World bank 2022 report on Ghana’s economy
The title of the World Bank 2022 report on the Ghanaian economy is: “Price Surge: Unravelling Inflation’s Toll on Poverty and Food Security”.
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It was launched on July 19, 2023, and it is an update on the country’s economy for last year.
Being a study of the effects of local and external factors on the Ghanaian economy, the report provided a detailed analysis of inflationary pressures and others and how they impacted the prices of goods and services and the cost of living during 2022.
Twenty-twenty-two was the year that Russia unexpectedly invaded Ukraine on February 24, with the view to occupying it, ostensibly to prevent that country from becoming a member of the North Atlantic Treaty Organisation (NATO).
Russia and Ukraine are two of the world’s largest suppliers of grains, cooking oil and fertiliser.
Both countries supply about 30 per cent of wheat, 60 per cent of sunflower oil and about 20 per cent of corn to the world market.
Russia and Ukraine are also among the largest suppliers of fertiliser to the global market.
The Russia-Ukraine war has disrupted the supply chains for these commodities and only limited supplies are available.
That made prices of commodities go up, raising inflation in many countries, especially in African countries that import most of their grains, oil and fertiliser from Russia and Ukraine.
Ghana, a developing country that imports those commodities from the warring countries, was adversely affected in 2022.
In December 2021, Ghana’s inflation stood at 9.98 per cent.
A year later, in December 2022, the country’s inflation jumped to 54.1 per cent.
The background facts and figures, therefore, justify the title of the World Bank report on the Ghanaian economy for 2022, which is: “Price Surge: Unravelling Inflation’s Toll on Poverty and Food Security”.
In its 2022 report, the World Bank stated that the inflationary trend for 2022 put some 850,000 Ghanaians into poverty because of rising prices of goods and services.
“The inflationary pressures have led to a deterioration in living standards and ultimately worsened poverty and food security,” the report states.
Explaining the causes of the unexpected rise in inflation for 2022, the report states: “A combination of domestic imbalances and external shocks in 2022 led to micro-economic changes in Ghana.
“The year was marked by currency depreciation, rising inflation and tumbling investor confidence.
“Pre-existing fiscal vulnerabilities, such as mounting debt burden, a rigid budget weakened by energy sector costs and chronically low public revenues, were deepened by difficult global economic conditions,” the report adds.
Ghana, according to the report, “faces an extremely challenging outlook and the economic situation is likely to remain challenging before it rebounds”.
It projects Ghana’s economy to go down to 1.5 per cent in 2023 from 3.2 per cent in 2022.
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Growth will increase to 2.8 per cent in 2024.
Thereafter, economic recovery will come in 2025, when its potential will begin to unfold.
Mr Pierre Laporte, World Bank Country Director for Ghana, Liberia and Sierra Leone, gave reasons for the bank’s economic projections for Ghana.
“As a result of efforts to address micro-economic instability, corrective fiscal and monetary policies are expected to influence total demand and slow down non-extractive GDP growth,” he states.
“High inflation, increased interest rates and macro-economic uncertainties will keep private consumption and investment growth below pre-pandemic levels, leading to subdued non-extractive growth in the short term. However, growth will begin to recover to its potential by 2025 – as drag from fiscal consolidation fades and macro-economic stabilisation and structural reports start bearing fruits.’’
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To make the economic projections achievable, the World Bank, in its report, recommended that the government should consider implementing a number of measures.
These include structural reforms to remove the root causes of the economic crisis, boost economic growth and build economic resilience.
Other recommended measures include the collection of more domestic revenues, reduced government expenditure, solutions to the energy sector shortfalls and implementation of the Energy Sector Recovery Programme.
Re-building of the financial sector buffers and boosting of inflow of Foreign Direct Investments (FDI) are among the World Bank’s recommendations to the Ghana government.
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Mr Ashwini Sebastian, Senior Agricultural Economist of the World Bank and a co-author of the report, made some recommendations to the Ghana government on how to ensure that more foods are available and food insecurity is avoided.
According to him, in addition to “supporting higher domestic food production, policies need to target opening the country to more effective integration with global food supply chains”.
Government “programmes may seek to foster regional and global trade to improve the availability and affordability of food by reducing trade barriers, promoting regional integration and increasing market transparency”.
He suggested that the government should consider pursuing policies that “seek to reduce market distortions such as subsidies, taxes and price control” to “improve market efficiency and reduce food waste”.
As noted at the beginning of this article, a major cause of the unexpected high upward jump in prices and inflation that started in early 2022 has been the Russia-Ukraine war that has not ended.
Ghana will continue to suffer shortfalls in the supply of grains such as wheat and rice, cooking oil and fertiliser from Ukraine and Russia.
This is because Ghana cannot meet local demands for the commodities imported from the two warring countries in the short and medium terms by increasing agricultural production.
Besides, Ghana cannot achieve elevated food production and supply without the needed input of fertiliser from Russia and Ukraine.
The solutions to the problems, as Mr Sabastian and others, including this writer, have suggested, include the need for the African Union (AU) countries, including Ghana, to jointly and severally pursue the path of vigorous diplomatic moves to get Russia and Ukraine to allow shipping of grains, cooking oil and fertiliser from the two countries.
Russia should permit shipping from Ukraine’s Black Sea ports to continue while contentious issues are discussed and dealt with at the diplomatic level.
Meanwhile, Russia has, from July 2023, pulled out of the agreement that makes it possible for continued shipping of the much-needed commodities to the global market.
Uninterrupted shipping of the commodities from Ukraine has reduced high food prices and lowered inflation rates in some parts of the world, including African countries.
Russia’s interruption of shipping, as it has promised to do, could worsen food insecurity globally, and developing countries, including those of Africa, would be adversely affected.
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