We failed to deal with local triggers of inflation before Russia-Ukraine war – Prof. Bokpin

Economist and Finance Lecturer at the University of Ghana Business School, Prof. Godfred Bokpin says the current economic woes of the country are partly due to government’s failure to address inflation challenges even before the Russia-Ukraine war started.

Prof. Bokpin believes that government cannot solely blame the increasing prices of food and products on the Russia-Ukraine war as there were early indicators of inflation in the country.

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Speaking on Top Story, Friday, he said the Monetary Policy Committee (MPC) ought to have instituted emergency measures such as increasing the policy rate as a reactive measure to deal with the situation.

“Inflation started picking up in Ghana ahead of the world and that is why we have held the view that the price development in Ghana started even before Russia started firing bullets to Ukraine and therefore we have local triggers of inflation that we failed to deal with rather than outsourcing everything to Russia-Ukraine.

“The response then was for the MPC to arrange an emergency meeting and then increase the rate, that is more reactionary rather than being proactive,” he said.

According to the finance lecturer, the weak fiscal management and increasing public debt are other contributors to the poor economy, hence, the Bank of Ghana cannot be fully blamed.

He contended that politicians and other managers of the fiscal system should be held responsible for their failure to be fiscally disciplined in terms of their expenditures.

“We may be missing the point if we blame the Bank of Ghana so much and leave out the big elephant in the room, which is the fiscal side where the political economy is dominant, where politicians and managers of the fiscal side are to be blamed for the current mess that we are in.

“If you look at Bank of Ghana’s statement for the past one year, you will see a certain posture of Bank of Ghana that suggests that they are unhappy with the way the fiscal side is being managed,” he explained.

Prof. Bokpin noted that the current fiscal system is in a mess and the Central Bank is just “deploying monetary policy as a broom to sweep the mess that is created by the fiscal side”.

He was responding to the Central Bank’s rebuttal that it is not responsible for the increasing rate of inflation in the country as the World Bank has suggested.

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The BoG on Thursday said it cannot be blamed for the increasing rate of inflation in the country.

Announcing a monetary policy increment on Thursday, thus a 200 basis points increase to 24.5 percent, the Governor of the Bank of Ghana, Dr Ernest Addison, explained that the rising inflation rate is not a result of delay in tightening the monetary policy rate.

“They’re of the other view that the monetary policy tightening is the way to go. Except that we’re late by their assessment, which I also disagree with because we started this policy tightening as far back as November 2021. It wasn’t in January that we got locked out of the market”, he added.

The comments by the BoG Governor, follow a recent World Bank report which indicated that failure of the Central Bank to tighten its monetary policy on time, is the cause of the country’s rising inflation which has consequently affected the economy.

Per the report, the country’s debt to GDP is expected to hit 104% by the end of the year.

This means if Ghana’s total productivity, if measured over a one year period, it cannot cater for its external debts; as a deficit of some 4% would be required.


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