Accra, Ghana//-Ghanaians are grappling with rising food prices as reflected in the spike in inflation. The country’s annual Consumer Price Index (CPI) which measures changes in the price of a fixed basket of goods and services purchased by households keeps galloping.
For instance, consumer inflation for the month of August 2022 inched up to 33.9%, the highest in 21 years. This means that in the month of August 2022 the general price level was 33.9% higher than August 2021.
While the month-on-month inflation between July 2022 and August 2022 was 1.9%, according to the Ghana Statistical Service (GSS).
How bad is the food price issue in Ghana?
The increasing cost of food in Ghana has negatively affected the living standards of ordinary citizens. It has become a serious cause for concern. However, it appears that managers of the Ghanaian economy are yet to come to terms with the situation.
For instance, prices of basic food commodities are on the ascendency, and nobody knows when this precarious situation will come to an end.
A sack of onions which used to be sold at GH¢500.00 six months ago is now sold between GH¢750.00 and GH¢900.00 while a bag of maize has been on the rise since the beginning of the year.
It is currently trading at around GH₵600. 00, doubling the price last year at GH¢300.00. Maize being the staple food for most Ghanaians is also the best feed for poultry.
So due to the increase in maize prices, poultry feed prices have also gone high in Ghana resulting in a lot of challenges faced by poultry farmers to acquire feeds for their poultry farms.
Also, there are shortages of maize in the country caused by low production due to farmers’ inability to get fertilizers for their farms. This is one of the saddest effects of the Russia-Ukraine war as fertilizers cannot leave the war zone to Ghana.
Speaking at the 11th Leadership Dialogue Series (LDS 11) organised Centre for Social Justice (CSJ), a Deputy Minister of Finance, Dr John Kumah admits: “Agricultural growth, albeit at 5 percent per year, has been driven by expansion of land area rather than improved yields and modest productivity gains”.
Agricultural productivity has changed only marginally with yields of major food crops typically being 20-60 percent below their achievable levels. Although Ghana’s agriculture is transforming through diversification into non-traditional products, the role of cocoa in Ghana’s agricultural exports has not diminished, according to him.
The key consequence of the country’s inability to increase productivity is that its agricultural sector is not able to compete with the imports of products that are traditionally produced in the country.
“In fact, if we exclude cocoa, we have become a net agricultural importer of primary foods and agro-processing products. The value of net agricultural imports reached almost US$1.24 billion in 2020, such that in the same year, almost US$1.28 billion of foreign exchange earned by exporting cocoa is used to pay for imported foods and other agricultural products”, Dr Kumah laments.
He continues: “The increasing demand for meat, rice, and processed foods, which is a result of growing urbanization and a growing middle class, is increasingly met by imports. Our top three imports (Rice, Fish and Poultry) in 2019 were valued at US$790 million, more than the recent US$750 million we secured from the Afrexim Bank”.
Ghana currently imports around $391 million worth of rice and the national demand for poultry meat alone is about 400,000metric tonnes. Thus, imports of poultry meat are about 180,000metric tonnes with a shortfall of 162,129metric tonnes.
In his words: “It cost us about US$375 million annually to import chicken and beef. We continue to also see a surge in the import of many agro-processing products such as canned tomatoes and tomato paste, the consumption of which is substituting for the consumption of locally grown fresh tomatoes”.
As prices are going through the roof, the real income of the average income earner has been falling consistently. This implies that Ghanaians and other nationals living in the West African country can now afford fewer baskets of commodities for their livelihood and sustenance.
The food and non-alcoholic beverages component of inflation is by far the most important determinant as it accounts for over 50% of the total weight of the basket of items that are used to measure price increases.
Food that has gone up in price includes oils and fats, fruits and nuts, fish and other seafood, water, cereal products, milk, dairy products and eggs, cocoa drinks, vegetables, live animals and meat, and ready-made food.
Average Ghanaians consume and drink these items daily, especially cereal products and water.
Maize and yam are used for producing kenkey, tuo-zaafi (TZ) and porridge, and fufu, which are widely consumed across length and breadth of the country.
According to economist Professor John Gatsi, inflation reflects cost structure distortion and painful downgrade of disposable income of income earners.
Thus, the inflation rate of 33.9% cannot be good news for Ghana. When the inflation rate is underpinned by transport, water, and food prices then you should note that cost of living has become unbearable for average households.
The middle-income bracket is also complaining, breakfast, lunch, and supper for Senior High School (SHS) students have become difficult. Eating patterns of average households are deteriorating very fast, Prof Gatsi adds.
The World Bank in its latest Food Security Brief says: “Domestic food price inflation remains high around the world. Information between May to August 2022 shows high inflation in almost all low-income and middle-income countries; 93.3 percent of low-income countries, 90.9 percent of lower-middle-income countries, and 93 percent of upper-middle-income countries have seen inflation levels above 5 percent, with many experiencing double-digit inflation.
The share of high-income countries with high inflation has also increased sharply, with about 85.7 percent experiencing high food price inflation”.
What’s behind inflation?
The inflationary trend in the country is largely attributable to factors that have pushed up costs such as wages and input costs as well as prices of energy and utilities.
For instance, prices of petroleum products at the various Oil Marketing Company stations and tariffs for electricity and water have gone up.
Additionally, the available evidence shows that agriculture in the country is characterised by low inputs, high dependence on rainfall, and production on predominantly smallholder farms.
Only 19 percent and 7 percent of households in Ghana Living Standards Survey (GLSS) six conducted in 2014 reported use of inorganic fertilizer and renting equipment, respectively.
Inadequate innovation in small-scale agriculture and poor transport and distribution channels have all been identified as contributors to slow agricultural productivity growth in the country.
Furthermore, the disruption to supply chains caused by the war in Ukraine has affected the volume of food imports and farming machineries and fertilizers.
IMF which Ghana is seeking $3billion bailout from in its recently concluded visit notes: “Ghana is facing a challenging economic and social situation amid an increasingly difficult global environment. The fiscal and debt situation has severely worsened following the COVID-19 pandemic.
At the same time, investors’ concerns have triggered credit rating downgrades, capital outflows, loss of external market access, and rising domestic borrowing costs”.
The IMF mission statement adds: “In addition, the global economic shock caused by the war in Ukraine is hitting Ghana at a time when the country is still recovering from the Covid-19 pandemic shock and with limited room for manoeuvre.
These adverse developments have contributed to slowing economic growth, accumulation of unpaid bills, a large exchange rate depreciation, and a surge in inflation”.
The depreciating exchange rate of the Ghana cedi against other foreign currencies particularly the US dollar which is the major currency for importation of goods into the country, has also played a role.
The currency depreciation means that Ghana is paying more for the commodities it imports, including rice and sugar and other food items. The extent of the cedi’s depreciation explains why inflation is higher in Ghana than its peers in ECOWAS.
According to economists, cedi depreciation affects the cost of imported inputs and leads to price increases of goods and services along the production and supply chains.
The exchange rate has worsened under the Akufo-Addo administration. This recurring loss in value of the cedi in relation to other currencies is reducing the purchasing power of the average Ghanaian particularly so for items with imported components in their production and service delivery.
What can the government do?
In August the Monetary Policy Committee (MPC) of the Bank of Ghana (BoG) at an extraordinary meeting increased its policy rate to 22% from 19%. This followed a 3-percentage point rise in August.
This was done to contain the worsening inflationary spiral and the instability of the exchange rate in the country. The monetary and fiscal authorities need to do more work to arrest the galloping inflation and the free fall of the cedi.
The growth of money supply firstly needs to be checked by drastically limiting advances or overdrafts the BoG issues to the government.
Secondly, Ghana must work assiduously to execute its programme with the International Monetary Fund (IMF) fast to deal with the country’s multiple economic challenges.
By Masahudu Ankiilu Kunateh, African Eye Report
Email: mk68008@gmail.com
