 161 118 85 131 104 37 52 25 105 56 -8 -64 33 415 25 N/A

NotestoTable34: (a)FOBPriceofCocoa(from Table 3-4(3)) minus Rendered PortPriceofCocoa(from Table 3-3(2)) multiplied byOfficial CocoaMarketing Boardproduction estieates basedonsarketings (from Table1-23)). (b)Coluen (1)divided by6overnment Revenue (from Table 3) in thesucceeding year. lc)Column i1)divided by I-) Budget Surplus (from Table3) in thesucceeding year.

202

Table 35 TaxonCocoa

PerUnitTaxonCocoa TotalTax - --------------------onCocoa (NC/at) (a) I FOB(b) (mill NC)(c) Year (1) (2) (3) 1955 1956 1957 1958 1959 1960 1961 1962 1964 1963 1965 1966 1967 1968 1969 1970 1971 I172 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

101 74 326 273 1.79 83 59 78 112 49 32 125 262 428 480 271 307 312 644 885 544 1528 1538 6237 3000 -1273 -12200 7558 13000 9299 8967

23 19 52 50 41 24 19 23 31 18 12 32 47 56 59 42 45 38 50 52 36 59 39 60 33 -20 -244 25 22 11 7

23 20 67 70 57 36 24 32 48 26 13 47 111 143 201 118 146 133 270 350 226 516 446 1784 969 -362 -3026 1496 2249 1758 2027

NotestoTable35: (a)FOBPriceof Cocoa fromTable3-4(3) minus Rendered PortPrice of Cocoafrom Table 3-3(2). (b)Coluen (1)divided byFOBPrice ofCocoa fromTable3-4(3). (c1FOBPriceofCocoafromTable 3-4(3) minus Rendered PortPriceofCocoafrom Table3-3(2) multiplied byofficial Cocoa Marketing Boardproduction estimates based onmarketings fromTable1-2(3).

203

should

be

1960 to

noted

1865,

cocoa

prices

were

to 1978.5 lowering

low,

tax

the

Table

years

exploiting

this,

in

in

First

which

and the

Thereafter, real

In

value

of

relatively

generally this

high

level,

exchange

rate

the

the

low tax

thought

was a period

suffered

to a very as the

is

fact

goverrwnent

rose

is

Nkrumah

farmers.

rate

the

35.

alung

with

averaging

cocoa,

from

have

been

when world

market

farmers.

Following

49 percent

from

increasingly

became

FUH price for

to

rate

the tax

1967

overvalued rate

on cocoa

declined.

Transfers

of Rescurces There

transferred

are

resources

direct

effects

prices

and

prices

and quantities

investment

(Ariculture

number

of

taxes the

quantities,

and

trade

indirect

outputs

of

in

from Ghanaian

to and

of export

ways

and the which

and

and

Economy

These

exchange of the

inputs,

the

government

agriculture.

effects

and

Rest of

policy

has

include

the

controls

on output

overvalued

government

cedi

on the

recurrent

and

expenditures.

Estimates

ccntrols in

a

Between

of Rescuirce

Transfers

The direct

and

indirect

are calculated in Annex 7.

producer

surplus

for

maize

effects

of

Separate (Tables

trade estimates

7-1(1)

and exchange are

made

taxes

and

and 7-1(2)),

of changes rice

(Tables

7-2(1) and 7-2(2)), and cocoa (Tables 7-3(1) thrnugh 7-3(3)) for

the short,

long, and

dema-id and

supply

very long

run.

model, transfers

distortions

are

given

Using

to agriculture

a simple, resulting

by

ULhweighted average

of yearly

rates. 204

partial-equilibrium frtm the

direct effects of

+ 1/2 (P - P ) (Q - Q)

(P - P ) Q where

P

is

exchange

the

rate,

of price

domestic

price,

actual

productim,

0 is

and trade

from agriculture

distortions

due to

P

the

border

and Q

at

the

is

the

...(a)

is

effects

at

the

production

in

exchange

rate.

official

indirect

price

of

the

official

the

absence

Transfers

overvalued

exchange

rate, are given by (P* - P )Q* + 1/2 (P* - p )(Q* - Q*) where

is

P*

the

border

multiplying

the

calculated

from

official

producer

rate,

cocoa,

the

other

domestic

the export

tax.

from the

the

price As

rubber,

results

and other

tobacco Most

in

been to

effect less

than

The only export

severe,

the

tend

is

and the

generally direct

on cocoa

offsets

With

because of

rescuirces

is

years

the

and

negative,

price

to transfer this

VII.

another.

mne

border

to

to the

from Chapter

expressicns

by rate,

II,

in mo>st instances

exception tax

exchange Chapter

offset

is

both effects

indirect

unimportant.

of cocoa.

two

adjusted

away

in which

overvaluation

rate.

products

and

tend

direct

a result, sector.

Direct

relatively

have

generally

of an optimal

exchange

tradable

is

the

in

production

these

price

equilibrium

described

of

distortions

hand,

agricultural

introductian

of the

these

of the

equilbrium

when distorticns of

since the

ratio

each

border

of the

model

and rice,

effects an

tbythe

and Q* is

especially

indirect

equivalent

simulation

For maize positive,

price

the

exchange

price

(9)

-

than

that

maize,

price

rice,

Production

of

has never

equaled

production

products

producer

and are

not

traded

205

and cocoa. the

processing

transfers

industrial

more than of

These,

exist

for

however,

are

crops

-

cottan,

about 5 percent

oilseeds

internaticnally.

also

is

of that

artisanal

Domestic

prices

and of

these

products

of edible

are

oils

elasticities

government

are unknown, and the

on resource

Sugar is

another

to

is of

output

detailed

study

transfer

of

the sugar

of the mills,

was

1965-1968 and output

the

rest

of

nontradable

food

They

influenced

are

though

suggests

these

that

There

insecticides, subsidies

from having

4

National Statistics,

these

the

is

of

percent

price

effects

of

This cane

of the value

to is

could

price

cane.

impossible

sugar

policy

and

than to sugar

it

production

These

are not

indirectly

via

supply

effects

no

and

are not

policy

Without

a

assess

the

not a critical

production

during

of cocoa production,

import

inputs,

access to them at

but

demand

tariffs

import

subsidized

made up

subject

substitution

very

machinery

is

directly

largely

to price in

analysis

policy.

production

preseted

and earlier

inputs or

are

other

taxes

and equipment. restrictions prices.

also

direct

and

on fertilizers,

There are explicit prevent

As a

most producers

result,

the

prices

M.S. Singal and J.D.N. Nartey, Sources and Metheds of Estimation Income at Current Prices in Ghana, Ghana Central. Bureau 1971, pp.3-13. 206

of

great.

on agricultural

and agricultural on

which

howdever,

rather

agricultural

the

are

a detailed

been much lower.
a5I! , -4 i

Table52 Domestic RicePrices PriceScenarios UnderAlternative

Consumer Consumer Producer Producer Priceinthe Pricein the Priceinthe Priceinthe of of Absence of Actual Absence Absence of Actual Absence Total Direct TotalConsumer Direct Producer Intervention InterventionPriceIntervention PriceIntervention (PIc/Pna) (Ptp/Pna) (PclPna) (P'c/Pna) (Pp/Pnal lP'p/Pnal (f) (e) (d) (c) (b) (a) Year 315 299 246 244 236 232 200 156 142 115 253 166 202 174 166 144 187

N/A 332 264 229 238 234 199 173 157 134 125 81 89 83 120 190 164

N/A 332 264 229 238 310 311 332 360 280 260 219 437 305 218 323 273

459 447 387 386 375 369 334 282 271 243 392 295 349 319 299 273 325

N/A 485 407 369 377 371 333 301 288 265 245 198 219 216 245 326 298

NIA 485 407 369 377 458 462 484 521 433 400 357 619 471 359 480 424

212

128

246

354

258

393

202 275 292 255 280 461 387 257 147 417 215 446 661 503 180

95 111 192 294 117 98 -34 -49 -50 -67 -114 -137 -177 -30 -5

191 161 242 402 212 264 313 306 180 336 512 447 379 230 N/A

348 433 457 409 441 667 647 492 370 686 449 730 1007 771 371

225 244 342 454 253 250 164 140 143 129 71 60 43 158 158

334 302 400 579 362 441 563 548 407 592 791 731 682 457 N/A

Variance 14167

15996

6473

28028

11676

13336

1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1994 1985

236

NotestoTable52: (a)Actual Producer PricefromTable3-3(1l), deflated by the Nonagricultural PriceIndexfromTable 3-5(1). (b)Producer PriceEquivalent (OER) froeTable 3-4(1), deflated PriceIndex fromTable 3-5(1). Nonagricultural (c) Producer PriceEquivalent JEER) fromTable 3-4(1), deflated Nonagricultural PriceIndex froaTable 3-51). (d)Actual Consuser PricefromTable3-3(1), deflated bythe Nonagricultural PriceIndex froeTable 3-5(l). deflated (e)Retail PriceEquivalent IOER) fromTable 3-4(1), 3-5(1). Nonagricultural PriceIndexfromTable (EER) froeTable 3-4(1), deflated (f) Retail PriceEquivalent 3-5(1) Nonagricultural PriceIndex fromTable

237

Fiqu re 335:

cProdu-c-er Pr'ices of lF ;ie

mE:-.elti s R

9(,;Ae

_

~~~~~~~~~~~~(Pp/,Pna)

§

-9-

(P'p/Pno) (Pp,a/Pno)

%~~~~~~~~ 0063000

43' -

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

~~~~~~~~~---

-

-300LC

I< rt -t.z§t& ;~0r- COr,- ,~ cr 0 1Cr---c IDDeLfi 0 l 4or-4 C iL: fLE.

et

-

mD

0

Yea

------

- - --- -

-

-

T-

r~~~~~~

c-4r-ry -

Lf.l-¢ r--Irx,

--

-

T-

cx

N-.

- ,n

N r. m In,4Ch m .1-Ti T". -;nmm m m rollae :T., CIN ci rzh C-) Ch m Chm m C.I.m m QllrU C) .72h 11-1h S

s

r--

r-.

r-

.r-r--

r-.r

.r-

n

,

6EZ

1 9 53

}

1954 195519561957 -

I

1958 196)

1962

-

1962

-

19674

-L

-O

' '

+A-.

'

19713

197.3 -. 1 978

8+_

-

1*

1975 -~(:

Li -)

E ' 1-.. * .A

-(

1976

-~~

1972 197J4-

:c

'I19721 97e.f

1984

19 /3 1985

~-~-

\

_

jo-

+~~~~

t

.,6

1982~~~~~~~~~~~~~~~~.

. .s

-6

. .

Table53 Doaestic Cocoa Prices Under Alternative PriceScenarios

Producer Producer Consuser Consumer Priceinthe Pricein the Price in the Priceinthe Actual Absence of Absence of Actual Absence of Absence of Producer Direct TotalConsumer Direct Total PriceIntervention InterventionPriceIntervention Intervention (Pp/Pna) (P'p/Pna) (Ptp/Pna) (Pc/Pna1 1Pc/Pna) (PIciPna) Year (a) (b) (cI (d) (e) (f) 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1919 1980 1981 1982 19n3 1994 19"5

651 729 745 684 633 557 522 509 502 467 375 318 280 303 338 351 342 335 319 366 387 350 329 304 380 426 421 289 394 345 293 245 358

Variance 18243

N/A 1534 996 864 1400 1194 939 698 635 632 583 401 328 472 687 890 902 683 653 679 954 984 636 939 819 1421 737 197 -7 562 483 321 415

N/A N/A N/A N/A N/A 1031 910 753 742 667 614 375 555 500 486 552 774 514 360 287 619 597 326 602 457 1335 933 772 626 730 841 575 N/A

728 813 834 774 720 646 606 588 581 550 455 389 345 366 399 412 395 425 414 512 573 575 553 444 686 664 645 547 564 661 688 605 708

N/A 1618 1086 955 1487 1282 1023 777 713 715 662 472 393 535 748 940 955 735 748 824 1140 1209 859 1079 1125 1659 961 455 164 878 878 681 765

N/A N/A N/A N/A N/A 1120 994 832 820 750 694 447 619 563 547 613 827 566 455 433 805 822 549 742 763 1573 1157 1030 796 1046 1236 935 N/A

116222

51440

17713

108695

70045

240

NotestoTable53i (a)Actual Producer Price fromTable3-3(2), deflated by the Nonagricultural PriceIndex fromTable3-5(1). (b)Producer PriceEquivalent IOER) fromTable 3-4(3), deflated Nanagricultural PriceIndex fromTable3-511). (c)Producer PriceEquivalent (EER)fromTable 3-4(3), deflated Nonagricultural PriceIndex fromTable 3-51). (dlRendered PortPricefromTable 3-3(2), deflated bythe Nonagricultural PriceIndex froeTable 3-5(1). (eJFOIprice, converted at theofficial exchange rate,froo Table 3-4(3) deflated bytheNonagricultural PriceIndexfrom Table 3-5(1). (f)Optieum Domestic PriceatBorder fromTable 3-4(3), deflated bytheNonagricultural PriceIndexfromTable 3-5(1).

241

.~

co

W

a

co

I4-

L

-~

-

....

*

L

L

L

-

-- A

; O; L O z z. {4 ;S LLL -j-, sJ 1al m .-- ,- -, r m , ,T .-Ai , N) , -,,- ,-J '-'C ,-J-j O-

J6

-A

-

-L

L

A.

-_

- -- I-.

ss> 4;j 0 z (o o;D LI C.-tD iC. LO Di 4D --Z (O L. O sL;NL 0 Ln rJ rn ;n ;n . .S 15) M -- -m m} > lD lm. -j M 1. ulQ I I Vi ' ' '0'' CT' NaI i C,4, ,,co ,-

m a/ ,c Cn -in7

) tP '-.J U(i

.)

I I

I

I

I I

4-

I

** W L

*CJ

(A,J -D 0 I

I

I

I

1. t- L i

* _ .

rCTy rJi C. un ry XD' -.J a,) 4- t j

M

II

c O

+

I

f~~~~~~~~~1 ~ ~ 1

f:

I,DLd

,"Q,

d:

E;)o'4C

l-4d/;3,d.,' O

~

~

,

~

"'

*

El--

. qs

ii j

i

_Un 3 L C~

D131

~

M3~~ 1~~~~~~~~~~~~~.

S&

d=

^.1s9

_

1976-=_ 1 9W§-a

9f

-

,

5N,

A1

'

Fa

' = ~~~~~~~~~~~~c-

934

g'

4, 1-'

A * I4-> cc -a. ixz)m, c-r4 ir =t-, . Lf, t,tD:X| M M MMM l 10 PtCAc V V W¢ !-,3 LP ;W~ t-- P-t--t- F- - 1-- , tIn 'l UIn rJ M. rn *::. Mo M lz M LT at M (M ai o EIMat *n :n M ai ::$ LI C,t *n% M Cii *: th cJ 01c

*o

F=lg

In

-;1 0:

Lire

1 - I0 I - I N

W; to t-- 0

(CRd!

I 0 I WI t

tl> +

,,M Mr>0wMMe

n-

r

I11 I I>I

V0I'

e

r F;r-l

1-1l

I III

- 1-t-t-.,

t.....

IM OM MZ J' rwn @ l:. a> Ma0J Mr13B1 s~ ~~~ s X in MS _

_ir _ _ _ ~~~~~~~~te

247

/

MI'

of R I JI I I I, I l-e '.-m ',:::

, .- t-raMMI,

I

M.. M

) M an IT 'M M -M:D La M

PART THFEE: TK-EFAILLFE OF THE POLITICAL SYSTEM CHWPTER X: HYFPEOTHESSANM CONJLJISION

This suggest

a

chapter

number

brings

of

together

hypotheses

agricultural

price

major

of Ghana s historical

with

phases respect

to

policy

their

Parts

regarding

in Ghana.

These

One

and Two

the

political

hypotheses

development

are

and

of the

study

to

economy

examined

conclusicns

of

over

five

are

dramn

validity.

The Hypotheses A number are discussed

Imoortance

of significant

briefly

of

the

incentives. massive balance producer

this

of Macroeconomic The history

example

in

of agricultural

which

and

the

face

of such

hugh distortions.

Loss

of Real

Income

especially real

income.

of inflation

and to subsidize

There cocoa

were

no gainers

farmers,

Efforts

to

price

of macroeconomic

distortions,

prices

from

the

study,

which

Diseouilibrium

importance

of payments

emerge

section.

The combination price

hypotheses

and protect

policy forces

and a

in

turn

goverment

s

urban those

consumers

248

in shaping

rigid

inputs

Both

is

rate

imbalances Efforts

were

to

ineffective

agricultural

experienced consumed

a prime

macroeconcnic

exchange

budget.

Ghana.

incomes

Ghana

exacerbated

agricultural

in

in

led in

to the

increase in

the

produccers, large

increasing

losses

of

time

and

energy, every

and in

the end these

interest

to food

emigrated

Failure

of

this

from

such binding

scope for

Rise

allocation

of

economic

seeking graft

the

formal

sector

activities.

Many

in

on various turn,

to a

the

relationship

that

on policy

operate

in society,

decisions.

as successive

political

populace

groups

that

there

regimes

because of

vacuum

and (2) fcund themselves

constraints

In

was

their

confronted virtually

no

influence

the

decisions.

Activity

the

government's through

through

price

inability

policy,

its

administrative

exchange controls,

credit

allocation, for

government-controlled an a massive

corruption

increasing

extensive

licensing,

were created

and

have,

failed

macroeconomic

distribution,

activity

the

sector

stresses

impact

within

Ghanaian

management

possibilities formal,

groups

mechanism

resources

form of import

input

their

policies, these

independent

Given

the

that

of Rent-Seekinq

with

informal

economy

(1) made decisions

isolation

other

of political

feedback

increasingly

from contact

from virtually

System

between econanic

Ghana

and

as people

the country.

the Pblitical

and the influence

with

farming

outside

The theory exists

were abandcned

grcuip in Ghana withdrew

and returned others

effects

were

scale.

and

249

These took

board operations,

mechanisms.

the

informal

channels.

This

Cbovernment

rampant,

went towards

controls.

other

between

distribution

efforts

marketing

and

arbitrage

to

regulations

patron-client

EnormoLus market

and

led to rent-

were subverted, relations

became

entrenched scarce

as

the

chief

of Price

which

people

most

gain

could

access

to

Pblicy

In addition policy

to the

by macroeconomic

strong

bias

investments, producer

Since

unproductive,

Failure

to

in

the favor

Achieve During

pow-er was fairly these

were

entrenchment client

of

achieving

these

itself

increasingly

became

politically of staying

credit

rescurces

were

very

was very

large

with

on output price

governments through rather

projects,

a

public

by influencing

and many investments

increase contacts

maintained

than

limited

little

farmers

in production

and a

and influence.

Objectives

each

of the

clear

as to

phases its

Yet

rent-seeking

objectives

national

within

and

notions

achieved.

and unable and was forced

to

rely

newly less

constraints network that

Instead,

to act

regime mDre or

an elaborate

any

be

the

macroeconomic

dissipated was to

lbelow,

objectives

underlying

embattled isolated

described

activity

soon

in

imposed

agriculture

cheap

National

relationships

in

and

result

weighted. of

constraints successive

intervening

subsidies,

prices.

bias

objective

disequilibrium,

towards input

strong

means

by

rescurces.

Neulect

were

means

how

and the of

patron-

much progress the

decisively. on military

in

regime

in found

As a result weight

as

it its

power.

The Phases

described

The periods

during

in Chapter

IV can

which be

the

political

grouped

250

together

econcomy of Ghana evolved into

five

phases.

as

During

each

of

these,

the

in

government

a distinc:t

set

of objectives

exceptimn

of

the

frustrated

in

and objective

its

attempts

to

currently

achieve

its

as having

Each

weights.

gcvernment

Rawlings

be characterized

power could

in

regime,

objectives

and

with

found

power,

had the

itself

was eventually

displaced.

Colonial

Period The

oriented cocoa to

towards export

power,

that

colmnial export

trade,

manopoly

heavy

that

emphasis

would finance

rural

government

was

and yet

it

investment

the

and strongly

during

industry.

an extracting program

liberal

created

was to dominate

was placed

its

essentially

this

period

Oice

the

the

resources

and an penetrating

the

CRP came

from cocoa

politically

the

sector.

Nkrumah After

inderendence

industrialization

and

highly

to

sensitive

allowed

inflation

exchange were Finally, scale

in

increased the

to eat

towards farms

in

its

world

the

end of

this

sector

Nkrumah

prices

phase, the

there expense

251

services.

political

urban

Government

intent

squeezed was heavy of small

base,

and yet

it

and foreign

revenue

public emphasis farmer

an

It was also

once exchange

as objectives

cocoa

at

government was

in urban

incomes.

important

low

rural

of

away real

and

the

the

investment

welfare

became increasingly

exhausted

1957,

reserves revenues. on

large-

development.

National

Liberation

National

The macroeconomic by

imports

and to

an impor-tant less

producer

reduce

was seen

the

was

Redemption

role.

regime

Council

more

liberal

economy.

Emphasis

projects,

public

investments,

producer

prices.

Easing

perceived

as an important

tighten

input

increase

and

was input

Ghana s

to increase

Mbre emphasis

was placed

reversing

the

by raising

exchange it

rather the

a

but through

to achieve

improving

than

was

towards

than

self-sufficiency

equality

as having

bias.

trend

foreign

an

mechanism

on

controls.

Council (SMC). and

rather

the

cocoa

liberalize

regional

Military

to

distribution

subsidies

and

regional

income

on agriculture,

but

promoting

of

dependence

to

than

placed

objective

restrictions

exports.

income

and

rather

had a decided

The NFR come to power committed to

stimulating

quantitative

activity

Supreme

(NRC).

importance

a desire

of

Equality

of Busia

on

iwas

generally of private

productive

strong

placed

There

prevalence

and the

attached

also

prices.

as a regulator

directly weight,

Council

Emphasis

increasing

The state

National Limann

Liberation

stability.

exports

given

CGuncil (NLC) and Busia

was was to

than

to

distribution

on maintaining

of

macroeconomic

equilibrium.

Provisional

National After

little

more

than

PNDC under Jerry Althtugh government

its

the

Defense brief

attempt Rawlings initial

fosund itself

Councril

(PNDC)

interlude to cope

of with

came to views virtually

the

power

were

the

disastrous with

strongly

obliged 252

Limann

a

government, economic

strcng

interventionist

to adopt

a

more

which

situation,

populist

the

mandate.

in nature, liberal

did

the

framework

of objectives. far

behind

dealing not

Principal were

with

given

liberalization

the

high

of output Less

run its

foreign

exchange nor

Greater

mechanism

price

growth

was

was

especially

attentimn

was given

to

but not as ways of

of urban

equality

placed

stability,

of exports

Welfare

greater

policy,

was perceived

and growth

crisis.

weight

immediate

was macroecmnomic

of imports

priority,

distributimn.

crops.

among these

of

consumers

regional

mn

agriculture

for

cocoa

and

inccme

thrnugh

and the

industry,

was

though

the

industrial in the

long

as essential.

Summary Table various are

55 presents

objectives

with

cnmstraints reflect

during

each

the

extent

to

assigned,

which

Of particular occurred

weights

that

example,

was given

political

high

power,

objective

less

much

realized

revenue the

state

phases

regime

the

weights

Thus

beginning

attached

above.

independently

was faced.

at

the

described

possible,

importance frum

was and

the

priority but

of the

particular

generally

they

of each

to

The weights

phase,

importance

financing

phase

table to

are

the

sharp

tend before

to the

the

military In in

of the

government

contrast,

importance rural

farmer with

sector

shifts in

Consumer welfare,

another.

by Nkrumah, who depended on

weight.

very important of

in the

mne

important to Nkrumah but gained they

of

realities were fully felt.

econmic

of

each

of the

priorities

relative

estimates

rough

base

after Busia gave this welfare

succeeding to the

his urban

for

was governments

econwom.

least as

Cbvernment

to Nkrumah as a means of enhancing the power of his

ambitious

253

investment

program;

to other

gcverriments, recurr,ent

it

was

required

expenditures

in the

merely

face

to

of rising

keep public

up

with

the expansion of

sector

Table55

Relative Weightof Agricultural Price Policy Objectives

Colonial (1950-57)

Phase (years) Nkrumah NLC.Busia (1957-66) (1966-71)

Obiectives

NRCISMC PNDC (1972-79) (1982_ Present)

Consumer

Welfare

.20

.25

.--)

.10

.15

Welfare

.05

.00

.15

.15

.20

Government Revenue

.25

.35

.15

.15

.15

Price Stability

.20

.10

.25

.05

.270

Comparative Advantage

.20

.0o

.15

.00

.15

FoodSelfSufficiency

.0o

.05

.00

.20

.05

Industrialization

.05

.25

.10

.10

.05

Income Distribution

.00

.00

.00

.10

.05

Regional Balance

.05

.00

.00

.15

.05

1.00

1.00

1.00

1.00

Farmer

Total

employment. as

1.00

The relative importance attached to price

perioids of

rapid

inflation

have

restore macroecocrmic equilibrium. 254

stability has varied

been succeeded by strong efforts to

Regimes placed

on

have

exploitation and

government's

emphasis

other

favored

foreign

exchange.

exploitation

received

very

NRC.

The Nkrumah

intent

to

focus

high

on these

context

of the

Macroeconomic

The view,

to

by

was followed

NLC, on the

whereas

reduce

contrast,

the

NRC

depEndence

on

favors

once

more

distribution

and

as objectives, were

regional

except

possibly

conspicunus

be aware of distributional

balance

in

have

under the

their

regional

considerations

economy

moving

again

that

it

Testing

of the

Htvpotheses

has

not

but

yet

is

been

able

hypotheses

presented

five

just

phases

earlier

are

tested

here

within

the

discussed.

Disecnuilibrium

macroeconomic

is

no

question

disequilibrium economy.

hampered by the cocoa

the

means

colonial

issues.

There

agricultural

income

governments

to

example,

self-

advantage.

priorities

and Busia

on getting

The

would

of

for

in

food

The

more balanced

regime,

comparative

The PNDC appears

so

a

they have

versus

on industry.

as the

present

equity

never

towards

self-sufficiency

of Ghana's

emphasis

advantage

trade,

and concentration

The

the

industrialization. export

the

back

food

Finally,

bias.

on

shifted

in

Ghana's comparative

of cocoa

strongly

markedly

import-competing

neglect

hand,

differed

of

sufficiency

Nkrumah's

also

decline

prices

fell.

s

resources

ambiticus available

As was shown

255

recently

until

overshadowed

Nkrumah in

that

all

other

investment

the distortions program

from international

in Chapter

effects

V, total

of in the

was severely trade public

when

revenue

cocoa decreased

fron

dramatically the total

terms and as a share of was

greater.

even

was actually

let

prices in

for

easily.

unweighted

average

the producer

took

it

over

after

least

in

the

revenue

1966.

loss from

In 1965 it

still

disastrous.

because farmers

not

of Chapter

from S 546/mt

rates

was a

of protection

being

taken

was at

least

V, real

producer

as demonstrated

lightly cocoa,

taxed. with

consideration,

The

anly

was -0.24

of the 32 years

60 percent,

were

in 1960 to N! 27B/mt

period,

for

into

In five

its

emphasis full

control

was close 1971.2

on price

and in

between

the at 1954

17 of the years

over

the economy.

to double-digit

Furthermore, resolved

Inflation The real s refusal

reached

value

of

figures

the massive during

this

±

Table

16, Chapter

2

Table

3, Chapter

by the time debt

problem

II. 256

was

that

the NFC

faced

by Ghana

in

proved

mismanagemnt 1977,

appreciated

any more than one nominal

VI.

was

phase.

figures rate

regime

Althouagh inflation

macroeconomic

triple-digit

the exchange

to undertake

the NLC/Busia

stability,

Uhder the NRC/SMC/Limann regime

government

total

absolute

40 percent.-

to gain

in

terms

from 1960 to 1965.

Nkrumah was never

in 1981.

prices,

was

Table 9

Yet this

policy

protection

Despite

slcwi.d,

terms

which cocoa was relatively

of nominal

level

and 1985 negative

never able

in real prices).

of price

revenue

shown in

Two, during

effects

was at

In real

1960 and NV 17 million

in

As

(1972 constant Part

it

both in

sales.

1972 constant

government

cocoa decreased

thrcaughout

direct

in

decline

off

1965

in

of

1961-66

negative. This

being

value

Measured

NY 146 million

cocoa equalled

the period

during

and than again

sharply

with

devaluation,

the and

as denEstrated

in

during

1970s and early

the late

Part

Two, this

was the

at

the

exchange

rate.

time,

same

the magnitude

has mffved towards

institutionalized

Thus even if

the

of distortions

cause

of price

distortions

macroeconomic

equilibrium

19E0s.

The PDNC, in contrast, and,

major

rate

that

periodic

of

inflation

characterized

adjustments

increases

in

recent

past

the

in

the

the future, should

not

be repeated.

Loss of Real

Income

The losses

of

in Chapters

IV

experienced

mixed

effects,

appreciably

from

gained

increasingly which

and

real

to purchase

sector

sector

employees

real

inccmne losses. time

to

opportunities returned against

in some

high

rates

exchange

rate

farmers,

years of

on

especially

protection

and a

on

the

of the

other

average

lack

been documented the

other

after in

the

of foreign

hand,

1976, 24 in

wages fell

to approximately

were completely

unable

As a result, informal

sector

were available.

to the countryside,

to

many were forced activities, Others

were

hand,

1972, face

they of an

exchange with

greatly

wage in manufacturing

from 100 in 1972 to 49 in

Public

of

and

workers,

An index

urban CPI fell

maize

and

have

imports.

Urban inflation.

Rice

IX.

overvalued

income by cocoa farmers

simply

where food

inflation.

257

injured

deflated

1979, and 11

the same extent. protect

by

by the and 1983.

Thus formal

themselves

to devote

an increasing

including

rent-seeking

from real amoit where

abandoned the urban economy and

production

offered

a better

hedge

of

Failure

the

Political losses

These workers

had

Yet they those is

little

the

that

the

graoups

were

lasting

of its

the

sector.

no longer

able

at the

cocoa

of

itself the

the

price

economy

that

given

pressure,

furthermore,

corruption,

the

the

to

there

the

cocoa of

very and

interest in power.

that

Nkrumah's

by the

UGFOC had a

this

region

was the

successful

because

separatist

approach.

NLM s influence

by focusing

farmers

in

the

gained

regime.

With

was no room for

raising

overvalued

was useless. turned

was never

that

en

issue.

demise

increasingly

regime

in

and

therefore,

on those

areas

welfare.

farmers

be drawn,

clear

growing

and urban

fcod

an extent

is

constituency

main

most

must

opponent

Party,

the

followed,

further,

major

s Progress

contributed

it

cocoa

to subvert

as the

their

effectively

(NLM), which

able

affecting

duwn to such

and other

regional

farmers

were

that

farmers,

His

was therefore

than

pressure

cocoa

en a

Under aisia this

to apply

Mavement

producer

to organize

cocoa

that

decisions

had broken

impact.

concentration

suggest

The conclusion

Ashanti

Liberation

The LUFCC

able

system

political

income on policy

political

of

National

real

better

informal

Looking penetration

in

influence

were much

in

System

exchange

Confronted inward,

by its

the

power,

but

deterioration

producer rate.

prices Political

own ineptitude

and

more and more an muilitary

relying

force.

Rent-Seeking

Activity The Nkrumah years

saw the

development

arrangements

that

provided

abundant

first

Cocoa

Marketing

Board and the

was the

of

opportunities

258

UGFCC.

two for

major

institutional

rent-seeking.

The first

The

has survived

or

more

less

resurrected

as

trappings for

intact;

of

the

is

spelled

import

in

Chapter

key areas

relationships

of the

to

goods

of the

the

to

where

was the foreign

the

1966

but was

without

the

later

political

system

established

exchange.

Each

problems

established

that

they

presented

resources

of are

enabled

Elaborate those

in

behavior

to political

influence patrcn-client

without

the

Intermediaries,

direct

distribution

whether

contact of state-

or

not

they

were

benefitted.

of rent-seeking

had two profound

away from productive

total quantity of

rent-seeking

resources.

participate

and services. of course

for

an alternative

scarce

nevertheless

state,

opportunities

acquire

The growth it drew

of these

way to

state

controlled part

V,

econcomy provided

were

the

albeit

arrangement

and access

in

in detail.

and power as a

with

dismantled

Company,

The second

The introduction into

was

Buying

licenses

described

out

second

Produce

the UGFOC.

allocating

these

the

goods and

activities

implications.

that

services available

could

First,

have

increased

to society.

This was

particularly true of urban areas, where the state's influence still reached. Seccnd,

it

undermined

processes influence on a

at

development

state

policy-mnakers

level

populist

state-level PNDC have

instead leader,

political loudly

and

activity.

the

would

Instead,

an local Jerry

of

that

directly.

mutchmDre decentralized

and concentrated the

the

the

largely political

political

have

basis

systems.

Rawlings,

was there

It

no accident

is

condemnried rent-seeking

behavior.

259

allowed

political rural

institutions interest

groups

development that

once that

to

occurred

ignored

Only with

and

the the

rise

more an increase Rawlings

state of in

and the

Neglect

of Price

Policy

The combination the

political

price

economy to operate

policy

as

the

transferring

welfare.

they

control

could

cheap

credit.

Nkrumah

farmer,

state

such

NRC/SMC/Limann

phase,

and cheap

which

were

recurrent

cost

severe

left

institutions

shortages most

have which

gotten

the

established

was

dominated

and of

the

to aid

large or

that

subsidies,

primarily

involved

and

mechanisms

input

later

of output

resources

form

ministries

use

of

public

the

sector

parastatals. these

by

The plus

input

still

approach

parastatals

are

the

were

operating

resource

in

used

expenses

to

a

pay

that

First,

management

in Ghana.

were

existed

two-fold.

strang

institutions

that

resources

were

required

scarcest

of these

constraints

the

this

the

Given

the

deteriorating

salaries

would

skills,

Second,

enormous. rapidly

the

and

have

little

enabled

was these

to be effective. As

far

of

management

accessible

undermined

generally

with

and

financial

for

were

central

problems

budgetary

over

on

failure

credit.

requirements

economy, most

relied investments,

Projects

the

allocating

the

the

the

for

took

particularly,

projects, and

this

these

as

The major farms,

public

farms. but

bureaucracies,

state

governments

Under

and

discouraged

instrument

projects,

small

private

primary

-

of

constraints

effectively

Instead

establishment

subsidies

of macroeccnomic

as

input

farmers

the to

originally

and

smaller placed

and

operating

could

development the

subsidies

be of

funds implied

reached.

private

farmer. greatest

cheap

emphasis

260

are

that

Furthermore,

sector This

credit

input it

was

anly the

largest,

these

subsidies

marketing, the

concerned,

which

might

NRC/SMC-gcvernment,

on more equal

distributimn

of

income,

that

wealthier

Failure

contributed

probably

to

most

to Achieve

described

National

of

favor

Objectives

intentions

in this

realities

of

chapter

the

of

governnents

were

frustrated

time.

during by

The colonial 1950s.

Yet

period

resources

for

the

state

collapse

in

world

to

mobilize

ccnsequences

of

the

industrialization and a severe

was also drain

on public

consumer welfare,

in

and maize,

for

and 1.06

confidence

NLC

the

example,

population Bisia's

and

but

was

during

protection

on cocoa,

rice,

and maize

entire

three

decades,

rate

leading

end,

to

some

emphasis

on

urban

exchange

and

protection

it was the

in

on 1960

loss

of

Nkrumah's downfall.

placed

was greater

of

the

unproductive

respectively

about

period

with

and rising

to foreign

In the

brought

this

areas

and -0.60

this

Although

Nkrumah's

nominal

government

agriculture,

the

it

that

during

to be remarkably

The

1965.3

most successful

prices.

in urban

phases

and political

was soon confronted

access

from -0.06

in

economic

Finally,

budget.

rose

respectively

of the urban The

proved

resources.

four

was perhaps

cocoa

the form of cheap food

of balancing

the problems

it

first

Nkrumah's desire

by the need to restrict

wages, was undermined

to 0.59

achieved,

the

the

regime

because of the cocoa boom of the

during

in

farmers.

The

rice

discrimination

more

emphasis

on

(1967-69)

that

negative

than at

almost

any time

large

transfers

out

of

These are based on the effects of direct Table 17, Chapter VI. and indirect price price interventions. Based on the effect of direct interventions, from Table 19, the EWR was -0.36 for rice and -0.73 for maize in 1965. Thus once the for rice and -0.07 for maize in 1960 and -0.35 consumers continued to be taken into account, overvalued exchange rate is prices in 1965, but to a lesser extent vis-a-vis world market subsidized than in 1960. Z

261

agriculture.4 real

Furthermore,

urban

incomes in

the governnent stable

prices.

Ohce again,

resulted

in the

The farmer

base,

welfare,

income.

however,

required As

over

economy

became

was achieved, by foodcrop since

this farmers.

declined.E

the

used of

welfare

1971, despite

and maintaining crisis

and

to the situation,

and

food

dependent

4

Tables 39-41, Chapter VIII.

s

Tables 43-50, Chapter IX.

of

262

these

financial constraints

the government moreover,

than

self-sufficiency

and

objectives,

and

resourrce

that: greater losses

family

of

management

distorted,

To the extend

Furthermore,

achieve

and these

programs

increasingly

distribution

to

deteriorated

improving

self-sufficiency,

scarce

was more because of these

Ghana became increasingly

in

of macroeconomic

food

in

use

As

income and welfare

consumer

to

instruments

the projects

prices

inflation

by declining

by the NRC.

balance

intensive

was eroded

by the government

committed

became more severe, output

increasing

overreaction

was

The

the

regime

was a combination

and a better

regional

resources.

it

plus

take

NRC/SMC

in the

1969 and 1970, and rising

s ccnwmitment to

a weak political that

confidence

collapsed.

cocoa farmer's regional

balance

the gains

achieved

was

until 1984 on food

aid

not

attained

imports.

Conclusions The hypotheses evidence

presented

an effective that

led

instead, those

ultimately

areas

this

by

came

was made to

hioever,

the

in

Ghanaians

political the

frustration

it

liberalize

that

the

that

over

Marginal

base.

and ultimately

induced political

activities.

The first

were econaoy

will

people activity

government to

are

this

and

the

actions.

263

expected

price

than

not

being in

distortions,

complete.

developed their

that

favor

will

through

of Ghanaians

however, to

resources

administrative

yet

confidence

development, be

Cbce the

Once again rather

decisions

time

at doing

attempts

reduce

however, is

institutions

can its

and to

to

committed

counter-productive.

prices

relative

take

strongly

decreased.

policy

Without

and hostility

took

and away from

resource

leader

The process,

influence

regime.

provide

of resources

activities

Decentralized

rent-seeking with

clear

This

by the

to

Rent-seeking

these the

politics

allocation

as a populist

the

for

to

to

state.

trade

accordance

action.

current

suggests

power

and discretion. NDr is

of

system.

eroded

the

failure

supported

flourished.

to

incentives

were allocated

enable

with

be well

in the

dramatically

private

decision

the

resources

of rent-seeking

suppressing

regulations

of

decreased

correspondingly

elimination

policy

severely

contacts

Rawlings the

of

pr-oduction

to rent-seeking

rural

It was the

the collapse

to

appear

influencing

diversion

their

here

study.

for

to

the

involving

to minimize in

this

mechanism

but

retums

in

proposed

enccounter

past

history

increasing

in

AGRICLLTlUPL FiODUCTION

ANNEX1:

The purpose

of this

for

collecting

agricultural

of

available

data

annex is

production

by

crop.

to describe

data and

Comparisons

and evaluate

to present

are

also

estimates of cocoa sfftggling,and the cocoa production

the system

the time

series

made of alternative figures are adjusted

accordingly.

System for Data Collection Cocoa Llntil 1962, regularly on

measurements. on

the quantity

marketings

to

foreign

stocks.

External

information

by

and

of

Eutreau of

and valute of cocoa exports.

quantity

permitted After

of AgricuiltLure

estimates

of produtction

Board sales

for

cocoa being

smuggled across

prodLction

changes

estimated

Ghana,

Ghana's

provided

mills,

and changes in from

provided

customs

data on the

from different

of the data

of the data. on production

were obtained

in stocks.

(CMB)

published

Statistics,

of data

the quality

Board

purchases from producers,

grinding

Comparison

checks on the quality 1962,

of cocoa

local

Statistics

Central

Marketing

Cocoa

and valute

buyers

Trade the

The

±

information

better

of the Ministry

Division

prepared estimates of the area under and prodLuctionof cocoa based

sample

sources

Cocoa

the

This

by adjusting ignored,

borders.

by the Cccoa Marketing

deteriorated,

Board

Cocoa Marketing

however,

Table 1-1

and

the

problem of

presents

and two sets

data on

of estimates

from M.S. Singal and J.D.N. Nartey, X- This discussion is taken Sources and Methods of Estimation of National Income at Current Prices in ELUreau of Statistics, 1971, pp.3.-13. Ghana, Ghana Central

265

Table 1-1 CocoaProduction andSmuggling 1960-19B2 (000At)

Smuggled Year

Production (a)

Cocoa(b)

1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

430 409 413 428 538 401 368 415 323 403 413 454 407 340 376 3-96 320 371 365 296 258 225 180

10 8 14 11 14 17 17 21 17 25 31 37 42 34 30 38 40 45 50 N/A

N/A N/A N/A

Smuggled Cocoa Brong-Ahafo lc)

Total(d)

6.6 5.9 -1.9l -7.6 -6.1 .9 37.13 31.5 19.2 23.3 17.9 21.4 13.8 9.2 15.9 20.13 21.4 37.NA 29.8 31.8 31.4 24.1 21.2

10.3 9.4 -2.9 -12.0 -9.2 1.3 57.1 46.8 26.5 33.9 34.3 32.4 21.9 14.1 26.6 34.4 35.0 64.3 60.8 56.0 61.5 46.3 45.4

NotestoTable1-1: (a)Cocoaproduction dataarebasedonCocoa Marketing Boardestiaates, thesources forwhicharegiveninTable 1-2. (b)Estioates of Ghanaian cocoa officials andinternational traders from R.6.Franco, 'TheOptiaal Producer Price oiCocoainShana,m Journal ofDevelopeent Economics, Vol.8,1981,pp.77-92. (c)Econometric estimates fromErnesto May,Exchange Controls and Parallel Market Econoeies inSub-Saharan Africa--Focus on Shana, WorldBankStaffWorking Paper No.711, 1985,p.69. (d)Derived bydividing Brong-Ahafo estisates by theshareof theBrong-Ahafo region in theproduction ofallregions bordering neighboring countries.

266

of

cocoa

being

guess-estimates traders.

of

The

Ernesto May cocoa

in

that

exchange rate,

total

Regime, which

smuggled

by the share

figures bordering

two

from

cocoa

in

region

on

series

smuggled

ouLt

Ghana

in

some years.

place

over

the quantity

less

than 5 percent

that

the

direction

of

market

and cocoa

were obtained and Luntil

only

for

recently bordering

two regions

Estimates

for

May's Brong-fAhafo

production

of

of

regions

all

of

of cocoa

being

flow

production.

the

Ivory

cocoa have been

indicate

period

that

of Ghana was always

May's estimnates

suggest,

way, that

in fact,

is that

Ghana in some

Coast into

important

196:)to 1965,

from

smuggled out

may have been the other

considerably

differing tons of

They also

During

total

while

up to 5>-6O.-),CX

time.

may have been smutggled from the

this

Ghana,

by dividing

smuggled cocoa, that

example,

at the black

Coast

by

the price

Regions.3

the

cocoa

countries.

do suggest

for

Volta

of

in

as the other

and

to year,

changes have taken

Ivory

from Ghana were obtained that

cocoa

of

model developed

function

estimates

consists

international

to cedis

of

the

from year

of

as a

Reasonable

much

first

an econometric

price

borders

The and

converted

the Western

of

neighboring The

as --

country.

officials

country

in Ghana. 2

coLuntries

cocoa

cocoa

producer

twice

the

smtuggled cocoa

the official

almost

of

derived

neighboring

capacity

neighboring

is

estimates

the Brong-Ahafo produced

out

Ghanaian

second

the

prodiuction

siLtggled

years

cocoa during

period.

2 Ernesto May, Sub-Saharan Africa No. 711, 1985.

3

Smuggling

Exchanoe Controls Focus on Ghana,

from regions

and Parallel World Bank

in the interior

267

is

Market Economies in Working Faper Staff

considered

to be negligible.

In 1965.

any

event,

May' s work indicates

in 1966 because of

the

level

that

a fall

this

in the

of smuggling increased markedly after took place very dramatically official

producer

of the cedi on the black mark:et. 4

sharp depreciation to be

that the

differ

somewhat with repect to the timing of

process was more gradual.

smiuggling between that

price

the mid-1%96s and the

the average level

The two

seems

sets of estimates

also

other changes

10 percen t

pace with

inflation

By the early

in the

of production.

5

They

the latter

in producer prices

and the depreciation

rate of

they each suggest

also agree that the rate of smuggling increased again during of the 197C)s. This was becatse increases

in Ghana and a

Expert opinion

mid-197C)s, but

was between 5 and

beginning

failed

half

to keep

of the cedi on the black market.

198)s, smuggling may have accoLnted for close to 20

percent of

production. It

is

economic situation system declined which

possible

that

deteriorated

increasingly

these dur-ing

degenerated.

In

figures the

are overestimated.

1970s,

addition,

in importance as a source of supply relative had

poorer

road

linkages

Ghana's transportation the

Brong-Ahafo

to the

situation,

with the Ivory Coast.

in

fact,

Regicn

to the Western Region, Finally,

government crackdcons on cocoa smuggling undcoubtedly acted as Experts close

As the

have estimated

periodic

a deterrent.

smuggling during

" Until 1966, the NV/$LS rate on the black market was relatively close to the official rate of .714 N&/$US. As a resLult of a strong tightening of trade and exchange controls in that year, the black market rate moved to 2.13 Nhl/U5. See May, Exchanae Controls..., p.129. > One reason for the differencein timing may be learning effects and other forms of capital investment in smuggling that cause the long run response to variations in incentives to differ from the response in the short run, which was estimated by May.

268

the early

199:s to

be probably

between 10,(X:}

and 20,OCKx) tons per year.*

This woAuldamnountto approx>imately 1-0 percent of current

production.

Cocoa MarketingEoard estimates of production are smtgglinghere on the its

level

during the early

to Table when it With

basis of this more conservative

cocoa

1-2(3)! beqan to

increa,ses

1990s.

as a

producer

result

prices

smuggling is assL.uTedto have remained purch-Ases from

1971 to

1975.

of

in

it

regarding

have been nil until 1966,

late

constant

for

in the footnotes

substantial

the

Thereafter

hypothesis

in detail

smutggling is assumed to

increase in

As indicated

adjusted

at

price

incentives.

1960:s and early percent

5

rose again until

1970s,

of official it

reached 10

percentof productionin 193:.

Other Crop' The Economics Agriculture cocoa.

is

in

the

for

Division

estimating

mid-1960s,

the

of

the

production

of crops other than

estimates

were

farms

Data on cultivated and

from

sample

area surveys

were

compiled

from

for small farms.

obtained

by

and livestock:

numbers.

FolloitAp

1972 to update the 1970 inputs,

and

farm

surveys were

estimates machinery

and

to

censuses for

A broader sample

survey was Lndertaken in 1970 to measure area Lnder production

labor

of

Ministry

the area Lunder cultivationby average yields for each crop under

consideration. large

responsible

Beginning

multiplying

and Marketing

of main crops

then conduLcted in 1971 and

obtain

and equipment.

information

on yields,

Althcxtghthe

usutal

6 World Bank, Ghana: The Cocoa Sector, Background Faper No. 1 of 4 prepared for Ghana: Folicies and Proqram for Adiustment, October 14, 19E3, p.5.

269

difficulties

were encountered with these surveys,

the results

are considered

to be reasonably reliable. As foreign increasingly Shortages

exchange constraints

difficult of fuel

to

maintain

and spare parts

sampling.

Instead,

agricultural

production

figures

based on their

point,

was a deterioration

introduced,

however,

in

is not

table. most Bureau

of Statistics

cocoa statistics Except taken caution above, polated orders

for

they

but on cruder by

FAO.

sotrce

to report

valid

area and

There clearly,

at

this

Whether a bias was

cocoa,

data

1-2(1)

throrugh

are given

the Ministry

1969.

The

1-2(3)

in the notes

of

Nevertheless,

field they

though

and the Central source

for

the

EBard.

These

prior data

to the micd-1'?96s are TLtst

be

treated

based on the system of sample surveys

estimates

for

to the

of Agriculture,

original

on production

Yearbooks. not

Tables

from World Bank Reports

the Cocoa Marketing

are

for

Data

of data is

obtained

personnel probably

as corrected reflect

reasonably

with

described and interwell

the

after

the

of magnitude involved.

The same may not be true early

in

Sources

original

from FPO Production since

collection.

required

of the data.

Froduction

Economic Sulrvey is

mobility

data

became

so clear.

to 1985.

were

for

opinions.

the quality

from 193:)

data

1972. it

were obliged

informed

data are contained

the

after

system the

officers

Froduction

The principal of

this

limited

Aqricultural

17 crops

tightened

1970s.

inconsistent

These show a with the evidence

of the

sharp

figures

decline

on

production

in food production

presented elsewhere in this

270

study

that seems that food

prices rose significantlyin relationto prices of cash crops. There are at least

two

possible

experienced northern almost parts

very

severe

area.

The second

and the

inability

led to a strong

in,comesthat

this

from

reason,

in

This

which

the transport

was occLurring

was

across

to

The first 1977.

is that

Ghana

especially

in

the

has been more persistent,

is

the

system due to lack

food marketings. decline

decline. 1975

of the government

decline

years.

for

drought

breakdown in

total

in earlier

explanations

to maintain which

abetted

the

of fuel

and spare

road system.

had been quite

by the decrease

substantial in per capita

broad segments of the ulrban population.

271

This

Table1-2(l) (a) Agricultural Production (000Its)

Cereals Year 1930 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

maize N/A N/A N/A N/A NIA N/A 169 169 169 183 NIA N/A N/A 169 183 170 206 353 278 253 300 482 465 402 427 486 343 286 274 218 380 382 378 346 173 574 411

staples

Rice SorghusMillet Cassava Yale CocoyaePlantain -/A N/A N/A _ /A -/--N/A--N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A NIA N/A N/A N/Ak NIA NIA N/A 79 99 512 481 NIA N/A 23 79 99 512 481 NIA N/A 23 79 99 512 481 N/A N/A 23 90 112 823 481 N/A N/A 30 N/A NIA 1092 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 32 N/A N/A NIA N/A N/A N/A 30 100 80 N/A N/A N/A N/A 31 105 65 789 1001 N/A N/A 33 109 68 1194 1098 N/A N/A 42 113 70 1229 1153 N/A NIA 32 89 57 1100 1055 NIA N/A 29 107 66 1152 1170 NIA N/A 42 83 78 1156 1219? N/A NIA 42 72 57 1058 1382 NIA N/A 60 96 90 1350 2000 N/A 700 49 186 141 2388 909 1136 1641 55 173 130 2388 909 1136 1641 70 152 99 2840 679 945 1670 62 167 109 2865 606 1325 2071 73 177 154 3606 850 1510 2024 71 185 122 2398 709 1099 1246 70 189 144 1819 575 773 1256 109 181 125 1811 535 722 927 108 121 98 1895 544 726 940 93 158 149 1759 602 749 817 78 132 82 2322 650 643 734 97 131 119 2063 591 631 829 2470 588 628 745 36 85 76 40 56 40 1729 866 720 342 66 NIA N/A 4083 N/A NIA N/A 90 62 54 3076 485 581 676

Notes toTable1-2(1): (a)Datasource foryearspriortoCBSSurvey isFAOYearbooks. 1966-1969 (millet, cassava, yam), Datasource for1964-1969 (maize, rice, sorghum), Survey 1964. and1969(plantain) isCentral Bureau of Statistics, Econosic Agricultural Sector Review, Datasource for1970-1983 isWorldBank,Ghana Annex5,August 6, 1985. for1984and1985istheMinistry ofAgriculture. Datasource 272

Table1-2(2) Agricultural Production(a) (000its)

Edible Nuts&Seeds Year 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Ground- Coco- Oilpale nuts nuts bunches Cowpeas SugarCane N/A N/A N/A N/A N/A 44 44 41 41 49 N/A N/A N/A 47 50 27 38 39 62 61 102 102 89 127 157 111 113 8l 83 107 92 100 110 70 N/A N/A

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 302 302 296 306 307 311 229 152 159 159 H/A N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 696 696 711 782 917 901 281 739 935 1012 N/A N/A N/A N/A N/A N/A

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A N/A N/A N/A N/A N/A N/A 11 11 9 7 11 11 12 11 8 9 N/A N/A N/A N/A N/A N/A

N/A N/A N/A I/A N/A N/A N/A N/A NIA N/A N/A 71 N/A 393 401 100 147 295 240 300 112 112 145 161 171 205 190 258 272 190 192 190 110 100 N/A N/A

Notesto Table1-2(2): (a)Datasourcefor 1950-1969 is FAG ProductionYearbooks. Datasourcefor 1970-1979 (1970-1978 for sugarcane) is Norld Bank,GhanaAgricultural SectorReview, August6, 1925,Annex5, p. 63. Datasourcefor Datasourcefor 1980-1983 (1979-1983 for sugarcane) is FAO, 273

Table1-2(3) Agricultural Production (000 its)

Year

Cocoa 'aj

Cocoa (b)

1950 1951 1952 1953 1954 1955 1?56

262 211 247 211 220 229 264 206 256 317 430 409 413 428 538 401 368 415 323 403 413 454 407 340 376 396 320 271 265 296 258 225 181 157 172 215

262 2-1 247 211 220 229 264 206 256 317 430 409 413 428 538 401 372 423 333 419 434 477 427 357 395 416 339 290 286 323 284 248 198 173 189 226

1957 1958 1959

19?60 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

274

Seed Cotton (c) Rubber(c) Tobacco(c) N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A NIA N/A N/A N/A .20 .40 1.30 1.90 2.50 3.00 9.00 11.40 4.50 5.20 3.00 .70 .50 .50 N/A N/A

N/A N/A N/A N/A .30 .30 .30 .30 .40 .60 .60 .80 .30 .30 .30 .20 N/A NiA N:A N/A .70 1.00 1.20 1.30 1.80 2.10 2.70 2.70 3.30 3.30 1.70 .70 .70 .50 N/A N/A

N/A N/A N/A .10 .10 .10 .10 .10 .30 N/A N/A N/A .70 .80 .90 1.00 1.00 1.20 1.10 1.10 .90 1.40 1.70 2.60 3.30 2.30 2.10 .80 .80 .80 .40 .50 .60 .50 N/A N/A

Notesto Table1-2(3):

(a)Source ofcocoaproduction dataisCocoa Marketing Board, as reported inthefollowing: 1950-59, Merrill J.Batemn,'An 6ccnometric Analysis of Ghanaian CocoaSupply,' inR.A. Kotey, C.Okali, andB.E.Rourke, Economics ofCocoaProduction and Marketing, Institute ofStatistical, Social, andEconomic Research, University of6hana, Legon, 1974, p.315; 1960-78, WorldBank, 6hana: TheCocoaSector, Background Paper No.I of4 prepared forthe6hana: Policies andProgras forAdjustsent Report, October 14,1983,p.45; 1979-1984, WorldBank, GhanaTowards Structural Adjustment, Vol.2: Statistical Appendix, October 7,1985,p.57. Ib1Cocoa Marketing Board(ChB) estimates adjusted forsmuggling underthefollowing assumptions: 1950-65negligible smuggling 1966-70smuggling increases fromnilto5 percent ofCNB estimates inequal annual increments 1971-75smuggling remains constant at 5 percent ofCMB estimates 1976-80smuggling increases from5 to10 percent ofCMB estimates isequalannual increments 1981-85smuggling remains constant at10percent ofCHI estimates (c)Source of datafor1950-69 isFAGProduction Yearbooks; source for1970-83 isWorldBank, 6hanaAgricultural Sector Review, Annex5,August 6,1985,p.63.

275

EQUILIERIUM EXCHANGE RkTE

INNEX 2:

annex

This calculate

the equilibriLun

1953-84.

The method consisted

have equilibrated the

absence

describing

of

are based elasticities

of demand for

each case

quantitative

for

chhanges in the

debt service,

with

however,

the value

it

on

fLmncticns

for

would

of exports

in

ELefore

to consider

two These

(FPF) and (2) the

of exports,

trade

that

exchange rate.

power parity

and supply

terms of

the period

trade.

is useful

the equilibrium

of purchasing

imports

over

the exchange rate

restrictions

in detail,

the notion

on (1)

Ghana

to

were taken

demand and sLtpply

of imports

to estimating

that

steps

for

(tt)

and finding

value

methodology

approaches

rate

accoLnt

or

taxes

the

detail

of estimating

the dollar

this

alternative

flows,

exchange

exchange on current

foreign

in

describes

with

adjLstment

in

of capital

and the strcLture

and transfers.

Furchasina

FPower Parity

Aprroach

The Real Exchange Rate This find

a year

is more or

in which the current

from this studied

which

an indicator purchasing

in the

with

compared

(RER) is is the of

power

the

the ratio

the

currency

276

of

major

change over

may be

sets in

rate

trading of

(NOR) for

prices.

the

This

The

two

goods and services

and

changes

comntry

partners.

terms of another;

between

transfers,

of transfers

in the

prices

to

possible

of unrequited

exchange

level

of two

it

the structure

nominal

in its

that

eXclusive

with

of one currency

relative

of each

the notion

account!

absolute

levels

price

with

consistent

adiust

and to

base year

exchange rate NOE,

in balance,

less

flows,

capital

starts

approach

being "real" is the

first

the second is in the

countries priced

in

terms

of that

currency.

of the relative in terms

Miltiplying

monetary

approach

example,

that

monetary

fixed,

of

in

the rest

of tradables, and

nontradables.1±

goods and

a measure

services

priced

and

through

flows

from a

essentially

the extent,

for

generated

a more rapid

rate

of inflation

in

the

world!

of nontradables

to

move

account

this

could

or transfers,

and

yet

the

exchange rate

in Ghana rose more rapidly

consumers

current since

is derived

To

of

producers

circumstances,

theory

adiustment.

causing

The

capital

provides

of payments

expansion

the prices

tradables

power over

power parity

to balance

Ghana than existed

together

currency.

The pu.rchasing

the prices

two ratios

change in purchasing

of a single

remained

these

to shift

in

towards

the direction into

moved not

than

the consumption

of producing

deficit

under

more these

be sustained

over

the

long run

exchange

rate

was

not cne

the existing

of equilibrium. In the no structLtrJl

changes,

equilibrium

throuLgh

some

crombination

absolute

level

of prices

that

would

expansion that

have

government

absence of

offset

and inflation.

woLld have adiusted,

of

in the a

price

or trade

long

movement

in

in Ghana, compared with the

original

Regardless however,

price

of whether

and assuming

rmn would have

been achieved

the exchange its

major

changes it

is

rate

trading

and in

the

partners,

caLsed by monetary the

the RER would have remained

I Nontradables are defined theoretically which, in the absence of government price the same as domestic currency are not most substitutes. In practice, of course, substitutes for services are not perfect between tradables and nontradables distinction

277

policy,

NER

or prices

the same.

as goods and services for or trade policy, prices in for their closest tradable locally produced goods and tradable products so that the becomes one of degree.

In Ghana's monetary avoid

and fiscal balance

policies

case, the major source of distortions policy,

of

accompanied

payments

were unimportant

government

to

variations

deficits.

until

clamp

dcwn

1961, on

btLt

the overall

exchange and

As

discussed

when

thru1st of

trade in

declining

imports.

in the pace of expansionary

controls,

by

was expansicnary

the text,

reserves

Thereafter

policies

to these

forced

Ghana

pressutres and these

controls

in the

the

experienced

intensity

of

continued

in the same

the

approach

direction. The base period 1957-59, scale.

before

these

The nominal

adiLtsted

for

,-4

and in

was

an

index

its

account index

induistrial

for

both

nominal exchange rates

2

includes

using

wholesale

exports

two

in

Unit

to developing

nominal

and real

the official

that

Annex

of

the

Value

(MUV) index 3

exchange

rates

market

The

products.

a second

of exports

by

presented

in

are

Comparing

of the cedi

World Bank:, Economic Analysis

278

and Projections

the two

became a

CFPI in

An alternative

of

partners

this

table

index was also

used, therefore, which is restricted to nonagricultural nontradables. the prices of all locally produced food products increased quite over the period studied, the two indices vary substantially. :

and the value

however,

rates.

nontradable

States

two trading

trade,

index

The first

total

total

overvaluation

3.

agricultural

indexes.

countries..

and black

suggests

consumer price

Since these

of Ghana's

on a substantial

in the United

share

is

from 19598to 1985 was

separate

prices

1972.

FFP

imiplemented

the period

country's

Manufacturing

From Table 3-5(1).

some tradable

were

(NER) for

partners

about one third

The resulting

of

Ghana Lusing the nontradable

market economies

Table 2-1

rate

by each

was the

application

policies

and

NEs

and

only

employed

in

weighted

imports for

exchange

trading

of

f.ingdom,

Ghana' s

trade

inflation

(CPI)

United

chosen for

Department.

Since rapidly

Table 2-1 Exchange Rates, 1958-85 (NC/$US) (a)

Nomainal Exchange Rate

Year 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1068 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

RealExchange Rate(d)

RealExchange Rate(e)

PriceIndices (1958=100)

Black 6hana NonAg OfficialMarket Official BlackMarket OfficialBlackMarketNonTradNonTradUS/UK (bl (c) (1) (2) (1) (2) (1) (2) (1) (2) CPI(f) CPI(9) WPI MUV(h) .71 .71 .71 .71 .71 .72 .71 .71 .70 .71 .71 .87 .71 .71 .68 .71 .56 .62 .71 .58 .58 .71 .65 .46 .71 2.13 .42 .84 1.67 .55 1.02 1.75 .58 1.02 1.75 .57 1.02 1.64 .58 1.03 1.75 .57 1.15 1.64 .62 1.15 1.49 .56 1.15 1.73 .56 1.15 1.99 .50 1.15 2.91 .31 1.15 9.20 .14 1.51 8.96 .14 2.75 15.56 .19 2.75 15.97 .15 2.75 26.25 .07 2.75 61.67 .06 3.45 76.58 .03 35.34 135.00 .22 54.05 160.00 .35

.71 .70 .70 .70 .68 .61 .56 .44 .40 .53 .60 .59 .60 .58 .64 .63 .65 .56 .36 .17 .16 .21 .15 .07 .06 .03 .23 .34

.71 .72 .70 .87 .68 .49 .47 .43 1.24 1.09 1.01 .97 .92 .97 .88 .73 .85 .86 .78 1.15 .82 1.06 .89 .70 1.24 .63 .83 1.03

.71 .70 .70 .70 .68 .48 .46 .41 1.20 1.06 1.03 1.01 .97 .99 .91 .81 .97 .96 .90 1.38 .93 1.16 .86 .68 1.25 .65 .88 1.00

279

.71 .72 .70 .87 .68 .58 .55 .52 .47 .56 .61 .60 .61 .65 .69 .65 .62 .57 .43 .32 .32 .43 .37 .19 .15 .09 .50 .61

.71 .70 .70 .70 .68 .57 .54 .50 .45 .55 .62 .63 .63 .66 .72 .72 .72 .64 .50 .39 .36 .48 .36 .18 .15 .09 .53 .60

.71 .72 .70 .87 .68 .45 .45 .48 1.41 1.11 1.05 1.04 .97 1.11 .99 .84 .93 .99 1.09 2.60 1.90 2.46 2.14 1.79 3.36 2.03 1.92 1.82

.71 .70 .70 .70 .68 .44 .44 .46 1.35 1.08 1.07 1.07 1.02 1.12 1.02 .94 1.07 1.11 1.27 3.11 2.15 2.70 2.06 1.74 3.38 2.10 2.02 1.77

100 100 100 100 100 100 103 103 101 104 104 127 110 110 104 120 129 105 132 138 107 170 150 110 194 171 113 173 170 113 186 179 107 200 188 111 208 197 117 229 202 127 253 225 136 299 259 146 352 319 173 455 396 197 721 513 193 1634 726 205 2728 1179 250 4279 1848 292 6491 2704 364 13584 5307 361 17207 6349 346 39795 12339 327 51153 22246 316 53547 30224 343

100 99 101 102 104 102 105 105 109 110 109 115 122 129 140 163 198 220 224 246 2B2 320 35i 353 348 339 333 335

Notesto Table2-1: (a)Source is IMF,International Financial Statistics, except whereotherwise noted. (b)Theaverage official exchange ratesin1972and1973wereactually NC1.32/US$ andNC respectively, rather thantheNC 1.151US5 indicated here, because of thedollar's de vis-a-vis goldonFebruary 13,1973.During thisperiod, however, thegoldcontent Cedi washeldconstant. (c)Source isPick's Currency Yearbook, various issues, for1958-83 andWorldBank, 6hana: Irrigation Sector Review, for1984; Economist, 1985Summary, for1985. (d)Nominal exchange ratedivided bythe6hananontradable CPI(1958=100) andmultiplied b (1)a weighted average of theU.S.WPIindexandtheU.K.#PIindex multiplied times rate,withweights equaltotheshares oftheU.S.andtheU.K.intotaltrade i (2)theManufacturing UnitValue(MUYV index of exports by industrial market economi developing countries. le)Nominal exchange ratedivided bythe6hananonagricultural, nontradable CPI(1958=100) (1)a weighted average of theU.S.WPIindex andtheU.K.WP index multiplied tises rate, withweights equaltotheshares oftheU.S.andtheU.K.in totaltrade i (2) theManufacturing UnitValue(MUV) index of exports byindustrial market economi developing countries. (f)CPIfornontradables (1958=100) fromAnnex3,Table3-5(1). (g)CPIfornonagricultural nontradables (1958=100) fromAnnex3, Table 3-5(1)3. (h)Source isWorldBank, Economic Analysis andProjection Departeent.

280

problem in

Ghana for

exchange controls market rate

time at the end of the Nkrtuitah regime, when

were for the

first

dropped somewhat after

and the official difference

the first

rate

between the two

finally

trade

rate.

effect,

several

in the

black market

official

when the

the two

Afterwards

repeated adjustments

in the official

in the face of inflationary

and exchange controls.

Thereafter,

as

The distortion

the Economic Recovery Program was placed in

large devalutatlicris were announced and the rate slowed.

Ey 1985 it

pace of increase

was less than three times the

exchange rate. The importance of inflationary

divergence

in

exchange rates

in Ghana and its official

trading

exchange rate,

some short-term

the rising

fluctuations,the

premium,

in

the

value face

increase in the price more of

an

with the fact of foreign of

increasing

of nontradables

indication

of

Ghana causing this

by relative

in a drastic 19B4.

long-term

when deflated

is consistent scarcity

results

at least up until

in

have been very strong.

the exchange rate

partners

is upwards, especially This

pressures

appears to

which index is used, deflating

CPI.

in 1973,

reached a peak in 1982, when the black market rate was 22 times the

official

rate

even

rate.

rose very rapidly

quantitative

The black

minimum, the black market rate

the official

despite

enforced.

as the import program was expanded

Nevertheless,

higher than

as the black marhet rate and

strongly

rates was at a

rates began to diverge sharply,

pressures

this,

was increased.

was almost ta) percent

rate,

time

Cln the

trend in

No matter

price

decline

in the real

other hand, despite the real black market

by the nonagricultural

nontradable

that the black market rate reflects

exchange, and restrictions relative

perhaps also on imports,

to the price

the risk

whereas the

of tradables

changes in the free trade eqLlilibriLun

281

changes

is

exchange

rate.

It

with

also

suggests

the maintenance

through

of

trade

trade

absence of policy and

service, equilibrium,

exchange

capital

MR.

The

of

necessary

a great

deal

is the exchange rate

that

trade

taxes

on imports

can

include

For

the

flows

and

to be equal

or

account net

be

subsidies,

and foreign would

flows

exchange

must

sustainable

price

exchange. be balanced

of capital,

rate

to

autonomous

consistent

in the

with

debt

be

one of

rather

than

the country's

structLire. that

and transfers, same

is

trtLe

there

are fundamental

there

must be corresponding

if

there

economy, such as those associated terms

exchange rate

explains

exchange

the current

market

these

To the extent debt service,

that

transfers.

and mLtstbe

as

restrictions imply

however,

accorimodating

such

quantitative

foreign

exchange rate

and sutpply of foreign

distortions

and unrequited

overall

official

coupled

the Ghanaian economy.

equilibrium

does not necessarily the

inflexible

power parity,

and exchange controls, into

woxuld cause the demand for

since

of purchasing

ExchanQe Rate

The free

This

theory

relatively

introduced

EquLilibrium

controls,

the

a

the use of direct

of the distortions

The

that

trade,

since

with

these

to achieve

equLilibriLm

Over

period

are structural

can

rising

per

in

be expected

changes

in capital adjustments

changes capita to alter

flows, in

the

in the domestic

income,

or in

the

the exchange rate

the absence of government

price

or

trade

policy.

current

acconlt

the deficit

was

1957-1959, nil.

In

changes in foreign exchange reserves.

282

as

seen

addition,

in Table 2-2, the average there

were

virtually no

This suiggeststhat the balance of

Table 2-2 Balance ofPayments Current Account (a) (millions 5US)

Year 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Current Real AccountPrice of Imports Other Total Exports Other Total CreditCocoaCe) FOB Debit(b) Debit(c) FOB Credit CreditBalance (d) ($/kg) (1) (2) (3) (4) (5) (6) (7) (8) 250 219 299 348 388 310 337 322 439 321 265 265 295 375 368 223 372 798 651 690 860 780 803 908 954 589 500 533 669

41 40 37 81 80 73 78 75 94 77 119 120 146 167 167 125 168 234 272 305 298 321 318 355 381 316 224 280 284

290 259 336 429 468 383 415 396 533 398 384 385 441 543 535 348 540 1,032 922

995 1,159 1,102 1,121 1,264 1,336 905 724 813 952

261 300 316 334 333 320 307 321 321 280 284 304 345 427 335 384 585 679 801 779 890) 893 1,066 1,104 711 607 439 566 632

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 31 37 47 50 55 59 69 68 94 115 131 105 99 110 121 107 39 46 44

N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 315 342 392 477 389 443 654 747 895 894 1,020 997 1,165 1,213 832 714 478 612 676

-29 41 -19 -95 -135 -63 -108 -75 -212 -118 -69 -43 -49 -66 -146 95 114 -286 -27 -101 -138 -104 43 -50 -504 -191 -247 -201 -276

2.39 3.08 2.70 2.13 1.74 1.69 2.01 1.79 1.30 1.74 1.96 2.54 3.15 2.14 1.56 1.72 2.51 2.78 1.94 3.13 5.38 4.10 3.58 2.60 2.07 1.76 2.20 2.53 2.36

Notesto Table 2-2: noted. Statistics, except where otherwise isIMF,International Financial (a)Source (b)1957-66 Other Debitfigures areactually netofOtherDebitandOther Credit forthatperiod. (c)Column (1)pluscolumn (2). (3). iscolumn (4)minuscolumn balance (d)For1957to1966credit (3). iscolumn (6)sinuscolumn balance For1967to1985credit CocoaOrganization average dailypriceinNewYorkandLondon deflated by (e)International Trade and (1980 constant $),froaWorldBank,Commodity Manufacturing UnitValueIndex, Bank,PriceProspects forMajor 1985, p.44,andWorld Price Trends, 1985, Washington: pp.31, 34. andImplications, Primary Commodities, Vol.I:Summary 283

payments was

in eqLlilibriLVn

approximation

for the

at that time and that the NER was a reasonable

EER except

for

the

possible

influence

of policy

distortions. Ghana's exports

in 1957-1959

were subject

percent of the average FOB value of exports. on cocoa,

the average

4

to taxes equal all

Almost

tax rate on other exports

these

the time were relatively highs especially in

covered

variable

1957-1959 quite

the

market

costs,

It is

price

for

percent.

This and

withoLut the

averaged $2.kY)/kg.

producer

import

resulted

' J. Clark Ghana, New York:

earlier

prices

to

at that

when

aro.rnd

those that

the time

clearly

were producing

producer

the average

side,

remained in

a

The

reasonably lower EER

level

required

lang-run

a

affecting

cocoa and was not adversely

rate

tariffs.

in cocoa trees

or more years

market prices at

relation

prodLtcer prices

The

prices

in were

reasonable to argues therefore! that the export tax was

to stabilize

On the

i93:s

and investment

had been made six

high.

operating

In any case,

1960s.6

taxes were

being only 2 percent.

tax on cocoa was not very bLurdensome,however, since world

characterized

to 25

tariff

constant

production. rate

over

of imports to

average world

achieve

in

the

1957-1999 last

than wculd balance

half

was 17 of

the

have existed of payments

Leith, Foreign Trade Recimes and Economic Development: Press, 1974, p. 13. Columbia University

price of cocoa in 1957-58 As shown in Table 2-2w the world market in 1960-69 it averaged in real terms (19W) prices); $2.72/kg

284

equilibrium

in

the

long

removed * can be estimated

if

these

import

tariffs

were to have been

from'

E*ao

where

run,

~~~~~~E

+ 4oQ

E* is

the

equilibrium

E

is

the

nominal

exchange

t.. is

the

average

rate

exchange

rate

r-ate;

of tariff,

or tariff

equivalents

on

foreign

exchange;

imports; is

Ghana's

price

elasticity

of denand

for

C, is

Ghana's

price

elasticity

of sutpply

of foreign

?,

is

2',

The demand elasticity £,

is

exclusive

assumed of

to

the effect

The resulting of

.71 Ne/$US.

EER is

equal

assumed C.6,

of prices

the

to equal long-run

2.0:). elasticity

on new plantings,

.80 N2!/$US, compared

The

with

exchange.

sLupply elasticity estimated

as described the official

rate

for

cocoa

in Annex 4. in 1957-59

7

that there is Appendix assuming (A.1) in the , Derived from equation account deficit and that the export tax does not have no existing current (1) does Equation allocation of resources. on the any long run effect are influ rnced in the long run by a change in assume, however, that exports the exchange rate as long as this change is passed on to producers. crude estimates of the elasticities of demand for ' These relatively sake only. The and supply of foreign exchange are used here for comparison the equilibrium exchange rate, described more sophisticated'estimate of and noncocoa exports, later in this annex, takes into account new plantings functions. The estimated demand and supply and is based on econometrically with the more sophisticated model is .8B, compared EER for 1958 estimated with this cruder approximation of .90.

285

During fluctLuated

the

greatly

financed

years

from year

a decline

by

since

in

1957-1999,

to year.

In

the cLtrrent

reserves

the

to

offset

deficits

largely short-term

during

the

program

stabilization.

a result

of booming cocoa prices,

Deficits

were

frequent

sutrpluses

elsewhere.

again

the

but

cn trade the

account

situation

was resulting This

inflows

in return

for

policy

reform,

would have

had only

a minor

the

therefore,

period

that

under

result

of

terms

policy

in

were debt.

aid was received

Ghana

to achieve

exchange rate of trade

induced

or

the

than

It

In

1980s, with by deficits

by both Ghanaians launching for

is

significant were

foreign delayed

exchange rate

account influenced

of cocoa..

the

balance

balance. by struLctural

economy that

Ghana s case,

movement in the price

in

at

and

to assume,

to 1985 was one in which

also

and its

of the Economic

r-easonable

the current is

as well.

offset

but disbursements

in the domestic

distortions.

example would be a long-term

more

on the equilibrium

with

short-lived

1970s and early

program called

from 1957-1959

was defined

The equilibrium the

impact

was

believed

consideration.

the period

of payments equilibrium

changes in

helping

period

being

1962.

of

at

the late

late

end

has

196C0sand early 1970s, but this was

this

in

aid

deficits

Ghana s foreign

Some foreign

aimed

norm during

to be unsustainable,

Recovery Program

1960s

balance

In 1972 and 1973, Ghana enjoyed large surplUses as

Again

creditors

late

support

economic

early

and by increasing

Neither of these practices was sustainable.

account

are not

the

the most obvious lthoLigh cocoa

is notoriously subject to long cyclical price changes, it is very difficult, from

the

trend

in its

the

industrial

historical data

shown

in Table 2-2w to discern any significant

world price deflated by the countries.

286

Manufacturing

Unit

Value index of

to 1985, its

value

estimates

of

both official

RER,

2-i

in Table

the NER

with

2-3.

from this

less

rn- increased

of

series

shown in Table 2-1.

market,

used to adjust exchange

equilibrium

nominal

can

which

approach,

Fff

the

with

compared

same indexes

by the

that

table

be compared

market

over

rate

the equilibrium

than the black

rapidly

mLuchgreater

but at a

rate

longer

the

rate.

the official

pace than

a the

using

be

from

the nominal official and black market rates, as shown in Table

is clear

It

obtain

to

rates (NEER), estimated directly

and black

the EER can be adjusted

Alternatively,

EER was constant

the

.9@3 NV/$US may

of

1957-1959

the

that

reasons,

these

for

Assiu1ing,

Elasticities Approach The purchasing exchange

rate

power parity on

concentrates

the

and nontradable

goods

response

to inflationary

pressures.

on the

hand, focuses exchange stpply

foreign

of

acccLunt

that

rate

and

all

approach,

It

the

the

in

prices

of

time

in

on the other in the

change

the demand for in

unsLsstainable inbalances

if

distortions

estimates to equate

prices

change over

as these

necessary

wouLtd be

the

between

The elasticities

sector.

tradables

exchange

relationship

and services

tradable

the equilibrium

to estimating

approach

and the

the current

goods were to be

of tradable

removed. definition

This is

equilibrium

maintained

the in

equilibrium the

face

by movements in the exchange rate

conditions allowing

of

foreign

to stabilize

exchange reserves

the foreign

This

that

rate

changing

demand and supply

alone

to fluctuate

exchange market.

287

of

implies

exchange

and not or using

is especially

by the government commercial important

policy for

Table 2-3 NominalExchange RatesandNosinal PurchasingPowerParity Equilibrium Rates (NC/MUS)

PriceIndices (1958100)

Year 1_56 1958 1959

1960 1961 1962 1963 1964 1965 1966 1967 1068 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1992 1983 1984 1985

Nominal Exchange Rate Equilibrium lb) ----------------------------------Black Official Market (1) (2) .71 -8.80 .71 .71 .80 .80 .71 .71 .BO .81 .71 .71 .81 .82 .71 .71 .66 .81 .71 .71 .84 .85 .71 .56 .92 .94 .71 .58 .99 1.02 .71 .65 1.24 1.29 .71 2.13 1.37 1.43 .84 1.67 1.23 1.26 1.02 1.75 1.40 1.37 1.02 1.75 1.45 1.39 1.02 1.64 1.42 1.36 1.03 1.75 1.45 1.42 1.15 1.64 1.50 1.45 1.15 1.49 1.64 1.47 1.15 1.73 1.64 1.42 1.15 1.99 1.85 1.66 1.15 2.91 3.00 2.59 1.15 9.20 6.40 5.34 1.51 8.96 8.75 7.76 2.75 15.56 11.78 10.74 2.75 15.87 14.30 14.85 2.75 26.25 30.17 30.93 2.75 61.67 39.94 39.74 3.45 76.58 97.76 94.38 35.34 135.00 130.16 123.49 54.05 160.00 125.19 128.32

Equilibrium (c) -------------(1)

-80 _7.80 .80 .81 .66 .84 .99 1.03 1.10 1.21 1.20 1.34 1.36 1.35 1.27 1.33 1.42 1.48 1.61 2.14 2.84 3.78 5.09 5.96 11.79 14.74 30.31 56.61 70.66

(2) .8.80 .81 .82 .81 .85 1.01 1.06 1.15 1.26 1.24 1.31 1.31 1.29 1.25 1.29 1.29 1.29 1.44 1.84 2.37 3.35 4.64 6.19 12.08 14.66 29.26 53.70 72.43

Ghana Ghana NonAg NonTrad NonTrad US/UK CPI (d) CPI (e) IPI HUV(f) 100 100 100 100 100 100 100 100 100 100 100 99 103 103 101 101 104 104 127 102 110 110 104 104 120 129 105 102 132 138 107 105 170 150 110 105 194 171 113 109 173 170 113 110 186 179 107 109 200 188 111 115 208 197 117 122 229 202 127 129 253 225 136 140 299 259 146 163 3.52 319 173 198 455 396 197 220 721 513 193 224 1634 726 205 246 2728 1179 250 282 4279 1848 292 320 6491 2704 364 351 13584 5307 361 353 17207 6349 346 348 39795 12339 327 339 51153 22246 316 333 53547 30224 343 335

Notesto Table 2-3i (a)FromTable2-1. (b) Equilibria exchange rate in 1958of .803 multiplied by (1) the ratio of the nontradableCPIfor6hanato the index of wholesaleprices forthe USand UKderived in Table 2-1. (2) the ratio of the nontradableCPIfor 6hanato the MUVindex of industrial countries shownin Table 2-1. (c)Equilibrium exchangerate in 1958of .803 multiplied by (1) the ratio of the nonagricultural,nontradableCPI for Ghanato the index of wholesaleprices for the USandUKderived in Table 2-1. (2) the ratio of the nonagricultural, nontradableCPI for Ghanato the MUYindex of industrial countries shownin Table 2-1. (d)6hanaNon-Tradable CPI,fromTable3-5(1), Annex3. (e) GhanaNon-Agricultural, Non-Tradable CPI,from Table3-S(1), Annex3. (f)Manufacturing UnitValue Index, (1958constant S), fromWorldDank,Commodity Tradeand PriceTrends, 1985, Washington:1985, p.44,andWorldDank,PriceProspectsfor Major PrimaryCommodities, Vol. I: Summary and lplications, pp.31, 34. 288

such as Ghana that

a country

subject to large Cocoa

Eoard

was

upon an exportedconmodity The

supply and world market prices.

in domestic

variations

Marketing

dependent

is highly

in fact, principallyto stabilize

established$

so as to avoid resources being continually

prices and incomes to producers

reallocatedon the basis of short-term market considerations.Similarly, to

the Ghanaiangovernmenthas over the

years

attempted

exchange reserves

wildly

fluctuating

The distinguish

as a buffer

against

of

course,

problem, between

policies,

current

stabilization

function,

cutrse, prices

role

in

raising

to establish of tradable

that

tax on cocoa,

that

are not.

for example,

has for revenue.

government

it

is

The

gcods might fluctuate

conmercial

Cocoa Marketing

is

for

Board's

been overshadowed possible,

always account

balance

of

or the

the equilibrium

withcLtt influencing and

exchange rate, but this woltld be fairly arbitrary

to

are maintained

many years It

difficult and

that

which the current

a range within

very

foreign

revenues.

export

deficits/surpluses

export

and those

purposes

by its

accoLnt

such as the effective

stabilization

is

its

use

the basis

for

establishingthe range would be disputable. It seems preferable,therefore, to estimate the equilibriLmexchangerate by correctingthe actual exchange rate for all

unisustainable current

account

imbalances

and distortions

in the

from year prices of tradablegoods, but to avoid drawing policy concluLsions to year changes in the equilibriumrate. for estimating The foraLila

the equilibrium

exchange

rate using the

elasticityapproach, where these elasticitiesare defined with respectto the distorted

economy, is given

See the Appendix to this S

by'

annex for the derivation

289

of this

equation.

(M-X) + XE.

+g

E*

)E* Xi, 1-t.

where

is the demand for

X

is the supply

t.

is the tax

and "total

for

and

credits",

The elasticities

period

prices

adjuisted

border

prices

average agriculture

of foreign

industry

Foreign

accoLnt;

for

of

of domestic

in

assLumed earlier.

above the

qutota

1972 and 1985 only.3

1972 was

Trade Reaimes ...

from

(domestic 1.60;

,

Leith

for

controls levels

in

of

premium created

and border

coefficient

debits,"

from Table 2-2.

of import

rose the

account

available

imposition

importables

com,parisons

protection

Leith,

the

becautse

nominal

is

t,-

With

of

available

and

of the current

on imports,

are

account;

exchange M and X, are "total

retain the same values

1957 to 1971.9

Direct

exchange on current

respectively,

domestic

exchange on current

on exports.

supply

however,

importables

foreign

E, and 7.

from

scarcity.

foreign

of

rate

The tax rate

9

l+tl.

M

The demand

)

Mfl

prices 0

for

1961,

the tax by import

manufactured

They sLugest

price/border

the

that

price)

in 1985, the comparable

the for

figure

p. 1 1 .

° Scott R. Pearson, Gerald C. Nelson.! and J.Dirck Stryker, "Incentives and Comparative Advantage in Ghanaian Industry and Agriculture," 1979, and P-E International Operations Ltd in Association with Thomas W. Allen & Associates Ltd, Trade Liberalization and Incentives for IndLustr in Ghana, January 1966, Volume II, p. 109.

290

weighted

for a

average

of

industrial

prodLucts

was

h-owever,these coefficients are based on a sample of price may not

represent In

very

order

exchange controls 1960 was

to

extrapolated

for

tradable

(2) the Manufacturing economies

to

over

Unit Value

cassava and yamns, but the of tradable foods.

because, as noted above, the two give covers

a br-oader spectrum Leith'

this

the

tariff

since

they

after

which

s import equivalent

the difference

for

of two indexes,

in Annex 3) and

the official

nontradable

closely back

The Manufacturing

Uhit

average very

of wholesale

similar

were used

rates

calculated the actual

results

market exchange

fcods,

category

rates

r-ose to more than double

and

of 17 percent

by industrial

have moved very

of Ghana's trading tax

rate

times

available by

index was used rather than the weighted

when import

rate

of exports

inclLtdes

index was used for 1956-62.

the overall

that

goods.

(see Table 3-5(1))

of these

The CPI is only

comparisons

by the ratio

multiplied

Ghana

case,

average of Ghana' s Consumer Price

(MUV) index

coiuntries

prices

tariff

by mu(ltiplying

of goods

for

equivalent the

(1) a weighted

categories

CPI

tax

therefore,

time

1972:

range of traded

the

estimate

developing

The tradable

rate.

the entire

were binding,

each set to base year Index

well

In each

1 .53.1L

such as with

those

to 1963, so Value

(MIJ)

price indexes

and the MUV index

partners. for

the

years

rates

between the two narrowed

After

above were Lised

as described tax

19586-6).

in

1965 and 1966,

considerably

under

the

the unweighted average '1 The figure for 1972 of 1.60 is the mean of with and the weighted average of 1.51 for industry, of 1.37 for agriculture sample, multiplied the industrial the weights being the output of firms in this coefficient the exchange rate used to calculate times the ratio of 1. 15/SUS). The rate used here (N (NV 1 .2E/*US) to the 1972 exchange proportions of these average reflects quite well the relative uinweighted Daring 1970-72, consumer goods imports in the early 1970s. sectors in total World 48 percent of total consumer goods imports. food products constituted Adjustment, October 7, 1985, Vol II, p.22. Bank, Ghana: Towards Structural

291

new govemaent's liberalization policies. Beginningabout 19764 however, increasingovervaluationof the cedi resultedin a strong upward movement in the tariff equivalent 1985.

that was checked only by devaluaticn

rate

The. estimated value

percent. years,

of the

tariff

Given the enormous distortions it

is encouraging that this

equivalent

rate

rate

in

is not too far

from the

observed tariff

which is not the result

be considerably

the

basis

of

Other exports

producer

were subject

which was ever greater

prices, to a

marketing board costs,

variety

than 2)

exports

cocoa and other two

and

normally

decreasing

real

value

Table using

the

of

This

from

Amnex 3

and FOB prices.

taxes and subsidies,

An assumed average ffLch in

error.

none of

tax

rate

of

The average tax

as a weighted average of the rates on

average

fluctuation

rate

between

was

positive

in

10

and

of

the equilibrium

34

all

percent

years

despite

but the

of the cedi.

2-4 shows the

elasticity

overvaluation degree

was estimated

exports.

of

percent.

zero on these exports is probably not too rate on total

of a random

in error.

The average tax rate on cocoa exports was calculated on

1985 is 216

that have occurred over the past 25

in 1985 of 53 percent,

sample and may therefore

equivalent

in 1984 and

estimation

approach.

of the exchange rate, overvaluation

is

approach. One reason for this

much

The

results

especially less

suggest

after

than

is that equation

that

the

exchange rate a

substantial

mid-1970s,

indicated

(2) is valid

using

only

but

the

the FFP

for small

movements away from the distorted sitLuation. DisequilibriLmin Ghana, however,has been enormousand clearly violatesthis assumption. One way of handling this

problem

is to

estimate

the equilibrium

exchangerate at the mid-pointbetween the distortedand Lndistorted

292

Table 2-4 Estimation of the Equilibriue Exchange Rate Using the Elasticities Approach

Year 1958 1959 1960 1961 1962 1903 1964 1965 1966 1967 1968 1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Current Account ----------------------Debit (a) Credit (a) ueill tUS) (milllSS) (1) (2) 259 336 429 408 383 415 396 533 398 384 385 441 543 535 348 540 1032 922 995 1159 1102 1121 1264 1336 905 818 N/A N/A

300 316 334 333 320 307 321 321 280 315 342 392 477 389 443 654 747 895 894 1020 997 1165 1213 832 714 507 N/A N/A

Import Tax Export Tax Nominal Tradable "UV Equivalent Rate on Total Exports of Official CPI(b) Index(c) Rate (d) Cocoa(e) Exports (f)Cocoa(f) Export Tax ExchangeRate 11972=100)(19721001 3() (5) (mill NC) (sill NC) Rate (g) (NC/SUS) (hi (3) (4) (5I (6) (7) (8) (91 (10) 39 39 40 40 43 46 51 67 76 68 74 80 63 91 100 120 140 184 299 686 1206 1856 2802 6199 7616 17406 23085 24117

44 44 45 45 46 45 46 47 48 57 69 73 77 82 100 116 141 157 159 175 265 545 598 601 593 724 7282 NIA

le 15 17 19 35 47 8a 109 58 42 45 43 48 32 36 32 55 149 419 502 350 520 1264 1599 3080 319 N/A

50 41 24 19 23 31 18 12 32 47 56 59 42 45 38 SO 52 36 59 39 60 33 -20 -244 25 22 11 7

209 226 232 230 230 218 229 227 191 245 339 333 467 496 565 730 840 928 951 1166 1581 2737 3458 2924 2402 6999 N/A N/A

125 138 133 139 134 136 136 137 103 131 186 221 300 204 291 397 466 551 516 680 988 1846 1942 1091 1053 3989 N/A N/A

30 25 14 11 13 19 11 7 17 25 31 39 27 19 20 27 29 21 32 23 37 22 -11 -91 11 13 N/A N/A

Notesto Table 2-4: (a)Froe Table 2-2; credit figures for1958-1966are export earnings, FOB. (b) FromTable 3-5(11. (c) NanufacturingUnit Value Index multiplied by the NominalOfficial ExchangeRate, from Table 2-1, and set at base year 1972 100. (dl Sourcefor1958-1961is J. Clark Leith, Foreign TradeRegisesand Economic Development:Ghana,NewYork: ColumbiaUniversity Press, 1974, p1i. For other years, the rate for 1972wasadjusted by the ratio of coluen (3) to column(4). Therate for1972was taken froe Scott R. Pearson,Gerald C. Nelson, and J. Dirck Stryker, 'Incentives and ComparativeAdvantagein Ghananian Industry and Agriculture', 1979. (e) Calculated as I - (RenderedPort Price of Cocoa/FOB Price of Cocoa)times 100. TheRenderedPort Price of Cocoais fromTable 3-3(2), the FOBPrice of Cocoais fromTable 3-4(3). (f)International MonetaryFund, International Financial Statistics Yearbook1985, pp.310-311. (g)A weightedaverageof the export taxrate on cocoain column(6) and of zero for other exports, where the weights are the value of cocoa and of other exports calculated fromcolumns(7) and (8). lh) Fros Table 2-1. (xlCalculated fromequation (9) using the following elasticities: demand2.0, supply 0.6. (j) Calculated as described in the Annex2.

293

.71 .71 .71 .71 .71 .71 .71 .71 .71 .84 1.02 1.02 1.02 1.03 1.15 1.15 1.15 1.15 1.15 1.15 1.51 2.75 2.75 2.75 2.75 3.45 35.34 54.05

Equilibrium Exchange Rate ---------------------------Distorted(i) Nid-pointli) (NC/$US) (NC/3USI (11) (12) .67 .75 .85 .89 .86 .94 1.00 1.35 1.31 1.17 1.24 1.19 1.27 1.48 1.16 1.17 1.46 1.48 1.90 2.85 3.32 5.70 8.56 22.11 11.37 19.45 N/A N/A

.70 .76 .85 .92 .88 .99 1.05 1.45 1.44 1.26 1.34 1.32 1.36 1.56 1.28 1.31 1.54 1.60 2.33 4.42 6.33 8.82 12.58 31.59 31.90 79.13 N/A N/A

situation case,

assuming involves

iterative

a

a very

The details

by the EER calculated

period.

The market

of this

mid-point

using

estimate

that

calculation

for E*, in this

requires are

the use of an

explained

in

the

situation as

stbstantially

the base

less

than the

r-ate.

The elasticity

and suLpply of used

that

foreign was

that

suffers

from

the weakness of its

it does not capture the complexity exchange

to

in Ghana.

estimate

data and to solve

exchange rate

Exchange Rate MDdel

approach

base and from the fact

time-series

the end of the period than

the distorted is generally

EqUilibrium

approach

equation

was sutbstantially higher towards

indicated

for

Solving

The results, presented in Table 2-4, suggest that the equilibrium

exchange rate

black

elasticity.

complex qLtadratic

process.

Appendix.

arc

constant

the

functions

resulting

system

wcould have prevailed

if

of the demand

Consequently,

these

empirical

an alternative

econometrically of

from

equations

the

had existed

and

no distortions

for

the current account had been in balance each year.

Import Demand FLnction The demand for of

tradables

relative

imports to

in Ghana is related

that

of

imports have been highly controlled domestic price the level of demand.

In

of tradables imports,

that

addition, the

to the

domestic

nontradablees and to real GDF. in

Ghana,

lowever,

it

has

price Since

been the

relative to

that of nontradables, rather than

has

in

varied

response

to

changing import

domestic production of foodstuffs, as influenced

294

an the demand

influence

factors, has had an important

and other

by weather

for imports.

data

was

equation

demand

import

The following

annual

using

estimated

from 1963 to 19873.

Pt

Y 2.321 In PF^ (.26:))

M - .6C4 In (.211)

4.=23 (1.845)

ln PF,,

R

+

P.

-

2.

372 ln

...(3)

( 503)

D.W. = 1.495

= .84

where P, is the domestic price of tradables (Table 3-5(1)) Pot

is the domestic price of nontradables (Table 3-5(1))

M

is the dollar value of cUrrent accoitntdebits

P.

is the Manufacturing LUnitValue index (Table 2-1)

Y

is GDP (Economic Pialysis and F'rojectionsDepartment, World Bank)

Q0, is

-an

(Table 2-2)

index of food producticon(Table 7) The implicit

The coefficienits of this equation are all highly significant. elasticity of demand for imports

is

is

which

1.85,

quite

close

to the

elasticity cf 2 assLutedearlier.

Exoort SLtpplyFunctions export

Two

Annex 4.

presented and discussed in current

include

the

market

price

and

the

trees. described

for

"normal" The in

last

functions were estimated.

supply

the quantity

level variable

the annex,

produced

production

of

is which

estimated takes

295

into

of

given using acccLnt

in the equation

variables the

previouLs year's

cocoa the

previoLus year,

of cocoa,

price

producer

official

maize,

Independent

That for cocoa is

stock

of cocoa

"vintage-matrix"

model

the existing a

the number of cocoa trees

of different

ages, their

yields over

which is partly a fLnction The exports. index in

Its

1972

as

quantities. other

export

incorporating price

sutpply fLinction is

the

index

for

The estimated

required

price

weights,

index

and

for

the

exports.

latter pr-ice

prices

the

for

published

domestic

nontradables,

for

index

price

sutbsidy

of gold.

the other

where X. is domestic

for

Adjustment

accounted to

national on cocoa., this

P^_

It

exports

and

is deflated

independent

by

by the

variable!

GDP.

P.,

...(4)

noncocoa exports,

and P. is

the

index

of

these exports.

Monopoly

Power

the

for

abouLt 40 percent world

on

timber

.94C) ln

(.229)

index for

At

influence

by adjLsting

D.W. = 1.73.9

the quantity of

by the 1972

GDP .-

.

.466

prices

prices

is PQ

=

prices

other

quantity

uses world

domestic

was derived

or

and

gold

of an export

The former

weights

tax.

as is

In XQ.= 7.716 + ..3-5) ln (.742) (.137)

R

timber,

the construction

The domestic

equation

the rate of new planting,

of price.

estimation

and a domestic

export and

second

time, and

beginning

prices

inccae, therefore! and the model of

of

the

period

of the world's through

its

cocoa trade export

Ghana shotuld have applied the equilibriLum

tax.

296

consideration,

Lnder

tax

and thus policy.

an

optimal

exchange rate

should

Ghana was able

To maximize export

tax

incorporate

If

it

cocoak* so that

can

its

to marginal

world

price

total

cost

tax

(t).,

rate

tax,

Ghana

on the world market

(OvfR) in turn!

is given by

... (5)

X.

is

Assuming

equal

Pd = P.

Dividing

of its

dX,

revenue,

is

revenue

revenue

all

the export

= Pw +

of cocoa.

marginal

Ghana exports

X0), ce moves nonlinearly farmer's

effort

approaches

As the

an

When PD

-

I--a

I_ o

I

cc

a~~~~~~~~~~~~~~~

.°-

e.o

8-2(2): Notes toTable for by thesumof thecoefficients FareIncome (10)divided (a)Actual by theirrespective andother(from Table8-41)),multiplied rice,maize, priceindices (froeTable8-4(1)). for bythesumof thecoefficients (11)divided FareIncome (b)Instantaneous by theirrespective multiplied Table8-4(11), rice, uize, andother(from Table8-4(1)). price indicn (from for by thesumof thecoefficients FareIncome(12)divided (c) Short-Run by theirrespective multiplied rice,uize,andothertfromTable8-4(1M), priceindices IfroeTable8-4(1)). for (13)divided by thesumof thecoefficients FarmIncome (d)Long-Run multiplied by theirrespective rice,maize, andother(from Table8-4(l)) priceindices (fromTable8-4(1)). RiceProducer PricefromAnnexTable3-3(1). (e}Actual (fJProducer PriceEquivalent of RiceIEER)fromAnnexTable3-4(1). paddytorice. multiplied by .65to convert RiceProduction fromAnnexTable1-2(1), Ig)Actual by .65toconvert fromTable23,multiplied RiceProduction (h)Short-Run TotalEquilibrium paddyto rice. (i)Long-Run TotalEquilibrium RiceProduction fromTable24,multiplied by .65toconvert paddyto rice. Production in thegiven (0) FareIncose is6.11multiplied by theratioof Actual Price(5).9.4at is in1956andby theActual Producer yeartoActual Production farmin 1973timesthe 25.358 et produced on a typical obtained by multiplying Production in1973,andby .65to ratioof Actual Production in 1956toActual convert paddytorice. (k)FareIncome is 6.11multiplied bytheratioofActual Production inthegiven Producer Price(6). yeartoActual Production in 1956andby theTotalEquilibrium (1)FareIncome is 6.11multiplied bytheratioofShort-Run Equilibrium Production (9)in thegivenyear Producer Price(6). in1956andbytheTotalEquilibrium Production Equilibrium (Table 20)to Short-Run (s)FarmIncome is 6.11multiplied by theratioof Long-Run Equilibrium Production (9)in thegivenyear (Table 21)toLong-Run Equilibrium Production in1956andby theTotalEquilibrium Producer Price(6).

353

it

-

:

-

-

-

-

--

-i-

a

o

w0

-

!9 Z Z-Z Z- 9 - -

-

-

-

°i -

-

w

5i

-

0.0s55u..C

Ca

-

_s

jj

505*

Z

Z:T~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i -

i_

,~~~~~~~~~~~~~~

i

i~~~~~~~~~~~~~~I

veve

r

Cwo

----

-----

--

~ ~Z ~

oww*50 5.C ='~~~~!t

3

s

,

j

------

-

: -_*. i: i~~~~~~~~~~~~~~~~~~~~~~

i

w g w O w tw _ _ _ w _ _ _ _ _ gi _ii_i_~~~~~~~3

-

I i

-

-

o

--

m

a

~-om

m

viwo-ws.,-ss,-:-i:

-

_is--N3JSS II

M

40

N

--

:-

j_0

Notesto TableU-3(1)i (a)Actual FareIncom(101divided by thesumof thecoefficients for by theirrespective multiplied Table9-4(1)), andotherffrom rice,maize, (froe Table9-4(1)). priceindices (blInstantaneous FareIncome (11)divided by thesus of thecoefficients for multiplied by theirrespective rice,maize, andother(fromTable9-4(1)), priceindices (from Table6-4(111. (c)Short-Run FarmIncome(12)divided by thesumof thecoefficients for Table9-4(1)), multiplied by theirrespective rice, uize, andother(from priceindices (from Table8-4(1)). for FarmIncome (13)divided bythesumof thecoefficients (d)Long-Run rice,maize, andother(from Table9-4(l)) multiplied bytheirrespective Table9-4(1)). priceindices (from (e)Actual MaizeProducer PricefromAnnexTable3-3(1). (f)Producer PriceEquivalent of MaizefromAnnexTable3-4(2). fromAnnexTable1-2(1). (g) Actual MaizeProduction

fro&Table20. (h)Short-Run Direct Equilibrius MaizeProduction MaizeProduction fromTable21. li)Long-Run Direct Equilibrium ti)FareIncose is2.37multiplied by theratioofActual Production inthegiven yearto Actual Production in1956andbytheActual Producer Price(5).2.37at is farmin 1973ties theratioof obtained bymultiplying 6 at produced on a typical in1973. Actual Production in 1956to Actual Production (k)FareIncose is2.37multiplied by theratioof Actual Production inthegiven Equilibrium Producer Price(6). yeartoActual Production in1956andbytheDirect (I)FareIncoee is2.37multiplied by theratioof Short-Run Equilibrium Production (8)inthegivenyear Price(61. Producer Equilibrium in1956andby theDirect Production Equilibrium (Table 20)toShort-Run (91) inthegivenyear Equilibrium Production by theratioof Long-Run is 2.37multiplied (s)FareIncome (Table 21)toLong-Run Equilibrium Production in 1956andby theDirect Equilibrium Producer Price(6).

355

-

CC

I

~°~ s

CO

"C'

__

._fln_

3 __

_

_

_

_,

_

_

_

rC.4_

*

SCOW

__ 0_ ___on gg -- ° is

j,f

*

i o

Ca

t

jI_

o

w

naC._

D

-

_

@5

..-

_ _

C

I

~

C

jc_

C i