Inflation Rate Scandal: Matters Arising

Ex-President Jerry John Rawlings is reported to be an angry man. Part of his anger is obviously fuelled by his belief that the New Patriotic Party (NPP) gained power via Election 2000 through deceit.

Not many take him serious, though. However, many reasonable and non-partisan men and women across the country may seriously now be re-evaluating Dr Dr Rawlings’ allegation in the light of the government’s scandalous scheming over the inflation rate for February 2003.

Following the release of the latest Consumer Price Index (CPI) by the Ghana Statistical Service (GSS), the Bank of Ghana scheduled a press conference for Friday, March 21, 2000 at which it hoped to set a new rediscount rate (the rate at which it lends money to the commercial banks) in line with the new inflation rate.

The figure, according to the GSS, had risen from 16.3% for the month of January 2003 to a whopping 29.4% for February 2003, so a new re-discount rate had become necessary. Mysteriously, the Bank of Ghana called off the press conference at the last minute, in all probability due to pressure from the government, which felt embarrassed by the increase of more than 12 percent. The press conference was again called off on Monday, March 24, to which it was re-scheduled following the cancellation the previous Friday.

As the media got curious, leaks were planted and aired that due to inaccuracies in data gathering in our environment, there were doubts over the figure for inflation released by the GSS.

Then Economic Planning and Regional Integration Minister but now Energy Minister, Dr Paa Kwesi Nduom, followed up on Tuesday, March 25, with a definitive declaration that the latest inflation rate was just 16% and not 29.4%, which some apostles of doom were jumping from one radio station to another announcing as the inflation rate for February 2003.

But the Minister was being very, very economical with the truth, putting it very charitably, as the Bank of Ghana came out on Thursday, March 27, 2003 to affirm that the new inflation rate was indeed above 29 %.

Obviously, a number of questions arise: the first is whether those who questioned the GSS data were unaware of the real situation? Of course they were. They simply were the witting tools of a government whose loud protestations about having the best brains within its fold had come home to roost and was embarrassed by it and at the same time did not feel man enough to admit it. They were shamefaced that in spite of themselves, the increase in the monthly figure had risen by double digits, for the first time in about 15 years or so.

The second question: Where did those who question the GSS data get their figures which are completely different from that of the Bank of Ghana from? Of course they got it from the work of the same GSS, but by surreptitiously changing the goal posts long after the competitive march had begun.

As part of its computation of the CPI, the GSS traditionally calculates two inflation figures. The first of the two is what it calls “Inflation over 12 Months”; the second, “Yearly Inflation”. Indeed, going by the yearly inflation, the inflation figure for the month of February 2003, as derived by the GSS, was 15.6%, approximately the 16 % quoted by Minister Nduom and those who share his opinion. But that is where the changing of the goal posts occurred behind the back of the referee.

Since the NPP Government took power on January 7, 2001, the inflation figure it has regularly announced to the public has been the one that the GSS calls inflation over 12 months. It was this rate of inflation that was 40.5% at the time the NPP took power. After a slight rise to 41 plus, it has gradually been declining till it hit 16.3% in January 2003.

With each monthly decline, obviously as a result of good management, the government trumpeted it from the rooftops and took deserved credit for it. It was this same “inflation over 12 months” which, because of the January 17, 2003’s 90.4% hike in the prices of petroleum products, rose astronomically to 29.4% in February 2003, according to the GSS computation.

But suddenly the government did not want anything to do with! What do we have here, fair weather governance? For the past 24 months that the NPP government has been using the inflation over 12 months figures, the parallel yearly inflation figures have been provided monthly by the GSS, but the same government has found no use for them as a basis for setting the Bank of Ghana re-discount rate. So,why now? Why?

Embarrassing as the inflation over 12 months figure for February 2003 is, a government that truly has the courage to take difficult and bitter but necessary decisions and truly deals honestly with its people, should have no problem explaining it away: oh this is the result of the recent fuel prices increases. Now, as you all know, those increases were necessary to prevent the banking system from collapsing. We assure you, however, that our pledge to achieve single digit inflation is still within sight and we are going to work diligently at achieving it, or words to that effect.

Expedient politicians will, however, always get up to the tricks some government officials attempted to play. That is, denying the obvious even when it is obvious. But the Gye Nyame Concord deploys the manner the Bank of Ghana made itself victim of the scheming by government to avoid facing the bitter truth that there has been something wrong with its management of the economy for some time now.

What happened to the independence of the Bank of Ghana, recently reinforced with a bill from Parliament? To say the least, the performance of the Bank of Ghana has been disappointing in this matter.

Gye Nyame Concord also deplores the silence of the Centre for Policy Analysis (CEPA), the Institute of Economic Affairs (IEA), the Centre for Democratic Development (CDD) and the University of Ghana’s ISSER at the government’s attempt to unjustifiable discredit the work of the GSS just because it does not dovetail into its parochial short-term interest. We should not choose to comment on only those issues that do not compromise our personal interests.

At the same time, Concord will encourage the GSS to maintain its backbone. Let nobody say that because he is looking for confirmation of appointment, he would supervise the doctoring of statistics to please the powers that be. That would be an unforgivable betrayal of a caring Motherland. This is why we salute Dr. Twum-Baah, acting Government Statistician for standing his ground on this issue despite the glaring conspiracy to discredit his office’s data. Ayekoo! Keep it up and you would be able to keep your head up.