Inflation could reach 40% if the current trajectory continues; implement fuel price controls – Financial Analyst

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Inflation could reach 40% by August 2022, if current trends continue and policymakers do not act decisively, predicted Valley View University chief financial officer Dr. William Peprah.

He therefore wants the Bank of Ghana to raise its policy rate and reserve requirements for banks to reduce lending, while the government will also cut spending to slow growth.

Dr Peprah told Joy Business that rising inflation will worsen the cost of living for Ghanaians.

“In monetary terms, inflation simply means that we spend more than we produce in goods and services. The government may therefore need to look for ways to reduce spending activities.

“First, the government must control its spending. When the government does that, the impact is that the government will have to revise its growth rate set for 2022. So the whole 5.4% has to come down,” he explained.

He also stressed the need for the Bank of Ghana to quickly implement the contractionary monetary policy.

“The Central Bank, as I mentioned before, needs to think about introducing what we call contractionary monetary policy. It is an increase in the rate of monetary policy, so we will control the rate of inflation and two also increase the reserve requirements for banks”.

“In this case, the banks will be constrained in giving more money or injecting more money into the economy. Indeed, we have to intentionally slow growth in order to be able to reduce what we see now,” he said. he declares.

“Otherwise and if it works like that, it will be when arriving at the period 1998/1999/2000 that inflation was around 40%. And if we are not careful, by August 2022 we will reach around 40% inflation rate,” he warned.

The government should institute a fuel price control mechanism

Dr. Peprah also proposed a mechanism to control fuel prices due to its impact on transport, food and other ancillary items.

“The government must first review its fuel price control mechanism. I suggest that maybe we also need to think about price controls in terms of fuel prices. Can the government be able to quickly intervene like what happened in December last year with mitigation measures. Because the price control mechanism will slow down the growth or the increasing pace of transport.

“So once we are able to control the transport sector, it will have a ripple effect on food, it will also have a ripple effect on the housing sector which has also increased, water and electricity because it all depends on the fuel. If you consider it critical, the government will have to put in place a price control mechanism for a while because it is an inflation control measure,” said he added.

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