Cost of goods to increase if government doesn’t act fast

The Association of Ghana Industries (AGI) has issued a warning that if the country’s high producer price inflation rate is not addressed, final goods prices will continue to climb.

Tsonam Cleanse Akpeloo, Greater Accra Regional Chairman of the Association of Ghana Industries (AGI), said in an interview with the media that if growing input prices are not addressed, more firms may become importers.

He remarked that “The rate of the producer price inflation is significant because what it means is that, by the time the cost of inputs goes up by the levels we’ve seen, it ends up affecting the entire production cycle, the cost of production and the final price that goes to the final consumer. The reality is that the exchange rate instability we’ve witnessed in the past couple of weeks has been part of the reason for the hike in the price of inputs producers use, as most of our inputs are imported. Inasmuch as there are external factors affecting prices in Ghana, the government needs to do its part to check the high price increases”.

Mr Akpeloo who was commenting on the backdrop of the recent producer inflation for all industries mentioned that “the fact that importers of finished products are having to incur a lower cost of doing business than those that have to import and manufacture, makes it unfriendly to produce locally. Very soon you may witness an increase in the importation of finished goods, and a decrease in the production of products locally, and that is certainly not good for Ghana”.

While charging the government to review some taxes affecting producers, Mr Akpeloo also mentioned that there is the need for the government to take a second look at the revised benchmark discount values policy as it makes it cheaper to import than produce in Ghana.

According to the Ghana Statistical Service, producer inflation for all industries in March 2022 was reported at 29.3 per cent year on year. The 29.3% year-over-year producer inflation rate for all industries means that domestic producers’ prices for producing their goods and services grew by 29.3% between March 2021 and March 2022.

The producer price inflation rate for all industries was 13.0 per cent in March 2021. In April 2021, the rate fell to a new low of 10.9 per cent, but then rose to 11.8 per cent in May 2021. In August 2021, the rate fell to an all-time low of 8.1 per cent. Following that, the rate maintains its increasing trend, rising to a new high of 29.3 per cent in March 2022.

The Manufacturing subsector which accounts for more than two-thirds of the entire industry, grew by 7.2 per cent, with a 36.0 per cent year-on-year increase in producer prices, the statistical service has said.