Ghana's oil resources toward economic growth and human development.

Author:Osei, Robert Darko
 
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As the country's oil production shifts into gear, Ghana's new status as a middle-income country is bound to see a reduction in official development assistance (ODA) in the medium to long term. This emerging oil industry will most likely provide a stimulus for increased net foreign direct investment (FDI) inflows into Ghana, particularly those targeted at prospecting and upstream activities. In the long term oil revenues can replace a country's ODA. However for Ghana's foreseeable future ODA needs to continue to be an important development tool--both in terms of being a source of finance, and as a tool for leveraging government policy.

But the prospect of oil revenues coming on-stream partnered with increased FDI inflows cannot be considered as protection from 'Dutch disease' problems. Nor do they guarantee a path of higher growth and sustained human development. These facts make it very important for Ghana to act preemptively to take advantage of both incoming ODA and oil revenues in the short to medium term to improve overall productivity in the country--particularly for the agricultural and manufacturing sectors--to avoid the 'oil curse'.

Ghana has experienced positive economic growth and increasing human development over the last two decades. In tandem with this economic growth has been a fairly remarkable decrease in the incidence of poverty. However inequality and underemployment do stubbornly remain, and have even worsened in places. The positive growth is bringing about a changing structure of the economy in terms of the contribution of the different sectors to GDP, but the change cannot be said to be of the developmentally transformative type. Production within the economy still takes place at the lower end of the technology scale, and the country's...

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