Inflation figures breaking free

is there a way out?

By Nii Kwaku Osabutey ANNY kwaku.anny@dailyexpressonline.com

When in 2006, IMF visiting official Samuel Itam said Ghana was on the path of achieving single digit inflation by 2007, it was welcomed as good news. Mr. Itam, a senior Advisor at the fund’s African Department, had his optimism based on the then relative decline in the rate as announced by the Ghana Statistical Service.

He said at the time that although the process of disinflation has not been smooth sailing, 12-month inflation declined from 40.5 percent in 2000 to 14.8 percent in 2005 has been well contained, despite the impact of soaring oil prices. He also praised government’s commitment to maintaining a macro-economic stability which, he said, was the very foundation for achieving high standards of sustained economic growth. But two years down the line, the situation has not been as Mr. Itam’s had hoped, and government officials, especially at the Finance Ministry are worried because of the negative impact it has on the already economically marginalised poor in the country.

Officials of the Ministry of Finance and Economic Planning are equally worried about the soaring trends. Sector Minister Kwadwo Baah-Wiredu has always been upbeat about government achieving single digit inflation, and has always been working round the clock to ensure that it happens, at least under his time as the man in the saddle. But things have not been as positive as he envisaged and should be somewhat disappointed just as most Ghanaians.

It is equally disturbing for government especially when one comes to think of it that elections are some few months ahead of us, and would have been a good tool to exploit. But that is not the case and the opposition political parties are likely to feast on it to hit hard at the government for poorly mismanaging the economy. Recent inflation figures as released by the Ghana Statistic Service put the rate for the month of May at 16.88% as against the 15.29% recorded in April. The rate has been on the rise since the beginning of the year, moving up by 1.59%, the highest for the year. However, officials of the Ghana Statistical Service are blaming it on the recent escalation of global food crisis, as well as the rise in petroleum prices.

The food crisis has even stirred up protests in several developng countries across the world, where people poor, who are heavily affected by the problem, have taken to the streets, chanting war songs, calling for the heads of government officials. In Haiti for example, protestors forced a sitting Prime Minister out of office.

Though Ghana is equally affected by the measures, a mitigation package has been announced by the president to “cushion” Ghanaians against the impact. Food prices are however yet to go down. Finatrade, one of Ghana’s biggest importers of rice, announced last week that it has reduced prices and will compel their dealers to do same.

Rev. Daniel Ogbamey-Tetteh is the Director of Research, Databank Financial Services. He told the dailyEXPRESS that the soaring inflation figures are worrying, especially when crude prices, one of the major factors contributing to the inflation rate, continue to go up.

“There is nothing we can do about crude oil,” he said.

He was however optimistic that should the government and other partners try and get the much talked about West African Gas Pipeline project off to a bright start, things will look good for the country.

“Our heavy reliance on crude oil will be moderated.” He also mentioned biofuel as an initiative which could make some trick for the country. The recent discovery of oil, some experts are hopeful, if managed well will be a blessing for this country. So far, major activities have not started on the oil fields but both Tullow and Kosmos officials are working round the clock to get the project off to a good start.

Rev. Ogbamey-Tetteh however believes any interventions made in the oil sector will be a long term measure. For the short term, he said it’s important for all stakeholders to take a second look at the agriculture sector. Ghana has major fertile lands for agriculture but little of it has been properly exploited.

Most farmers are still soaked up in the old form of farming where cutlasses and hoes are used to work small parcels of lands to feed a family of four persons. For those who employ the use of tractors and other heavy machinery, the cost of fuel is increasing their costs, especially in the face of the high cost of fertilisers.

There is also the question of post harvest losses which has become common to most farmers in the country. But Rev. Ogbamey-Tetteh believes the issue could be addressed. He said government needs to improve the road networks leading to major farms as a measure of ensuring that farm produce are transported on time to the major points of sale.

He said the global food crisis is something government could have taken advantage of if prudent measures had been put in place to ensure that Ghana’s agriculture sector is well managed.

Dr. Charles Ackah, a Senior Research Fellow at the Institute for Statistical Social, Social and Economic Research (ISSER) also argues that it is a sad commentary for Ghana to even cite the global food crisis as a measure for the rise in inflation. He said the country has over the years failed to take full advantage of its vast lands to cultivate enough for both local consumption and export.

He said researches have been conducted by both individuals and academia about the need for government to commit itself to the agriculture sector, but nothing concrete has emerged from the side of government. He also added his voice to the concerns expressed by farmers on the need to improve access routes to major farms to reduce the levels of post harvest losses.