A Policy Analyst of the Integrated Social Development Centre (ISODEC), Mr Dennis Nchor says the government is likely to meet its single digit inflation target for 2013 despite the reverse of the rate to 10 per cent in February 2013.
According to him, government’s plans to reduce its deficit and maintain stability in the exchange rate if sustained would help achieve its macroeconomic target of an end year inflation of nine per cent.
Mr Nchor who is also the Head of Budget at ISODEC told the GRAPHIC BUSINESS in an interview after the release of the inflation rate for February by the Ghana Statistical Service that, “it is still possible for government to achieve its target as this year government plans to reduce its deficit from 12 to 9 per cent which shows there will be a cut in expenditure” adding “that is one source of controlling inflation.”
Again, he said unlike 2012 when the economy witnessed an unprecedented depreciation of the cedi, “we are expecting a stable exchange rate and so it should be possible for government to achieve its target.”
Inflation, also known as the Consumer Price Index (CPI) measures the change over time in the general price level of goods and services that households acquire for the purpose of consumption.
The February rate of 10 per cent, which was the highest since June 2010, was recorded following the upward review of petroleum prices by 20 per cent by the National Petroleum Authority (NPA) last month which resulted in a surge of general prices of goods and services.
Mr Nchor said, the 10 per cent was a reflection of overspending in 2012 without a corresponding increase in output and if that happens “you end up getting high inflation”.
Despite the murky outlook of the CPI as the Ghana Statistical Service is yet to review its base for computing the CPI, the Volta River Authority has called for an increase in utility tariffs despite the current energy and water crises the country is currently facing.
Responding to concerns of the impact of the expected increase in tariffs on maintaining single digit inflation, Mr Nchor said increase in tariffs will definitely play a role.
“An increase in tariffs will increase cost of production, producers will march it up by pushing the burden to consumers and inflation can only go up further,” he said.
He was however quick to add that in the face of the current energy crises with no quality service to march it, there will be no basis for increasing tariffs.
The last time the economy recorded double digit inflation was in June 2012 (10.68%) after which it kept fluctuating between 9 and 8 per cent, with the latest pegging at 8.8 per cent in January 2013.
Unlike the usual trend of the non-food basket contributing largely to the increase of inflation, in February a combination of the increase in the pressures of the food and non-food basket used in the computation of inflation pushed the figure.
The year-on-year non-food inflation rate for February stood at 12.6 percent compared to 11.5 per cent it recorded in January 2013, the main drivers which were Alcoholic beverages, tobacco and narcotics (15.9%), Transport (15.8%) and Housing, water, electricity, gas and other utilities (15.5%).
The 5.3 per cent year-on-year food inflation recorded was also largely due to these price drivers ; mineral water, soft drinks and juices (15.7%), milk, cheese and eggs (15.3%), coffee, tea and cocoa (11.6%0 and meat (10.9%). GB
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