Government must tackle food inflation to reduce headline inflation - IEA

The Institute of Economic Affairs (IEA) Ghana has asked the Government to control food inflation as one of the means to check total inflation in the country.

This follows recent inflation trends, which have seen food inflation consistently being higher than non-food inflation, even though total inflation has remained broadly stable since December 2023.

“The fact that food accounts for nearly 44% of the CPI basket means that you cannot ignore it when you want to bring inflation under control,” Dr John K. Kwakye, Director of Research, IEA Ghana, said.

He said this when he met the press in Accra to present the Institute’s reactions on the State of the Nation Address (SONA) delivered by President Nana Addo Dankwa Akufo-Addo on February 27, as well as the Monetary Policy Committee (MPC) Decision delivered on March 25 by the Governor of the Bank of Ghana, Dr Ernest Addison.

Dr Addison in his address, noted that headline inflation declined to 23.2 per cent in February, down from 23.5 percent recorded in January 2024.

He added that the decline was broad-based, with food inflation down by 0.1 percentage point to 27.0 per cent, while non-food inflation declined to 20.0 per cent.

That, the IEA Director of Research said confirmed the important role of food inflation in recent inflation trends, “a role that needs to be recognised and taken into consideration if inflation is to be controlled on a durable basis”.

The Governor of the Bank of Ghana also reported that in the year to March 20, 2024, the Ghana Cedi recorded a depreciation of 6.8 per cent against the United States Dollar, stressing, however, that the cedi “continues to recover its value”.

Reacting to that, Dr Kwakye said the Cedi rather continued to depreciate, reaching nearly GHC13 to the dollar.

He emphasised that relying on funds from the International Monetary Fund, World Bank, Eurobonds, cocoa syndicated loan, among others, to strengthen the cedi, was “a lazy man’s approach” and unsustainable, as the pressure would be back when the loans fell due for repayment.

To stabilise the Cedi on a durable basis, Dr Kwakye said the country must increase its foreign exchange earnings through greater ownership of, and value addition to, its natural resources.

He added that the nation must reduce its import demand through domestic industrialisation as well as entrenching its fiscal and monetary discipline.