Inflation expectations not anchored; upward trend worrying – IMF Country Rep.
Resident Representative of the International Monetary Fund (IMF), Dr Touna Mama, has described as worrying the continuous rising rate of Ghana’s headline inflation.
According to Dr Mama, the upward trend of the country’s inflation rate indicates a de-anchoring of inflation expectations by the Central Bank.
“Rising inflation rate is worrying and this shows that inflation expectations are not anchored, and surprisingly non-food inflation for the first time has surpassed food inflation because rent and others (sic),” he stated.
The views expressed by Dr Mama at the economic forum organized by the Economic Governance Platform (EGP) on the E-Levy and a possible return of the country to the IMF for a Fund programme, is affirmed by the Central Bank in its 104th MPC press release.
In its 104th press release, the Central Bank noted a steadfast implementation of the proposed fiscal consolidation measures in the 2022 budget are needed to re-anchor inflation expectations.
“Fiscal policy has responded to these concerns with an announcement of a further 20 percent cut in expenditures in 2022. This fiscal policy measure will help to provide for some correction, avoid the opening up of macroeconomic imbalances, and further deepen the fiscal consolidation agenda. This should also shift the consolidation process away from a revenue-led one, to one which encapsulates both revenue and expenditure measures signalling stronger commitment to keeping the deficit under check.
“A steadfast implementation of the proposed measures will be needed to safeguard stability, foster credibility and re-anchor inflation expectations,” it added.
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Heading inflation for the month of January 2022 has been pegged at 13.9% by the Ghana Statistical Service (GSS).
The recorded headline inflation rate for January 2022 compared to the previous month’s -December 2021 – inflation rate of 12.6% marks an increment of 1.3 percentage points.
On a month-to-month basis, inflation between December 2021 and January 2022 was 2.1%.
According to the GSS, the rising cost of Housing, Water, Electricity, Gas and other Fuels (28.7%) as well as Transport (17.4%) pushed the rate of inflation for January 2022 to 13.9%.
Food inflation for the month of January 2022, the GSS noted was 13.7%, higher than both December 2021’s food inflation of 12.8%.
Non-food inflation on the other hand went up again in January 2022 to 14.1%, compared with the 12.5% recorded in December 2021.
Touching on the topic of the country going for an IMF programme, Dr Mama averred the country’s macroeconomic conditions are getting more complicated given the country’s high debt stock and fiscal deficit.
He stated that a programme from the IMF for the country at this point in time, will be extremely helpful for Ghana, however, that is something the government does not want at the moment.
He therefore advised government to focus on the needed reforms, policy packages and expenditure rationalization to resolve its fiscal and debt challenges.
The economic forum organized by the Economic Governance Platform (EGP) seeks to create a stakeholder dialogue platform to discuss findings from Civil Society Organizations (CSOs) and Academic community and also consider the strategies that GoG and its development partners are considering to manage the country’s debt and revenue challenges.
The objectives of the forum include:
(i) Provide CSOs and Academic community the opportunity to submit their findings/positions on the subject [E-lvey]
(ii) Create a dialogic platform for CSOs and GoG to build consensus and explore alternative approaches to finding lasting solutions to the recurring debt crisis situation
(iii) Enhance working relationships, promote transparency and build trust among stakeholders
(iv) Provide a working document (Outcomes from the dialogue session) for monitoring GoG progress in managing Ghana’s debt crisis
(V) Increase citizens knowledge on Ghana’s debt situation
