Fuel & Electricity Push Up Inflation in Ghana

GHANA may accelerate already expected tightening measures, including further interest rate increases, following a rise in inflation in May driven by a surge in non-food prices, especially petrol.

Inflation reached 11.0 per cent in May; the highest this year and the second month in a row it has been above the government's single digit target range this year. The comparable figure for April 2007 was 10.5 percent. The annual rate of inflation rose 0.5 percentage points.

The annual rate of inflation rose 0.3 percentage points from 10.2 per cent in March to 10.5 per cent in April having dropped in March by 0.2 percentage points.

Inflation is the rate at which the general level of prices for goods and services is rising.

The Bank of Ghana is wary of inflation, because of its impact on savings and macro-economic stability sustainability.

Latest figures compiled by the Ghana Statistical Service (GSS) indicates that Consumer Price Index (CPI) for May 2007 was 218.41 with respect to the base year of 2002 compared to 196.73 recorded in 2006.

According to the Acting Government Statistician, Prof. Nicholas Nsoma- of 44.9 per cent.

Within the non-food group, transportation contributed the highest to the upward movement of the index with 0.41 points where petrol was the highest contributor with 0.23 points. Housing, electricity and water group followed with 0.23 points.

These high movements, in Francis Nyoagbe, a financial expert with the NTH, were attributable to the recent fuel price increases and the shortage of electricity supply.

It would be recollected in what was described as the second fuel price hike in one month that the National Petroleum Authority of Prices of manufactured items have also increased because shortage of power to produce at full capacity. Shortage in supply pushes up prices.

Food and beverages group including potatoes also had the highest movement of 1.73 points with plantain, yam, cassava, and cocoyam recording the highest with 0.78 points, 0.31 points, 0.17 points and 0.07 points respectively.

High inflation causes increase in interest rate, which further reduces the present value of future cash flow thereby reducing the attractiveness of investment opportunities.