Tariff rise fuels inflation

Headline inflation surged further away from the Central Bank’s target in October, rising to 13.1 percent from 11.9 percent in September.

 

The jump in the rate, which represents 1.2 percentage points, is the highest since March 2010 and is attributed to the effect of price increases in housing, utilities and gas. The Bank of Ghana has said it is targetting an end-year inflation figure of 9 percent. 

“We all know that there were substantial increases in the price of water, utility products and fuel, and that has pushed the inflation rate up.

“The electricity tariff was increased by 77.60 percent, kerosene by 23 percent, with gas and water having an increase of 10.3 and 52.1 percent respectively,” Government Statistician Dr. Philomena Nyarko said at a media conference in Accra.

She said non-food inflation -- which comprises transport prices, utility costs, and the price of alcoholic beverages -- went up to 17.7 percent from 14.2 percent in September, while food inflation went down to 6.9 percent from 8.9 percent in September. 

The Public Utilities Regulatory Commission (PURC) last month increased power tariffs by 78.9 percent and water prices by 52 percent, maintaining that the adjustment will allow utility companies to cut down on their losses.

The electricity tariff increase has however been reviewed from 78.9 percent to 59.2 percent, following agitation by labour groups against the magnitude of the hike.

The decision, which government said will cushion the effect of utility tariff increases on consumers, could help to ease inflation in the coming months.  

The weak cedi has also contributed to the high rate of inflation this year, with the currency losing 17 percent to the dollar, according to Ecobank Research. The cedi will fall to 2.4 per dollar before the start of 2014, Souheir Asba, a London-based emerging markets strategist at SocGen, has predicted. 

The Bank of Ghana (BoG), which traditionally targets a single-digit inflation rate, has raised its policy lending rate by 100 basis points this year to contain price pressures as government cancels subsidies on petroleum products, electricity, and water.

The policy rate has been pegged at 16 percent since July, and the bank’s monetary-policy committee (MPC) is expected to convene in the week of November 25 to review its policy settings.

Apart from inflation rising, GDP growth has slowed to a projected 7.2 percent in 2013 from 7.9 percent last year, creating a tough balancing act for the BoG as it seeks to rein-in prices without hurting growth.

Inflation dynamics 

Three sub-groups of the food and non-alcoholic beverages sector recorded inflation rates above the group’s average of 17.7 percent. They include fish; mineral water; and soft drinks and cereals.

Three sub-groups, including housing, water and electricity; transport; and clothing and footwear recorded inflation rates above the national average of 13.1 percent.

Meanwhile, the Western Region maintained its lead as the region with the highest inflation rate of 15.8 percent, followed by the Greater Accra Region with 15.3 percent inflation. 

The Upper East Region recorded the least inflation rate of 5.7 percent.