Agricultural Development in Ghana and Monetary Policies

Agriculture is a critical sector to the economies of developing economies especially in sub-Saharan Africa as the sector employs about 60% of the labour force. In Ghana, the agricultural sector is characterised by small-scale rain-fed and livestock farming systems with an average farm size of less than 3 acres and accounts for about 80% of the total production. The sector over the last three decades has contributed about 30% to the Gross Domestic Product and has averagely grown at a 4.8% annually. The agricultural and its related sector employs more than five million people, and annually creates more than 300,000 jobs for the youth of Ghana. The sector is very critical in revenue generation for the government as it contributes more than two-fifth of direct and indirect taxes to the Ghanaian economy. Nonetheless, in the last two decades, the contribution of the sector has seen a decline from 35.2% to about 19% due to numerous challenges facing the sector such as climate change, poor monetary policies, limited financial credit to farmers, lack of political commitment to allocate at least 6% of public expenditure to agriculture and lack of adequate fertilizers to farmers. There has been little attention paid to the effects of monetary policies on agricultural development in Ghana, especially how monetary policies affect the contribution of agriculture to Gross Domestic Product and the exports of cocoa beans. The study was carried out to assess the effects of the Central Bank of Ghana’s monetary policy and agricultural development – i.e. agriculture as a percentage of gross domestic product in Ghana and cocoa beans exports. It analysed the interest rate (monetary policy rate), exchange rate, and inflation influence on Agricultural Gross Domestic Product as well as cocoa beans exports. The study used secondary sources from 1985 to 2020 and analyses were made using the multiple linear regression analysis. The most significant monetary policy variable statistically significant on agricultural development is the exchange rate