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
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
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
Washington, DC, May 11, 2012
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