Why the Persistent Increase in Ghana’s Rice Imports? Prescriptions for Future Rice Policy

Abstract

Prompted by the persistent increase in rice imports (and the implications thereof) amidst implementation of various import reduction policies and strategies in Ghana, this study sourced assessment of the plausible determinants of volume and value of rice imports in Ghana. Use was made of an imperfect substitutes model (an extension of the traditional import demand model) applied in a multiple regression frame for the period 1965-2009. Based on a framework used in this study, the perceived determinants of rice imports were local rice production, relative price ratio between imported and local rice, real per capita income, relative price ratio between maize and imported rice, relative price ratio between millet and imported rice, consumer tax equivalent of tariff on rice imports, domestic (beginning) stock variation, domestic demand for meat, urbanization index, trade liberalization and lagged value of rice imports. Estimates for the respective models, however, revealed that, both volume and value of rice imports increase significantly with increasing real per capita income, increasing millet price (keeping that for imported rice unchanged), increasing demand for meat, urbanization and with trade liberalization. In as much as volume of rice imports decreased marginally with increments in domestic stock, effect on value of rice imports was not significant. Local rice production, consumer tax equivalent of tariff on rice imports, relative price ratio between imported and local rice, relative price ratio between maize and imported rice and lagged value of rice imports had no significant effects on both volume and value of rice imports. Among the variables with significant effects, increments in relative price ratio between millet and imported rice, and urbanization yield the greatest impact (positive) on both volume and value of rice imports. Given these findings, there arises a need for policy makers to look beyond variables currently emphasized in rice policy of the country. For Ghana to stand a chance of significantly reducing rice imports and meeting set targets, effort should be made to intensively pursue quality improvement of locally-produced food, especially the most consumed rice substitutes for which Ghana holds a strong comparative advantage and incorporate income dynamics, dynamics in millet price (relative to import price), dynamics in domestic meat demand, and patterns of urbanization in future rice policy.