Inflationary pressures have intensified in recent times, leading to a general increase in the prices of goods and services
The Institute of Economic Affairs, in its latest Economic Outlook for September-October 2024, noted that the current rate of inflation suggests that Ghanaians spend approximately 43% of their income on food alone.
According to the report, inflation decreased steadily from 38.1% to 21.5% during the past year (September 2023-September 2024), representing a drop of 16.6 percentage points.
While food inflation was higher than combined inflation for most of the year, it also contributed significantly to the overall decline in inflation during the period.
The report highlighted the importance of food prices in influencing overall inflation in the country, noting that food accounts for 43% of the CPI basket. This indicates that, on average, Ghanaians allocate 43% of their monthly budget to food, leaving 57% for other consumer items.
“This shows the importance of food prices in determining overall inflation in the country. Indeed, the contribution of food prices to the general cost of living is evident in food’s weight of 43% in the CPI basket, indicating that, on average, Ghanaians spend 43% of their monthly budget on food alone, leaving 57% for all other consumer items,” parts of the report read.
Inflation has remained in the lower twenties since December 2023, following a significant decrease from a peak of 54% in December 2022. The latest inflation rate was 21.5% in September, with October’s inflation figures released by the Ghana Statistical Service showing a slight increase to 22.1%.
While many countries have experienced a decrease in inflation levels following the impact of Covid-19 and the Russia-Ukraine war, Ghana’s persistently high inflation suggests a failure of monetary policy to address underlying supply and cost factors, particularly food prices, fuel prices, and depreciation.
“With these factors persisting, we expect inflation to remain at least in the higher teens throughout the rest of the year. We note that the BoG has revised upwards its end-year inflation forecast from the previous 13-15% (mid-point 14%) to 17-19% (mid-point 18%. This looks more realistic, although disappointing,” the Institute noted.
In conclusion, the IEA noted that “We have long maintained that it will require the joint effort of the Bank of Ghana and the Government to address the underlying supply and cost drivers mentioned above to break Ghana’s inflation persistence.”
