Enact revenue collateralization law and deal with policy failure issues in the April , 2022 inflation figures -Prof. John Gatsi

The announcement of the consumer price index (CPI)inflation by the Ghana Statistical Service (GSS) is not a mere ritual but a serious opportunity to assess policy effectiveness and learn emerging lessons to activate a process of policy reorientation to protect livelihood and business sustainability.

Food prices have experienced upward trend over the past 4 years. The April 2022 CPI is influenced by food related inflation with imported inflation almost at par with domestic inflation. This calls for serious policy re-examination and not the usual blame game pointing at imported inflation because the data revealed both local and imported inflation have increased over the period. A number of local “foods”from cereal, grain and vegetables among fifteen items with higher weight of inflation such as maize, corn dough, water melon, okro and wheat among others are not not less that 54% inflation over the period.

The above should trigger examination of our agricultural policies in terms of producing at cheaper cost and made available to the domestic market for industrial and household consumption at relatively lower prices. Agricultural policies must feed into price stability programs. Inflation in advanced economies should not be our strength to shift blame. The level of inflation and pass-through effects of monitoryand fiscal policy choices with eminent significant upward tariff review for water and electricity will lead to further increases in the rate of inflation, monetary policy hike that will increase already high lending rates and possible pressure on the exchange rate. 

We now talk about taxation more than production. We have forgotten the influence on cost structure and price by importers due to heavy burden of taxes at the ports, exchange rate depreciation as major contributors of price development in Ghana and cv not only increases in inflation globally.

Continuous uncontrollable fiscal policy engagement poses enhanced risk of fiscal burden that must be checked. The Finance Minister has hinted of collateralizing proceeds from the e-levy to enable government to borrow . Actually, new borrowing is collateralized against future revenue so if the future revenue is hugely collateralized then present and future creditors whose repayments are based on future revenue are clearly at risk. There must be a legislation to deal with collateralization to ensure discipline , accountability, risk management and protection of future public revenue space.

The inflation figures and the disaggregation of the data shows weak policy regime that demands serious attention and not shifting blame. The trend of collateralization calls for enactment of revenue collateralization law to strengthen fiscal management.