The Government Statistician, Prof. Samuel Kobina Annim is making arguments in favour of the view that the current rising inflation in the country has more to do with the country’s fiscal policies rather than monetary policy.
According to him, confirmed data collected by the Ghana Statistical Service points to the fact that the rising cost of goods can only be tackled through policy decisions taken by the government on the supply side of things.
“If you want to resolve the inflation rate [issue] in Ghana, it’s not a monetary policy argument. Thankfully, the Governor of the central bank has indicated that we should begin to think of the supply side,” he said while delivering his inaugural lecture at the University of Cape Coast last week.
Prof. Kobina Annim said that data collected from 54 food trading outlets across the country in January 2018, during the COVID-19 period in May 2020 and this year amidst the Russia-Ukraine war in April 2022 point to wide disparities in prices at different outlets during the two periods of economic turmoil.
He noted that while the cost of a bag of rice across all 54 outlets in 2018 was stable and almost the same, the prices at the peak of the COVID-19 pandemic varied significantly and has become even worse presently.
“I look at the data from our 54 outlets over three time periods; 2018, during the Covid pandemic and in 2022 during the Russian invasion of Ukraine and see the disparities in prices across these markets…In 2018, there was stability in prices across the outlets. During the Covd-19, you see the varying prices and during the Russia – Ukraine war you see stack variations across the outlets,” he noted.
“The human factor in the variations in our prices during economic turmoil is pretty significant… With some outlets selling a 5kg of imported rice specifically Gino rice over GHS108, I took the pain to check last week and it is just GHS63 somewhere in Accra. We look at the numbers, and we say that, what you need to think about is the hoarding effect and transportation effect,” he added.
The Bank of Ghana, after raising the interest rate to a record 17% in March 2022, hiked the rate again to 19% in May 2022 as a desperate measure to stop the spiralling inflation in the country. But economists are challenging the view that increasing the policy rate will arrest inflation, and have warned that any further action in that regard will shrink the country’s economy by way of limiting borrowing.
The Governor of the Bank of Ghana, Dr. Ernest Addison has already hinted of the fact that the solution to Ghana’s current inflation challenges need to be tackled from the fiscal policy side that rests in the domain of the government and the Minister for Finance, Ken Ofori-Atta.
In May, the Bank of Ghana announced that consumer prices rose by 23.6% in April, more than double of its target.
Food contributes more than 50 percent of the overall inflation and according to Prof. Samuel Annim, incidents such as hoarding, and transportation effects are the reasons for the situation and can best be tackled through government fiscal policy intervention measures such as those related to government spending, public borrowing, and taxes.