IMF backs Bawumia And Orders GSS To Recalculate Inflation Figures

The International Monetary Fund has literally thrown its weight behind the recent analysis of the nation’s economy by Mahamudu Bawumia, Vice Presidential Candidate of the New Patriotic Party.

It has consequently called on the Ghana Statistical Service to rebase the Consumer Price Index used for calculation of inflation figures beginning from 2011.

As a result of this directive, the GSS will update its consumer price index which currently uses 2002 as its base year, resulting in new weightings for the components of its CPI basket.

This change is to apparently provide a more accurate reporting of inflation, and would also see the inflation basket of goods increasing from 242 to over 270 goods.

The visiting IMF mission to Ghana, in a meeting held last week with heads of the GSS, made this demand, indicating to the Statistical Service that single-digit inflation as has been recorded was not having any correlation with important economic variables.

It is recalled that on Wednesday May 2 2011, Dr Bawumia in the “State of our economy” speech stated that most Ghanaians were not feeling the impact of government’s much touted attainment of single-digit inflation.

According to the renowned Economist, the figures did not “add up”, wondering why the nation should be experiencing rising cost of living, exchange rate stability and high interest rates in an economy with single-digit inflation.

In his speech, Dr Bawumia stated expressly that “It could be a measurement issue, but the established relationships between inflation and key economic variables appear to have gone missing for now?”

He explained that the missing relationship between inflation and other key economic variables “could be a measurement issue.”

This statement was explained by government and surprisingly by the Head of the Ghana Statistical Service, Philomena Nyarko, as an attack on the integrity of the service, resulting in attacks on the personality of the NPP Vice Presidential Candidate.

In an interview with Reuters last week, in which he confirmed the IMF directive, Magnus Ebo Duncan, head of economic statistics at the Ghana Statistical Service, stated that the move to rebase the inflation figures would set the new base year as 2011.

“There will be additions to the basket and most of the weightings will also change because the structure of people’s expenditure has changed over the years,” Mr Ebo Duncan told Reuters.

Mr Duncan did not say what the impact of the re-basing would be on the headline figure which rose to a one-year high of 9.1 percent in April as a result of the weakness of the cedi currency.

However, he noted the weighting of transport costs in the basket – which includes fuel – would rise from the current 6.21 percent, a level that is lower than what pertains in other West African countries.

“The weight of transport as we have it now is the true reflection of the 2002 base year and until 2003 when fuel prices, for example, were significantly increased, Ghanaians were spending less on that area,” he said.

Source: thestatesmanonline