Ghana inflation rises to 9% in July

The latest data released by the Ghana Statistical Service has shown a significant increase in the inflation rate for the month of July, rising to 9% year on year from the previous recorded 7.8% in June. Professor John Gatsardine, Dean of the School of Business at the University of Cape Coast in Ghana, recently joined CNBC Africa to delve into the key drivers behind this surge in inflation. Professor Gatsardine highlighted that food price inflation has been a major contributing factor to the overall rise in inflation. The inflation basket in Ghana is divided into two main categories - one related to imports and the other related to food price development within the country. He explained that food prices have been steadily increasing over time, mainly due to factors such as fluctuations in production, particularly in the agriculture sub-sector. This trend is expected to persist in the foreseeable future. During the interview, Professor Gatsardine also shed light on the expectations set by the monetary authorities in previous meetings. He noted that there was a target range of 8% plus or minus 2%, indicating that the authorities anticipated inflation rates to stay within 8-10%. However, the current inflation rate surpasses these projections, prompting concerns about the policy decisions that will be made moving forward. When questioned about the potential actions or comments from the National Policy Committee (NPC) in response to the sustained increase in inflation, Professor Gatsardine expressed some skepticism regarding the NPC's focus solely on inflation as a basis for their decisions. He suggested that other critical factors often influence policy rate announcements, and it remains to be seen how the NPC will address the current scenario. In terms of policy coordination between the monetary and fiscal authorities, Professor Gatsardine highlighted potential challenges arising from the fiscal authority's actions. He emphasized that fiscal activities, such as excessive borrowing and interest payments, are undermining the efficacy of monetary policies in Ghana. The discord between the two authorities raises concerns about the overall synergy of economic policies in the country. The interview also touched upon the monetary authorities' room for maneuver in managing economic challenges. Professor Gatsardine acknowledged the efforts of the authorities in implementing reforms to address economic issues. However, he cautioned against relying solely on short-term measures, such as injecting money, as sustainable solutions are required for long-term stability. As the conversation turned towards the country's debt levels and revenue projections, Professor Gatsardine expressed apprehension regarding Ghana's ability to meet revenue targets amidst mounting debt. With a significant shortfall in revenue mobilization for the remainder of the year, there are concerns about the government's ability to fund key activities and manage debt ratios effectively. Finally, the discussion concluded with Professor Gatsardine's positive views on the partnership between the Bank of Ghana and a German firm to introduce a digital E-currency named the ECD. He described this initiative as a step towards enhancing revenue mobilization and improving economic transactions through digitalization. The introduction of the ECD is expected to facilitate cashless transactions and support revenue identification efforts in Ghana's economy. In summary, the interview with Professor John Gatsardine highlighted the challenges posed by the rising inflation rate in Ghana and underscored the importance of coordinated policy responses to navigate the country's economic landscape.