The International Monetary Fund (IMF) has asserted that the incessant increase in prices of commodities is mainly due to domestic factors in the country.
According to the Director of the IMF’s African Department, Abebe Aemro Selassie, it would be misleading to pin the whole blame on external factors such as the Russia-Ukraine invasion.
At a press conference on the sideline of the IMF/World Bank Spring Meetings from 10-16 October 2022 in Washington, D.C., US, he explained that “on inflation, I mean, again, there are always trade-offs when you’re doing policy calibration, and so in our regional economic outlook, we are very careful to flag that there are some countries where inflation has clearly been driven more by domestic factors than exogenous factors. I think Ghana would fall in that camp.”
His comment, however, suggests that both domestic and external factors have a role to play in the country’s extremely high inflation rate.
Since January this year, inflation has been on the rise. From 13.9%, Ghana’s inflation rate now stands at 37.2% as of September 2022, according to the Ghana Statistical Service (GSS).
As inflation rose this year, the price of petroleum products also saw an increase. During the period when fuel prices were hiked, transport fares were adjusted twice.
Consequently, the cost of goods and services has also surged.
The Bank of Ghana has adjusted the Monetary Policy Rate (MPR) to check rising inflation. Increasing the rate from 17%, then to 19% and 22% seems to have not aided the reduction of the inflation rate.
Despite failed efforts, the central bank has recently increased the policy rate to 24.5% in a bid to control the high inflation rate.
The Bank of Ghana is optimistic that its many measures will address the worrying rate.
As the adjustment in policy rate has failed to check inflation, some experts have asserted that imported inflation could be driving Ghana’s inflation.
Such views have not been discarded, as Ghana remains a heavily imported dependent country.
Mr Abebe Selassie also hinted at such an assertion, however, did not categorically state that Ghana falls under such a category.
“But there are also quite a lot of other countries where the inflation we are seeing is more imported inflation, so the scope and the space and the ability of monetary policy to address that is limited. So again, it depends on country-specific circumstances, and on time”.
Mr. Abebe also said a volatile exchange rate affects a country’s inflation rate. Currently, a dollar is trading at over GH¢12 at the forex bureaus.
Source: The Independent Ghana