Following the most recent Monetary Policy Committee (MPC) meeting’s conclusion, Bank of Ghana (BoG) Governor Dr. Ernest Addison projected a drop in inflation from 52.8 percent to 29 percent by end of the year.
The prediction was cited as one of the reasons for the 150 bps increase in the benchmark rate.
However, Dean of the University of Cape Coast (UCC) Business School, Professor John Gatsi, expresses grave doubts about government’s ability to bring down inflation by more than 2,000 basis points by end of the year.
Professor Gatsi posits this doubt on the fact that the recent passage of new revenue tax measures will make the task even more challenging. “… to get inflation down by more than 20 percentage points within one fiscal year, it is a challenging task; and the policies that have been put in place do not support this goal”.
“These new taxes, when they are implemented, will have a pass-through effect over a period of time to reflect in prices – and this is among the reasons we were already having high inflation,” he observed.
Prof. Gatsi noted that expenditure rationalisation remains the most prudent way to address the ongoing economic crisis, which has been cited as the reason for introducting the new handles.
In a related development, Chief Executive of the Ghana National Chamber of Commerce (GNCCI), Mark Badu-Aboakye; the Association of Ghana Industries (AGI); and the Ghana Union of Trader Associations (GUTA) have all expressed disappointment with the Excise Duty, Growth and Sustainability Levy and Income Amendment bills’ recent passage by parliament.
They all cite high inflation rates, VAT increase, water tariff increment, electricity tariff increment, policy rate hikes, and levies on imported raw materials as unbearable for businesses to contend with.
Local industries are already struggling to absorb these costs, and the recent taxes will only compound their problems, they complain.
The CEO of GNCCI has consequently called on government to engage taxpayers on the revenue measures for consensus building.
Adding its voice to the chorus of complaints, the Trades Union Congress (TUC) says passage of the three new revenue taxes will make life more difficult for Ghanaians.
According to the World Bank’s April 2023 Africa Pulse Report, inflation in Ghana, Uganda and Burundi is expected to accelerate by more than 3 percentage points in 2023 from last year.
This means inflation could stay above 50% this year, lending credence to Professor Gatsi’s concerns about government’s ability to bring down inflation to 29% by end of this year!
About 75% of the countries in the region registered double-digit year-over-year inflation rates at the end of 2022, with the fastest increases experienced in Zimbabwe, Sudan, Ghana, Rwanda, Sierra Leone, Burundi, Malawi and Ethiopia, the World Bank notes.
Therefore, bringing down inflation and anchoring inflation expectations should continue to be a priority for policymakers, the Bank maintains, to prevent further deterioration of people’s incomes and food security – and to avert social unrest.
The World Bank’s notes that the Ghanaian economy has been struggling with high levels of public debt and elevated inflation fuelled by a sharp weakening of the cedi.
Finance Minister Ken Ofori-Atta, during his presentation of the 2023 Budget, said the economy will expand by 2.8% in 2023. However, the World Bank has lowered Ghana’s growth rate to under 2.0% in 2023.
The April 2023 edition of Africa’s Pulse shows growth across sub-Saharan Africa remains sluggish, dragged down by uncertainty in the global economy, underperformance of the continent’s largest economies, high inflation, and a sharp deceleration of investment growth – and is insufficient to reduce extreme poverty.
Resource-rich countries can take advantage of the rising demand for minerals and metals linked to the global transition to a low carbon economy (such as cobalt, copper and lithium) to increase fiscal resources, create new regional value chains that produce jobs, and accelerate energy access on the continent.
Currently, the country is actively exploring for lithium in the Central Region. Consequently, government has enacted the Integrated (mining to finished products) Aluminum, Iron and Steel Corporation (GIADEC, Act 976, 2018 & GIISDEC, Act 988, 2019), to achieve this purpose.
Lithium is among the top-10 most expensive minerals in the world, and it is important that GIADEC will help government diversify its revenue sources to increase fiscal resources available to the state.
Lithium has been discovered in commercial quantities in the Volta, Western and Ashanti Regions, and Ghana is on course to be West Africa’s first lithium-producing country.