Russia-Ukraine War: Cracks In Akufo-Addo’s Economy And Food Supply Exposed By A Recent Military Conflict
- There is no doubt that the Russia-Ukraine war has taken a toll on many countries across the globe. At YEN.com.gh we tried to find out how its effects on Ghana’s economy and food supply may have been exaggerated.
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Allegations of economic mismanagement
It has been a tough couple of years for Ghana’s economy. The economy has been reeling under longstanding structural defects that would only be exacerbated by the aftermath of the global pandemic.
Source: Getty Images
Ghana Statistical Service (GSS) data show inflation figures for May 2022, have gone up significantly. This is due to transport fare increases and rising food prices. Inflation for May 2022 rose to 27.6% from 23.6% in April and about 19.4% in March. This dangerous trend of rising inflation figures since March is the highest in 18 years.
At the peak of recent hard-hitting public criticisms about poorly managing the economy and triggering economic hardships, the Nana Akufo-Addo administration fought back forcefully. The government cited a lull in global economic progress due to the Covid-19. But it added a new cause – the Russia-Ukraine war that started in last days of February 2022.
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Some politicians, notably Vice-President Dr Mahamudu Bawumia and Finance Minister Ken Ofori-Atta, have blamed the skyrocketing inflation, and the cedi’s depreciation, among others, on the economic disruptions caused by that the war.
However, many Ghanaians don't see a connection between the inflation and the recent war. Some have asked, "Do we share boundaries between Russia and Ukraine" others think "Politicians want us to believe Russia attacked Ghana through Ukraine".
Ghana’s trade with Ukraine and Russia
To be fair, a close look at bilateral trade figures between Ghana and Ukraine and between Ghana and Russia show that Ghana’s food supply challenges, depreciating cedi, and the rampant increases in fuel prices are partly due to the Russia-Ukraine war.
According to the Observatory of Economic Complexity (OEC), a research institution that maps out the dynamics of the global economic geography, in 2020 Ghana’s imports from Ukraine reached $81.5 million.
The main products Ghana imported from Ukraine included processed iron bars ($33.5 million), seed oils ($10.6 million), and raw iron bars ($10.2 million). Ukraine’s exports to Ghana have been increasing steadily every year, reaching 31.6% by 2020, according to the OEC data. Within the same period, Ghana also exported cocoa beans, aluminium, and manganese to Ukraine, earning some $120 million in foreign exchange.
Also, the OEC figures on Ghana’s imports from Russia for 2020 reveal a similar trend. The main products that Ghana imported from Moscow include wheat ($48.6 million), nitrogenous fertilisers ($23 million), and mixed mineral or chemical fertilisers ($13.6 million). Ghana also made $71 million in foreign exchange in 2020 from exports to Russia.
However, with sanctions imposed on Russia, these imports have ceased. Ukrainians are also busy defending their country from invasion and so face severe limitations to provide critical exports to Ghana and other countries.
Impact based on existing problem
Despite these figures, experts analysing the impact of the war on Ghana are cautious not to support the government’s attempt to make it a scapegoat. For some of them, blatant decision-making failures are to blame.
For instance, according to Dubawa, a renowned fact-checking and investigative reporting powerhouse, the war only compounded pre-existing cracks in Ghana’s economy.
Dubawa Editor for Ghana, Sierra Leone and Liberia, Nathan Gadugah, believes farmers in Ghana had been faced with a longstanding problem with fertiliser before the war broke out.
“Already, peasant farmers in Ghana had been complaining about the shortage of fertiliser and the reduction in fertiliser subsidy to them even before the war began.
“With the onset of the war, the situation has deteriorated. The war in Ukraine has compounded the situation,” he said in response to a series of questions put to him on how much Ghana’s economy has been hit by the war.
Mr Gadugah noted, however, that the war has dealt a bigger blow to Ghana’s import demand for cereals, particularly wheat from Russia.
Quoting data from the United States Department of Agriculture, he said about 85% of wheat flour is imported into Ghana. Of this amount, 50% comes from Canada, with the remaining coming from Russia, France, and the US.
Nathan Gadugah is convinced that the war in Ukraine due to the Russia invasion has already affected Ghana’s import demand for wheat flour which has led to the increase in prices of bread and other pastries. This impact is currently small, but it has a potential to grow exponentially as the war is still on, he surmised.
Meanwhile, Dr Charles Nyaaba, Head of Programmes at the influential Peasant Farmers Association of Ghana (PFAG), is certain the government’s failure to act on fertiliser shortage at least 12 months ago caused the high prices for locally produced commodities this year. He said the supply of local produce like plantain, cassava and maize among others, have been quite low in 2022 because the Ministry of Agriculture failed to release money for local fertiliser manufacturers.
“Last year [2021], for instance, the fertiliser advance came in very late, and [manufacturing] companies didn’t bring in subsidised fertiliser. This was due to the government’s failure to pay them what they owe the year prior.
“Because of this, most farmers didn’t apply fertiliser on their farms and this affected their yields. Once yields are affected, this affects the total market. It is the reason why food prices, across almost all the commodities, are very high,” Dr Nyaaba said.
Petroleum problem and borrowing
A historical analysis of Ghana’s inflation data shows that fuel price increases significantly drive up the prices of goods. This is because the country depends largely on imported crude oil to meet its needs. This makes oil an integral part of the economy. As a result, fluctuations in the global crude supply hit home. Over the last six months, Ghana has recorded consistent fuel price increases.
Fuel prices have been increasing steadily from GH¢6.9 on January 3, 2022, to an average of GH¢ 12.34 as of June 13. Experts believe sanctions on Russia for invading Ukraine have caused a global crude oil problem because Russia is a leading oil producer. While Russia does not supply Ghana directly, the sanctions have created a global supply problem which affects Ghana indirectly.
But once again for Ghana, the problem has been compounded by the depreciation of the cedi and huge taxes imposed on a litre of petrol and diesel. Chamber of Petroleum Consumers Ghana (COPEC-GH) said in a statement released in March 2022, that while the global crude price was skyrocketing, Ghana’s depreciating cedi worsens the situation. The cedi has depreciated to an all-time high of GH¢7.85 to $1 as of June of 2022. The cedi’s depreciation is not only a function of high imports but also of high borrowing. Ghana’s public debt hit GH¢391 billion in first quarter of 2022, representing over 80% of GDP.
Mitigating the impact
To mitigate the effects of the Russia-Ukraine war on Ghana’s economy, Dubawa’s Nathan Gadugah thinks the government must critically review its investment priorities.
“With the potential food crisis on our hands, the government needs to invest more in agriculture production and support for farmers. There is already a Planting for Food and Jobs policy in place which needs to be supported in full if the government wants to make headway in fighting the increase in prices of commodities,” he said.
He has also called on Ghana’s development partners, especially the African Development Bank (AfDB) and allied organisations to adopt measures that will help not only Ghana but other African countries in these trying times.
Also, a Fellow at Centre for Social Justice (CSJ) Theodore Albright has admonished that the inherent weaknesses in the structural framework of the Ghanaian economy needs attention.
“See balance of trade, lack of value addition, low investment in local industries and inadequate bolstering of skills to compete. A new framework that embraces ambidexterity, and complexity coupled with an honest appraisal and desire to remedy the weaknesses will be a start,” he said.
He added that a catalyst to breaking the current inertia will be for policymakers to clarify national priorities and to have an unflinching determination to make a difference.
“Momentum will only come with leadership whose heart is broken that our gifts of natural resources are yet to be optimised,” he said.
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Source: YEN.com.gh
