THE EFFECT OF GOVERNMENT AGRICULTURAL EXPENDITURE ON THE NON-COCOA SECTOR ON ECONOMIC GROWTH IN GHANA

Abstract

Despite a renewal of the commitment in Malabo 2014 through the Malabo Declaration, Africa spends less per capita on agriculture than other areas of the globe, and just a few of the nations hit the Maputo objective of 10%. This implies that investment levels are still inadequate, as evidenced by the relationship between agricultural GDP and the intensity of government spending. The yearly average rate of growth regarding land productivity for the agricultural sector in general has averaged 3.3% per annum, driven mainly by the noncocoa subsector with a growth rate of 3.7% unlike that of the cocoa subsector which has a growth rate of 1.0 percent. To unravel the asymmetric effects of government agricultural sector spending patterns for policy making, this study assessed the effect of government agricultural expenditure on the non-cocoa sector on economic growth. Annual time series data from 1961 - 2019 on study variables was analysed using linear and nonlinear Autoregressive Distributed Lag Models. The result showed that, in the long-run whiles noncocoa sector spending positively influence growth, cocoa sector spending and financial development negatively affect growth. However, in the long-run, noncocoa sector spending and exchange rate positively influence growth whiles inflation, financial development and cocoa public spending inhibit growth. The study concludes that there exists a unidirectional causality between noncocoa sector spending and growth where it is only noncocoa sector spending that Granger causes economic grow and not the other way round. The study recommends that government should provide adequate budgetary allocation to the due to its positive influence on growth. There must also be adequate supervision of flagship programmes such the Planting for Food and Jobs to ensure they yield the needed results.