Government should employ targeted fiscal policies to deal with rising inflation - Economist

Courage Martey Courage Martey is an economist

Fri, 10 Jun 2022 Source: www.ghanaweb.com

Economist with Databank, Courage Martey, has noted that the current economic crisis Ghana faces cannot be solved with the monetary policy alone.

He suggested that government should intervene in the rate of food price increases by providing subsidies for the agriculture sector and others that contribute to rising inflation.

Courage Martey speaking to Citi Business News said the economy is currently in a hard time that needs policy interventions that will address the issue.

“Overall, the latest data from the Ghana Statistical Service confirms that we are not in normal times, the data also confirms that monetary policy alone cannot solve the situation. Another thing the data confirms is that fiscal policy needs to be more targeted and not blanket or sweeping scale implementation. Talking of more targeted fiscal policy, if we had a more targeted fiscal policy, we could find a way of mitigating the cost pressures imposed by inflation.”

“For instance, you could argue for subsidies, but you could only do that if you have a system that can accurately identify the segment of society that needs to be subsidized, but our systems do not allow that,” he added.

Ghana’s inflation rate for May this year reached 27.6 percent from an earlier 23.6 percent recorded in April, the Ghana Statistical Service has said.

The hike was attributed to prices of food and transportation costs making it the highest rate recorded in more the 18 years since 2004.

Government Statistician, Professor Samuel Kobina Annim, addressing journalists on Wednesday, June 8 said food prices reached 30.1 percent from a year earlier, compared with a 26.6 percent increase in April.

For Non-food inflation, the rate increased to 25.7 percent, from 21.3 percent in the previous month, with transportation costs increasing by 39 percent.

The Bank of Ghana on May 23 hiked the monetary policy rate by 200 basis points from 17 percent to 19 percent – a move meant to stem rising inflation and address excess liquidity in circulation.

Meanwhile, government is yet to make headway with its move to raise some US$2 billion which will be injected into the economy, and provide relief to the budget and balance of payments.

Source: www.ghanaweb.com
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