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Inflation could hit 40% by August 2022 if current trajectory persists – Financial analyst

Dr. Williams Peprah.png Dr. William Peprah is CFO at Valley View University

Fri, 13 May 2022 Source: www.ghanaweb.com

BoG must be thinking of bringing contraction monetary policy, Dr. Peprah

We need a fuel price mechanism, Analyst

Fuel prices affect general prices, Analyst


Chief Finance Officer at the Valley View University, Dr. William Peprah has cautioned that if government fails to act urgently and decisively inflation could hit 40% by August 2022.

He proposes that the Central Bank increases its policy rate and reserve requirements to reduce banks’ lending, as the government is cutting its expenditure to slow growth.

Speaking to Joy Business, Dr. Peprah said a further increase in the inflation rate would further worsen the plight of the already suffering Ghanaians.

“In terms of the monetary side, inflation simply means we are spending more than we produce goods and services. So the government may have to look at ways of reducing spending activities.”

“First, government must check its spending. When government does that the impact is that government will have to revise its growth rate set for 2022. So the 5.4% set must go down”, he explained.

The financial analyst stated that the Bank of Ghana needs to hasten the implementation of the contraction monetary policy.

“Central Bank as I have already mentioned must be thinking of bringing what we call the contraction monetary policy. That is one increasing monetary policy rate so that we will control inflation rate and two also increase the reserve requirement for banks”.

“In that case, banks will be limited by giving more money or putting more money into the economy. In effect, we have to intentionally slowdown the growth to be able to curtail what we are seeing now”, he said.

“If not and if it goes like this, it will be getting to the 1998/1999/2000 period that inflation was around 40%. And if we do not take care, by August 2022, we will hit about 40% inflation rate”, he warned.

Speaking on the increasing cost of fuel he noted that, “government must first look at its fuel pricing control mechanism. I’m proposing that we may have to also think about price controls in terms of fuel pricing. Can government be able to come in a while like what happened in December last year with mitigating measures? Because the pricing control mechanism will slow down the growth or the increasing rate of transportation.”

“So once we are able to control the transport sector, it will have a rippling effect on food, it will also have a rippling effect on the housing sector which also went up, water and electricity because all of these rely on fuel. If you look at it critically, government will have to come in with a price control mechanism for a while, because that is a measure of controlling inflation”, he added.

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Source: www.ghanaweb.com
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