Food crisis prompts budget rethink

Ghana has become the latest country in West Africa to announce it is struggling to manage its national budget in the face of spiraling world prices for fuel and food.

Newly released statistics from the government show Ghana’s expenditure on crude oil imports rose from US$ 500 million in 2005 to US$ 2.1 billion by the end of 2007 for the same quantity of oil.

Ministry of Finance officials say Ghana’s current budget was drawn up with an estimated crude oil price of US$ 85 a barrel, whereas the current world price of oil is hovering around US$ 135 per barrel.

In an address broadcast on national television and radio across the country on 22 May, President John Kufuor announced a US$1 billion package of interventions to mitigate the impact on Ghanaians.

He said the government would “immediately” drop all import duties on rice, wheat, yellow corn and vegetable oil.

He also announced the removal of excise duties oil and tax on fuel for the country’s fishermen and subsidies on fertilizer and free tractors for farmers.

The President acknowledged that the mitigation policies will involve slimming down other development projects but he assured that “there will be no cut backs on the policies designed to protect the vulnerable.”

On the streets of Accra, the news received popular support. A loaf of bread that sold at US$ 0.80 in January is now selling at US$1.80. A bag of maize that was sold at US$ 40 six months ago now costs US$ 75. The increases are also reflected in transport fares which have also gone up by more than thirty percent.

“I can now save some money to keep my sons in school,” said a 55 year old father of three, John Appiah who says he currently spends 70 per cent of his US$ 300 monthly income on food and transportation every month.

Emergency fiscal measures including suspending import taxes, restricting exports and releasing emergency food stocks onto markets have been undertaken in many countries in the region.

Ghana’s West African neighbors, Ivory Coast, Niger and Burkina Faso have all witnessed violent protests in response to the rising global food prices that has crippled several families.

In Senegal, 130,000 public sector workers are currently striking in protest at high food prices. They are demanding salary hikes. There are also frequent strikes in Burkina Faso.

In Ghana however the timing of the announcement has triggered political backlash as this is a presidential election year.

A coalition of opposition parties in the country called the Committee for Joint Action (CJA) described the measures as “a badly conceived public relations gimmick which is bound to fail”.

However the World Bank welcomed the measures.

An economist with the World Bank in Accra, Chris Jackson, told IRIN the real challenge will be sustaining these measures because the global shocks triggered by the surging oil price and spiraling cost of food will continue for months.

He noted that subsidies on fertilizer and tractors for Ghanaian farmers have been attempted in the past “without being as successful as were originally envisaged” because of challenges in implementation.

“There is a fundamental change in the global economy which means the crisis will be around for some years so the fiscal implications need to be well thought out,” he told IRIN.

He said the removal of taxes on petroleum products and some food items will “certainly” improve Ghana’s ability to raise enough needed revenue to invest in producing more food for local consumption.

em/nr