The International Monetary Fund (IMF) has advised the government to adjust the producer price of cocoa to reflect changes in international cocoa prices.

According to the IMF, the downward adjustment had become necessary because the Ghana Cocoa Board (COCOBOD) was grappling with a funding gap of GHS1billion due to the government's inability to reduce producer prices paid to cocoa farmers at a time global prices of the crop had been falling.

In its seventh and eighth review `documents under the recently concluded the External Credit Facility (ECF) Programme, the IMF explained that the adjustment was needed to save COCOBOD from the expanding financing gap.

The fund said although the government and COCOBOD were taking appropriate measures to provide some temporary relief, "more is needed to strengthen COCOBOD's financial position."

Cocoa prices

Before the commencement of a cocoa season, mostly in October every year, COCOBOD normally announces a farmgate price - the producer price - that it will pay to farmers for their beans in the crop season.

That price was last increased by 11.76% in October 2016 to cover the 2016/2017 season.

Since then, it has remained unchanged at GHS7,600 per tonne, translating into GHS5475 per bag of 64 kilogramme (kg) gross weight.

Within the same period, however, the price of cocoa on the international market suffered a tumultuous fall, dropping from an average of $2,500 per tonne in November 2016 before ending that year at $2,287 per tonne according to the International Cocoa Organisation (ICCO).

The price of cocoa remained bearish throughout 2017, rising only in October before falling again to end December at $1,917.68 per tonne, according to the world cocoa body.

In 2018, ICCO's data showed that prices strengthened consistently to peak at $2,659.9 per tonne in May before fluctuating throughout the remaing part of the year.

The Bloomberg Terminal, which also tracks global prices of the crop, quoted it at $2,245 per tonne on the morning of April 25.

Thus, maintaining the price at GHS7,600 per tonne at a time the global cocoa price was crashing means that COCOBOD has been accumulating losses, a development the IMF now estimates at GHS1 billion.