topic:REASONS WHY GHANA HAS

FAILED TO ACHIEVE ITS INFLATION TARGETS

A PRESENTATION BY GROUP 19

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 2

What is inflation?It is the rate of increase in the general price level of goods and services in an economy over a period of time.

PATTERN OF INFLATION IN GHANA (2012-2014)

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 3

What is inflation targeting?

Inflation targeting is an economic policy in which a central bank estimates and makes public a projected, or "target", inflation rate and then attempts to steer actual inflation towards the target through the use of interest rate changes and other monetary tools.

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 4

Pattern of inflation targeting in Ghana?Year Targeted rate % Actual rate %

2012 8.5% 8.8%

2013 9.0% 13.1%

2014 9.50% 14.50% as at March

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 5

Why Ghana has failed to achieve its inflation targets

EXCHANGE RATE DEPRECIATION NATIONAL DEBT SERVICING EXTERNAL SHOCKS & UNFORSEEN CIRCUMSTANCES UNREALISTIC TARGETS

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 6

EXCHANGE RATE DEPRECIATION High demand for foreign products over locally produced ones.

e.g Chocolates, Rice, Shoes, Bags, Furniture, Clothing, etc.

More Dollars, Euros, and Pounds to import

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 7

NATIONAL DEBT SERVICING Increase in taxes

rise in prices of goods and services

Printing of more currencies (Cedi)

increase in the money supply

devaluation of the Cedi

increased prices

DEBT TO GDP AS AT THE END OF AUGUST 2013

Public debt 49.44%

External debt 22.11%

Domestic debt 27.33%

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 8

EXTERNAL SHOCKS & UNFORSEEN CIRCUMSTANCES

Increase in fuel prices

Higher transport cost

Higher cost of farming inputs i.e. diesel for irrigation pumps, tractors for ploughing farmlands, premix fuel for fishing activities, etc.

High cost of production

Natural disasters i.e. floods, fire, etc.

Destruction of farms, businesses and property

Shortage in supply of food crops, etc.

Increase in prices of goods and service

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 9

UNREALISTIC TARGETS

Over optimism

Expectation of favourable conditions to occur

Political reasons

Pressure on gov’t from international bodies to reduce inflation

REASONS WHY GHANA HAS FAILED TO ACHIEVE ITS INFLATION TARGETS || GROUP 19 10

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