IMF’S 15% Inflation for 2024 unrealistic

– As revenue enhancement measures fuels price build-Prof Lord Mensah  

By Isaac AIDOO, Accra

A respected figure in finance and a professor at the University of Ghana Business School, Professor (UGBS), Prof Lord Mensah, has voiced skepticism about the International Monetary Fund’s (IMF) recent projection of a 15% end-of-year inflation figure.

The IMF forecasted a gradual decline to 8% in 2025.

In an interview with The New Finder, Prof. Mensah expressed his reservations, deeming the 15% year-end inflation prediction as unrealistic.

He pointed to certain factors that, in his view, would hinder the realization of the IMF’s projections.

According to Prof Mensah, there are factors that will impede the realisation of what the IMF has predicted.

He stated that the pass through effect of the revenue enhancement measures within the IMF programme itself had a way of resulting into a price build.

“If you introduce taxes, the business man will not absorb the tax, it will come through price increase to the consumer so that at the end of the day, it is a way of increasing prices on the market which will become inflationary,” Prof Mensah explained.

He explained further that the resumption of the country’s debt servicing could force the exchange rate into levels that will trigger inflationary pressures because “ ours is an import driven economy and once the dollar rises obviously prices of imported products including petrol go up which will feed into other things.”

The professor further argued that Ghana’s historical data indicates that achieving and sustaining single-digit inflation has been challenging, casting doubt on the feasibility of the IMF’s predictions.

According to Prof. Mensah, any semblance of stability or reduction in inflation that Ghana is currently experiencing is merely cosmetic.

His critique challenges the IMF’s optimism, suggesting a need for a revised outlook based on Ghana’s economic history and existing challenges.

For Prof Mensah, whatever stability or reduction in inflation Ghana is  enjoying is cosmetic.

Increases in taxes won’t escalate Ghana’s inflation-BoG

Meanwhile Governor of the Bank of Ghana (BoG), Dr Ernest Addison recently  allayed fears of increases in taxes leading to a rise in inflation, thereby, dampening government’s single digit inflation target.

He assured that BoG will continue to manage the inflation side of the macro-economy to ensure that the implementation of tax policies does not affect the downward trend of inflation we’ve seen in recent times.

According to him, the increases in taxes should not necessarily lead to higher inflation.

Rather, he expects that the taxes will help improve fiscal consolidation and bring the overall macro pressures down.

He stated that in recent times, monetary policy stance, stable crude oil prices, a relatively stable exchange rate environment, and a stronger foreign exchange reserve accumulation had supported Ghana’s disinflation process.

Dr Addison pledged government’s resolve to continue to implement sound policies to further bring down inflation in 2024 until a single digit inflation is achieved.

To achieve this, he said BoG would continue to monitor both domestic and external developments and respond appropriately to ensure that the downward inflation trajectory was sustained without undermining growth.

He envisaged that a challenging year confronted the country, but expressed optimism that ongoing structural reforms would support a better functioning of the economy.