Ghana’s inflation has continued its downward trajectory for the fifth consecutive month, signaling notable progress in the government’s efforts to curb rising prices. As of August 2024, the inflation rate stands at 20.4%, a slight dip from 20.9% in July, indicating ongoing measures aimed at stabilizing the economy.
However, Dr. Agbanyo Richard, an economist at the University of Professional Studies Accra (UPSA), contends that short-term monetary strategies alone are insufficient to address the country’s inflation challenges. He stresses that a more sustainable solution lies in expanding production and reducing the cost of doing business.
Tackling the underlying causes of cost-push inflation, such as high taxes and inefficiencies, Dr. Agbanyo believes Ghana can achieve long-term inflation control and economic stability.
Finance Minister Dr. Mohammed Amin Adam previously emphasized the government’s success in managing inflation since coming into office in 2017. He pointed out that during the National Democratic Congress (NDC) administration, inflation stood at 17.7% in 2015 and 15.4% in 2016.
In contrast, the New Patriotic Party (NPP) government achieved significant progress, reducing inflation to single digits, with rates of 9.4% in 2018 and 7.9% in 2019—marking two consecutive years of single-digit inflation.
This steady decline in inflation as of August follows a record high of 54% in December 2022, which was attributed to global shocks like the Russian-Ukraine war and domestic economic challenges that fueled inflationary pressures. The government, optimistic about this trend, has set a target of 15% by the end of the year.
Yet, experts like Dr. Agbanyo caution that the focus on short-term inflation targets may overlook the structural issues driving inflation, particularly cost-push factors such as high taxes, production costs, and inefficiencies in the business environment.
He argues that the current inflation management approach, which relies heavily on controlling the money supply, fails to address the structural causes of inflation.
“For me, when it comes to inflation management in Ghana, meeting a short-term target like this should not be my concern. Inflation in Ghana is not about people’s ability to buy, it is cost-push inflation, driven by high production costs, high taxes, and corruption,” Dr. Agbanyo explains.
According to Dr. Agbanyo, the government’s objective of reducing inflation to 15% by December could be politically motivated, especially with elections on the horizon.
“Such objectives could be political, not developmental,” he says, adding that the timing of the target suggests it may be designed to present a favorable economic outlook ahead of the December elections, rather than being a sustainable solution to inflation management.
Ghana’s inflation, he argues, is largely cost-driven, with high taxes and the high cost of production being key contributors to rising prices. “The problem of inflation in Ghana is about cost-driven inflation. It is the cost of production that is driving inflation. If we work on reducing the cost of doing business, inflation naturally goes down in the long term,” he adds.
Dr. Agbanyo insists that more focus should be placed on long-term solutions that address the root causes of inflation. “I am thinking about achieving long-term inflation goals by expanding production, reducing the cost of doing business, and eliminating nuisance taxes,” he emphasizes.
Focusing on these areas, the economy can achieve sustainable growth, reducing inflation over time without relying on temporary measures like controlling the money supply.
