The World Bank Group’s Country Director, Pierre Laporte, led the launch of the 7th Ghana Economic Update titled ‘Price Surge: Unraveling Inflation’s Toll on Poverty and Food Security’ on July 19th, 2023, in Accra.
The report delves into recent developments and the economic outlook for Ghana while highlighting the challenges posed by inflation and its impact on food security.
In his address to an esteemed audience, which included the Honorable Minister of Finance, representatives from government agencies, development partners, members of the private sector, civil society organizations, and the media, Mr. Laporte expressed his pleasure at being part of the launch event.
The past year has presented numerous difficulties for Ghana’s economy, as it faced the repercussions of both the global pandemic and the Russia-Ukraine crisis.
These challenges, coupled with pre-existing fiscal vulnerabilities, took a toll on the nation’s financial stability.
In 2022, Ghana’s debt sustainability concerns intensified, leading to its exclusion from the Eurobond market. Capital outflows and tightening monetary policies in advanced economies exerted significant pressure on the exchange rate, causing a feedback loop with inflation and hindering the post-COVID-19 economic recovery.
The World Bank’s report highlights the burden of these challenges, particularly on vulnerable segments of the population. Poverty rates surged in 2022, with over 800,000 Ghanaians estimated to have fallen below the poverty line due to inflation. The poorest members of society were the hardest hit, exacerbating food insecurity during peak inflation.
Addressing the audience, Mr. Laporte emphasized that macroeconomic crises, especially inflation, disproportionately affect the poor. He underscored the importance of building buffers during favorable economic conditions and making swift adjustments during challenging times.
To restore macroeconomic stability and debt sustainability, the Ghanaian government secured an International Monetary Fund (IMF) program and initiated a comprehensive debt restructuring program. Moreover, the government is implementing revenue-enhancing and expenditure consolidation measures and the World Bank is working closely with the government on a series of Development Policy Financing to support these reforms.
Regarding future economic prospects, the report warns that risks related to inflation are still elevated, primarily influenced by global petroleum prices and exchange rate dynamics. Consequently, private consumption and investment growth are expected to remain subdued in the short term, with a potential recovery to its full potential by 2025 as fiscal consolidation eases and reforms bear fruit.
Mr. Laporte stressed the necessity for Ghana to strengthen debt sustainability, reduce fiscal deficits, improve domestic revenue mobilization, and optimize public expenditure to rebuild fiscal and external buffers. He highlighted the importance of structural reforms to foster long-term growth and economic resilience, focusing on investments in agriculture, human capital development, technology, and food supply chain diversification.
In conclusion, Mr. Laporte acknowledged the critical challenges ahead for Ghana in reviving its economy while protecting vulnerable populations. He commended the government’s efforts in doubling the benefits of the LEAP transfers to alleviate poverty and encouraged evidence-based policies to enhance food security through improved agricultural productivity and market access for farmers.
The World Bank, as a longstanding partner of Ghana, pledged its continued support to the nation’s agenda of restoring macroeconomic stability while safeguarding the vulnerable sections of society. The launch event concluded with the anticipation of fruitful discussions to collectively steer Ghana towards a prosperous future.
