Dr. Isaac Doku, an Economist and Lecturer at the University of Education, Winneba, has urged consumers to brace up for more hardships as the cost of living is likely to continue rising in the coming months.

According to him, it’s not surprising that national year-on-year inflation rose from 12.6% in December 2021 to 27.6% in May 2022, driven mainly by transport and fuel components. The Economist warned that unless government takes drastic measures to reduce taxes on petroleum products, the Central Bank’s efforts to fight inflation will remain futile.

“Ghana, we are putting square pegs in round holes. The reason why inflation is going up is a cost push problem; it’s a supplier side issue. We are thinking that inflation is caused by people demanding for goods so we are increasing the policy rate to deter people from supplying more money into the system to cut down demand. Meanwhile, our problem is cost.

“The main problems causing inflation are exchange rate and crude oil. Crude oil prices are rising and we are not cushioning the citizens by trying to bring the taxes down. We have heard that Ghana is a net exporter of oil and if you are a net exporter of oil, then when crude oil prices are going up, you stand the chance to benefit. So, why can’t we remove taxes on petroleum products so that fuel prices will reduce? Yesterday GPRTU said they want to increase fares because they have been told that when prices at the pump increase by 10%, they are at liberty to increase their prices”.
Dr. Isaac Doku

Dr. Isaac Doku explained that the more fuel prices go up, the more it drags cost of living up, making life unbearable for Ghanaians.

The UEW Lecturer expounded that businesses use oil in their production activities and once oil prices are going up, they will pass the cost to consumers as they can’t bear the cost of production alone. Farmers, he said, also use fertilizers and other farm inputs that are imported so the producer price at the farm gate may increase because crude oil components are mostly used to produce fertilizer.

He further indicated that before middlemen and market women add their margins on these food products, mainly due to high transportation costs, retail prices will more than double at the market. The more urbanized an area is, the more the impact of transportation will be on the cost of living which partly explained the disparities in inflation rate among geographical locations in the country, per Dr. Doku’s analyses.

Current challenges not caused by Russia-Ukraine war

Nevertheless, Dr. Doku emphasized that the current economic challenges should not be blamed on the ongoing Russia-Ukraine war because inflation in neighboring countries and other peers within the sub-region is not as high as what is being observed in Ghana.

He attributed Ghana’s challenges to certain inefficiencies within the economy that needs to be ironed out, one of which is high taxes.

The Economist expects the government to roll out measures in the mid-year budget statement that will ease the burden on consumers instead of relying on the Bank of Ghana’s inflation targeting framework which continues to “chase inflation”.

In the interim, Dr. Isaac Doku urged consumers to stockpile products and goods that are not perishable due to expectations that prices will rise further in the coming days as transport fares are likely to go up. He said this is the best coping strategy that households should adopt so as not to be affected because “if you expect prices to rise, then you need to increase your demand today”.

Dr. Isaac Doku made this known in an interview with the Vaultz News on the current galloping inflation in the country and how to mitigate the hardship on Ghanaians. From 13.9% in January 2022, year-on-year inflation currently stands at 27.6% at End-May 2022. In the first quarter of 2022, the average inflation was 16.3%, relative to 10.2% recorded for the same period in 2021.