Ghana Between Food Insecurity and the Financial Crisis
By Paul-Florent Montfort, Analyst, momagri
The current financial crisis started out in wealthy countries and its macroeconomic consequences were first felt in wealthy countries (collapse of major banking institutions, massive layoffs in financial markets, GNP contraction in industrialized nations…). But the crisis is now global and its advent in developing countries is all the more serious since, for many of them, this economic and financial crisis is coming on top of a still severe food crisis, which makes any attempt to restore food security even more precarious.
Ghana, a small Western African nation of 23 million people, represents a particularly striking example of the consequences of the financial crisis on food insecurity and illustrates the urgency of bringing an international solution to the crisis, which not only affects the financial systems of wealthy nations but also the local economic structures of developing nations that suffer the most.
Respectful of recommendations to fight hunger, Ghana is the only country in Sub-Saharan Africa to reach the Millennium Development Goal of halving the proportion of the world population facing undernourishment and poverty by 2015. According to FAO statistics, undernourished people in Ghana dropped from 5.4 million for the 1990-92 baseline period to 3 million in 1995-97 followed by a further decrease to 1.9 million in 2003-05, thanks to effective policies of investment and diversification in agriculture.
Still, the financial crisis and soaring inflation threaten to bring to naught the country’s efforts and achievements in the fight against hunger and poverty. Even though food prices in Ghana reached their peak in mid-2008––as it was the case for the rest of the world––they remain unusually high, despite the very good harvest recorded this year. This situation is far from insignificant for a population that commits 60 to 80 percent of its income to food….
The situation in Ghana is not out of the ordinary: a new interactive index from the FAO1, which registers basic foodstuff prices on national markets in 55 developing countries, shows that if food prices are dropping at the international level, prices in developing countries have not fallen so fast, or even not at all. While the trend has yet to be totally explained, many are questioning possible ties to the financial crisis.
In addition, the World Food Program (WFP) assessment on the impact of the global financial crisis on food security conducted in April 2009 indicates that the households most affected by high food prices are those relying on money transfers from abroad, which are themselves directly concerned by the global recession.
As stated by Minouche Shafik2, Permanent Secretary of the British Government Department for International Development (DFID), the poor are always the most hurt by economic crises. The international community must remember this to define exit strategies to the crisis that do not involve merely the international financial and banking system but the international agricultural system as well.
It is therefore crucial to restore confidence in financial and inter-banking markets, as token of balanced global economies. But it will not be enough to relieve the situation in developing countries, whose economic conditions––paradoxically the most distressed––are still in the periphery of the international financial system. The case of Ghana shows that getting to the bottom of the crisis at the local level requires above all dealing with agriculture, and this for two reasons. On one hand, because Ghana, just like most developing nations, essentially remains an agricultural economy, and, on the other, because this agricultural activity provides the catalyst that will yield the greatest impact on people’s standard of living. So, we can only hope that international decisions-makers, who are currently focusing on the means to curb the crisis and to define the new international governance, recognize this state of affairs by including agricultural regulation in the scope of their priorities, just as financial market regulation.