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24.01.2006 General News

Ghana Losing 6% GDP Annually

By Public Agenda

...Through Resource Depletion - World Bank Report About six percent of Ghana's Gross Domestic Product (GDP), an equivalent of $475 million is lost annually through overexploitation of natural resources, according to a restricted document released by the World Bank late last year. Currently, Ghana's GDP, which is, the total value of goods and services produced in the country is roughly estimated at $7.9 billion.

According to the report, about half of this figure comes from natural resources and natural resource related sectors, i.e. agriculture and livestock, forestry and wood processing, fisheries, electricity and water, and tourism.

These sectors respectively contribute about 29%, 6.5%, 4.0%, 3.0% and 5.0% to total GDP. Ghana's natural resource base, therefore, accounts for a vast portion of the country's economy and provides goods and services fundamental to rural and urban livelihoods.

The World Bank is however worried that with 6% of the nation's natural resources going waste, the current trend of economic growth of the country and the livelihoods of many Ghanaians will in future, become unsustainable, if the trend is not immediately halted, especially since, "economic development and rural livelihoods in Ghana are highly dependent on natural resources.'

The report notes that in Ghana, rural households rely on soil and other natural resources for their livelihoods, with fisheries and wildlife providing important sources of protein. The report says that urban economic activities rely on hydroelectric power and fuel, the wood processing industry, the main manufacturing sector in Ghana, depends on timber with the emerging tourism sector also relying on cultural and natural assets. Besides, natural resources are indispensable for most of the economic sectors of the country.

But with the continuing overexploitation, these natural assets are certain to continue to decline both, in quantity and quality, thus threatening future sustainability of livelihoods.

The dilemma however is that the report mentions sectors, which it acknowledges are considered key drivers of the economy as leading the resource depletion. It cites gold mining, cocoa farming and the wood industry as threatening the high forests and that the ensuing soil erosion would soon undermine food and agricultural production.

It notes though that natural resource depletion is interrelated and self perpetuating. That if there is scarcity of fish stocks, it would usually lead to increased pressure on wildlife. So would soil fertility losses often lead to forest clearing in search of productive land? The degrading of Lake Volta's environment too will increase the cost and reduce the quality of both water and power supplies to rural and urban populations.

Thus with economic activities and natural resource depletion, a proper mix of policies must be evolved not only to ensure the sustainability of economic activities, but also to ensure that there is inter and intra generational equity in the use of the country's natural assets.

However, this has often eluded the eyes of Ghanaian policy makers and implementers. Many at times, economic projections are formulated without due recognition of these losses and issues of equity, both inter and intra generational. Gold reserves that belong to several generations are dug and carted away by multinational companies without the required reinvestments for the benefit of future generations.

As the report also points out, current national accounting systems neglect the negative economic effects of natural resource degradation. As a result, wealth accumulation is being overestimated in the country, with data suggesting that wealth accumulation equals 25% of GDP.

On the contrary, according to the report, accounting methods that "integrate natural resource depletion show that wealth accumulation is significantly lower than wealth accumulation as calculated through traditional measures." It cites the study, Natural Resources Management and growth Sustainability, a collaborative work of the Institute of Social Statistical and Economic Research (ISSER) of the University of Ghana, the UK Department for International Development (DFID) and the World Bank, which concludes "that wealth accumulation is closer to 15% GDP," and not 25% (sic) as meaning that economic growth is eroding the productive base of which Ghana depends, thus threatening growth sustainability.

But even as the World Bank, by its report, is warning that the country's national accounting system may seriously be ignoring some negative economic indices and that the GDP growth rate could have been overestimated, President Kufour is complaining that the economy is not growing fast enough towards the target of attaining a middle income status by 2010. May be, if the current GDP growth rate of 5.8% were adjusted to take account of natural resource losses and their impacts on rural and urban livelihoods, the economy's real picture would have emerged.