The Institute of Economic Affairs (IEA) is pressing the government to assume comprehensive responsibility for the current inflation crisis, thus the issue of growing inflation is not going away any time soon.
It consequently calls for a cooperative effort between the government and the Bank of Ghana to address the problem and prefers a pragmatic approach over an ideological one to handle what has grown into a persistent national problem.
The economic think tank suggested a new strategy to combat the growing inflation, which reached 27.6 percent in May 2022, and said the government should consider, among other measures, removing or cutting a number of fuel taxes and levies.
Dr. John Kwakye, director of research, stated during a roundtable discussion on "Rethinking Inflation Management in Ghana," "Government must engage alongside BoG to reduce consequences of primary drivers, which, according to inflation numbers, include food, gasoline, and transportation."
In fact, GSS has made a point of identifying the primary causes of Ghana's inflation in order to assist policymakers in implementing the proper corrective actions. It is time to release part of the Bulk Strategic Stock's reserves, if any, for food in order to increase supply. To complement local supplies, the government should also use any available ECOWAS strategic stock, he noted.
To further lessen the burden on low-income customers, it was said that "government should grant temporary subsidies for basics like maize, rice, and bread. Even the notoriously anti-subsidy IMF has urged governments to offer food subsidies to mitigate the consequences of high prices on their populations.
Again, it was said that "the Government could utilise part of its windfall revenues from higher oil prices, which are over $120 as opposed to the budget expectations of roughly $60 to cushion local pump costs. The Energy Sector Stabilisation Levy Act (ESLA), which collects tax money to avert future shocks, should now be put into effect. The multiple gasoline taxes and charges should be reduced by the government as well.
Trends and causes of inflation
Comparing Ghana to its contemporaries in Africa and internationally, inflation there has always been high.
Inflation throughout the 1980s and 1990s reached into double digits.
But during the past 20 years, inflation has greatly decreased and macroeconomic performance as a whole has improved.
According to empirical literature, Ghana's inflation is primarily caused by fiscal policy, food prices, and the currency rate.
preserving the cedi
The IEA stated that closing the supply and demand mismatch is the only option to stabilise the cedi's exchange rate permanently.
Dr. Kwakye contends that this calls for fully using available resources and prospects for generating foreign cash, including expanding and diversifying exports as well as raising revenue from natural resources by exerting more control over them.
The IEA also demanded that institutional and legal frameworks governing remittances be simplified in order to encourage inflows from the Ghanaian diaspora.
In order to reduce demand for imports and foreign currency, it also advocated for vigorous domestic industrialization promotion of the manufacture of import alternatives.
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