For the first time since at least 2020, Ghana has reduced the cocoa farmgate price by 28% in response to falling global cocoa prices and mounting payment arrears owed to farmers.

In announcing the reduction, alongside a broader set of reforms, the Finance Minister stated that unpaid cocoa farmers would be settled.

“Cabinet has directed COCOBOD to commence immediate payment of all affected cocoa farmers,” he said.

What was not fully clarified at the time, however, was the source of funding, particularly given COCOBOD’s well-documented liquidity challenges in recent years.

Speaking on Top Story on Joy FM, the Deputy Finance Minister, Thomas Ampem Nyarko, said the government would absorb the losses COCOBOD is expected to incur from purchasing about 50,000 metric tonnes of cocoa beans already supplied by farmers but not yet paid for.

Because the beans were supplied before the reduction in the farmgate price, the government has agreed that farmers will be paid the previous rate of a little over $5,200 per tonne.

At current market conditions, this implies that COCOBOD will incur substantial losses.

According to the Deputy Minister, those losses are estimated at about $150 million, which the government has agreed to absorb.

At prevailing exchange rates, the $150 million translates to roughly GHS 1.6 billion. That is a significant fiscal commitment.

“There are some 50,000 tons of cocoa [that farmers have already supplied]. Government has agreed to [pay] the farmers the price that was agreed with them earlier. That means COCOBOD is going to make huge losses of about $150 million. Government is absorbing that cost,” he said.