Inflation Figures Slammed

The largest opposition party in Ghana, New Patriotic Party (NPP) has criticized figures used in calculating inflation, citing several irregularities in the measurement of the average price of goods and services within a period.

Following its request to the Ghana Statistical Service (GSS) for the retail market prices from January to May 2011, which was used in calculating inflation figures, the NPP said it has discovered abnormalities in the inflation calculation, raising questions about the artificial inflation being pursued by the National Democratic Congress (NDC) government to the detriment of the economy.

Policy think tank, Center for Policy Analysis (CEPA) earlier slammed the government, saying the single digit or low inflation was affecting the creation of jobs and the cedi.

The NPP demanded the retail market prices dated June 13, 2011 so as to conduct due diligence but discovered that the price of many items at most of the markets for each of the five months were taken to be zero Ghana cedis (GH¢0.00) by the GSS. This meant that the items are given out for free at these markets, it added.

The items included pineapple, coconut oil, bush meat, men’s suit and charges for textbooks at Bolgantanga in the Upper East region. Others were onions, pawpaw, groundnut oil, firewood and guinea fowl at Sunyani in the Brong Ahafo region, and fresh herrings, tobacco leaves, whisky, proper tax, among others discovered in Kumasi, capital of Ashanti region.

In May 2011, it discovered that the price of charcoal, electric iron, omo, light bulb and doctor’s consulting fee were taken to be zero Ghana cedis.

According to the Policy Research desk of the party, the impact of these irregularities on the resulting inflation figures is obvious, adding these irregularities could explain the difference between the inflation figures put out by the GSS and the experiences of people who visit Ghana’s markets.

In a statement signed by the head of the Policy Research desk, Kwaku Kwarteng, the party said the irregularities justify doubts about the accurateness of the figures the GSS publishes.

The party said it had studied the data and discovered significant irregularities and errors which must be dealt with immediately by the GSS.

“We call on the GSS to institute full investigations into these irregularities and do a full review of the data capturing and data processing systems for generating inflation figures in the country. The NPP is willing to offer any support we can to the GSS in this regard.”

It explained that not all the items in the inflation basket were included in the inflation calculations. For instance, as many as 11 items were left out of the basket in the research conducted for January 2011 in store 1 at the Wa market. These items were pawpaw, coconut oil, palm kernel oil, pork, snails, palm wine and men’s kente. Others were women’s kente, men’s suit, pajamas and starch.

The issue of inflation has become a subject of intense debate between the government and opposition parties, especially NPP alongside policy think tanks such as Imani Ghana and the Institute of Economic Affairs (IEA).

They raised serious argument, saying the single digit inflation the NDC government has been making noise about is not the true reflection as the lives of people had worsened compared to three or four years ago. Indeed, many people that this paper spoke to in a vox pop recently on the impact of the low inflation on their lives were unenthusiastic.

Some analysts and market watchers have also questioned the true state of the single digit inflation which hit 8.39 percent in July 2011, arguing that it should have influenced lending rates significantly. However, lending rates are still high on the average of 28 percent though inflation is the major determinant of the rates.

Inflation was even the 10th factor considered by banks before granting loans according to a survey carried out by the Association of Ghana Industries (AGI) earlier this year.

Among the factors, Treasury Bill was the first followed by borrowers risk, policy rate, cost of fund and loan loss provision. The rest are administrative and overhead costs, profit margins, competitive action, primary reserves and inflation.

Source: Charles Nixon Yeboah