Economist identifies import dependency, agricultural supply chain issues as drivers of high inflation
Senior Lecturer of Economics at the University of Ghana (UG), Dr Priscilla Baffour, has stated that the country’s dependency on imports, particularly food imports, agricultural supply chain issues, and the cedi’s depreciation are the major causes of the country’s high headline inflation rate.
According to her, the country’s high headline inflation rate driven by food inflation is due to the fact that the agricultural sector and its whole value chain are not working as expected.
Speaking during the NorvanReports’ and the Economic Governance Platform’s Twitter Space Discussion themed “Navigating Ghana’s inflation Landscape” on Sunday, Dr Baffour noted that, the country needs to tackle food inflation by addressing the supply-side issues that are contributing to the elevation in inflation and also reduce its dependency on imports.
Additionally, Government needs to support monetary policy decisions taken by the Bank of Ghana with fiscal policies or measures such as reduction in expenditure.
“The agricultural sector and the whole value chain is not working as expected and that explains the current challenge we have.
“We need to tackle food inflation, supply-side issues adding to the elevation in inflation and also reduce our dependency on imports if we are to effectively deal with inflation in the country,” she stated.
“Additionally, Government needs to support monetary policy decisions taken by the Bank of Ghana with fiscal policies or measures such as reduction in expenditure. The recent reduction in expenditure by Government is commendable, and Government must make further expenditure cuts to help bring down inflation (sic),” she added.
Speaking further during the X Space Discussion, Dr Twumasi noted that historically, Ghana has struggled with inflation and so the country has consistently had high inflation.
But from April 2018 to March 2020, the data indicates that the country got a hang on inflation as it consistently recorded single inflation digits.
The challenge with the prevailing high inflation rate, however, begun when Covid struck and led to a global crisis resulting in elevated supply side challenges.
Headline inflation witnessed a marginal uptick (60bps) year-on-year, climbing to 43.1% in July 2023 compared to the 42.5% figure registered in June.
Month-on-month inflation between June 2023 and July 2023 was 3.6 percent.
According to the Ghana Statistical Service, Food and Non-Alcoholic Beverages Inflation which stood at a notable 55.0% played a role in driving the overall inflation figure higher.
Month-on-month food inflation was 3.8% with last month’s food inflation being 54.2%.
On the flip side, Non-Food Inflation maintained its inflation figure of 38.3% during the same period, reflecting a less pronounced but significant inflationary pressure within the sector.
Month-on-month non-food inflation was 3.4% with last month’s non-food inflation being 33.4%.
Inflation, according to a World Bank report, pushed nearly 850,000 Ghanaians into poverty at the end of the 2022 year.
