After headline inflation dropped for the eighth consecutive month to 11.5% in August, economist Prof. Peter Quartey is sounding the alarm that the next three months are very risky and could undo all the gains chalked by the government.
The Director of the Institute of Statistical, Social and Economic Research (ISSER) at the University of Ghana maintains that the gains could be derailed if the government lets its guard down on fiscal prudence.
Reacting to the latest inflation figures published by the Ghana Statistical Service, Prof. Quartey said history shows that the last quarter of the year often comes with fiscal “indiscipline.”
He says there is a dangerous mix of higher imports, festive-season spending, and increased government expenditure.
Without a firm rein on these risks, the economist fears the government will spill all the gains in the macroeconomy, which can put the economy in jeopardy.
“We need to remain focused, but oftentimes, it is the last three months of the year that we see some level of indiscipline in our fiscal numbers. During the last three months that we see increased demand for Christmas items, increased demand for imports, increased expenditure, and that drives inflation,” he noted in an interview monitored by The High Street Journal.
He cautioned that, “we still have to maintain the stability of fiscal prudence as we have started, and also ensure that the exchange rate remains stable. There is a marginal depreciation, but that is to be expected. We are hoping that we will maintain some stability to the end of the year.”
“It is during the last three months that we see increased demand for Christmas items, increased demand for imports, and higher expenditure, and that drives inflation,” he cautioned.
The economist fears that although the festive season may bring joy, it can also bring higher prices if government spending and forex demand run unchecked. Should the government’s fiscal discipline falter, the relief households are beginning to feel from slowing inflation could quickly vanish.
Prof. Quartey maintains that keeping spending in check now will not only stabilize prices but also protect the cedi and maintain investor confidence as Ghana works to consolidate its economic recovery.
