INFLATION IN GHANA

 Inflation is the rate at which a currency's value is falling and, as a result, prices for goods and services are generally rising.

Inflation is sometimes put into three types: Demand-Pull inflation, Cost-Push inflation, and Built-In inflation.

Demand-pull inflation, which economists define as "more money chasing fewer goods", is the increasing pressure on prices that accompanies a scarcity in supply. This is more in line with the fundamental idea of supply and demand, which states that higher demand raises prices and larger supply lowers prices all else constant/ceteris paribus . The world's oil-producing nations' decision to reduce the global supply of oil is a classic illustration of this form of inflation. Due to the constant rise in demand, these countries had to raise their prices in order to profit more from the sale of barrels e.g. In response to EU sanctions due to invasion of Ukraine, Russia cut gas supply to Europe, which readily drove up the prices of gas in these countries. The soaring energy prices due to reduced supply opposed to increased demand threatened a recession in the region.

A type of inflation known as "cost-push inflation" is thought to be brought on by price increases for essential goods or services when no adequate substitute is available. Businesses are compelled to raise the pricing of their outputs as a result of rising costs for the fundamental inputs. Cost-push inflation typically results from manufacturing procedures. It happens when the cost of production and its variables rise. Examples include when production workers demand greater wages, when raw materials increase in price, and when distribution increases in cost or becomes riskier. Inflation is a result of these new advances, which often raise the cost of manufactured goods and services.

For built-In inflation In general, all economic sectors and individuals are impacted by inflation, which is essentially generated by no one. When a country's commodity prices rise and workers demand higher pay to keep up with or maintain their quality of living as a result of the higher costs of finished goods, this is known as built-in inflation. It is frequently compared to an endless cycle of increasing spending.

Depending on how people perceive it, inflation can be either positive or harmful. Inflation is typically bad for people who have money in hand or kept in a bank since it lowers the value of their money. Inflation, on the other hand, can be advantageous for people who own tangible assets and securities since it enables them to boost their gains if the price increase affects their holdings.

The whole of 2022 has seen price increases every month. World Bank reports that Ghana has seen the highest increase in food prices in sub-Saharan Africa: a whooping 122% jump since January 1, 2022. So if you used to get 4 big tomatoes for 5 cedis in January, you'd buy 4 of the same-sized tomatoes for roughly 11 cedis. Inflation has taken a significant toll on livelihood across every part of the country. A lot has been blamed on post-pandemic effects on the economy and the Russian invasion of Ukraine since February, which has kept the cost of oil on an unstoppable hike.

In January, one could buy $1 for an average of GHc 6.08673. At 10:57am on 14 October 2022, Joy Business posted an article titled "Cedi hits ¢12.10 to a dollar".

Putting the two rates into perspective, 6.08673 USD/GHc and 12.10 USD/GH, the dollar appreciated by 98.9% against the cedi while the cedi depreciated by over a 49.7% against the dollar.

Direct quotation (USDGHc)

Indirect Quotation (GHcUSD)

Ghana is heavily dependent on import and the constant depreciation of our currency against dollar is affecting a lot of importers. Let's take someone who deals in mobile devices. Given that the prices in dollars of the devices remain unchanged since January, and he could get one mobile device 500 dollars, he'd spend almost two times the amount in Ghana cedis used to purchase the device in October compared to that in January, not to talk of the hefty import duties charged. 

This will definitely trickle down to the consumer.

On the other hand, some do benefit in this situations. Let's take a school that charges the cedi equivalent of $5000 as school fees: comparing January to October, whoever is honoring the commitment of paying fees will pay twice the amount in cedis in October compared to the amount paid in January. So there are always two sides of the coin.

Things aren't looking so good for Ghana. Negotiation with IMF does not seem to foretell a bail out anytime soon. Some are even predicting an imminent economic recession in the coming year.

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