Mr. Isaac Adongo, the Member of Parliament for Bolgatanga Central, has expressed reservations about the Finance Minister’s statements about falling inflation.
According to him, the inflation rate is likely to rise further.
During an appearance on JoyNews’ Newsfile, Mr Adongo presented figures indicating that the government has not been successful in reducing inflation. He cited specific inflation rates for different months, stating that in April, it was 41.2%, in May, it rose to 42.3%, and by June, it reached 42.5%.
The MP highlighted several indicators that contribute to the inflation problem. He mentioned the year-on-year growth of currency outside the banking sector.
Mr Adongo claimed that in just one year (2022), the money outside the banking sector grew by 44.8%, and in the first half of 2023, it increased by 41.3%, leading to a substantial withdrawal of funds from the banking system.
“It means that in one and a half years, over 96% of the money in the banking sector has left the banks,” he added.
According to Mr. Adongo, this tendency to hoard money and other factors will continue to put pressure on inflation, causing it to rise even further. He pointed out that if the numbers for these indicators were showing a downward trend, it would have indicated progress in solving the inflation problem. However, since they have been steadily rising, he believes the issue persists and is worsening.
“But the problem still persists and it’s been getting worse. Look, total liquidity in the economy in 2022 grew by 38%. And by half a year, it has grown even more than the total year by 44.4%. How can you solve inflation with these types of liquidity numbers? Currency in circulation in 2022 grew by 42 .8% and as of half of this year, it has grown by 38 .8%. Reserve money in 2022 increased by 57.5% and by half a year, it has grown by 29 .24%.”
“These are the numbers that are driving inflation. If you get 57 .5% increase in your reserve money, what it means is that this must be multiplied by a factor of three to get the money supply in the economy. In other words, your money supply increased by almost 160% in one year and you need to bring those monies back in order to solve the problem of inflation.”
Mr. Adongo also raised concerns about the government asking the Bank of Ghana to write off the debt they owe, as this move will exacerbate the inflation problem.
“You took a chunk of that money, you said they should write it off. So how will the money come back? You took GH¢80 billion. So for those monies to come back in order to affect these numbers to moderate and slow down inflation, you must pay the GH¢80 billion so that they lock that money out, and that money is not back in the economy.”
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