The great challenge facing Ghana is how to manage its emergence as an oil producer. In theory oil should be a boon for a developing country; in practice many have found it a disruptive influence as the attractions of easy oil revenues take away the imperative for long-term investment in the economy. Ghana’s officials need only look to the fellow west African state of Nigeria for examples of what can go wrong.
So far Ghana, which is producing about 120,000 barrels of oil per day from its offshore Jubilee field, has made a good start. Under the stewardship of finance minister Kwabena Duffuor, the government has been getting its budget and macroeconomic house in order so there is a solid framework in place as the oil revenues start to flow. The budget deficit has been reduced from 15% during the financial crisis to less than 10%, with plans to halve it again over the next two years. Inflation that peaked at more than 20% in June 2009 is now in single figures, despite pressures from rising oil and transport costs, and an oil fund has been established to make best use of oil revenues.
