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Opinions of Thursday, 22 November 2018

Columnist: Nana Kwasi Junior

Docket: The frivolous science of inflation in Ghana

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The Science of anything or everything is the study of pattern(s) and behaviour(s) of physical, non-physical and/or natural happenings through critical observations and experiments to proffer tangible results that are sound and meaningful.

This is why Inflation is simply elucidated as the general increase in prices of goods and/or services in a given country over a stipulated time period (normally, every 3 months). In other words, Inflation reduces the purchasing value of the citizenries’ disposable income, thus raising their costs of living.

Now, it’s equally imperative to underscore the point that batteries of factors do characterize the occurrences of this trouble with the appellation, Inflation. Some of the major influences on the part of private individuals and/or corporations include excessive importation(s), exchange rates, and cash flights; government policies such as taxation, price hikes in petroleum products, and excessive borrowing.

My Economics lecturer back at the university was in a haste to conclude that these aforesaid influences/determinants and many more assumes Inflation marginally or contrary.

HOW THESE INFLUENCES STIR UP INFLATION

TAXATION & EXCESSIVE IMPORTATION: Taxation is a means by which a government imposes and charges extra levies on good(s) and/or service(s) manufactured and/or imported and/or consumed in a given country. Ghana is a heavily dependent import oriented country, meaning, majority of its products are imported, including those it could even locally produce such as toothpicks, chicken wings, rice, and etc.—perhaps also, this is a country whose citizenry have abnormal taste buds for foreign products.

The million dollar question then is, ‘Has taxes (VAT) been increased on imports?’ Yes, see: https://www.ghanaweb.com/GhanaHomePage/business/Importers-upset-over-3-VAT-flat-rate-insist-it-s-collapsing-businesses-582048; thus, Importers too threatening to increase prices if government doesn’t abrogate its decision.

Don’t you realize Inflation here?

EXCHANGE RATES: The Finance Minister of Ghana, Mr. Ken Ofori-Atta had mentioned during the 2019 Budget Presentation read in Parliament House on the 15th of November, 2018 that, “Billions of dollars of food items were imported this year (2018), including those that could have been produced locally. Over US$1.7B worth of refined petroleum products were also imported.”

What these scenarios suggest is that, the amalgamation of all of these investors/importers must have spent a lot of physical Ghana Cedi notes to buy less of these physical US Dollar notes (US$1.7B + over US$1B) to be able to execute their respective item importations. Once all else remained equal over the next quarter period in the same or next financial year, the same or different and/or more or less of investors/importers may need a significant extra amounts of the Ghana Cedi notes to buy less of physical US Dollar or Euro notes just to be able to import again.

This may cause significant dearth of physical US Dollar, Euro or whatever trading notes in the country, then the theory of ‘Demand and Supply’ comes to play thereby causing the Ghana Cedi to depreciate further against the major foreign trading currencies.

The million dollar question then is, ‘Has the Ghana Cedi significantly depreciated against the major foreign trading currencies? Yes, see: https://www.ghanaweb.com/GhanaHomePage/NewsArchive/US-dollar-getting-stronger-against-cedi-but-our-economy-is-growing-Bawumia-685098

CASH FLIGHTS: This is one other condition precedent to the behaviours of the foreign exchange market (Exchange Rate). So, the Cash Flight circumstance is mostly when Multinational Corporations repatriate huge sums of monies in profit to their respective mother corporations overseas. How may this affect Inflation? So, they gather significant Ghana Cedi notes only to buy the equivalence of whatever foreign currency needed before transferring to their mother corporations overseas.

These monies may never come back to Ghana again, thereby causing probable dearth of the said foreign currency on foreign exchange market in Ghana. So, other investors would need extra Ghana Cedi notes just to be able to buy less equivalent physical notes of the said foreign currency—this may result in high Exchange Rates. This is the practice of such Multinational Corporations that refuse to locally expand their existence, thereby robbing the local economy of further growth, expansion and stimulation.

HIKES IN PETROLEUM PRODUCTS: This is one direct major influence on Inflation; the availability and subsequent affordability of petroleum products help for the smooth and swift transportation of goods and/or services in a given country. Therefore, the concurrent and/or singular antithesis (availability and subsequent affordability) may also result in the ‘Demand and Supply’ school-of-thought, where the citizenry gets to buy the same, limited or more fuel at extra cost than before, which may also lead to higher transportation costs as well as price hikes of other goods and/or services. That’s inflation right there.

Mind you, Ghana is a country with potentially enormous oil extracts, yet, has only one oil refinery which is woefully unable to refine the quantity of finished oil products needed for consumption, therefore, “Over US$1.7B worth of refined petroleum products were also imported (in 2018),” the Finance Minister mentioned. The million dollar question then, ‘Is the current price of fuel unusually more costly than before?’ Yes, see: https://www.ghanaweb.com/GhanaHomePage/business/Fuel-prices-go-up-again-694401

EXCESSIVE BORROWING: Managing Editor of The Insight Newspaper, Mr. Kwesi Pratt Jnr had once mentioned on a programme which he happened to be a panelist that, “For every $1 that government borrowed, it paid in excess of about $7,” and this anomaly may be attributed to copious factors, including change of governments, defaults in meeting terms and conditions of the borrowing agreement, including not meeting deadlines.

If this was really or mostly the case, then the citizenry needed to embrace themselves to pay extra taxes for government to generate enough revenue to defray or service old debts. Once these taxes are introduced, it’s obvious prices of goods and/or services won’t remain same but shoot up either marginally or significantly.

That’s Inflation right there. The million dollar question then is, ‘Was the immediate past NDC and current NPP governments engaged in borrowing spree? Yes, see: https://www.ghanaweb.com/GhanaHomePage/business/Ghana-s-economy-will-crash-if-government-continues-borrowing-MP-689380

THE CONTENTIONS & IRONIES OF DATA COLLECTED AND EMPLOYED Who isn’t aware in this country that all processes from accurate data collection to final usage may be akin to a Pyrrhic victory? This is such that renowned persons in society, as well some very key institutions (Ghana Statistical Service, Bank of Ghana, and etc.) mandated by law to collect, and put data collected to useful employment, thus, even when assumed to be collected, only tend to publicly denounce the accuracies of such data collected—it’s really a shame. Let’s check a few:

i)The former Director-General of the National Development Planning Commission, Dr. Nii Moi Thompson had concluded on the 18th of October, 2018 on Good Evening Ghana show on Metro TV that, “So, these (data) raises serious questions about the statistics from the Ghana Statistical Service (GSS), because they (GSS) are now revising past statistics from 2010 to 2017. GSS said Agriculture grew by 12% in 2010; but now they say they’re sorry—it’s rather 5% not 12%.

ii)Quite a similar argument was initially held in 2015 by then Vice Presidential candidate of NPP, and now Vice President of Ghana, to the extent that GSS has honourably concurred to his assertions—see, https://www.ghanaweb.com/GhanaHomePage/NewsArchive/GSS-vindicates-Bawumia-admits-GDP-errors-352056

iii)Mr. Kwesi Pratt Jnr., again had concluded on Good Morning Ghana show also on Metro TV that, “Me, I’m not interested in figures (from GSS, World Bank, and etc.) These figures are thrown about to cover the real situation. How much of our internally generated fund is contributed by multinationals (companies). These are the real issues we should be speaking about,” not useless figures.

FOOD FOR THOUGHT

Please do not lose attention of these two facts that (i) GSS now assumes Inflation Rate has dropped all the way from 15.5% as of December, 2016 to 9.47% as of November, 2018 (ii) these aforesaid influences are somewhat interconnected, suggesting the positive and/or negative occurrences of one or more may hold majority of tendencies to positively and/or negatively affect the other(s).

Let’s also consider the fact that all of the aforesaid influences/determinants plus more are currently on the rise in Ghana, thereby causing the steady rise of prices of goods and/or services, and consequently, the general purchasing values of monies of the citizenry have reduced; yet, Dr. Bawumia and Mr. Ofori-Atta are comfortable in their respective senses that GSS is right at pegging the current Inflation Rate at 9.47% even when everything is now more costly than before. Hm. Are you too genuinely comfortable in your senses?

Author: Jr Docket Email: jr-docket@writeme.com

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