Ghana has set itself the agenda of achieving a single-digit inflation, that is, below 10 per cent, by the close of the year.
While the objective is not new, its attainment has eluded the country for years, although that objective attained in one of the months in 1999 was short-lived.
The attainment of a sustained low inflation rate will automatically impact on prices, such as the cost of borrowing, the exchange rate and, in a remote sense, on employment. This will produce a stable environment that can help all economic actors, including businesses, to plan.
As indicated by the Finance Minister, Dr Kwabena Duffuor, there was always a positive correlation between stable macro-economic stability, on one hand, and growth and development, on the other.
For this reason, the government has kept a tight lid on its spending, directing it only into productive areas to bring about growth and development, without necessarily saturating the system with so much money to freely chase fewer goods and services, the situation that often leads to rapid changes in the prices of goods and services.
It is obvious now that investments in agriculture are paying many dividends. Since the beginning of the year, the government has injected more than GH¢27 million into various agricultural activities, including the provision of inputs for farmers, irrigation development and establishing a buffer stock.
This has undoubtedly resulted in lowering inflation, the 10th consecutive time up to April. Overall, the 12-month inflation rate slowed down during the second half of 2009, from 20.74 per cent in June 2009 to 15.97 per cent in December 2009.
The Daily Graphic commends the government for the commitment and discipline with which it has managed the economy and brought about this record stability. The stability has been achieved within difficult times when the world economy is reeling under low demands, liquidity and debt.
Inflation cannot be attacked in isolation, especially so when it appears the over-dependence on imported merchandise is having a toll on the pricing system in the country.
It is clear that the group of food items in the index is exerting a downward pressure on inflation, while the non-food component has been responsible for the upward pressure.
But items within the food group which are influencing prices upwards happen to be those that are import related.
This means that imported inflation is an issue which should be tackled with long-term approach.
The government must come up with strategies, such as import substitution industrialisation, to promote the local production of goods and services. Also, its policy should encourage the consumption of products made locally.
The DAILY GRAPHIC appeals to the government to also give attention to areas that will help address the immediate and basic needs of the people. For instance, replicating the magic wand used in reducing inflation to reduce interest rates will help a great deal.
Despite the fall in inflation, a reduction in government borrowing, leading to low treasury bill rate and stable exchange rates, financial institutions have still not responded positively by significantly slashing their lending rates.
The government should make some specific and deliberate interventions that can combine short- and long-term strategies to ensure that interest rates come down to ensure more credit for the private sector, a necessary condition for growth and job creation.
The indicators are good, but we urge the Finance Minister and his team to speed up the recovery plan.
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