Government is likely to miss out inflation target for this year, a Senior Lecturer and Economist at the University of Ghana, Dr. Ebo Turkson, has predicted.
Government in the 2016 budget has targeted end of year inflation rate of 10.1 percent, however, Dr. Turkson believes the target cannot be met, citing the recent fuel price hike as a major challenge aligned with inflation rise.
“The cost of transformation forms part of the factors in the consumer basket which affects the prices of goods and services. So if fuel price increases, it will automatically increase the prices of goods and services, thereby, increasing inflation.
The passage of the Energy Sector Levy by parliament in December 2015, has been the basis of the increases in petroleum products which took effect from Monday, January 4.
The move has been greeted with hue and cry from the public, especially drivers who lament that the current increase will affect their business.
Commenting on the development in an interview with the B&FT newspaper, Dr. Ebo Turkson added that improvements in the economy’s productive capacity support a low inflation environment or otherwise.
“What it means for producers is that the cost of production will also increase. And those firms who export will no longer be competitive compared to other firms who are outside Ghana. Domestic firms that produce locally will also see increase in their cost of production and that will lead to increase in the prices of their products.
“What it means is that imported goods are going to be cheaper than locally produced goods. So if we want to encourage the consumption of domestic goods then we must decrease the cost of production in the economy.”
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