From Francis Owusu-Ansah, Sunyani .
The Brong-Ahafo Region recorded an inflation rate of 10.8% for the month of August 2018, higher than the national average of 9.9%.
As the inflation rate nears double-digit, the Ghana Statistical Service is blaming the August 9.9% national inflation rate on the free fall of the Cedi.
The year-on-year inflation for the month of July recorded was 9.6 per cent. The monthly change rate was 0 per cent compared with the rate of 0.4 per cent recorded in July 2018.
The Upper West Region recorded the highest year-on-year inflation rate of 11.8 %, while the Upper East Region recorded the lowest year-on-year inflation (8.2 %) in August 2018.
The Acting Government Statistician, Mr. Baah Wadieh, who announced the figures, said the year-on-year non-food inflation rate for August 2018 was 10.8 per cent compared with the rate of 10.7 recorded in July 2018.
Mr. Wadieh, who linked the marginal increase in the inflation rate to the fall of the cedi and hike in transport fares, said the year-on-year food inflation rate for August 2018 was 7.9 per cent compared with 7.4 per cent recorded in July 2018.
The year-on-year non-food inflation (10.8 per cent) was more than one quarter that of the food inflation rate (7.9 per cent). “The underlying cause is basically due to base rate effect, as well as some causes like the depreciation of the cedi,” Mr. Wadieh said.
According to the Government Statistician, the main price drivers for the non-food inflation rate were clothing and footwear (15.2 %), transport (15.1 %), recreation and culture (13.9 %), furnishing, household equipment and routine management (12.6 %) and miscellaneous goods and services (11.9 %).
The Greater Accra Regional Vice Chairman of the Ghana Union of Traders Association (GUTA), Nana Peprah, has told Space FM in Sunyani that the depreciation of the Ghana Cedi as against the dollar and other major currencies affects consumers in the country. Nana Peprah has, therefore, asked the government to put in place pragmatic measures to control the cedi’s depreciation.
The GUTA Vice Chairman’s comment follows an assertion by Dr. Gideon Boako, spokesperson of Vice President Dr. Mahamudu Bawumia that the cedi is relatively strong presently compared to the Mahama era.
Dr. Boako said the Akufo-Addo-led administration has been able to reduce the rate of depreciation from a point of 31 percent to 6 percent, and asked Ghanaians to be grateful to the government.
Nana Peprah said the power to control the depreciation of the Cedi is not in the hands of GUTA, but rather with the government, and, therefore, the government must be seen working assiduously to solving the problem.
“As you may be aware, the power to control the cedi depreciation is not in the hands, or in the power of GUTA; we can only narrate the consequences and effects of the cedi depreciation on our businesses. We can say the effects are numerous, because Ghanaian traders use the dollar to import their goods into the country, and as it goes up, we pass it onto the consumers, which is not good for all of us,” Nana Peprah said.
Nana Peprah said GUTA was in constant consultation with the government over the cedi depreciation, and was hopeful that their deliberations would bear fruitful results.
He, therefore, asked traders and Ghanaians in general, not to make any panic exchange of their cedis for foreign currency, since the government was on top of the situation, because the government had assured them of measures to control the currency
The Chief Executive Officer (CEO), of the Association of Ghana Industries (AGI), Mr. Seth Twum Akwaboah, has also cautioned that speculations against the downward trend of the cedi could further affect its performance in the future.
Mr. Twum Akwaboah said the current state of the cedi is just temporary, hence the need to halt the speculations.
The inflation rate measures the annual percentage rise in the cost of living (CPI). A rise in the inflation rate means prices are rising at a faster rate.
In the short run, it is more likely the Central Bank will increase interest rates to moderate the inflation rate. Savers who have fixed income may become relatively worse off. Borrowers, by contrast, are likely to find it easier to pay back their debts.
A higher inflation rate could cause greater uncertainty amongst businesses, leading to lower investment. Inflation may also cause a depreciation in the exchange rate.
Effects on business
A rise in inflation is likely to mean a rise in the cost of raw materials. Also, workers are likely to demand higher wages to cope with the higher cost of living.
This rise in prices can also cause greater volatility and uncertainty. With firms uncertain about future costs, they may hold back from making investment decisions. Firms generally prefer a low and stable inflation rate.
Also, with inflation rate, firms may expect rising interest rates, which will increase cost of borrowing – another reason to hold back on investment.
With higher inflation, firms may face menu costs (the cost of changing and updating prices). However, with modern technology, this cost has diminished in importance, as it is easier for firms to update prices automatically.
Effects on consumers
With rising prices, consumers may be more inclined to try and purchase more quickly before prices rise further. With rising prices, it can create more confusion over which prices are of good value.
It could lead to costs of consumers looking around different shops comparing prices (this is known as shoe leather costs).
However, for moderate rises in inflation, this is unlikely to be too serious. Also, the internet and price comparison sites can make it easier to compare prices.