Accra Ghana (Commonwealth Union)_Having a meal a day is proving to be difficult in Ghana. Inflation has skyrocketed, with annual inflation quickening 43.1 percent from 42.5 percent in June, impacting food the most. Ghana’s President vowed to curb inflation many months ago but the solution is proving to be difficult with money printing being done unabated. With cost of living increasing exponentially, the high cost of food is proving to be unmanageable for the average family.
According to the country’s statistical service, the increase in inflation over the previous month is only marginal, but what is causing concern is that inflation has crept up consecutively in the last four months. The sobering news was that at the beginning of the year, inflation was showing signs of slowing down.
The Central Bank’s solution to reduce inflation was to raise interest rates which in turn should reduce demand. However, with the printing of money, there is no way that the stubborn rate of inflation will be brought down any time soon. When asked the reasons for the persisting high inflation, an economist stated that according to the official announcement, inflation is caused by cost of production, fuel cost and exchange rate impacts. “But if that’s the case, inflation should have fallen well below 40 percent by now,”
There have been widespread protests across Ghana and especially in Accra with people taking to the streets protesting the high cost of living. The problem has so intensified that Ghana’s largest opposition party, the National Democratic Congress accused the Governor of the Central Bank and his deputies of incompetence, mismanagement and recklessness, calling on them to resign in three weeks, if inflation is not brought under control.
Ghana produces oil, cocoa and gold and has seen its currency plummet by more than 40 percent against the US dollar, making it one of the worst performing currencies in the world.
The country has looked to the IMF for help – the second time in the past three years and the 17th since independence in 1957. This recurrent cry for help however only spells out the failure to build an economy that can withstand internal and external shocks by successive governments. Lack of fiscal discipline and more recently, the dependency on foreign financing has seen investor sentiments blow hot and cold, which has also resulted in the selling off of portfolio investments. There is an immediate and vital need for Ghana to restructure the country’s massive debt if the IMF is to extend any assistance given that the IMF will only lend to countries who have a concrete plan to restructure debt and therefore restore debt sustainability. This will include limiting borrowing from the domestic market and respecting the law on fiscal responsibility. Money printing won’t cut it!
