Ghana’s Cocoa Crisis: An Urgent Call for Agricultural Reform

Ghana’s Finance Minister Dr. Cassiel Ato Forson presented the 2025 Budget, highlighting severe challenges in the cocoa sector, including a 50% production decline and COCOBOD’s 32 billion Cedis debt. He pointed out revenue losses due to locked-in lower prices and emphasized the need for urgent reforms to ensure the sector’s sustainability.

On March 11, 2023, Ghana’s Finance Minister, Dr. Cassiel Ato Forson, presented the 2025 Budget and Economic Policy to Parliament, centered on the theme “Resetting Ghana for the economy we want.” He drew attention to the severe fiscal risks jeopardizing Ghana’s cocoa sector, stating that the debt of COCOBOD amounts to 32 billion Cedis. The Minister lamented the dire state of the cocoa sector, which has historically supported the economy, now faltering due to years of mismanagement despite soaring global prices.

Dr. Ato Forson also pointed out that cocoa production has plummeted by nearly 50% over the last three years. COCOBOD is currently unable to fulfill its contractual obligations for the 2023/2024 crop season, creating a shortfall of 330,000 tonnes. The Finance Minister noted that lower prices locked in by 2023/24 forward sales contracts have incurred revenue losses of approximately US$840 million, negatively impacting both COCOBOD and local farmers.

The Finance Minister outlined various financial challenges besetting the sector, including unsustainable debt levels and quasi-fiscal expenditures related to cocoa roads, which are categorized as a non-core function. COCOBOD’s liabilities are notably significant, with a total debt of GHC32 billion, including GHC11.92 billion due in 2025. The contracts for cocoa roads alone accounted for GHC21 billion (US$1.3 billion) in 2024, with only GHC4.4 billion reflected in the financial statements of COCOBOD.

Additionally, market price disparities threaten to exacerbate the crisis, as discrepancies between market prices and farmer payments have increased incidents of smuggling, raising concerns about the long-term viability of the cocoa industry. To mitigate these pressing issues, Dr. Ato Forson asserted the necessity for reforms to rectify fiscal risks and assure the sustainability of the sector.

In summary, the cocoa sector in Ghana confronts daunting challenges characterized by declining production, excessive debt, and mismanagement. The Finance Minister underscored the urgent need for reforms to correct these fiscal issues and secure the sector’s viability. Addressing these concerns will be essential for reviving the cocoa industry and supporting the broader agricultural economy in Ghana.

Original Source: www.gbcghanaonline.com