Ghana has consistently recorded higher domestic inflation compared to that of imported goods, a situation that poses a threat to the government’s call for the patronage of locally produced goods.
Recent Consumer Price Index (CPI) released by the Ghana Statistical Service show that the year-on-year inflation of imported goods remained unchanged at 6.1 percent for December 2020 and January 2021 while the inflation of local goods was 11.3 percent on average for January 2021, down from 12.1 percent last month. Month-on-month inflation for imported goods was 0.7 percent and for locally produced goods 1.0 percent.
The inflation of imported goods was 5.6 percent in November 2020, while the inflation of local goods was 11.5 percent. In December 2020, month-on-month inflation for imported goods was 0.3 percent and 1.1 percent for locally produced goods.
On average in 2020, year-on-year inflation for locally produced goods was 11.8 percent, which is more than double the average year-on-year inflation of 5.3 percent in 2020 for imported goods. Especially in the second half of 2020, local goods recorded higher rates of inflation than imported goods.
The average year-on-year inflation for locally produced goods is higher than the average headline inflation of 9.9 percent for 2020.
This may potentially reflect a higher cost of production of locally produced goods compared to foreign goods. Another reason that may account for this is a deficiency in local production to meet the increasing local demands.
The consistently higher rates of inflation of locally produced goods above their imported counterparts raise questions as to whether the much-anticipated benefits of some government policies and programs are yielding their required results. As far as this is concerned, the major policies that require an assessment are the Planting for Food & Jobs (PFJ) initiative and the One-District-One Factory (1D1F) program.
The regular higher rates of food inflation over non-food inflation may mean that the PFJ initiative has not yet produced the needed results contrary to what the government is telling its citizens.
The recent rate of 12.8 percent for food inflation in January 2021 is still slightly above the average rate of 12.3 percent over the last 12 months. Food contributed 57.0 percent to the total inflation in the first month of this year. This is still above the average for the last one and half years, even though, it is slightly lower than the 59.1 percent recorded in December 2020.
Whilst the government indicated last year that the PFJ has made Ghana a net exporter of food, developments in price movements of locally produced goods especially food items show otherwise. Vegetables have consistently recorded the highest rates of inflation within the food sub-classes. Within the Food Division in January 2021, Vegetables Subclass recorded the highest rate of inflation of 20.3 percent.
The higher inflation for locally produced goods also means that the 1D1F initiative is yet to prove itself as having the potency to drive the government’s call for the patronage of locally produced goods. Once the prices for imported goods are lower, the rational consumer will prefer such goods to locally produced goods, conditioned on the fact that they all serve the same purpose and give the same satisfaction.
To revert this situation, the government must do more to reduce the cost of production and also commit more resources to the PFJ initiative as well as the 1D1F. Anything short of this, the ‘Wear Ghana’ and ‘Eat Ghana’ agenda will remain an illusion.
