Declining oil prices will least affect Ghana – Economist

Some Economists have ruled out any significant impact on Ghana’s economy following the declining global oil prices. The decision by Oil Producing and Export Countries (OPEC) including Russia to cut down production due to increased supplies has resulted in a drop in prices. Contrary to the expectations of many investors in the oil and gas industry, the OPEC countries extended their cut in production by nine months, to March 2018. The price of a barrel of crude oil has dropped by about 4 percent in some markets following the announcement on Thursday, May 25th, 2017. As at Friday, May 26, 2017, a barrel of oil was selling at about 49 dollars. This is down compared to the government’s projection of 55 dollars per barrel. Speaking to Citi Business News on the development, Economist and Senior Research Fellow at the Institute of Fiscal Studies (IFS), Dr. Said Boakye explained that the benefits of declining prices would not impact heavily on the revenue targets within the short to medium term. “Government revenue is important but the declining prices also affect consumers positively so we should look at the broader picture in analyzing the impact of the drop in oil prices. The fiscal distortion may be apparent but in the broader impact on the economy may be not so severe,” he asserted. Dr. Boakye also strongly believes that although Ghana is a net importer of crude oil, the country’s aggregate production and export figures makes it a net exporter rather. In his view, that should rather be beneficial to the economy as government may not be spending more to import. Citing some taxes slapped on importers of crude in 2014 for example, Dr. Said Boakye stressed that the falling prices have always been beneficial to government rather than the consumer. “In 2014/2015, prices were going down and export revenue was also declining but the government at the time introduced a 17.5% tax on oil imports…there is a drop yes but the government was able to implement the tax. Had the prices been high, the taxes perhaps may not have been easy to be instituted,” he explained.