2024 budget falls short of expectation – Peasant farmers

The Executive Director-Peasant Farmers Association of Ghana (PFAG), Dr. Charles Kwowe Nyaaba, has expressed disappointment over the 2024 budget and economic policy, stating that it fell short of meeting the hopes of local peasant farmers.

According to him, given the agricultural sector’s challenges – characterised by food insecurity and soaring food prices throughout the year – the PFAG and its members anticipated more dedicated investments aimed at enhancing food production, lowering food costs and bettering the lives of farmers.

“Though the 2024 budget attempts to do so, it falls short of the rapid transformational change we were expecting to see in the agricultural sector that would address the current food insecurity crisis and food inflation the nation is battling with,” he stated during a post-budget analysis press conference in Accra.

The Minister of Finance, Ken Ofori-Atta, presented the 2024 Budget Statement and Economic Policy to parliament on November 15, 2023 under the theme ‘Pursuing growth and development within a stable macroeconomic environment’.

The fiscal policies presented seek to advance the path toward fiscal consolidation, restore macroeconomic stability and boost growth, expenditure rationalisation, structural reforms and social protection.

Given the importance of agriculture and the current need for vibrant investment in the sector to ensure sustainable food production, the PFAG post-budget analysis seeks to scrutinise and highlight emerging issues from the agricultural sector budget – especially investment decisions and how such decisions could impact agricultural performance in the country.

The analysis also focused on understanding the recent policy decision by the Minister of Trade and Industry to ban/restrict importation of certain commodities, including agricultural commodities, by granting permits to selected importers; and how such a policy could impact households, businesses and the economy at large.

Against this backdrop, Dr. Nyaaba bemoaned government’s continuous failure to commit substantial resources into the agricultural sector – describing the development as “worrying”, given that “this is the sector that can trigger the growth of most other sectors, especially the industry and manufacturing sectors”.

Government expenditure for the agricultural sector comprises expenditure of the three key ministries (Ministry of Food and Agriculture (MOFA), Ministry of Fisheries and Aquaculture Development (MOFAD) and Ministry of Lands & Natural Resources (MOLNR)), which are responsible for coordinating the activities of farmers and agribusinesses.

The total budget allocation for the three ministries in 2024 increased by 74 percent to GH¢5,054,184,462 (MOFA, GH¢3,020,653,634; MOFAD, GH¢298,772,253 and MOLNR, GH¢1,734,758,575), compared with the allocation of GH¢3,717,507,762 in 2023 (MOFA, GH¢2,153,234,369; MOFAD, GH¢213,308,813, and MOLNR, GH¢1,350,964,580).

While there is an increase in the actual budget allocation, computing the budget allocations using these three ministries shows that the agricultural sector budget allocation as a percentage of total government budget in 2024 is the same as in 2023 – i.e., 1.95 percent.

“This is still far below the expected 10 percent commitment made under the Malabo Declaration,” Dr. Nyaaba said. He explained that with inflation hovering around 40.5 percent and the cedi experiencing an over-20 percent depreciation on average in 2023, “The nominal value of total budget allocation in real terms has reduced, while allocation to the agricultural sector in real terms has declined by 40.5 percent.

“The analysis of Ministry of Food and Agriculture spending against budget allocation depicts underspending. This trend has been a common feature of the ministry’s implementation spanning from 2018-2022. Budget performance data for the period 2018-2022 show that MoFA’s budget has been underspent by 27 percent, 18 percent, 19 percent, 10 percent and 45 percent for 2018, 2019, 2020, 2021 and 2022 respectively.

“The underspending is largely due to failure by the Ministry of Finance to disburse funds for project implementation. In 2021 and 2022, for instance, the Ministry of Finance failed to release funds for payment of fertiliser and seed supplied under the PFJ 1.0,” he stated.

“If the country does not change strategy to improve execution of the sector’s budget,” Dr. Nyaaba said, “Ghana will certainly not achieve the sustainable development goal 2 of Zero Hunger by 2030 and Maputo and Malabo Declaration of 10 percent budget allocation to the agricultural sector.”

With International Monetary Fund (IMF) support, he said, PFAG was expecting to see a substantial budget allocation in support of capital investment for agriculture in the areas of irrigation development, feeder roads, warehousing and mechanisation, which are critical for meaningful transformation in the sector.

“Apart from inadequate allocation, there is no detailed breakdown of specific areas of investment – which makes it difficult for monitoring and tracking,” stated Dr. Nyaaba.

Performance

Other analysts have expressed concern over the flat growth expectations of the sector, as well as its contribution to the wider economy; especially as the issue of food security has attained increased importance following supply chain disruptions across the globe.

In the first half of 2023, the economy maintained a familiar structure, with the Services sector continuing its dominance by accounting for 46.1 percent of nominal output – a slight increase from the preceding year.

This was followed by the Agriculture sector, which saw a marginal increase in its share from 21.1 percent to 21.4 percent as it grew by 6.3 percent versus the 4.3 percent recorded in the first half of 2022. Meanwhile, the Industrial sector experienced a decrease from 33.2 percent to 32.5 percent

The Agriculture sector growth was primarily propelled by outstanding performances in the crops and livestock subsectors, both registering growth rates of 6.8 percent – a significant improvement from the previous year.

However, not all subsectors experienced positive momentum. The cocoa subsector faced challenges, slowing down sharply with a growth rate of 0.4 percent – attributed to unfavorable weather conditions and the cocoa swollen shoot virus disease (CSSVD).

Despite these setbacks, the fisheries subsector rebounded; recording a healthy growth rate of 12.2 percent in the second quarter and contributing to an overall growth of 4.9 percent for the first half of 2023. This, though, represents a slowdown compared to the 15.8 percent recorded in the same period of 2022.

The sector is expected to close 2023 at a slower than projected pace, which will continue into 2024. The projected decrease is largely attributed to lower growth expectations in the crops, livestock and fishing sub-sectors.

Despite this, the sector is anticipated to recover with a growth rate of five percent from 2025 onward, averaging at 4.5 percent over the medium-term (2024-2027) – but analysts argue this is not ambitious enough.

The sector’s resilience however remains crucial for Ghana’s economic stability, as it employs over 38.3 percent of the workforce and has contributed an average of 20 percent to the GDP between 2017 and 2022.

Despite the touted success of government’s flagship programme ‘Planting for Food and Jobs’ (PFJ), the country is grappling with significant challenges including an annual expenditure of about US$2billion on importing poultry, rice, sugar, vegetables and other food products.

This heavy reliance on imports has placed undue pressure on the national currency, contributing to high levels of inflation. By mid-2023, food inflation had surpassed 50 percent; primarily due to importing staple foods which could be produced locally in sufficient quantities.

Government is now under increasing pressure to address this issue urgently and reverse the trend, possibly by bolstering local production through policies and incentives as the move to ban imports of select items continues to face legislative hurdles.