Taming inflation: 2025 Budget — The Agriculture for transformation agenda
As Ghana sets its sights on an inflation target of 11.9% by the end of 2025, economic analysts are weighing the feasibility of this goal. Deloitte Ghana, in its 2025 Budget Analysis Report, has endorsed the target as achievable, provided that policy measures aimed at addressing high inflation are effectively implemented.
The government’s strategy hinges largely on the Agriculture for Transformation Agenda, which seeks to tackle inefficiencies along various food value chains to boost production and control food inflation, a major driver of inflationary pressures in recent years.
However, the path to economic stability is fraught with challenges, including geopolitical risks, structural inefficiencies, and external shocks.
Ghana’s inflation trends
Ghana's inflation rate has been a key concern in recent years. In 2022, the country recorded an inflation rate of 54.1% in December, the highest in two decades, driven by food price hikes, currency depreciation, and global supply chain disruptions.
The situation improved in 2023, with inflation declining to 23.2% by December, largely due to monetary tightening policies implemented by the Bank of Ghana (BoG).
The 2025 target of 11.9% is therefore ambitious but not unattainable if robust economic policies are effectively implemented.
Agriculture for transformation: The engine for price stability
A key pillar of the 2025 budget is the Agriculture for Transformation Agenda, designed to enhance productivity across various food value chains.
Deloitte’s report highlights that food inflation remains a primary driver of overall inflation, accounting for more than 50% of price increases in 2023.
By improving agricultural efficiency, Ghana aims to reduce the cost of food, ensuring price stability and increasing food security.
The initiative involves:
1. Enhancing irrigation systems to support year-round farming
2. Providing subsidies for improved seeds and fertilizers
3. Strengthening market linkages to reduce post-harvest losses
Investing in mechanization and technology to improve productivity
These measures are expected to increase food production and stabilize prices, reducing the pressure on consumers and businesses alike.
Impact on government initiatives
The Agriculture for Transformation Agenda aligns with Ghana’s broader economic policies, including:
1. The Ghana CARES "Obaatan Pa" Programme, aimed at revitalizing the economy post-COVID-19
2. The Ghana Investment Promotion Centre’s (GIPC) efforts to attract foreign investment in agribusiness
3. The Planting for Food and Jobs Phase II, targeting agricultural modernization
By reinforcing these initiatives, the government aims to create jobs, reduce food imports, and support local industries.
4. Implications for Corporates and Businesses
Businesses stand to benefit significantly from price stability and increased agricultural productivity. Reduced food inflation would lower operational costs for food processing industries, hospitality businesses, and retail chains.
Moreover, agro-based companies could see improved supply chain efficiency, leading to increased profitability.
Additionally, financial institutions may experience reduced default rates as inflation stabilizes, enhancing credit access for businesses and consumers alike.
The agricultural sector could also attract more investors, both domestic and foreign, as production costs decline and profitability improves.
Households and the economy: A macro perspective
For households, inflation control means increased purchasing power. Currently, high food prices consume a significant portion of household incomes, with food expenditure accounting for over 50% of total spending in lower-income families.
With stabilized prices, disposable income can be redirected toward education, healthcare, and savings, improving overall living standards.
At a macroeconomic level, achieving the 11.9% inflation target could:
1. Strengthen the cedi by reducing exchange rate volatility
2. Improve investor confidence in Ghana’s economic policies
3. Reduce government borrowing costs by curbing interest rate hikes
4. Foster sustainable economic growth by ensuring a predictable economic environment
Navigating risks: Geopolitical and structural challenges
Deloitte has warned about emerging geopolitical risks, particularly those stemming from Europe, America, and Russia, which could lead to trade disruptions and commodity price volatility.
Ghana, as a net importer of essential goods, remains vulnerable to external shocks.
The government must adopt proactive strategies, such as diversifying trade partnerships and bolstering local manufacturing, to mitigate potential disruptions.
Additionally, structural inefficiencies, such as inadequate infrastructure, limited access to finance for smallholder farmers, and bureaucratic bottlenecks, must be addressed to ensure the success of the agriculture for transformation agenda.
Conclusion
While the 2025 inflation target of 11.9% is ambitious, it is within reach if Ghana successfully implements its Agriculture for Transformation Agenda alongside other complementary economic policies.
The initiative promises broad benefits for government programs, businesses, and households, setting the stage for sustainable economic growth.
However, to safeguard against external shocks and domestic inefficiencies, proactive policy measures and stakeholder collaboration will be critical in the journey towards a stable and prosperous economy.
sammylaatey@yahoo.com