Sharp Rise in Electricity, Food Prices, and Inflation Pushes 850,000 Ghanaians into Poverty – World Bank Report

The World Bank has sounded the alarm over the rising cost of living in Ghana, revealing that inflation and skyrocketing prices of essential goods and services have pushed approximately 850,000 Ghanaians into poverty. According to the 7th edition of the World Bank’s Ghana Economic Update report, titled Unraveling Inflation’s Toll on Poverty and Food Security, the rapid increase in food and electricity prices, coupled with high inflation, has significantly worsened living conditions for many households, especially toward the end of 2022.

Poverty Reduction Reversed

Ghana has long been hailed as a model of economic growth in Africa, significantly reducing its poverty rate over the past two decades. Between 1991 and 2012, the poverty rate in the country fell by half, from 52.6% to 21.4%, based on Ghana’s national poverty line. This achievement was primarily due to sustained economic growth and improved social policies, which lifted millions out of poverty. However, recent developments have reversed some of these gains.

As inflation surged in 2022, with prices of essential items such as food and electricity rising dramatically, many Ghanaians found themselves struggling to meet basic needs. The World Bank’s report estimates that nearly 850,000 people have fallen into poverty, representing a significant setback in the country’s efforts to reduce poverty and improve living standards.

Impact of Inflation on Living Standards

The report highlights that the sharp rise in inflation has eroded the purchasing power of households, particularly affecting vulnerable groups such as low-income families. relying on data from the Annual Household Income and Expenditure Survey (AHIES) conducted in 2022 by Ghana’s Statistical Service, the World Bank simulated the impact of these price hikes on welfare. The findings indicate that the situation has led to widespread deterioration in living standards across the country.

With inflation reaching record highs, the cost of everyday items such as food, electricity, transportation, and healthcare has become unaffordable for many Ghanaians. Food prices, in particular, have skyrocketed, contributing to heightened food insecurity in both rural and urban areas. The World Bank report emphasizes that this crisis has disproportionately affected the poor and those living just above the poverty line, pushing many of them into deeper financial distress.

Food Security Under Threat

The rising cost of food has had a devastating impact on food security in Ghana. The World Bank’s report warns that the price hikes have made it increasingly difficult for many households to access nutritious food, leading to higher levels of malnutrition and hunger. Vulnerable populations, especially women, children, and the elderly, have been hardest hit by the crisis.

The report underscores the urgent need for targeted interventions to address the worsening food security situation. It recommends scaling up social protection programs, such as cash transfers and food assistance, to help cushion the most affected populations from the adverse effects of rising prices.

Recommendations for Policy Intervention

In light of the report’s findings, the World Bank has called for immediate policy actions to mitigate the impact of inflation and rising prices on Ghana’s most vulnerable citizens. Some of the key recommendations include:

1. Strengthening Social Protection Programs: The government should expand social safety nets, such as the Livelihood Empowerment Against Poverty (LEAP) program, to cover more households affected by the rising cost of living.
2. Supporting Agricultural Productivity: investing in agricultural productivity and improving the resilience of food systems, the country can stabilize food prices and enhance food security.
3. Energy Subsidies: To relieve the burden of rising electricity prices, the World Bank suggests that the government consider targeted energy subsidies for low-income households.
4. Macroeconomic Stabilization: Implementing sound fiscal policies to control inflation and stabilize the economy will be critical to preventing further increases in poverty.

Long-Term Economic Outlook

Despite the current challenges, the World Bank remains cautiously optimistic about Ghana’s long-term economic outlook. The report acknowledges that while the recent rise in poverty is concerning, Ghana has the potential to recover and return to a growth trajectory if the right policies are implemented. However, the immediate priority must be to address the inflationary pressures and safeguard vulnerable households from slipping further into poverty.

Conclusion: A Call for Action

The findings from the World Bank’s latest report are a stark reminder of the fragility of economic gains in the face of rising prices and inflation. Ghana’s significant progress in reducing poverty is now at risk of being undone unless swift and decisive actions are taken to address the root causes of the crisis. As inflation continues to strain household budgets, especially for basic necessities like food and electricity, the government’s ability to implement policies that protect the most vulnerable will determine the country’s path forward.