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The inflation immune magic republic

E.  Ablorh-Odjidja

 

I have been surprised by many things since my arrival in Ghana in March 2012.  But now I am amazed by the level of confusion, and here I am being kind, besetting the society on the question of the national inflation rate.

 

The overall inflation rate, as widely touted by the Government), is in the single digits.  In February 2012 it was 8.6.  It edged up slightly to 8.8 percent in March 2012. In April 2012 it was 9.1.  So far so good.   Keeping inflation rate low must be the healthy desire for any government.

 

But the effect of the inflation rate need not be in statistical name only.  It must relate to life on the ground.  So how could it be single digit now when life is this hard on the same ground?

 

That question came to mind when I read NPP's (the opposition party) report stating that “18% of the prices from which the GSS calculated inflation rates had been given as zero Ghana cedis (GH¢0.00). What this means in practice is that those items are sold for free in the markets.”

 

The NPP paper cited data from GSS that they obtained on request, upon which they based the claim that the zero items were mainly “prices the Service had collected from markets across the country which they had used for GSS’ inflation calculations,” covering the first 5 months of 2011.

 

Inflation rate for May 2011 by the way was 8.9 percent. The GSS has to refute the NPP charge or explain why the zero pricing for 18% of all the data in the basket could not have helped  pull the rate down to single digits that year; and also if the same practice was carried or not carried forward into the following year.

 

When prices for critical food items in markets at key areas of the country sell at zero pricing, then it is time for some real explanations.  At three markets at Kwahu Praso, the report said price for maize was GHC 0.00.  Sefwi Bekwai had kenkey and fish selling at the same zero price.  And flour at Koforidua was GHC 0.00. 

 

Prices for food stuff are key gauges for calculating the inflation rate. Dr. Bawumia, the NPP presumptive VP had questioned in a recent lecture the single digit inflation rate espoused by the government.  Dr. Philomena Nyarko, the Acting Government Statistician has said that “Dr. Bawumia's analysis on the country's single digit inflation does not only undermine the current level of inflation but also the Ghana Statistical Service's indicators on inflation.”

Dr.  Nyarko made no mention of the zero prices found in the 2011 data given to the NPP on request.  To date, she has not defended on denied that report’s existence.

 

In the same 2011 data report, the NPP pointed to items that were missing.  Points at Kumasi, ostensibly the largest markets after the ones in Accra the capital, showed no trace of items like Electricity charges, Gas for cooking, Kerosene, Water, Petrol,  Intercity bus fares , Standard postage within Ghana,and Telephone charges. The missing items constitute about 17% of the data for calculating the inflation rate, according to NPP.

 

The question has to be asked whether the zero pricing and the missing items did not help lower the overall inflation rate. And for how long the method has been used, regardless of the administration it served.

 

And, even if we were to give the GSS the benefit of doubt for human errors we still have to conclude that the accounting method for the inflation rate was flawed and as such the results over the years should be suspect. This method of zeroes and missing items should be scrapped.

 

Things are a bit complex within all economies.  But it is within reason to accept that the average Ghanaian knows when he is hurting, if not why. 

 

Ghana is a major importer of goods and services.  We import all kinds of things - from tooth pick to toilet rolls. Our big construction jobs are handled by the Chinese.  To keep up with the demands of this suicidal habit, we have been buying foreign currencies at speeds that have already made the cedi the second worst performer against the dollar in recent history. 

 

The cedi is in a steady decline since 2008. The exchange rate for the dollar in March 2012 was 1.65 cedis.   Two months later in May 2012, the same has gone up to 1.84.  Accordingly, prices for many imported goods have also gone up.

 

It is alright for Dr. Nyarko to say that “ it is inappropriate to calculate inflation using prices of few goods which are not used in the consumer basket analysis of the statistical service particularly cement;” in response to Dr. Bawumia’s speech.

 

But prices in cement sales have a way of turning up in rent collection.  When crude price goes up, perhaps because the cedi is weak, that rise is also reflected in transportation costs. Maize price would not be GHC 0.00 because it has to be transported from farm to market at increased fare.

 

Inflation in an economy, as understood by all civilized nations, occurs in many instances when the purchasing power of that particular currency shrinks.  The cedi has shrunk.  But, incredulously, Ghanaians are asked to believe that they now can buy more goods and services with less money now than they did for the same items four years ago when the cedi was relatively stronger.

 

E. Ablorh-Odjidja, Publisher www.ghanadot.com, Washington, DC, May 11, 2012

Permission to publish:  Please feel free to publish or reproduce, with credits, unedited.  If posted at a website, email a copy of the web page to publisher@ghanadot.com . Or don't publish at all.

 

 

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