Ghana is
grappling with a severe inflation crisis that has unleashed devastating
consequences on food security and poverty levels, according to the latest Ghana
Economic Update released by the World Bank.
The report shed
light on the alarming surge in prices across all consumer categories,
significantly impacting the living standards of Ghanaians, especially the poor.
The Economic
Update highlights that average prices for all Classification of Individual
Consumption According to Purpose (COICOP) categories experienced a stark
increase in 2022 compared to the previous year.
While non-food
inflation was notably high, at an average of 29 percent in 2022, food prices
soared even higher, escalating by an average of 34 percent.
This disparity
has disproportionately affected the poor, who allocate a larger share of their
budget to food and are thus more severely impacted by the rising prices.
It further indicated
that the erosion of purchasing power resulting from inflation has led to a
decline in living standards for Ghanaian households.
“In 2022, the
minimum wage in Ghana saw a 10 percent increase. However, this increase was
overshadowed by the staggering inflation rate, causing real incomes of
minimum-wage workers to plummet by nearly 44 percent. Consequently, the average
purchasing power of these workers declined by 15.7 percent throughout the
year.”
The report reveals that the poorest 20 percent of the population
experienced a significant loss of purchasing power, amounting to 16.1 percent
in 2022.
“Surprisingly,
the richest 20 percent also suffered a notable decline in purchasing power,
losing 15.5 percent. While the wealthy lost more purchasing power in absolute
terms, the impact was less burdensome compared to their total expenditure.”
Simulations
conducted in the report indicate that approximately 850 thousand Ghanaians were
pushed into poverty in 2022 due to the combination of rising prices and the loss
of purchasing power.
Furthermore,
food security in the country deteriorated considerably. The number of food
insecure individuals jumped from 560,000 to 823,000 in the last quarter of
2022.
By the end of
the year, one-quarter of the population was classified as food insecure, a
trend expected to persist into 2023.
To combat the
adverse effects of inflation on food security, the World Bank’s Ghana Economic
Update highlighted several policy recommendations.
“The government
must prioritize investments in agriculture, including research, development,
and technology transfer, to enhance productivity, reduce production costs, and
improve food quality and safety. Diversification of income sources,
improved connectivity, and market access can help households better cope with
shocks and seize opportunities.”
The report
additionally emphasised the importance of investing in climate-smart
agriculture initiatives.
Furthermore, the
Economic Update recommends allocating resources towards developing rural
infrastructure, including better roads, irrigation channels, and improved
primary education.
To alleviate the
immediate impact of high food prices on vulnerable households, the report
emphasised the need to enhance social protection programs.
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SOURCE: CITINEWSROOM
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