Following the recent sharp increases in prices of petroleum products and utilities, cost of living in Ghana is set to rise further.
The Ghana Union of Traders Association (GUTA) has warned that prices of goods and services cannot stay the same.
President of GUTA, Mr George Ofori, says “the year has not started on a good note with these increases because automatically, prices of goods and services will be increased.”
Mr Ofori explains that trucks that cart foodstuffs from the hinterlands into the city centres will be affected by the price hikes and will pass on the costs to traders who cannot help but increase the prices of their wares.
The almost 30 per cent increase in prices of petroleum products will further fuel inflation and increase the already high interest rates.
The move could also affect cost of production particularly those in the manufacturing and mining sectors.
Firms could also be compelled to reduce their staff strength leading to redundancy.
Petroleum prices were adjusted upwards by between 18 and 28 percent on January 1, 2016.
This is also set to result in the increment of transport fares across the country.
The transport component in the inflation basket is quite substantial and therefore any increase in fuel products pushes inflation up.
This subsequently affects interest rates since the Bank of Ghana (BoG) will adjust its policy rate further up to contain the rising inflation.
Inflation inched up to 17.6 per cent, from the October 2015 figure of 17.4 per cent; according to the Ghana Statistical Service.
The figure was the highest inflation rate since July 2015, which was mainly driven by increases in cost of food, housing and utilities, transportation and clothing during the period under review.
The BoG also warned that inflation will remain high for some time since the current level and the latest inflation expectations remain far above the medium term target band of 8±2 percent.
The Central Bank added that core inflation (CPI inflation excluding energy and utility prices), which typifies underlying inflation, has also continued to rise over the period. In addition, there are imminent upside risks to the inflation outlook such as worsening external financial conditions and the utility tariff adjustments which are now likely to be higher than anticipated during the last MPC.
Average bank lending rates is presently about 32 percent, an indication of high inflation rate. This has increased the bad debt situation of banks since most clients cannot bay back their loans.
For instance, banks made a provisioning of about GH¢769 million for non-performing loans for the third quarter of 2015 according to the Bank of Ghana Financial Stability Report.
However, Treasury bill rates have surprisingly gone down marginally with the 91-day bill going for 22.90 percent whilst the 182 day is going for 24.44 percent.
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