March inflation forewarns new governor

When Dr. Henry Kofi Wampah left his position as Governor of the Bank of Ghana, calls came from major stakeholders such as industrialists, economists and financial analysts for anyone who takes over the hot seat to make taming inflation his top priority.  

 

Lecturer and Senior Economist at the University of Ghana, Dr. Eric Osei-Assibey, charged the new Governor to balance the management of inflation with economic growth.

The latest consumer inflation figures, released on Wednesday by the Statistical Service, show just how high the hurdle is that confronts the new governor and his charges -- as March inflation surged to 19.5% from the 18.5% it was before Dr. Issahaku took over.  

According to the GSS, the sharp rise in consumer inflation was occasioned by the 15 percent hike in road transport fares in late February.

"Fares are linked to almost all market activities and locally produced goods, and any change in those fares tends to have a direct impact on consumer prices," government statistician Philomena Nyarko said during a press conference in Accra.

Dr. Issahaku’s appointment as the central bank’s boss took effect from April 1, which technically means that he can only be judged in May when inflation figures are released by the GSS.

However, the current inflation of March raises concerns as to whether Dr. Issahaku can fight and win the war of inflation, which his predecessor often took flak for.

The new Governor in his first press conference maintained he is committed to ensuring that the country adheres to the IMF programme, which is expected to stabilise the economy by reducing inflation. 

"My focus is to work assiduously on achieving our core responsibility of ensuring price stability," Dr. Issahaku said.

 Dr. Eric Osei-Assibey remains worried, though, that: “Interest rates are still on the rise, inflation is around 19 percent and this has seriously crowded out the private sector -- in the sense that the cost of borrowing is very high and so investable funds are not available for many businesses to expand. So since they are not able to expand, it will be difficult to enhance economic growth.”

He told the B&FT before the new Governor took over that: “I am looking forward to a central bank Governor who can keep one eye on inflation, which is very critical, and another eye on economic growth; so that monetary policy rate does not always have to be adjusted upward but they can just take a little bit of risk and reduce it to motivate banks into reducing their lending rates,” 

Dr. Abdul-Nashiru Issahaku’s appointment was met with a lot of optimism and confidence in the financial sector, with experts tipping him to succeed in his new assignment.

 “My few interactions with him inform me that he is a confident and knowledgeable man. Provided he can operate well within the political space, then he can succeed in his new assignment,” said Prof. Peter Quartey, Head of the Economics Department at the University of Ghana. 

“Now he has to be able to strike a good balance between achieving results and independence. But I believe with his educational background, work experience and his ambition to achieve results, he will do a good job and try to strike a good balance,” Prof. Quartey said. source:b&ft