In the last five months, the slang ‘Ghana is hot’ has become more popular due to the rising cost of living. Last year, a cup of porridge also known as ‘Hausa Cocoa’ was 70 pesawas. The price has doubled to 1.50 pesawas for a cup if you are lucky.
Over the last 5 months, Ghana’s economy has weakened. This has been characterized by debt to GDP ratio crossing the 80 percent mark in the first quarter of the year. The cedi, equally went from being the best performing currency to the dollar to being the worst losing 19 % of its value. Further, credit rating agencies such as Fitch and Moodys down graded Ghanaians credit rating from a B3 to a Caa1. Technically, junk rating!
The trickle down effect of the ailing economy is being felt through rising cost of living. Leading up to April, inflation has been on the rise. From 13.9 % in January, 15.7 % in February and 19.4 % in march. This marked a 5 year high inflation rate. However, Aprils inflation hit an 18 year high of 23.6 %.
These numbers have affected the cost of living for majority of Ghanaians. According to the united nations, Ghana’s Per Capita Income ending December 2021 stood at 14, 891 ¢. On a monthly basis, the average Ghanaian earns 1,240 ¢.
With inflation at 23.6 %, the average Ghanaian needed an extra 292 ¢ in addition to the average salary of 1240 ¢ to cover their monthly expense.
As if to further drive home the point, the minister of finance Ken Ofori Atta during the finance ministry briefing in march announced that diesel and petrol prices in the first quarter went up by 57 and 45% respectively. This significantly affected cost of transport with operators increasing transport fares.
Ghana statistical service for the month of April pegs transport inflation at 33.5%. According to Expatisan, on a monthly basis, public transport costs 234 ¢. For the month of April, passenger paid an extra 78 ¢ for the same distance bringing transport cost to 312 ¢
Besides the cost of services rising, basic goods and commodities have equally recorded a sharp increase.
The cost of food and non alcoholic beverages also significantly shot up. According to the world bank, Ghanaian households spend 55% of their income on food. Due to increase in production costs such as fertilizer and land clearing and shortage of food from the region due to instability and draught, food prices have gone up. Further, the Russia Ukraine invasion has not helped as Ghana imports both fertilizer and grains from the two countries. These developments have seen food and non alcoholic beverage record an inflation rate of 26.3 %. Household food budgets have gone up to 861 ¢ in April from 682 ¢ in march.
Another good that has been steadily rising is liquefied petroleum gas. The price of LPG last year was 7.89 ¢ per kilograms. During the next pricing window, according to Institute of Energy Studies it will be 11 ¢.
While the cost of basic goods and services keep rising, Ghanaians have been turning to the government to look for answers. However, according to Dr Mahama Abdul Kabiru, an economic policy advisor to the vice president, reprieve is not coming anytime soon.
Speaking on starr fm, Dr. Mahama acknowledges the current economic turmoil but says the government is unable to predict when normalcy will resume since the economy is being destabilized by external factors.
This is no new narrative. The president, the vice president and the minister of finance have time and again blamed Covid 19 and the Russia Ukraine invasion for the current economic woes. According to the vice president Dr. Alhaji Mahamadu Bawumia, the countries fiscal deficit pre-covid 19 was 4.5 %. However, cushioning Ghanaians during Covid 19 by providing tax reliefs, personal protective gear, vaccines, free water and electricity pushed the government into heavy spending and borrowing. This not only increased the debt stock to 351 billion ¢ but also widened the budget deficit to 11.63 % in 2021.
As the world begun recovering from Covid and opening up, the Russia Ukraine Invasion happened. According to Vice president Bawumia, due to disruption of supply chains by the invasion. As of march wheat prices had gone up by 62 %, fertilizer 300%, maize 36 %. Ghana was directly affected as it imports 50% of flour, 30 % of grains and 30 % of fertilizer from Russia.
Help might not be near as Covid 19 keeps mutating. Some parts of the world are battling a fifth wave. Further, there is no end in sight with regards to the Russia Ukraine invasion.
Seeing that government is staying clear off steering the economy back on track and easing the economic burden, some Ghanaians have also taken to social media to vent out frustrations. Many are sharing experience of poor salaries and lack of increments to cushion them. While many in this developing economy earn low wages, some have suffered the fate of losing their jobs upon requesting for better pay.
Popular Blogger Kobby Kyei on his twitter handle has been sharing messages from contractors who were allegedly fired by a local dairy products manufacturing company over asking for better wages. The said contractors used to to take home 500 ¢ .
Kofi Davor, a labor expert attributes this impunity by employers to scarce job opportunities. According to the labor expert, unemployment rate in Ghana over the last 10 years has tripled hitting 13.4% in 2021. The job desperation leaves room for employers to prey employee welfare creating unfavorable working conditions.
The financial abuse of employees has turned Ghana’s remuneration scheme into the worst in the west Africa. Further, the labor expert points out that the current salary of majority of workers is a direct contrast to the cost of living. Ghana’s minimum wage is below its economic peers at 53$ a month. However, Countries like Seychelles offer $432, Libya $322, Morocco $281, South Africa $242and Kenya $140.
Earl Ankrah, the director of research, monitoring and evaluation at Fair wages and salary commission says employers are also struggling with high cost of living. Doing business has become expensive and profit margins have narrowed. While employers could lay off staff to manage losses, many opt to keep staff on board maintaining pay or in dire circumstances with pay cuts.
However, Earl admits that despite employers efforts to maintain staff on board, the pay is not favorable. This is to say, during the next stakeholder engagement to negotiate minimum wage for the year 2023, Earl promises that inflation will play a major role while settling for a a new minimum wage. Currently minimum wage in Ghana is 13.53 ¢ translating to 284 ¢ after 21 working days.
The writer, Ondiro Oganga, is broadcast journalist with the EIB Network