Single-Digit Inflation Must Have Meaning For People

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Single-Digit Inflation Must Have Meaning For People - Bawumia

Details: Category: Uncategorised; Created on Thursday, 03 May 2012 00:00; Hits: 14886

He said those statistics must have meaning in the lives of the people.

“While I do not want to argue with or question the integrity of our hardworking officials at the Ghana Statistical Service (GSS) who do a good job under very difficult circumstances and should, indeed, be resourced and given more independence to do the work they do, I would like to state that the available evidence indicates that statistically reported single-digit inflation is not consistent with the economic fundamentals and developments in some key economic indicators relating to the cost of living, interest rates and exchange rates,” he said.

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Delivering a lecture on the current state of the economy at the fifth Ferdinand Ayim Memorial Lecture in Accra Wednesday, Dr Bawumia, an economist, argued that although inflation could be a measurement issue, the established relationships between inflation and key economic variables appeared to have gone missing for now.

“Unfortunately, most people in Ghana cannot relate to the talk about a single-digit inflation when they get to the market. I was at the Mallam Atta Market last week and it is clear that prices are increasing at a faster rate than what the official statistics may be capturing,” he said.

In attendance were former President John Agyekum Kufuor; the former Vice-President, Alhaji Aliu Mahama; the flag bearer of the NPP, Nana Addo Dankwa Akufo-Addo; Members of Parliament, chiefs and traditional leaders, as well as members of the Diplomatic Corps and representatives of the other political parties.

Comparing the prices of a number of commodities such as rice, maize, sachet water, Ideal milk and cement as of the end of 2008 to their current prices, Dr Bawumia said it was clear that the cost of living had gone up.

“It is clear that the cost of living, as measured by the prices of these items and others such as petroleum products, school fees, road tolls and electricity bills, has increased by triple digits! I should add that these price changes do not necessarily mean that single-digit inflation is not possible. It would depend on what is being measured and over what period. What we see of price increases for basic commodities in our markets over the last year is that they are increasingly volatile and definitely at rates beyond single digits,” Dr Bawumia stated.

“How many Ghanaians have seen a single-digit increase in the prices of what they normally buy in the markets and shops over the past year?” he asked, adding, “I can testify that if you try to give your spouse a single-digit increase in chop money, she will not be amused.”

Dr Bawumia said what was interesting was the claim that Ghana’s recent single-digit inflation was being driven by food prices.

“It is rather curious that in the face of declining growth in crop production and increased demand for food (including the demand for buffer stocks), statistically recorded food price inflation continues to decline,” he said.

He stated that just last week Ghana received food aid from Japan of 17,000 metric tonnes of rice to augment the shortfall in domestic production and wondered whether the decline in food price inflation was, therefore, coming from certain imported foods that did not respond to exchange rate depreciation.

He said most Ghanaians would attest to the fact that life in Ghana had got harder and harder over the last three years.

“Single-digit inflation has not reflected in a reduction in the cost of living and in this regard it has been rendered practically meaningless. Ghanaians are, in fact, experiencing “triple”-digit inflation in their pain and suffering,” he added.

Dr Bawumia said he would, however, leave the judgement on whether “we actually have a single-digit inflation to Ghanaians who shop in our markets every day. Nevertheless I think it is time for Ghana to have a truly independent and well-resourced statistical service”.

On corruption, he said it was clear that corruption in Ghana was on the increase, as documented by its worsening performance in the Corruption Perception Index published by Transparency International.

He explained that that was evident in the overpricing of suppliers’ contracts in areas such as health, education, infrastructure, as well as judgement debts paid for work not done, pointing out that the government was not getting value for money and was paying money for no work done.

Dr Bawumia stated that the increasing resort to single-sourcing procurement compromised the transparency of the procurement process.

“When moneys are paid for no work done, as is the case of some judgement debts, it creates a liquidity overhang (that is, too much money relative to output) which finds its way into prices and ultimately results in the depreciation of the cedi,” he said.

On the strength of the cedi, Dr Bawumia observed that it was currently in free fall and depreciating, virtually on a daily basis, adding that the cedi had obtained the dubious distinction of being the weakest performing currency in Africa at this point in time, even though the NDC’s Green Book claimed exchange rate stability as one of its unprecedented achievements.

“The lesson from history for governments is that you cannot manage the economy with propaganda. In fact, you can engage in all the propaganda you want but if the macroeconomic fundamentals are weak, the exchange rate will expose you,” he stated.

Dr Bawumia suggested that the country should let technology be the focus of its politics, since other countries had been able to develop along that path.

“There is, therefore, the need for a paradigm shift because we cannot continue doing things the same way and expect different results. The paradigm shift that Nana Akufo-Addo and the NPP are seeking the mandate of Ghanaians to implement is one of focusing on solutions and results underpinned by a mindset change and the inculcation of the can-do spirit in Ghanaians,” he added.

Source: Graphic.com.gh