Food inflation, welfare implications

Food inflation attributed to the rising cost of food has a tremendous impact on national welfare.

According to available statistics, food inflation in Ghana currently stands at 53 percent.

Food inflation in Ghana is one of the highest in the world and deserves the critical attention of policymakers because it constitutes an important component of the combined consumer price index (CPI), which is used to estimate price level changes from year to year.

The high rate of food inflation or better still, the high cost of food is certainly depressing for low-income earners, whose incomes cannot keep up with the hikes.

A large proportion of Ghanaians earn less than $5 a day.

The surge in food prices means social instability and domestic violence for rural communities.

Social unrest ensues every time individuals’ food security are threatened by food inflation.

Food security

Food security, defined as individual or household access to “enough preferred food” has a direct impact on well-being.

From the analysis of recent figures on consumer price indices, social tensions are expected to escalate in regions where food inflation has exceeded the national average of 45 per cent.

Ironically, the new regions, especially Western, North, and Savannah regions, are experiencing even higher rates of district-based inflation.

These regional economies have outstripped the Greater Accra Region on food inflation statistics.

Production statistics on food sub groups made of carbohydrates (tubers and cereals) and protein (vegetables, read meat, fish, and dairy products) are responsible for inflated prices of food items in urban supermarkets.

Food is the necessity of life which must be satisfied before all other needs.

Hence, price hikes of foodstuffs have a dramatic effect on consumer wellbeing, security, and happiness.

Inadequate access to food constitutes the greatest threat to national welfare.

Furthermore, because Ghana is a lower-middle-income country, price hikes are expected to correspond to salary adjustments and high-income earnings.

If earnings are not adjusted correspondingly, living standards fall.

Best practices

Using best practices in other countries, for instance, Asia and Latin America, salaried workers receive a double rise in income earnings whenever food inflation crosses the 50 percent threshold.

In Ghana, there is no regulatory body in place to check opportunism.

Ghanaians suffer unduly in regulated food markets.

Workers neither receive realistic salary adjustments nor subsidies.

Therefore, food inflation has a tremendous impact on human capital development.

Average productivity of Ghanaian workers falls when the cost of energy increases.

If salaried workers in Ghana spend more than half of their monthly earnings on food, then rural poverty is projected to increase by the same margin.

In many parts of Ghana, food security is synonymous with poverty.

According to the latest statistics on economy computed from Ghana Statical Service data, four out of 10 people go to bed without food.

The fact is that if Ghana is not self-sufficient in the production of cereal products and tubers, then poverty rates will appreciate.

Cyclical unemployment will magnify and real growth rates will stagnate.

Ghana stands to lose out if income earners devote greater shares of income to purchasing food and food-related items.

In other parts of the world, citizens spend less than $3.00 a day on food.