Ghana is experiencing cost-push inflation, rendering the BoGs continuous policy rate increases ineffective- Economist
Ghanaian chartered economist Emmanuel Darkwah claims that the reason we continue to have high inflation rates is that we have more cost-push inflation and less demand-pull inflation.
He noted that the demand-pull effect indicates that the central bank believes there is excess liquidity in the market, and that the excess money is influencing the prices of goods.
The cost-push, on the other hand, explains that the inputs used in producing goods and services in Ghana are increasing, which is why the cost of goods and services is increasing.
In an interview with Kwabena Agyapong on Rainbow Radio 87.5Fm’s Frontline, he stated that the rate of depreciation against the major currencies and external pressures are affecting our ability to have external sources of funding to support our budget.
Mr. Amoah Darkwah stated that our inflation rate is the key indicator that could influence an increase in the monetary policy rate in Ghana, and it is critical that we disaggregate the main challenges.
”In my opinion, we are experiencing more cost-push inflation than demand-pull inflation. Transport is expensive, and it is expensive because petroleum prices are high. Petroleum products are expensive because the product price on the international market is high. Number two, the currency used to import the products has depreciated by 25.5%.”
“As a result of price increases, we can say that our transportation, which is one of the leading inflation drivers, is now more expensive. Second, when comparing imported and non-imported or domestic inflation, imported inflation remains high, hovering around 31%. This is because the currency you use to import has depreciated by 25.5%.”
Mr. Amoah Darkwah stated that “these hikes would feed into the final pricing of the goods produced in the economy.” So, for this diagnosis, I’m not sure why the Bank of Ghana keeps raising the monetary policy rate whenever inflation rises”.
He suggested that there should be a blend and not the current approach used by the central bank because of the kind of inflation we have in Ghana.
By: Rashid Obodai Provencal/Rainbowradioonline.com/Ghana