A Development Economist and Head of Research at the Danquah Institute, Dr. Frank Bannor, has argued that attributing the inflation spike that plagued Ghana post-2021 to the Bank of Ghana's money printing to finance government deficits is overly simplistic.

On the August 15, 2024, edition of Good Morning Ghana on Metro TV, Dr. Bannor and host Randy Abbey delved into the complex factors behind Ghana's inflation surge in 2022 which peaked to 54 percent.

Dr. Bannor said that multiple factors, including the depletion of reserves, depreciation of the Ghanaian cedi, and global supply chain disruptions, played significant roles.

He highlighted that Ghana's reserves were severely impacted post-COVID, leading to a depreciation of the cedi and increased costs for imports.

"It cannot be the fact that the central bank printed money to finance government deficits. That is why we had a higher inflation rate... In 2022, that was when Ghana had one of its worst reserves. During the COVID time, the president stated that our debt needed to be suspended, in terms of debt service, which wasn't done. For that matter, in 2020, Ghana had one of its highest reserves since independence, about 4.8 months of import cover. So, we expended most of these reserves in servicing debt due to revenue shortfalls and other expenses. Therefore, we virtually depleted our reserves, causing the cedi to lose its value," he explained.

He noted that the global price of freight and essential commodities, such as fertilizers from Ukraine and Russia, skyrocketed, further exacerbating inflationary pressures.

"2022 was worsened because of the pricing of fuel. President Joe Biden himself said Putin has weaponized fuel. In fact, food inflation was one of the highest inflations we had in 2022. Why? Because most of the inputs we get to produce food come from Ukraine and Russia. Ukraine and Russia are the two major suppliers of fertilizer. When Putin invaded Ukraine, the global price of fertilizer went up about 15 times. Most IMF reports will tell you that sub-Saharan Africa, in particular, suffered from that incident," Bannor stated.

He also pointed out that similar inflationary pressures were observed in other countries, like Turkey.

Randy Abbey, however, maintained that the extraordinary increase in money supply by the central bank cannot be ignored when discussing inflation.

He argued that while external factors like the Russia-Ukraine conflict and COVID-19 had significant impacts, the central bank's actions were a crucial component of the inflationary trend.



ID/MA

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