Inflation does not merely happen in a country; several factors contribute to the sudden increase in inflation, indicating that the nation's economy is ill and needs immediate care. The competence of economists who tackle real-world problems by treating the disease's symptoms will have a significant impact on how quickly the nation recovers.
While the NPP government refuses to take responsibility for the economic disaster in our nation that was caused by its incompetence and places the blame on Mahama, COVID, and the Russian-Ukrainian War, this writer, will highlight serious financial errors the NPP government made that caused inflation to soar in the nation. Numerous financial errors have both immediate and long-term impacts on a nation's economy.
Despite statements to the contrary from the ministry of agriculture, the World Bank has confirmed that Ghana has the highest food costs in Sub-Saharan Africa.
No country's foundation can ever again be as solid as a rock following the banking crisis that led to the collapse of the nine financial institutions in the country. I am convinced that I can pinpoint the cause of Ghana's inflation from this point forward because the GHC 100 and GHC 200 were first put into circulation under Akufo Addo's administration.
The currency that was printed at the end of 2019 came into circulation in January 2020. This ought to have been avoided since new currencies can have a long-lasting, detrimental impact on an already troubled economy. In July 2022, it was revealed that history has repeated itself. Ato Forson, a representative for the NDC in the central region's Ajumako-Enyam-Esiam seat, asserts that the NPP administration issued GHC 22 billion in new currency without the legislature's consent.
I interpret the vice president, Mahammudu Bawumia’s refusal to tell Ghanaians the truth, a man who is purported to be an economist, as dishonest. What measures can the government take to address the issue now that the NPP government's financial missteps have severely hurt the local currency, the economy, and the populace?
Effectively solutions to combat inflation
Taking quick action will slow the rate of inflation increase, and a robust economy will be able to successfully fend off further inflationary assaults on the state.
• Control the amount of new money entering the system. Loans are the primary way that money enters the economy. Making loans unprofitable is important to stop it. To do this, the Central Bank raises the benchmark interest rate, which is followed by an increase in the annual loan interest rate by commercial banks. As a result, making a deposit rather than taking out a loan is more profitable.
It should be noted that this will result in a decrease in the country's economic activity as well as the rate of inflation because everyone will begin to save money, which will cause a downturn in the economy.
You are already aware of how hard inflation hits money. Banks also control the flow of money, therefore; control over the nation's financial flows must be established. Non-repayable loans should be prohibited, and banks should lend to economically significant industries that serve strategic purposes.
• Control the cost of socially significant items. The state should regulate the price of bread, flour, sunflower oil, and other necessities during a period of fast inflation increase. Reassure the public by assuring them that the situation is under control and would soon improve but simply changing these products' prices or lowering the margin percentage won't be sufficient.
Additionally, it is essential to encourage agricultural producers by giving them preferred loans, lowering their taxes, regulating the prices at which they may buy the materials they need, etc. Generally speaking, we must establish all necessary conditions for these businesses to operate profitably during times of crisis.
Observe the exporters' activity. Whom does the government limit the rise in prices for items with social significance? for the local populace. In other words, at these rates, these products should only be offered on the home market, and in adequate quantities.
What can savvy "clever speculators" who care nothing for their nation or its citizens do? They can import items at reduced costs. Naturally, the government should carefully regulate exporters' operations and completely suppress speculation.
It should be acknowledged that implementing immediate anti-inflationary measures will merely delay the rate of national currency depreciation and not help the country escape its crisis. The state must alter its strategic trajectory to fully resolve the issue. How do you do it? Read on!
Using strategy to fight inflation
Rising inflation rates show how weak the economy of the nation is. The answer to the issue is obvious: we must boost the economy immediately. You can do this with the aid of strategic inflation-fighting techniques:
· Achieving the inflation targets specified. In times of emergency, the state must quickly stabilize the situation. And the first thing that needs to be done is to give the public and businesses again financial direction. To do this, it is vital to promptly and accurately deliver data on real and anticipated inflation indicators for the current year.
As a result, the economic recovery will quicken and public trust in the government will grow. However, it must be realized that: if this is absent, the government will utterly lose faith in itself, and a new crisis will sweep the nation.
• Modifications to the budgetary plan. The state budget is in deficit as a result of the economy's decline. An unsecured money supply will not fix the issue; rather, it will merely begin the process of depreciating money, which will lead to continued inflation.
You might also request financial aid from nations with stronger economies, but this will lead to debt. Because of this, it is first and foremost required to assess the state's budgetary policies to lower spending and raise revenue. For instance, cut back on the size of the bloated government, carry out structural alterations to the manufacturing facilities, ensure that taxes are paid in full, etc.
Establishing favorable conditions for corporate growth: Entrepreneurs have the potential to resuscitate the economy, however; due to massive corruption taking place daily, both local and international investment has declined. To lower inflation and revive the economy, we should foster an environment that is conducive to the growth of small and medium-sized firms (support at the legislative level, elimination of bureaucratic barriers, fight against corruption, moderate taxation, etc.
Lesson on import substitution: The growth of domestic manufacturing sectors deserves special attention since they boost GDP and reduce the country's reliance on imports. This dependence decreases with the economy's degree of external resistance.