Poverty Reduction in Ghana: A Golden Experience

Earlier this Fall, tweets from local media outlets suggested that the Ghana Statistical Service (GSS) had developed poverty estimates that diverged significantly from those of the World Poverty Clock project. Amid this context, this blog aims to examine Ghana's current poverty reduction situation, as well as the likely prospects, over the course of the SDG period.

Ghana’s definition of extreme poverty differs from the international definition championed by the World Bank and the United Nations, which currently stands at $1.90 daily. Specifically, Ghana defines extreme poverty (also called “lower poverty” or “food poverty”) as not being able to afford a representative food basket of a minimum 2,900 calories per day for an adult, which costed some 982 Ghana Cedi in 2016/17 (GSS 2018, p.8), or $1.70 in 2011 PPP terms.  As a result of employing this lower threshold, it is reasonable that the GSS would conclude that fewer Ghanaians live in extreme poverty than the World Poverty Clock’s model estimates.

Based on Ghana’s definition of extreme poverty, in 2017 nearly 2.4 million – or some 8.2% of the total population – lived below the poverty line; this finding is in line with our own data (8.35% of the population) when the threshold of $1.70 was used instead of $1.90. However, taking the international definition of extreme poverty with $1.90 PPP daily spending power, our data show that in 2017, in Ghana, 3.1 million people were below the poverty line, representing a share of 10.6% of the country’s total population.

Borrowing inspiration from the Economist’s “Big Mac Index” – and to give a common interpretation what a daily intake of 2,900 calories means – this amount of caloric intake can be translated to two Big Mac menus (medium) with fries and a milkshake. Of course, this can only refer to the calories equivalent as, e.g., in Ghana’s capital Accra, one menu costs around 30 Ghana Cedi, much more than the average daily spending power for the extreme poor of less than 2.70 Ghana Cedi (in 2016/17 terms).

Apart from methodological differences, the good news is that, if things remain stable, Ghana is on track to eradicate extreme poverty. In 2010, the country’s share of extreme poverty stood at 13.5%; we expect this figure to be halved to 6.6% by 2023, and to fall below the 3% threshold by end of 2029. Between 2010 and 2030, this would amount to an average decrease of 7.1% annually – an impressive feat considering the more modest relative progress of other countries from its neighboring peer group.

For example, although Ghana’s neighbor Cote d'Ivoire is also expected to reduce the extremely poor’s share of the total population by some 7.4% per annum, it will not be able to achieve SDG 1.1 over the next ten years. Indeed, we estimate more than 2 million people will still live in extreme poverty by 2030. For other similar countries in Ghana’s neighboring region, e.g. Cameroon (annual average decrease of 3.4% between 2010 and 2030), or Burkina Faso (5.4%), the poor will still represent between 12.8% and 14.6% of the total population. In Niger we expect an increase in the total amount of people in extreme poverty until 2030.

On the other hand, and the other side of the continent, Ethiopia is expected to diminish extreme poverty by 12.7% per year and is therefore poised to become the first Sub-Saharan African country to fulfill SDG 1.1, beating Ghana by a couple of months. These competitive predictions notwithstanding, by 2030 many African countries will have much to celebrate. Ghana will have lowered the share of people living in extreme poverty by 10.7 percentage points (pp) since 2010, Cote d'Ivoire by 31.0 pp and Ethiopia by 41 pp.

As we showed in a recent Brookings article, under current projections, 88% of the world’s poorest are expected to live in Sub-Saharan Africa (some 414 million people) by 2030. The top 10 poorest countries in the world will all be African—both in terms of absolute numbers and share of extreme poor as a percentage of the total population.  Against this background, success stories from African countries like Ghana cannot be praised enough—and should be considered as role models of truly a golden experience.